Document:

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                                                                   Exhibit 10.12

                                 LOAN AGREEMENT

                                      among

                       SEABULK GLOBAL TRANSPORT, INC. AND
                        SEABULK OVERSEAS TRANSPORT, INC.,
                         as Joint and Several Borrowers,

                          THE GUARANTORS NAMED HEREIN,
                        as Joint and Several Guarantors,

           THE BANKS AND FINANCIAL INSTITUTIONS LISTED IN SCHEDULE 1,
                                   as Lenders,

                    NORDEA BANK FINLAND PLC, NEW YORK BRANCH,
                             as Arranger and Agent,

                    NORDEA BANK FINLAND PLC, NEW YORK BRANCH,
                              as Security Trustee,

                                       and

                    NORDEA BANK FINLAND PLC, NEW YORK BRANCH,
                                as Swap Provider

                           Dated: as of March 18, 2004

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                                TABLE OF CONTENTS

ARTICLE I  DEFINITIONS AND ACCOUNTING TERMS                              1

   SECTION 1.01.  Certain Defined Terms                                  1
   SECTION 1.02.  Interpretation                                        16
   SECTION 1.03.  Computation of Time Periods                           16
   SECTION 1.04.  Accounting Terms                                      16

ARTICLE II  THE ADVANCES                                                16

   SECTION 2.01.  The Advances                                          16
   SECTION 2.02.  Borrowing Procedures                                  16
   SECTION 2.03.  Failure of Lender to Make Advance                     17
   SECTION 2.04.  Repayment                                             17
   SECTION 2.05.  Prepayment                                            18
   SECTION 2.06.  Interest On the Advances                              19
   SECTION 2.07.  Payments and Computations                             19
   SECTION 2.08.  Taxes                                                 20
   SECTION 2.09.  Increased Cost and Reduced Return                     21
   SECTION 2.10.  Illegality                                            21
   SECTION 2.11.  Designated Transactions                               22

ARTICLE III  CONDITIONS PRECEDENT                                       22

   SECTION 3.01.  Conditions Precedent to the First Borrowing           22
   SECTION 3.02.  Conditions Precedent to the Second Borrowing          25
   SECTION 3.03.  Conditions Precedent to Each Borrowing                27
   SECTION 3.04.  Determinations Under Section 3.01, 3.02 and 3.03      28

ARTICLE IV  REPRESENTATIONS AND WARRANTIES                              28

   SECTION 4.01.  Representations and Warranties                        28

ARTICLE V  AFFIRMATIVE COVENANTS                                        34

   SECTION 5.01.  Affirmative Covenants                                 34

ARTICLE VI  NEGATIVE COVENANTS                                          41

   SECTION 6.01.  Negative Covenants                                    41

ARTICLE VII  AGREEMENT TO GUARANTEE                                     44

   SECTION 7.01.  Guarantee                                             44
   SECTION 7.02.  Indemnity                                             45
   SECTION 7.03.  Guaranty Absolute                                     45
   SECTION 7.04.  Waivers and Acknowledgments                           47
   SECTION 7.05.  Subrogation                                           48
   SECTION 7.06.  No Competition                                        49
   SECTION 7.07.  Taxes                                                 49
   SECTION 7.08.  Permitted Actions                                     49
   SECTION 7.09.  Financial Condition of the Borrowers                  50
   SECTION 7.10.  Continuing Guaranty                                   51
   SECTION 7.11.  Rights Cumulative; No Waiver                          51

ARTICLE VIII  EVENTS OF DEFAULT                                         51

   SECTION 8.01.  Events of Default                                     51
   SECTION 8.02.  Application of Moneys                                 53
   SECTION 8.03.  Position of Swap Provider                             54

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ARTICLE IX  THE AGENT AND THE SECURITY TRUSTEE                          54

   SECTION 9.01.  Appointment and Granting                              54
   SECTION 9.02.  Reliance                                              56
   SECTION 9.03.  Knowledge                                             56
   SECTION 9.04.  Security Trustee and Agent as Lenders                 56
   SECTION 9.05.  Indemnification of Security Trustee and Agent         56
   SECTION 9.06.  Reliance On Security Trustee or Agent                 57
   SECTION 9.07.  Actions by Security Trustee and Agent                 57
   SECTION 9.08.  Resignation                                           57
   SECTION 9.09.  Release of Collateral                                 58

ARTICLE X  MISCELLANEOUS                                                58

   SECTION 10.01.  Judgment Currency                                    58
   SECTION 10.02.  Books of Lenders and the Agent Conclusive            58
   SECTION 10.03.  Costs and Expenses; Indemnity                        59
   SECTION 10.04.  Notices                                              60
   SECTION 10.05.  Successors and Assigns                               60
   SECTION 10.06.  Financing Statements                                 62
   SECTION 10.07.  Modification of Agreement                            62
   SECTION 10.08.  Governing Law                                        62
   SECTION 10.09.  Waiver of Jury Trial                                 62
   SECTION 10.10.  Waiver of Immunities                                 62
   SECTION 10.11.  Consent to Jurisdiction                              62
   SECTION 10.12.  Right of Set-off                                     63
   SECTION 10.13.  No Waiver; Remedies                                  63
   SECTION 10.14.  Severability                                         64
   SECTION 10.15.  Execution in Counterparts; Integration               64
   SECTION 10.16.  Joint and Several                                    64
   SECTION 10.17.  Headings                                             64

SCHEDULE 1            Lenders and Commitments
SCHEDULE 2            Repayment Schedule
SCHEDULE 3            Acceptable Brokers
SCHEDULE 4.01(f)      List of Material Litigation
SCHEDULE 4.01(g)      ERISA
SCHEDULE 4.01(h)      Environmental Matters
SCHEDULE 4.01(i)(1)   Material Compliance with Maritime Laws
SCHEDULE 4.01(i)(2)   ISM Code Documentation
SCHEDULE 4.01(k)(1)   List of Subsidiaries
SCHEDULE 4.01(k)(2)   List of Material Assets
SCHEDULE 4.01(m)      List of Material Financings

EXHIBIT A  Form of Assignment and Acceptance
EXHIBIT B  Form of Assignment of Earnings
EXHIBIT C  Form of Assignment of Insurances
EXHIBIT D  Form of Designation Notice
EXHIBIT E  Form of Mortgage
EXHIBIT F  Form of Note
EXHIBIT G  Form of Notice of Drawdown

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         LOAN AGREEMENT dated as of March 18, 2004 (this "Agreement") among (i)
SEABULK GLOBAL TRANSPORT, INC. and SEABULK OVERSEAS TRANSPORT, INC., each a
Liberian corporation, as joint and several borrowers (each, a "Borrower" and
collectively, the "Borrowers"), (ii) each of the Guarantors named herein, (iii)
each of the banks and financial institutions listed on Schedule 1 hereto (each a
"Lender", and collectively, the "Lenders"), (iv) NORDEA BANK FINLAND PLC, New
York Branch, as arranger and as agent for the Lenders (in such capacity, the
"Agent"), (v) NORDEA BANK FINLAND PLC, New York Branch, as Security Trustee (in
such capacity, the "Security Trustee"), and (vi) NORDEA BANK FINLAND PLC, New
York Branch, as swap provider (in such capacity, the "Swap Provider").

                                   WITNESSETH:

         WHEREAS, the Borrowers have requested that the Lenders make available
to the Borrowers a credit facility in the aggregate principal amount of
US$49,600,000 in two separate loans, each in the principal amount of
US$24,800,000, to finance the acquisition of the Mortgaged Vessels (as
hereinafter defined), and the Lenders have agreed to make available the credit
facility and to lend such amounts in the form of the Advances on the terms and
conditions set forth herein.

         WHEREAS, the Guarantors have agreed to guarantee the performance by the
Borrowers of the Borrowers' obligations hereunder and under the other Loan
Documents (as hereafter defined) to which either of the Borrowers is a party.

         WHEREAS, the Borrowers and Seabulk International (as hereafter defined)
desire to enter into swap agreements with the Swap Provider to, among other
things, hedge the Borrowers' exposure to interest rate fluctuations under this
Agreement.

         NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:

                                    ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

         SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:

         "ACCEPTABLE BROKER" means any of the sale and purchase ship brokerage
companies identified in Schedule 3 hereto, and any other independent sale and
purchase ship brokerage company which the Lenders may in their sole reasonable
discretion approve from time to time for purposes of this Agreement.

         "ADJUSTED EBITDA" means, with respect to Seabulk International for any
period, an amount equal to EBITDA for each of Seabulk International's most
recently ended four fiscal quarters, as reported in the financial statements
most recently delivered to the Agent, MINUS that portion of EBITDA attributable
to the Lightship Tanker Entities PLUS an amount equal to the dividends received
during such period from the Lightship Tanker Entities.

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         "ADJUSTED FUNDED DEBT" means with respect to Seabulk International for
any period, the average of Seabulk International's Consolidated Funded Debt less
any Debt relating to the Lightship Tanker Entities for each of Seabulk
International's most recently ended four fiscal quarters, as reported in the
financial statements most recently delivered to the Agent.

         "ADJUSTED FUNDED DEBT RATIO" means as of any date of determination the
ratio of the Adjusted Funded Debt to the Adjusted EBITDA.

         "ADJUSTED INTEREST EXPENSE" means, with respect to Seabulk
International for any period, the Consolidated Interest Expense less any
Consolidated Interest Expense relating to the Lightship Tanker Entities for each
of Seabulk International's most recently ended four fiscal quarters, as reported
in the financial statements most recently delivered to the Agent.

         "ADJUSTED TANGIBLE NET WORTH" means with respect to Seabulk
International, as of any date of determination, the Consolidated Tangible Net
Worth of Seabulk International less any Consolidated Tangible Net Worth relating
to the Lightship Tanker Entities.

         "ADVANCES" means the amount advanced to the Borrowers by each of the
Lenders with respect to either Tranche of either Term Loan as part of a
Borrowing.

         "AFFILIATE" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. For purposes of this
definition, the term "control" (including the terms "controlling", "controlled
by" and "under common control with") of a Person means the possession, direct or
indirect, of the power to vote 25% or more of the voting stock of such Person or
to direct or cause direction of the management and policies of such Person,
whether through the ownership of voting stock, by contract or otherwise.

         "AGENT'S ACCOUNT" means Account Number 52150000032201001 maintained at
the Agent's New York Branch, ABA Number: 026010786, SWIFT: NDEAUS3NXXX,
Attention: Credit Administration, Re: Seabulk.

         "APPLICABLE MARGIN" means, with respect to each Advance relating to the
relevant Mortgaged Vessel, 1.75% per annum with respect to Tranche A and 4.00%
per annum with respect to Tranche B.

         "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered
into by a Lender and an assignee, and accepted by the Agent, in substantially
the form of Exhibit A hereto.

         "ASSIGNMENT OF EARNINGS" means the first priority assignment by each
Borrower in favor of the Security Trustee, for the benefit of the Lenders and
the Swap Provider, of the earnings of such Borrower's Mortgaged Vessel, in
substantially the form of Exhibit B hereto (as the same may be amended,
supplemented or modified from time to time).

         "ASSIGNMENT OF INSURANCES" means the first priority assignment by each
Borrower in favor of the Security Trustee, for the benefit of the Lenders and
the Swap Provider, of the insurances in respect of such Borrower's Mortgaged
Vessel, in substantially the form of Exhibit C hereto (as the same may be
amended, supplemented or modified from time to time).

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         "ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction
means, at the time of determination, the present value of the obligation of the
lessee for net rental payments during the remaining term of the lease included
in such sale and leaseback transaction including any period for which such lease
has been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.

         "BANKING DAY" means a day on which dealings are carried out in the
London Interbank Market and which is also a day on which commercial banks are
not authorized or required to close in New York, New York.

         "BOND" means the 9-1/2% Senior Notes due 2013 issued by Seabulk
International pursuant to the terms and conditions of the Indenture.

         "BORROWING" means the making of the Advances by each of the Lenders in
respect of a particular Mortgaged Vessel on the same date under Section 2.01
hereof.

         "CAPITAL LEASE OBLIGATION" means, at the time any determination is to
be made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.

         "CHANGE OF CONTROL" means with respect to (a) a Borrower, Seabulk
Global Carriers or Seabulk Tankers, the occurrence of any act, event or
circumstance which results in Seabulk International owning, beneficially and of
record, directly or indirectly, less than all of the issued and outstanding
capital stock of such Person and (b) Seabulk International, the persons owning
all of the issued and outstanding capital stock of Seabulk International as of
the date of this Agreement shall cease to own beneficially and of record 51% of
the issued and outstanding stock of Seabulk International or the board of
directors of Seabulk International ceases to consist of a majority of the
existing directors as of the date of this Agreement or directors elected or
nominated by such existing directors or by contract or other agreement any third
party shall have the ability to influence the actions of the board of directors.

         "CLASSIFICATION SOCIETY" means in respect of each of the Mortgaged
Vessels, the American Bureau of Shipping or such other classification society as
is selected by the Borrower owning such Mortgaged Vessel with the prior consent
of the Agent acting on the instructions of and upon the acceptance by the
Majority Lenders.

         "CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated and the rulings issued thereunder.

         "COLLATERAL" means all property (including, without limitation, any
proceeds thereof) referred to in the Security Documents that is or is intended
to be subject to any Lien in favor of the Security Trustee, for the benefit of
the Lenders and the Swap Provider, securing the obligations of the Borrowers
under this Agreement or any other Loan Documents and the right of the Swap
Provider to receive amounts under the Master Agreement.

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         "COMMITMENT" with respect to any Lender at any time, has the meaning
specified in Section 2.01 or, if such Lender has entered into one or more
Assignments and Acceptances, means the amount set forth for such Lender in the
Register maintained by the Agent pursuant to Section 9.05(b) as such Lender's
"Commitment", as such amount may be reduced at or prior to such time pursuant to
Section 2.04 and "Commitments" mean the aggregate of the Commitments of all the
Lenders.

         "COMMITMENT TERMINATION DATE" means April 30, 2004 or such earlier day
as the Commitments shall have been canceled pursuant to the provisions of this
Agreement.

         "COMPLIANCE CERTIFICATE" shall have the meaning assigned such term in
Section 5.01(g)(vi)

         "CONFIRMATION" has the meaning ascribed thereto in the Master
Agreement.

         "CONSOLIDATED FUNDED DEBT" means, with respect to any Person as of any
date of determination, the sum, without duplication, of (a) the total amount of
Debt of such Person and its Subsidiaries, plus (ii) the total amount of Debt of
any other Person to the extent such Debt has been guaranteed by such person or
one or more of its Subsidiaries, plus (iii) the aggregate value of all
Disqualified Shares of such Person, in each case, determined on a consolidated
basis in accordance with GAAP.

         "CONSOLIDATED INTEREST EXPENSE" means, for any period, the sum of: (a)
the total interest expense of Seabulk International and its Subsidiaries plus,
to the extent not otherwise included in such interest expense (without
duplication), and to the extent incurred by Seabulk International or any of its
Subsidiaries (i) interest expense attributable to Capital Lease Obligations, the
interest expense attributable to leases constituting part of a sale and
leaseback transaction and the interest portion of rent expense associated with
Attributable Debt in respect of the relevant lease giving rise thereto,
determined as if such lease were a capitalized lease in accordance with GAAP and
the interest component of any deferred payment obligations, (ii) amortization of
debt but not debt issuance costs; (iii) non-cash interest expense, (iv)
amortization of commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, (v) interest
accruing on any Debt of any other Person to the extent such Debt is guaranteed
by or secured by the assets of Seabulk International or any of its Subsidiaries
and (vi) net costs associated with Hedging Obligations (excluding amortization
of fees paid at the time of entering into such Hedging Obligations; PLUS (b) all
dividends, whether paid or accrued and whether or not in cash, on any series of
preferred shares of a Person or any of its Subsidiaries payable to a Person
other than Seabulk International or its Subsidiaries; PLUS (c) cash
contributions to any employee stock ownership plan or other trust for the
benefit of employees to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person other than Seabulk International or
its Subsidiaries in connection with and Debt incurred by such plan or trust to
purchase share capital of Seabulk International.

         "CONSOLIDATED NET INCOME" means, for any period for any Person, the net
income (loss) of such Person and its consolidated Subsidiaries determined in
accordance with GAAP; PROVIDED, HOWEVER, that there shall not be included in
determining such Consolidated Net Income: (a) any net income (or loss) of any
subsidiary if at the date of determination the making of distributions or the
payment of dividends by such Subsidiary are not permitted without prior

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governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or other organizational document or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders except (i) Seabulk
International's equity in the net income of any such Subsidiary for such period
shall be included in such Consolidated Net Income up to the aggregate amount of
cash distributed by such Subsidiary during such period to Seabulk International
or a Subsidiary as a dividend or other distribution (subject, in the case of a
dividend to a Subsidiary, to the limitation contained in this clause), and (ii)
Seabulk International's equity in a net loss of any such Subsidiary for such
period shall be included in determining such Consolidated Net Income; (b) any
gain or loss, together with any related provision for taxes on such gain or
loss, realized upon (i) the sale or other disposition of assets of Seabulk
International, its consolidated Subsidiaries or any other Person (including
pursuant to any sale and leaseback transaction) which is not sold or otherwise
disposed of in the ordinary course of business, (ii) the sale or other
disposition of any securities of any Person not sold or otherwise disposed of in
the ordinary course of business or (iii) the extinguishment of any Debt of any
Person; or (c) any extraordinary gain or loss, together with any related
provision for taxes on such extraordinary gain or loss.

         "CONSOLIDATED TANGIBLE NET WORTH" of any Person, as of any date of
determination, means the consolidated shareholders' equity of such Person as
determined in accordance with GAAP less (to the extent included) amounts
attributable to Disqualified Shares of such Person.

         "CREDIT PARTY" means any of, and "Credit Parties" means all of, the
Borrowers and the Guarantors.

         "CUSTOMARY PERMITTED LIENS" means

                  (a)      Liens for taxes, assessments or charges of any
                           government authority or claims not yet due or which
                           are being contested in good faith by appropriate
                           proceedings and with respect of which adequate
                           reserves or other appropriate provisions are being
                           maintained in accordance with the provisions of GAAP;

                  (b)      statutory Liens of landlords and Liens of carriers,
                           warehousemen, mechanics, materialmen and other Liens
                           imposed by law created in the ordinary course of
                           business for amounts which are not past due for more
                           than 30 days or which are being contested in good
                           faith by appropriate proceedings and with respect to
                           which adequate reserves or other appropriate
                           provisions are being maintained in accordance with
                           GAAP or which in the aggregate do not detract from
                           the value of the property or assets or materially
                           impair the use thereof in the operation of the
                           business of either of the Borrowers;

                  (c)      licenses, leases or subleases granted to other
                           Persons in the ordinary course of business not
                           materially interfering with the conduct of the
                           business of the Borrowers;

                  (d)      easements, rights-of-way, restrictions (including
                           zoning restrictions), encroachments, protrusions and
                           other similar charges or encumbrances,

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                           and minor title deficiencies, in each case whether
                           now or hereafter in existence, not securing
                           obligations for the payment of borrowed money and not
                           materially interfering with the conduct of the
                           business of the Borrowers;

                  (e)      rights of tenants, subtenants, franchises or parties
                           in possession (other than a debtor in possession,
                           trustee in bankruptcy or receiver of a Borrower), or
                           options or rights of first refusal, whether pursuant
                           to leases, subleases, franchise agreements, other
                           occupancy agreements or otherwise, if such rights
                           were vested on the date hereof or created thereafter
                           in the ordinary course of business in transactions
                           permitted under this Agreement;

                  (f)      any interest or title of a lessor, sub-lessor,
                           licensee or licensor under any lease or license
                           agreement permitted by this Agreement;

                  (g)      Liens in favor of a banking institution arising as a
                           matter of law encumbering deposits (including the
                           right of set-off) held by such banking institutions
                           incurred in the ordinary course of business and which
                           are within the general parameters customary in the
                           banking industry;

                  (h)      Liens in favor of customs and revenue authorities
                           arising as a matter of law to secure the payment of
                           customs duties in connection with the importation of
                           goods;

                  (i)      Liens arising out of conditional sale, title
                           retention, consignment or similar arrangements for
                           the purchase or sale of goods, entered into by a
                           Borrower in the ordinary course of business in
                           accordance with the past practices of such Borrower;

                  (j)      deposits made to secure statutory obligations in the
                           form of excise taxes;

                  (k)      Liens incurred or deposits or pledges made in the
                           ordinary course of business in connection with
                           workers' compensation, unemployment insurance and
                           other types of social security, old age or other
                           similar obligations, or to secure the performance of
                           tenders, statutory obligations, surety and appeal
                           bonds, bids, leases, government contracts,
                           performance and return-of-money bonds and other
                           similar obligations (exclusive of obligations for the
                           payment of borrowed money); and

                  (l)      Liens resulting from operation of law with respect to
                           any judgments or orders not constituting a Default.

         "DEBT" means, as to any Person (a) indebtedness for borrowed money, (b)
obligations evidenced by bonds, debentures, notes or other similar instrument,
(c) obligations to pay the deferred purchase price of property or services, (d)
obligations classified as "capital leases" in accordance with GAAP, (e) any
obligation of such Person with respect to Hedging Obligations and (f)
obligations under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in

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<PAGE>

respect of, indebtedness or obligations of others of the kinds referred to in
clauses (a) through (e) above.

         "DEFAULT" means a condition or an event which, with the giving of
notice or lapse of time, or both, would constitute an Event of Default.

         "DEFAULT INTEREST RATE" shall mean the Interest Rate plus 2% per annum.

         "DELIVERY DATE" means the date on which a Mortgaged Vessel is tendered
by the seller thereof to the applicable Borrower, and such Borrower accepts
delivery thereof, in accordance with the terms of the relevant memorandum of
agreement relating to such Mortgaged Vessel.

         "DESIGNATED TRANSACTION" means a Transaction which fulfills the
following requirements:

                  (a) it is entered into by Party B and the Swap Provider
         pursuant to the Master Agreement for purposes of one or more Hedging
         Obligations;

                  (b) the notional principal amount of such Transaction,
         together with all other continuing Designated Transactions, does not
         and in the future (taking into account the scheduled amortization
         thereof) will not exceed the aggregate amount of the Loan scheduled to
         be outstanding from time to time; and

                  (c) it is designated by the Swap Provider, by delivery by the
         Swap Provider to the Agent of a notice of designation in the form set
         out in Exhibit D, as a Designated Transaction for the purposes of the
         Loan Documents.

         "DISQUALIFIED SHARES" means any share capital that by its terms or upon
the happening of any event matures or is mandatorily redeemable.

         "DRAWDOWN DATE" means each requested date for the making of each
Borrowing, which shall not be later than the Commitment Termination Date.

         "EARNINGS ACCOUNT" means each account opened by and in the name each of
the Borrowers with NORDEA BANK NORGE ASA, Grand Cayman Branch, in which the
earnings of each Mortgaged Vessel shall be collected.

         "EBITDA" means, with respect to Seabulk International and its
Subsidiaries for any period, the Consolidated Net Income of such Person for such
period plus the following to the extent deducted in calculating such
Consolidated Net Income:

                  (a) all federal, state and local and all foreign income tax
         expense;

                  (b) Consolidated Interest Expense;

                  (c) depreciation expense and amortization expense;

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<PAGE>

                  (d) the sum of any non-cash costs, charges or expenses
         attributable to the accrual of or reserve for cash charges in any
         future period for pension liabilities of Seabulk International and its
         Subsidiaries;

                  (e) an amount equal to any non-cash loss or gain realized in
         connection with an asset sale or any unrealized gains or losses in
         respect of any Hedging Obligations;

                  (f) an amount equal to the fees, expenses and other costs
         incurred by the Credit Parties in connection with the transactions
         contemplated by this Agreement; and

                  (g) to the extent that Seabulk International's accounting
         policy with respect to the capitalization of dry-docking costs is
         changed, an amount equal to any expensed dry-docking cost.

         Notwithstanding the foregoing, amounts relating to a Subsidiary of
Seabulk International shall be added to Consolidated Net Income to compute
EBITDA only to the extent (and in the same proportion) that the net income (or
loss) of such Subsidiary was included in calculating Consolidated Net Income.

         "EVENT OF LOSS" means any actual, constructive, compromised or arranged
total loss of, or the requisition of title to, a Mortgaged Vessel.

         "ENVIRONMENTAL ACTION" means any administrative, regulatory or judicial
action, suit, demand, demand letter, claim, notice of non-compliance or
violation, investigation, proceeding, consent order or consent agreement based
upon or arising out of any Environmental Law or any Environmental Permit,
including without limitation (a) any claim by any governmental or regulatory
authority for enforcement, cleanup, removal, response, remedial or other actions
or damages pursuant to any Environmental Law and (b) any claim by any third
party seeking damages, contribution, or injunctive relief arising from alleged
injury or threat of injury to health, safety or the environment.

         "ENVIRONMENTAL INCIDENT" means (i) any release of Environmentally
Sensitive Material from a Mortgaged Vessel; or (ii) any incident in which
Environmentally Sensitive Material is released from a vessel other than a
Mortgaged Vessel and which involves collision between a Mortgaged Vessel and
such other vessel or some other incident of navigation or operation, in either
case, where a Mortgaged Vessel or the relevant Borrower is actually or allegedly
at fault or otherwise liable (in whole or in part); or (iii) any incident in
which Environmentally Sensitive Material is released from a vessel other than a
Mortgaged Vessel and where such Mortgaged Vessel is actually or potentially
liable to be arrested as a result and/or where the relevant Borrower is actually
or allegedly at fault or otherwise liable;

         "ENVIRONMENTAL LAW" means any federal, state, local, foreign or
international law, rule, regulation, order, writ, judgment, injunction, decree,
treaty, determination or award relating to the environment, health or safety.

         "ENVIRONMENTAL PERMIT" means any permit, approval, identification
number, license or other authorization required under any Environmental Law.

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         "ENVIRONMENTALLY SENSITIVE MATERIAL" means oil, oil products, any other
substance which is polluting, toxic or hazardous or any substance the release of
which into the environment is regulated, prohibited or penalized by or pursuant
to any Environmental Law.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.

         "ERISA AFFILIATE" of any Person means any other Person that for
purposes of Title IV of ERISA is a member of such Person's controlled group, or
under common control with such Person, within the meaning of Section 414 of the
Code.

         "ERISA EVENT" with respect to any Person means (a) the occurrence of a
reportable event, within the meaning of Section 4043 of ERISA, with respect to
any Plan of such Person or any of its ERISA Affiliates unless the 30-day notice
requirement with respect to such event has been waived by the PBGC; (b) the
provision by the administrator of any Plan of such Person or any of its ERISA
Affiliates of a notice of intent to terminate such Plan, pursuant to Section
4041(a)(2) of ERISA (including any such notice with respect to a plan amendment
referred to in Section 4041(e) of ERISA); (c) the cessation of operations at a
facility of such Person or any of its ERISA Affiliates in the circumstances
described in Section 4062(e) of ERISA; (d) the withdrawal by such Person or any
of its ERISA Affiliates from a Multiple Employer Plan during a plan year for
which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(e) the failure by such Person or any of its ERISA Affiliates to make a payment
to a Plan described in Section 302(f)(1) of ERISA; (f) the adoption of an
amendment to a Plan of such Person or any of its ERISA Affiliates requiring the
provision of security to such Plan, pursuant to Section 307 of ERISA; or (g) the
institution by the PBGC of proceedings to terminate a Plan of such Person or any
of its ERISA Affiliates pursuant to Section 4042 of ERISA, or the occurrence of
any event or condition described in Section 4042 of ERISA that would constitute
grounds for the termination of, or the appointment of a trustee to administer,
such Plan; provided, however; that an event described in clause (a), (c) or (d)
of this definition, or in clause (b) of this definition solely with respect to a
standard termination under Section 4041(b) of ERISA, shall be an ERISA Event
only if such event is reasonably likely to result in a material liability of
such Person or any of its ERISA Affiliates.

         "FAIR MARKET VALUE" means, in relation to a Mortgaged Vessel, the fair
market value of such Mortgaged Vessel determined by means of a valuation made
(at the expense of the Borrowers) at any relevant time by an Acceptable Broker
as may from time to time be selected by the Borrowers; such valuation shall be
made on an "as is where is" basis with or without physical inspection of such
Mortgaged Vessel, on the basis of a sale for prompt delivery for cash at arms'
length on normal commercial terms as between a willing seller and a willing
buyer, free of any existing charter or other contracts of employment, and shall
be conclusive evidence of the fair market value of such Mortgaged Vessel at the
date of such valuation.

         "FINAL PAYMENT DATE" means (a) in respect of Tranche A Advances, March
31, 2011; and (b) in respect of Tranche B Advances, March 31, 2007.

         "FOREIGN PENSION PLAN" shall mean any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by a Credit Party Borrower or
any one or more of its Subsidiaries primarily for

                                       9
<PAGE>

the benefit of employees of such Credit Party or such Subsidiaries residing
outside the United States of America, which plan, fund or other similar program
provides, or results in, retirement income, a deferral of income in
contemplation of retirement or payments to be made upon termination of
employment, and which plan is not subject to ERISA or the Code.

         "GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, except as disclosed in the financial
statements of the Credit Parties.

         "GUARANTEED OBLIGATIONS" shall have the meaning assigned such term in
Section 7.01(a).

         "GUARANTORS" means Seabulk International, Seabulk Global Carriers and
Seabulk Tankers.

         "HAZARDOUS MATERIALS" means (a) petroleum or petroleum products,
natural or synthetic gas, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation and radon gas, (b) any substances defined as
or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," contaminants" or "pollutants,"
or words of similar import, under any Environmental Law and (c) any other
substance exposure to which is regulated under any Environmental Law.

         "HEDGING OBLIGATIONS" means, with respect to any Person, the net amount
of the obligations of such Person under interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements, foreign currency exchange
agreements, commodity price protection agreements and other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates, foreign currency exchange rates and commodity prices.

         "INDENTURE" means the Indenture dated as of August 5, 2003 among
Seabulk International, the guarantors named therein and Wachovia Bank, National
Association, as Trustee.

         "INTEREST PAYMENT DATE" means, in the case of each Advance, the day on
which interest in respect of such Advance is due in accordance with Section
2.06(a) of this Agreement.

         "INTEREST PERIOD" means, for each Advance, (a) in the case of the first
such period, the period commencing on the date such Borrowing is made and ending
on the last day of the period selected by the Borrowers pursuant to the
provisions below and (b) thereafter, each subsequent period commencing on the
last day of the immediately preceding Interest Period and ending on the last day
of the periods elected by the Borrowers pursuant to the provisions below. The
duration of each such Interest Period shall be one, two or three months as the
Borrowers may, upon notice received by the Agent not later than 11:00 A.M. (New
York City time) on the third Business Day prior to the first day of such
Interest Period, select or request; PROVIDED, that:

         (i) the Borrowers may not select any Interest Period which ends after
         any Payment Date unless, after giving effect to such selection, the
         aggregate principal amount of Advances having Interest Periods that end
         on or prior to such Payment Date shall be at least equal to the
         aggregate principal amount of such Advances due and payable on or prior
         to such Payment Date;

                                       10
<PAGE>

         (ii) the first Interest Payment Date applicable to the Borrowing made
         in respect of the delivery of the second Mortgaged Vessel shall
         coincide with the Interest Payment Date then applicable to the
         outstanding Advances;

         (iii) whenever the last day of any Interest Period would otherwise
         occur on a day other than a Banking Day, the last day of such Interest
         Period shall be extended to occur on the next succeeding Banking Day,
         PROVIDED THAT, if such extension would cause the last day of such
         Interest Period to occur in the next following calendar month, the last
         day of such Interest Period shall occur on the immediately preceding
         Banking Day;

         (iv) whenever the first day of any Interest Period occurs on a day in a
         calendar month for which there is no numerically corresponding day in
         the calendar month that succeeds such initial calendar month by the
         number of months equal to the number of months in such Interest Period,
         such Interest Period shall end on the last Banking Day of such
         succeeding calendar month.

         "INTEREST RATE" means LIBOR plus the Applicable Margin.

         "INVESTMENT" means any direct or indirect advance, loan or other
extension of credit (including by way of guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of capital stock (or other equity
interest), Indebtedness or other similar instruments.

         "ISM CODE" means the International Safety Management Code for the Safe
Operating of Ships and for Pollution Prevention constituted pursuant to
Resolution A.714(18) of the International Maritime Organization and incorporated
into the Safety of Life at Sea Convention and any amendments or extensions
thereto and the rules, regulations and requirements thereunder.

         "ISM CODE DOCUMENTATION" in relation to a Vessel includes:

                  (a) the document of compliance (DOC) and safety management
         certificate (SMC) issued pursuant to the ISM Code in relation to a
         Vessel within the periods specified by the ISM Code; and

                  (b) all other documents and data which are relevant to the ISM
         Safety Management Systems and its implementation and verification which
         the Agent may reasonably require; and

                  (c) any other documents which are relevant to establish and
         maintain a Vessel or the relevant Borrower's compliance with the ISM
         Code which the Agent may reasonably require.

         "ISM SAFETY MANAGEMENT SYSTEMS" means the Safety Management System
referred to in Clause 1.4 (or any other relevant provision) of the ISM Code.

                                       11
<PAGE>

         "LENDING OFFICE" means, with respect to any Lender, the office of such
Lender specified as its "Lending Office" opposite its name on Schedule 1 hereto
or in the Assignment and Acceptance pursuant to which it became a Lender, or
such other office of such Lender as such Lender may from time to time specify to
the Borrower and the Agent.

         "LIBOR" means, with respect to any Interest Period, the rate per annum
calculated by the Agent at approximately 11:00 a.m., London time, on the date
which is two Banking Days prior to the beginning of such Interest Period by
reference to the British Bankers' Association Interest Settlement Rates for
deposits in Dollars (as set forth by any service selected by the Agent which has
been nominated by the British Bankers' Association as an authorized information
vendor for the purpose of displaying such rates) for a period equal to such
Interest Period.

         "LIEN" means any mortgage, pledge, charge or other encumbrance of any
kind.

         "LIGHTSHIP TANKER ENTITIES" means Lightship Tanker Holdings, L.L.C.,
Lightship Partners, L.P., Lightship Tankers I, L.L.C., Lightship Tankers II,
L.L.C., Lightship Tankers III, L.L.C., Lightship Tankers IV, L.L.C., Lightship
Tankers V, L.L.C., Delaware Tanker Holdings I, Inc., Delaware Tanker Holdings
II, Inc., Delaware Tanker Holdings III, Inc., Delaware Tanker Holdings IV, Inc.
and Delaware Tanker Holdings V, Inc.

         "LOAN" means, at any time, the aggregate principal amount of the Term
Loans advanced by the Lenders pursuant to Section 2.01.

         "LOAN DOCUMENTS" means this Agreement, the Note, the Guaranty, the
Master Agreement and the Security Documents.

         "MAJORITY LENDERS" means Lenders holding more than 50% of the aggregate
unpaid principal amount of the Loan.

         "MANAGEMENT AGREEMENT" means a management agreement with the Manager
based on or substantially in the form of the BIMCO Standard Ship Management
Agreement "Shipman 98", or such other management agreement in form and substance
reasonably satisfactory to the Agent providing for the commercial and technical
management of the Mortgaged Vessels.

         "MANAGER" means World-Wide Shipping Managers Pte. Ltd., a company
incorporated and existing under the laws of Singapore, or such other manager as
is selected by the Borrowers with the prior consent of the Agent acting on the
instructions of and upon the acceptance by the Majority Lenders.

         "MASTER AGREEMENT" means the Master Agreement (on the 1992 ISDA Master
Agreement form) entered into among Party B and the Swap Provider, and each
Confirmation and Schedule related thereto, pursuant to which Party B enters into
certain Transactions (as such term is defined in the Master Agreement) pursuant
to separate Confirmations providing for, among other things, the payment of
certain amounts by the Borrowers to the Swap Provider to hedge the Borrowers'
exposure to interest rate fluctuations under this Agreement.

         "MATERIAL ADVERSE EFFECT" means, (i) with respect to a Person, any
material adverse effect on the business, assets, liabilities, condition
(financial or otherwise), operations, performance,

                                       12
<PAGE>

properties or prospects of such Persons taken as a whole on, where appropriate,
a consolidated basis in accordance with GAAP, (ii) with respect to any Loan
Document, any adverse effect (a) whether material or not, on the binding nature,
validity or enforceability thereof, (b) on any Person's ability to perform its
obligations under such Loan Document or (c) on the rights and remedies of the
Security Trustee or any Lender thereunder and (iii) with respect to any
Collateral, a material adverse effect on its value as Collateral or its
usefulness in the business of any Person pledging such Collateral or on the
validity, perfection, priority or enforceability of the Security Trustee's Lien
thereon.

         "MORTGAGED VESSELS" means each of the Liberian registered vessels
SEABULK RELIANT, Official Number 12274, and SEABULK TRUST, Official Number
12273, subject to a Mortgage.

         "MORTGAGE" means a First Preferred Liberian Ship Mortgage made by a
Borrower in favor of the Security Trustee, for the benefit of the Lenders and
the Swap Provider, in respect of such Borrower's Mortgaged Vessel, in
substantially the form of Exhibit E (as the as the same may be amended,
supplemented or modified from time to time).

         "MULTIPLE EMPLOYER PLAN" of any Person means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, which is subject to Title IV of ERISA,
and (a) that is maintained for employees of such Person or any of its ERISA
Affiliates and at least one Person other than such Person and its ERISA
Affiliates or (b) that was so maintained and in respect of which such Person or
any of its ERISA Affiliates could have liability under Section 4064 or 4069 of
ERISA in the event such plan has been or were to be terminated.

         "NOTE" means the joint and several promissory note of the Borrowers
payable to the order of the Agent, for the benefit of the Lenders, in
substantially the form of Exhibit F hereto, evidencing the aggregate
indebtedness of the Borrowers to the Lenders resulting from the total Advances
made or to be made by the Lenders in respect of the Mortgaged Vessels.

         "NOTICE OF BORROWING" has the meaning ascribed thereto in Section
2.02(a) hereof.

         "OBLIGATIONS" means all the payment and performance obligations of the
respective obligor under this Agreement, the Security Documents and the Master
Agreement.

         "OFFICER'S CERTIFICATE" means a certificate of the Secretary or other
authorized officer of the Borrower.

         "PARTY B" means, collectively, the Borrowers and Seabulk International.

         "PAYMENT DATE" means with respect to each Mortgaged Vessel, June 30,
2004 and each date every three (3) months thereafter until the Final Payment
Date.

         "PBGC" means the Pension Benefit Guaranty Corporation, or any successor
agency or entity performing substantially the same functions.

                                       13
<PAGE>

         "PERSON" means an individual, partnership, corporation (including a
business trust), firm, joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision or
agency or instrumentality thereof.

         "PERMITTED ENCUMBRANCES" means: (a) liens or rights in rem for current
crew's wages, for general average or salvage (including contract salvage) or for
wages of stevedores employed by the charterer, the operator, agent or master of
a Mortgaged Vessel which in each case (i) are unclaimed or (ii) shall not have
been due and payable for ten (10) days after termination of a voyage; (b) liens
or rights in rem for repairs or incident to current operations of a Mortgaged
Vessel (other than those referred to in clause (a) above) or with respect to any
change, alteration or addition made to such Mortgaged Vessel, but only to the
extent in each case that such liens are based on claims not yet delinquent and
do not involve any risk of a sale, forfeiture, hindrance to operation or loss of
such Mortgaged Vessel; (c) liens or rights in rem for sums due to the Manager
under the Management Agreement, but only to the extent in each case that such
liens are based on claims not yet delinquent and do not involve any risk of a
sale, forfeiture, hindrance to operation or loss of such Mortgaged Vessel; (d)
liens for amounts being contested by the applicable Borrower in good faith by
appropriate procedures, diligently prosecuted or appealed which do not involve
any risk of a sale, forfeiture, hindrance to operation or loss of a Mortgaged
Vessel; (e) liens covered by valid policies of insurance held with respect to a
Mortgaged Vessel and meeting the requirements of the related Mortgage; (f) the
lien of the Mortgages and the other Security Documents; and (g) any other liens
expressly permitted by any of the Loan Documents.

         "PLAN" means a Single Employer Plan or a Multiple Employer Plan.

         "RATABLE PORTION" means, as to any Lender, with respect to either the
Tranche A or Tranche B portion of any Borrowing or the Loan, the percentage
obtained by dividing such Lender's Commitment in relation to such Tranche by the
aggregate amount of all the Lenders' Commitments in relation to such Tranche.

         "REPAYMENT SCHEDULE" means the schedule, attached hereto as Schedule 2,
setting out the amount and due date of each installment payable pursuant to
Section 2.04.

         "REPORTABLE EVENT" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan that is subject to Title IV of ERISA other than
those events as to which the 30-day notice period is waived under subsection
..22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.

         "RESTRICTED PAYMENT" shall have the meaning assigned such term in
Section 6.01(h).

         "SEABULK GLOBAL CARRIERS" means Seabulk Global Carriers, Inc., a
Liberian corporation.

         "SEABULK INTERNATIONAL" means Seabulk International, Inc., a Delaware
corporation.

         "SEABULK TANKERS" means Seabulk Tankers, Inc., a Delaware corporation.

         "SECURITY DOCUMENTS" means (a) this Agreement (where the context so
admits), (b) each Mortgage, (c) each Assignment of Earnings, (d) each Assignment
of Insurances and (e) any other document that provides for the guarantee of the
obligations of the Borrowers under the Loan

                                       14
<PAGE>

Documents or that creates, or purports to create, a Lien in favor of, or for the
benefit of, the Agent or the Lenders or the Swap Provider for purposes of
securing the Obligations.

         "SINGLE EMPLOYER PLAN" of any Person means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, which is subject to Title IV of ERISA,
and (a) that is maintained for employees of such Person or any of its ERISA
Affiliates and no Person other than such Person and its ERISA Affiliates or (b)
in respect of which such Person or any of its ERISA Affiliates could have
liability under Section 4069 of ERISA in the event such plan has been or were to
be terminated.

         "SOLVENT" and "SOLVENCY" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature and (d) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute an unreasonably
small capital. The amount of contingent liabilities at any time shall be
computed as the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.

         "SUBSIDIARY" of any Person means any corporation, partnership, joint
venture, trust or estate of which (or in which) more than 50% of (a) the voting
stock of such corporation, (b) the interest in the capital or profits of such
partnership or joint venture or (c) the beneficial interest in such trust or
estate is at the time directly or indirectly owned or controlled by such Person,
by such Person and one or more of its other Subsidiaries or by one or more of
such Person's other Subsidiaries.

         "TAXES" shall have the meaning set forth in Section 2.08 hereof.

         "TERM LOAN" means each term loan advanced by the Lenders to the
Borrowers pursuant to Section 2.01.

         "TRANCHE A" means the first tranche of each Term Loan in the aggregate
principal amount of US$21,700,000 to be advanced by the Lenders to the Borrowers
in a single Borrowing for the acquisition of each Mortgaged Vessel on the
Delivery Date of such Mortgaged Vessel.

         "TRANCHE B" means the second tranche of each Term Loan in the aggregate
principal amount of US$3,100,000 to be advanced by the Lenders to the Borrowers
in a single Borrowing for the acquisition of each Mortgaged Vessel on the
Delivery Date of such Mortgaged Vessel.

         "TRANCHES" mean together Tranche A and Tranche B of each Term Loan and
in the singular means either of them, as applicable.

         "UNFUNDED CURRENT LIABILITY" of any Plan shall mean the amount, if any,
by which the value of the accumulated plan benefits under the Plan determined on
a plan termination basis in accordance with actuarial assumptions at such time
consistent with those prescribed by the

                                       15
<PAGE>

PBGC for purposes of Section 4044 of ERISA, exceeds the fair market value of all
plan assets allocable to such liabilities under Title IV of ERISA (excluding any
accrued but unpaid contributions).

         SECTION 1.02. INTERPRETATION. When used in this Agreement, (a) the
words "herein," "hereof," and "hereunder," and words of similar import shall
refer to this Agreement as a whole and not to any provision of this Agreement,
and the words "Article," "Section," "Annex," "Schedule," and "Exhibit" shall
refer to Articles and Sections of, and Annexes, Schedules and Exhibits to, this
Agreement unless otherwise specified and (b) whenever the context so requires,
(i) the neuter gender includes the masculine or feminine, the masculine gender
includes the feminine, and (ii) the singular number includes the plural, and
vice versa.

         SECTION 1.03. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".

         SECTION 1.04. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data submitted pursuant to this Agreement shall be prepared in accordance with
such principles.

                                   ARTICLE II

                                  THE ADVANCES

         SECTION 2.01. THE ADVANCES. The Lenders severally agree, on the terms
and conditions hereinafter set forth, to make available to the Borrowers, and
the Borrowers agree to borrow from each Lender (i) in respect of Tranche A, in
one Advance in respect of each Mortgaged Vessel on any Banking Day during the
period from the date hereof until the Commitment Termination Date an aggregate
principal amount not to exceed the amount set forth opposite such Lender's name
on Schedule 1 hereof in relation to Tranche A, and (ii) in respect of Tranche B,
in one Advance in respect of each Mortgaged Vessel on any Banking Day during the
period from the date hereof until the Commitment Termination Date an aggregate
principal amount not to exceed the amount set forth opposite such Lender's name
on Schedule 2 hereof in relation to Tranche B (such Lender's "Commitment"). Each
of the respective Lenders' Advances made on the same date shall together
comprise the relevant Borrowing. The Borrowings shall be in an aggregate amount
not to exceed $24,800,000 per Mortgaged Vessel (consisting of $21,700,000 of
Tranche A and $3,100,000 of Tranche B) and Advances shall be made on each
Drawdown Date by the Lenders according to their Ratable Portion in respect of
each Tranche.

         SECTION 2.02. BORROWING PROCEDURES. (a) The Advances for each Borrowing
shall be made on notice given not later than 11:00 A.M. (New York City time) on
the third Business Day prior to the relevant Drawdown Date, by the Borrowers to
the Agent (the "Notice of Borrowing"), which shall give to each Lender prompt
notice thereof by telecopier, telex or cable. Such Notice of Borrowing shall be
by telecopier, telex or cable, and, with respect to a Notice of Borrowing by
telex or cable, confirmed immediately thereafter in writing, in substantially
the form of Exhibit H hereto, specifying therein the requested (i) Drawdown
Date, which shall be a Banking Day, (ii) aggregate principal amount of the
Borrowing and (iii) the duration of the initial Interest Period applicable to
such Advances. The Interest Period for such Borrowing made on

                                       16
<PAGE>

the relevant Drawdown Date shall commence on the relevant Drawdown Date. The
Agent shall promptly notify the Borrowers and each Lender of the applicable
Interest Rate. Each Lender shall, before 3:00 P.M. (New York City time) on the
relevant Drawdown Date, make available for the account of its Lending Office to
the Agent at the Agent's Account, in same day funds, such Lender's Ratable
Portion of each Tranche of the Borrowing. After the Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in Article
III, the Agent will make such funds available to the Borrowers.

         (b) The Notice of Borrowing shall be irrevocable and binding on the
Borrowers. The Borrowers shall indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure to fulfill on or
before the Drawdown Date specified in the Notice of Borrowing the applicable
conditions set forth in Article III, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Advance to be made
by such Lender as part of the Borrowing when the Borrowing, as a result of such
failure, is not made on such date.

         (c) Unless the Agent shall have received notice from a Lender prior to
the relevant Drawdown Date that such Lender will not make available to the Agent
such Lender's Ratable Portion of each Tranche of the Borrowing, the Agent may
assume, or at its option request confirmation from such Lender, that such Lender
has made its Ratable Portion available to the Agent on such date in accordance
with subsection (a) of this Section 2.02 and the Agent shall, in reliance upon
such assumption or confirmation (as the case may be), make available to the
Borrowers on such date a corresponding amount. If and to the extent that such
Lender shall not have so made such Ratable Portion available to the Agent, such
Lender shall pay to the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrowers until the date such amount is paid to the Agent, at
the cost (expressed as a rate per annum) to the Agent of funding such Lender's
Ratable Portion. If such Lender shall pay to the Agent such corresponding
amount, such amount so paid shall constitute such Lender's Ratable Portion of
each Tranche of the Borrowing for purposes of this Agreement.

         (d) The Notice of Borrowing shall be deemed to constitute a
representation and warranty that all of the representations and warranties
contained in Section 4.01 hereof are true and correct at the date of such Notice
of Borrowing and that, to the knowledge of the Borrowers, no Default or Event of
Default has occurred and is continuing.

         SECTION 2.03. FAILURE OF LENDER TO MAKE ADVANCE. The failure of any
Lender to make available its Ratable Portion of each Tranche of the Borrowing
shall not relieve any other Lender of its obligation, if any, hereunder to make
its Advance on the relevant Drawdown Date.

         SECTION 2.04. REPAYMENT. The Borrowers shall repay to the Agent for the
ratable account of the Lenders the outstanding principal amount of Tranche A of
each of the Term Loans in 28 consecutive quarterly installments. The first 27
repayment installments of US$417,308 in respect of Tranche A of each Term Loan
shall be due on each Payment Date, and the final repayment installments of
US$10,432,692 in respect of Tranche A of each Term Loan shall be due on the
Final Payment Date. The Borrowers shall repay to the Agent for the ratable
account of the Lenders the outstanding principal amount of Tranche B of each of
the Term Loans in 12 consecutive quarterly installments. The first 11 repayment
installments of US$258,333 in

                                       17
<PAGE>

respect of Tranche B of each Term Loan shall be due on each Payment Date, and
the final repayment installments of US$258,333 in respect of Tranche B of each
Term Loan shall be due on the Final Payment Date.

         SECTION 2.05. PREPAYMENT. (a) OPTIONAL. The Borrowers may, upon at
least 10 Banking Days' notice to the Agent, stating the proposed date and
aggregate principal amount of the prepayment, prepay the outstanding principal
amount of the Term Loans in whole or ratably in part, together with accrued
interest to the date of such prepayment on the principal amount so prepaid;
PROVIDED, HOWEVER, that (i) each partial prepayment shall be in an aggregate
principal amount of not less than $500,000 (or, if the aggregate outstanding
principal amount of the Loan is less, such aggregate principal amount), and (ii)
in the event that any such prepayment is not made on the last day of an Interest
Period, the Borrowers shall be obligated to reimburse the Lenders in respect
thereof pursuant to Section 9.03(c). Each such prepayment of the Term Loans
shall be applied to the remaining installments under Tranche A and Tranche B of
each Term Loan, pro rata in accordance with the unpaid principal amounts
thereof. Amounts prepaid under this subsection (a) may not be re-borrowed.

         (b) MANDATORY.

                  (i) SALE OR TOTAL LOSS OF MORTGAGED VESSELS. In the event that
         any Borrower sells the Mortgaged Vessel owned by it pursuant to the
         provisions of Section 6.01(d) or such Vessel suffers an Event of Loss,
         the Borrowers shall be required to prepay an aggregate amount equal to
         or greater than, in the case of a sale, the remaining balance of
         principal and accrued interest of the Term Loan relating to such
         Mortgaged Vessel, or equal, in the case of an Event of Loss, to the
         proceeds of the insurance required by the relevant Mortgage on such
         Mortgaged Vessel. Any such prepayment shall be payable (1) in the case
         of a sale of the Mortgaged Vessel, concurrently with closing of such
         sale, and (2) in the case of an Event of Loss, on the earlier of (x)
         the Security Trustee's receipt of insurance proceeds or other
         compensation attributable thereto and (y) the date that is one hundred
         twenty (120) days after such Event of Loss. Simultaneously with the
         acknowledged receipt of the proceeds, the Security Trustee will release
         the Mortgage and other Liens in respect of such Mortgaged Vessel.

                  (ii) APPLICATION OF SALE OR TOTAL LOSS PROCEEDS. Proceeds of
         sale or insurance received by the Agent shall be applied: first, in
         payment of break funding costs pursuant to Section 10.03(c) plus any
         amounts then due and owing under this Agreement; second, to prepayment
         of the Tranche A Advances of the Term Loan relating to such Mortgaged
         Vessel, together with accrued interest to the date of such prepayment
         on the principal amount prepaid; third to prepayment of the Tranche B
         Advances of the Term Loan relating to such Mortgaged Vessel, together
         with accrued interest to the date of such prepayment on the principal
         amount prepaid; and fourth in payment of amounts owing under the Master
         Agreement. Any remaining proceeds thereof shall be released to the
         Borrowers or on their order. Amounts prepaid under this subsection (b)
         may not be re-borrowed.

         (c) UNWINDING OF DESIGNATED TRANSACTIONS. On or prior to any prepayment
of the Advances under this Section 2.05 or any other provision of this
Agreement, the Borrowers shall wholly or partially reverse, offset, unwind or
otherwise terminate one or more of the continuing Designated Transactions so
that the aggregate notional principal amount of the continuing

                                       18
<PAGE>

Designated Transactions thereafter remaining does not and will not in the future
(taking into account the scheduled amortization thereof) exceed the aggregate
amount of the Loan scheduled to be outstanding from time to time.

         (d) ADDITIONAL AMOUNTS PAYABLE ON PREPAYMENT. Any prepayment permitted
or required hereunder shall be accompanied by payment of (1) accrued interest on
the principal amount so prepaid to the date of that prepayment plus (2) if such
prepayment is applied to the payment of an Advance on a day other than a Payment
Date in respect of such Advance, such additional amounts as each Lender and the
Swap Provider shall in its sole reasonable discretion deem necessary to
compensate it for (A) the costs incurred by such Lender and the Swap Provider in
connection with such prepayment and (B) any actual loss or net cost incurred by
such Lender and all amounts due to the Swap Provider due to the occurrence of
such prepayment.

         SECTION 2.06. INTEREST ON THE ADVANCES. (a) INTEREST. Subject to
Section 2.06(b), the Borrowers shall pay interest on the unpaid principal amount
of each Advance owing to each Lender from the relevant Drawdown Date until such
principal amount shall be paid in full, at a rate per annum equal at all times
during each Interest Period for such Advance to the Interest Rate for such
Interest Period, payable in arrears on the last day of such Interest Period.

         (b) DEFAULT INTEREST. If the Borrowers shall default in the due and
punctual payment of any part of the principal of or interest on the Note, or any
other amount due from the Borrowers under this Agreement or any other Loan
Document, the Borrowers shall pay on demand interest thereon, to the extent
permitted by law, on a daily basis for the period from and including the date of
such default up to the date of actual payment (whether before or after judgment)
at a rate per annum equal to the Default Interest Rate.

         SECTION 2.07. PAYMENTS AND COMPUTATIONS. (a) TIME. PLACE AND MANNER.
The obligations of the Borrowers under the Note and all other amounts payable
under this Agreement by the Borrowers to the Lenders and the Agent shall be paid
in lawful money of the United States and in funds which are immediately
available to the Lenders and the Agent by 10:00 A.M. New York time on the date
payment is due (or in the case of amounts expressed to be payable on demand
within three days of such demand being made in writing) to the Agent's Account
or at such other place as the Agent may from time to time designate, without
set-off, counterclaim or defense. Provided that such funds are received by the
Agent at or before the time designated above, the Agent will on the date
received cause to be distributed like funds relating to the payment of principal
or interest or fees ratably (other than amounts payable under Section 2.07(e),
2.10 or 2.11) to the Lenders for the account of their respective Lending
Offices, in each case to be applied in accordance with the terms of this
Agreement. Partial payments of overdue amounts in respect of fees, expense,
interest and/or principal shall (unless specifically provided for elsewhere
herein or in any other Loan Document) be applied to the payment of such overdue
fees, expenses, interest and/or principal, as the case may be, in such order as
the Agent may determine unless otherwise directed by the Lenders.

         (b) COMPUTATION OF INTEREST AND FEES. All computations of interest and
of fees shall be made by the Agent on the basis of a year of 360 days, in each
case for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such interest or fees are payable.

                                       19
<PAGE>

         (c) NON-BANKING DAY PAYMENTS. If payment to be made by the Borrowers
hereunder or under the Note shall become due on a day other than a Banking Day,
that payment shall be made on the next following Banking Day (unless that next
following Banking Day falls within the next calendar month, in which event that
date shall be the immediately preceding Banking Day) and such extension or
reduction of time shall be included in computing any interest or fees in respect
of such payment.

         (d) DISTRIBUTION OF PAYMENTS TO THE LENDERS. Unless the Agent shall
have received notice from the Borrowers prior to the date on which any payment
is due to the Lenders hereunder or under the Note that the Borrowers will not
make such payment in full, the Agent may assume that the Borrowers have made
such payment in full on such date and, in reliance upon such assumption, the
Agent may cause to be distributed to each Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent the Borrowers
shall not have so made such payment in full to the Agent, each Lender shall
repay to the Agent forthwith on demand such amount distributed to such Lender
together with interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such amount to the
Agent, at the federal funds rate as determined by the Agent.

         (e) FUNDING LOSSES. The Borrowers agree to indemnify each Lender
against any loss or net cost (as determined by such Lender) resulting from (i)
any relending, depositing or sale by such Lender of funds which may have been
acquired by it to fund its participation in an Advance and which the Borrowers
shall fail to borrow under Section 2.01 after giving the Notice of Borrowing as
provided in Section 2.02, or (ii) any borrowing or other acquisition by such
Lender of funds which may be required by it to cover its position by reason of
failure of the Borrowers to pay when due any principal of or interest on the
Note or any other amount payable by the Borrowers hereunder or under any of the
other Loan Documents.

         SECTION 2.08. TAXES. Any and all payments by the Borrowers hereunder or
under the Note or under any of the other Loan Documents shall be made, in
accordance with Section 2.07, without deduction by reason of any present or
future income, stamp, sales, use, value added, goods and services or other taxes
or levies, imposts, deductions, charges, compulsory loans, fees, duties or
withholdings whatsoever imposed, assessed, levied or collected by or within any
state or nation or any political subdivision or taxing authority thereof or
therein on or in respect of (i) this Agreement, the Note, any of the other Loan
Documents, or any of the Collateral (including, without limitation, the
Mortgaged Vessels), (ii) the acquisition, ownership or transfer of any thereof,
(iii) the registration, notarization or other formalization of any thereof and
(iv) any payments of principal, interest, charges, fees or other amounts made
on, under or in respect of the Note, this Agreement, any Loan Document or any
such Collateral, excluding (x) with respect to a Lender, taxes on or measured by
the overall net income of such Lender imposed by any state or nation or any
political subdivision or taxing authority thereof or therein as a result of such
Lender doing business in such jurisdiction (other than any such state, nation,
political subdivision or taxing authority imposing such taxes solely as a result
of the transactions contemplated by this Agreement, any Loan Document or as a
result of the location or operation of the Mortgaged Vessels or any other
Collateral in such jurisdiction if such Lender would not be subject to taxation
in such jurisdiction but for the transactions contemplated by this Agreement or
any other Loan Document) or (y) such taxes as are levied on a Lender as a result
of business transactions of such Lender unrelated to this Agreement, any Loan
Document or the Mortgaged Vessels, together with interest and penalties with
respect thereto, if any, (such taxes, levies,

                                       20
<PAGE>

imposts, deductions, charges, compulsory loans, fees, duties and withholdings,
together with interest and penalties, if any, being herein collectively defined
as "Taxes"). If a Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder or under any Note or the Collateral, (i)
the sum payable shall be increased as may be necessary so that after making all
required deductions of Taxes (including deductions of Taxes applicable to
additional sums payable under this Section 2.08) each Lender receives an amount
equal to the sum it would have received had no such deduction of Taxes been
made, (ii) such Borrower shall make such deductions and (iii) such Borrower
shall pay the full amount required to be deducted to the relevant tax authority
or other authority in accordance with and in the time allowed by applicable law.
Within 30 days after the date of payment of Taxes, such Borrower shall furnish
to the Agent an original receipt showing payment of such Taxes or such other
appropriate evidence of payment thereof as is acceptable to Agent. All Taxes
shall be paid by a Borrower, for its own account, to the appropriate authority
before the date on which penalties attach thereto unless contested in good faith
by appropriate proceedings. The Borrowers will jointly and severally indemnify
each Lender against, and reimburse each Lender on written demand for, any Taxes.
The agreements in this Section 2.08 shall survive the termination of this
Agreement and the payment of the Note and all other amounts payable hereunder.

         SECTION 2.09. INCREASED COST AND REDUCED RETURN. The Borrowers agree to
jointly and severally indemnify and hold each Lender harmless against the net
cost to such Lender (as determined by such Lender in its sole discretion absent
manifest error) of (a) any material and adverse change in the basis of taxation
by any government of payments of principal of or interest on its Advances and
(b) any reserve requirements, taxes or other charges or any other requirements
imposed or implemented by any government or governmental regulatory agency after
the date of this Agreement on its participation in the Loan or any Advance
thereof or any deposits or other funds acquired by such Lender to make its
participation in the Loan of any Advance thereof, which requirements, taxes or
charges have the effect of increasing the cost to such Lender of making or
maintaining its participation in the Loan or any Advance thereof; PROVIDED,
HOWEVER, that, if by the provisions of any applicable law, the payment or
reimbursement of any such net cost cannot be legally made, then the Borrowers
shall be entitled at any time thereafter, on giving not less than fifteen (15)
days prior notice in writing to the Agent, to prepay the whole (but not a part)
of the aggregate outstanding principal amount of such Lender's participation in
the Loan, without penalty or premium, such prepayment to be accompanied by
payment of accrued interest to the date of such prepayment and of all other
amounts owing to such Lender pursuant to this Agreement, any of the other Loan
Documents or any of the Collateral as well as such amounts as such Lender shall
in its sole discretion absent manifest error deem necessary to compensate it for
any loss or net cost incurred by it due to the occurrence of any such
prepayment, whereupon such Lender's obligations to continue to make its
participation in the Advances available shall forthwith terminate.

         SECTION 2.10. ILLEGALITY. In the event that by reason of any change in
applicable laws or regulations or regulatory requirements, or in the
interpretation thereof, by any governmental or regulatory authority charged with
the administration thereof, it becomes unlawful for a Lender to maintain or give
effect to its obligations as contemplated by this Agreement, such Lender will
notify the Borrowers and the Agent to that effect and thereupon such Lender and
the Borrowers shall negotiate in good faith to agree on terms for such Lender to
continue its participation in the Loan on a basis which is not unlawful. In the
event no agreement shall be reached between the Borrowers and such Lender within
a period which in the absolute discretion of such Lender is

                                       21
<PAGE>

reasonable, such Lender (i) will use its reasonable efforts to find a substitute
Lender and (ii) shall be entitled to give notice to the Borrowers and the Agent
that such Lender's obligation to make and/or maintain its participation in the
Advances shall be forthwith terminated and thereupon the amount of its
participation in the Loan, or any relevant part thereof outstanding, shall
become due and payable in full on the first Payment Date to occur following the
receipt by the Borrowers of such notice, together with accrued interest thereon
and other sums payable hereunder, and such amounts as such Lender shall specify
to be necessary to compensate it for any loss and expenses incurred by it on
such Payment Date as a result of such prepayment, unless earlier prepayment is
required by any law, regulation and/or regulatory requirement.

         SECTION 2.11. DESIGNATED TRANSACTIONS. The Swap Provider undertakes to
enter into Designated Transactions in the aggregate notional principal amount up
to or equal to the aggregate principal amount of Tranche A and Tranche B of each
Term Loan on such terms as the Swap Provider and Party B shall agree.

                                   ARTICLE III

                              CONDITIONS PRECEDENT

         SECTION 3.01. CONDITIONS PRECEDENT TO THE FIRST BORROWING. The
obligation of each Lender to make its Advance on the first Drawdown Date is
subject to the following conditions precedent having been satisfied (or waived
in writing by the Lenders) on or prior to the first Drawdown Date:

         (a) the Lenders shall have been given such access to the management,
records, books of account, contracts and properties of the Credit Parties as
they shall have reasonably requested;

         (b) the Borrowers shall have paid, or caused to be paid, all accrued
fees then due and payable pursuant hereto;

         (c) the Borrowers shall have opened each of the Earnings Accounts; and

         (d) the Agent shall have received on or before the first Drawdown Date
(except as provided in Section 3.01(d)(xvii)) each of the following, each (where
applicable) dated as of the first Drawdown Date (unless otherwise specified), in
form and substance satisfactory to the Agent (unless otherwise specified) and
(except for the Note) in sufficient copies for each Lender:

                  (i)      the Note to the order of the Agent, duly executed by
                           the Borrowers;

                  (ii)     copies of the resolutions of the board of directors
                           of each of the Credit Parties, certified (as of a
                           date reasonably near the first Drawdown Date) by the
                           Secretary or Assistant Secretary of such Credit Party
                           as being a true and correct copy thereof, approving
                           this Agreement and each other Loan Document to which
                           such Credit Party is or is to be a party, and of all
                           documents evidencing shareholder approval and any
                           other necessary corporate action and governmental
                           approvals for such Credit Party with respect to this
                           Agreement, the Note and each other Loan Document to
                           which such Credit Party is or is to be a party;

                                       22
<PAGE>

                  (iii)    a certificate of the Secretary or an Assistant
                           Secretary of each of the Credit Parties certifying
                           the names and true signatures of the respective
                           officers of such Credit Party authorized to sign this
                           Agreement and each other Loan Document to which such
                           Credit Party is or is to be a party and the other
                           documents to be delivered hereunder and thereunder;

                  (iv)     copies of the articles of incorporation, bylaws and
                           other constitutive documents of each of the Credit
                           Parties and each amendment thereto, certified (as of
                           a date reasonably near the first Drawdown Date) by
                           the Secretary or Assistant Secretary of such Credit
                           Party as being a true and correct copy thereof;

                  (v)      copies of certificates dated as of a date reasonably
                           near the first Drawdown Date, certifying that each of
                           the Credit Parties is duly incorporated and in
                           goodstanding under the laws of such Credit Party's
                           jurisdiction of incorporation;

                  (vi)     a certificate of each of the Credit Parties, signed
                           on behalf of each Credit Party by its Secretary or
                           any Assistant Secretary, dated as of the first
                           Drawdown Date (the statements made in such
                           certificate shall be true on and as of the first
                           Drawdown Date), certifying as to (A) the absence of
                           any amendments to the constitutive documents of such
                           Credit Party since the date of the certificate
                           referred to in subclause (iv) above, (B) the absence
                           of any proceeding for the dissolution or liquidation
                           of such Credit Party, (C) the veracity in all
                           material respects of the representations and
                           warranties contained in this Agreement as though made
                           on and as of the first Drawdown Date and (D) the
                           absence of any event occurring and continuing, or
                           resulting from the making of the Loan that
                           constitutes a Default;

                  (vii)    a certificate of each of the Credit Parties, signed
                           on behalf of each Credit Party by its Secretary or
                           any Assistant Secretary, to the effect that no
                           information provided by such Credit Party to the
                           Agent or any Lender contained or contains any
                           material misstatement of fact or omitted or omits to
                           state any material fact necessary to make the
                           statements therein, in the light of the circumstances
                           under which they were made, not misleading;

                  (viii)   evidence that the relevant Mortgaged Vessel has been
                           sold by its seller to and purchased and accepted by
                           the relevant Borrower, and duly documented in the
                           name of such Borrower under the laws and flag of the
                           Republic of Liberia;

                  (ix)     each of the following Security Documents, which shall
                           be in full force and effect, with no default
                           thereunder and with no accrued right of termination
                           under any thereof:

                           (A)      the Mortgage pertaining to the relevant
                                    Mortgaged Vessel, duly executed by the
                                    relevant Borrower and duly recorded in

                                       23
<PAGE>

                                    accordance with the laws of the Republic of
                                    Liberia (and all fees and expenses in
                                    connection with the recordation of the
                                    Mortgage shall have been duly paid);

                           (B)      the Assignment of Earnings pertaining to the
                                    relevant Mortgaged Vessel, duly executed by
                                    the relevant Borrower; and

                           (C)      the Assignment of Insurances pertaining to
                                    the relevant Mortgaged Vessel, duly executed
                                    by the relevant Borrower, together with a
                                    duly signed Notice of Assignment in the form
                                    attached thereto;

                  (x)      either (A) duly executed UCC-l financing statements
                           and such other documents as the Agent may request,
                           the filing or recordation of which the Lenders, the
                           Agent or its counsel may deem necessary or desirable
                           to create or perfect the Liens created by the
                           Security Documents in the Collateral under applicable
                           law, or (B) evidence of the filing or recordation of
                           the same in such offices as the Agent shall have
                           specified;

                  (xi)     evidence of the completion of all other recordings
                           and filings of or with respect to the Security
                           Documents that the Lenders or the Agent may deem
                           necessary or desirable in order to perfect and
                           protect the Liens created thereby;

                  (xii)    evidence that each and every approval, waiver or
                           consent of any governmental authority or regulatory
                           body which in the discretion of the Agent may be
                           necessary or appropriate in connection with the
                           execution, delivery and performance of the Loan
                           Documents being executed in connection with the first
                           Borrowing and the transactions contemplated thereby
                           has been obtained, is in full force and effect and is
                           valid and sufficient for its purposes;

                  (xiii)   a certificate in respect of the relevant Mortgaged
                           Vessel dated within ten (10) days of the date of the
                           making of the Advances duly issued by the
                           Classification Society to the effect that the
                           Mortgaged Vessel is in class and is free of all
                           recommendations and notations affecting class;

                  (xiv)    a Certificate of Ownership and Encumbrance with
                           respect to the relevant Mortgaged Vessel issued by
                           the Office of the Deputy Commissioner of Maritime
                           Affairs of the Republic of Liberia in New York, New
                           York (the "Deputy Commissioner's Office"), confirming
                           that (1) such Mortgaged Vessel is duly registered
                           under the laws and flag of the Republic of Liberia in
                           the name of the relevant Borrower and (2) there are
                           on record no mortgages, liens or other encumbrances
                           on such Mortgaged Vessel other than the Mortgage;

                  (xv)     evidence of insurance effected with respect to the
                           relevant Mortgaged Vessel naming the Security Trustee
                           as insured and loss payee with such responsible and
                           reputable insurance companies or associations, and in

                                       24
<PAGE>

                           such amounts and covering such risks (including,
                           without limitation, Marine and War, Hull and
                           Machinery, Protection and Indemnity, Mortgagee's
                           Interest Insurance, including Additional
                           Perils-Pollution) as is required pursuant to the
                           terms of the applicable Mortgage, and a BankAssure
                           report in form and substance satisfactory to the
                           Agent regarding the adequacy of such insurance
                           coverage;

                  (xvi)    a valuation of the Fair Market Value of the relevant
                           Mortgaged Vessel, dated not more than 10 days prior
                           to the first Drawdown Date and showing such Fair
                           Market Value to be not less than 115% of the amount
                           of the Loan that will be outstanding on the first
                           Drawdown Date;

                  (xvii)   copies of all ISM Code Documentation required to be
                           maintained in respect of the relevant Mortgaged
                           Vessel (which documents may be provided within 3
                           Banking Days after the first Drawdown Date if such
                           documents are not available on or prior to the first
                           Drawdown Date);

                  (xviii)  a favorable opinion of Watson, Farley & Williams,
                           special Liberian and New York counsel for the
                           Lenders, in form, scope and substance satisfactory to
                           the Lenders; and

                  (xix)    a favorable opinion of counsel for the Credit Parties
                           as to matters of New York law, Delaware Law and
                           United States federal law, in form, scope and
                           substance satisfactory to the Lenders.

         SECTION 3.02. CONDITIONS PRECEDENT TO THE SECOND BORROWING. The
obligation of each Lender to make its Advance on the second Drawdown Date is
subject to the following conditions precedent having been satisfied (or waived
in writing by the Lenders) on or prior to the second Drawdown Date:

         (a) the Borrowers shall have paid, or caused to be paid, all fees due
and payable on or before the second Drawdown Date; and

         (b) the Agent shall have received on or before the second Drawdown Date
(except as provided in Section 3.01(b)(xi)) each of the following, each dated as
of the second Drawdown Date (unless otherwise specified) in form and substance
satisfactory to the Agent (unless otherwise specified) and in sufficient copies
for each Lender:

                  (i)      a certificate of each of the Credit Parties, signed
                           on behalf of each Credit Party by its Secretary or
                           any Assistant Secretary, dated as of the second
                           Drawdown Date (the statements made in such
                           certificate shall be true on and as of the second
                           Drawdown Date), certifying as to (A) the absence of
                           any amendments to the constitutive documents of such
                           Credit Party since the date of the certificate
                           referred to in Section 3.01(d)(vi) above, (B) the
                           absence of any proceeding for the dissolution or
                           liquidation of such Credit Party, (C) the veracity in
                           all material respects of the representations and
                           warranties contained in this Agreement as though made
                           on and as of the second Drawdown Date and (D) the
                           absence of any event occurring and

                                       25
<PAGE>

                           continuing, or resulting from the making of the Loan
                           that constitutes a Default;

                  (ii)     evidence that the relevant Mortgaged Vessel has been
                           sold to and accepted by the relevant Borrower, and
                           duly documented in the name of such Borrower under
                           the laws and flag of the Republic of Liberia;

                  (iii)    each of the following Security Documents, which shall
                           be in full force and effect, with no default
                           thereunder and with no accrued right of termination
                           under any thereof:

                           (A)      the Mortgage pertaining to the relevant
                                    Mortgaged Vessel, duly executed by the
                                    relevant Borrower and duly recorded in
                                    accordance with the laws of the Republic of
                                    Liberia (and all fees and expenses in
                                    connection with the recordation of the
                                    Mortgage shall have been duly paid);

                           (B)      the Assignment of Earnings pertaining to the
                                    relevant Mortgaged Vessel, duly executed by
                                    the relevant Borrower; and

                           (C)      the Assignment of Insurances pertaining to
                                    the relevant Mortgaged Vessel, duly executed
                                    by the relevant Borrower, together with a
                                    duly signed Notice of Assignment in the form
                                    attached thereto;

                  (iv)     either (A) duly executed UCC-l financing statements
                           and such other documents as the Agent may request,
                           the filing or recordation of which the Lenders, the
                           Agent or its counsel may deem necessary or desirable
                           to create or perfect the Liens created by the
                           Security Documents in the Collateral under applicable
                           law, or (B) evidence of the filing or recordation of
                           the same in such offices as the Agent shall have
                           specified;

                  (v)      evidence of the completion of all other recordings
                           and filings of or with respect to the Security
                           Documents that the Lenders or the Agent may deem
                           necessary or desirable in order to perfect and
                           protect the Liens created thereby;

                  (vi)     evidence that each and every approval, waiver or
                           consent of any governmental authority or regulatory
                           body which in the discretion of the Agent may be
                           necessary or appropriate in connection with the
                           execution, delivery and performance of the Loan
                           Documents being executed in connection with the
                           second Borrowing and the transactions contemplated
                           thereby has been obtained, is in full force and
                           effect and is valid and sufficient for its purposes;

                  (vii)    a certificate in respect of the relevant Mortgaged
                           Vessel dated within ten (10) days of the date of the
                           making of the Advances duly issued by the
                           Classification Society to the effect that the
                           Mortgaged Vessel is in class and is free of all
                           recommendations and notations affecting class;

                                       26
<PAGE>

                  (viii)   a Certificate of Ownership and Encumbrance with
                           respect to the relevant Mortgaged Vessel issued by
                           the Deputy Commissioner's Office, confirming that (1)
                           such Mortgaged Vessel is duly registered under the
                           laws and flag of the Republic of Liberia in the name
                           of the relevant Borrower and (2) there are on record
                           no mortgages, liens or other encumbrances on such
                           Mortgaged Vessel other than the Mortgage;

                  (ix)     evidence of insurance effected with respect to the
                           relevant Mortgaged Vessel naming the Security Trustee
                           as insured and loss payee with such responsible and
                           reputable insurance companies or associations, and in
                           such amounts and covering such risks (including,
                           without limitation, Marine and War, Hull and
                           Machinery, Protection and Indemnity, Mortgagee's
                           Interest Insurance, including Additional
                           Perils-Pollution) as is required pursuant to the
                           terms of the applicable Mortgage, and a BankAssure
                           report in form and substance satisfactory to the
                           Agent regarding the adequacy of such insurance
                           coverage;

                  (x)      a valuation of the Fair Market Value of the relevant
                           Mortgaged Vessel, dated not more than 10 days prior
                           to the second Drawdown Date and showing the aggregate
                           Fair Market Value of the Mortgaged Vessels to be not
                           less than 115% of the amount of the Loan that will be
                           outstanding on the second Drawdown Date;

                  (xi)     copies of all ISM Code Documentation required to be
                           maintained in respect of the relevant Mortgaged
                           Vessel (which documents may be provided within 3
                           Banking Days after the second Drawdown Date if such
                           documents are not available on or prior to the second
                           Drawdown Date);

                  (xii)    a favorable opinion of Watson, Farley & Williams,
                           special New York counsel for the Lenders, in form,
                           scope and substance satisfactory to the Lenders; and

                  (xiii)   a favorable opinion of counsel for the Credit Parties
                           as to matters of New York law, Delaware law and
                           United States federal law, in form, scope and
                           substance satisfactory to the Lenders.

         SECTION 3.03. CONDITIONS PRECEDENT TO EACH BORROWING. The obligation of
the Lenders to make available their Ratable Portion of each Tranche of each
Borrowing is further subject to the satisfaction of the following conditions:

         (a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 and such other documents, opinions and instruments relating to the
transactions contemplated hereby as any Lender or the Agent may reasonably
request;

         (b) immediately after the making of such Borrowing, the aggregate
outstanding principal amount of the Advances will not exceed the Commitments;

                                       27
<PAGE>

         (c) immediately before and after giving effect to the making of such
Borrowing, no Default shall have occurred and be continuing;

         (d) the representations and warranties of the Credit Parties contained
in this Agreement shall be true on and as of the date of the making of such
Borrowing, unless such representation or warranty shall expressly relate to a
different date;

         (e) except as permitted in this Agreement, there has not been any
material change of circumstances in respect of any of the Credit Parties or its
shareholders;

         (f) any inspection reports of the Vessels requested by the Agent as
permitted hereunder shall be satisfactory to the Agent and the Agent shall be
satisfied that upon a review of the class records by the Agent or a surveyor
appointed by the Agent that the Mortgaged Vessels are being properly maintained
within the requirements of the relevant Classification Society;

         (g) each of the Credit Parties shall have complied with all laws,
rules, regulations, contracts or other requirements which may be applicable to
it, the absence of which would have a Material Adverse Effect on (1) any of the
Borrowers or the Guarantors, (2) the Loan Documents or (3) the Collateral; and

         (h) the Borrowers shall have paid, or caused to be paid, all costs
(including legal fees), incurred by the Lenders, the Agent, the Security Trustee
and the Swap Provider in connection with the preparation, execution and
performance of this Agreement and the other Loan Documents.

         Unless waived by the Agent or the Lenders, the making of such Borrowing
hereunder shall be deemed to be a representation and warranty by the Credit
Parties to the Lenders on the date of such borrowing as to the facts specified
in clauses (b), (c) and (d) of this Section 3.03.

         SECTION 3.04. DETERMINATIONS UNDER SECTION 3.01, 3.02 AND 3.03. For
purposes of determining compliance with the conditions specified in Section
3.01, 3.02 and 3.03, each Lender shall be deemed to have consented to, approved
or accepted or to be satisfied with each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to
the Lenders unless an officer of the Agent responsible for the transactions
contemplated by this Agreement shall have received notice from such Lender prior
to the relevant Drawdown Date specifying its objection thereto and such Lender
shall not have made available to the Agent such Lender's Ratable Portion in
respect of each Tranche.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

         SECTION 4.01. REPRESENTATIONS AND WARRANTIES. Except as otherwise
indicated, each of the Credit Parties represents and warrants as of the date
hereof and as of each the Drawdown Date as follows:

         (a) CORPORATE EXISTENCE AND POWER. Each of the Credit Parties (i) is a
company duly organized, validly existing and in good standing under the laws of
such Credit Party's jurisdiction

                                       28
<PAGE>

of incorporation, (ii) is duly qualified and in good standing as a foreign
company or corporation in each other jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so qualify or be
licensed, except where the failure to so qualify or be licensed would not result
in a Material Adverse Effect and (iii) has all requisite corporate power and
authority to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted.

         (b) AUTHORIZATION; NO VIOLATION. The execution, delivery and
performance by each Credit Party of each of the Loan Documents to which it is or
is to be a party, and the consummation of other transactions contemplated
thereby, are within such Credit Party's corporate or company powers, have been
duly authorized by all necessary corporate action, and do not (i) contravene
such Credit Party's articles of incorporation or bylaws, (ii) violate, to the
best knowledge of the such Credit Party, any law, rule, regulation (including,
without limitation, Regulation X of the Board of Governors of the Federal
Reserve System), order, writ, judgment, injunction, decree, determination or
award, (iii) conflict with or result in the breach of, or constitute a default
under, any loan agreement, contract, indenture, mortgage, deed of trust, lease
or other instrument binding on or affecting such Credit Party or any of its
properties other than the loan agreements and other documents entered into
pursuant to Borrowings under this Agreement, or (iv) except for the Liens
created by the Security Documents, result in or require the creation or
imposition of any Lien upon or with respect to any of the properties of such
Credit Party. To the best knowledge of the Credit Parties, none of the Credit
Parties is not in violation, of any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or in breach of any such
contract, loan agreement, indenture, mortgage, deed of trust, lease or other
instrument.

         (c) GOVERNMENTAL CONSENTS. No authorization, approval, consent or other
action by, and no notice to or filing with, any governmental authority or
regulatory body or any other consent or approval of any other Person is required
for (i) the due execution, delivery and performance by any of the Credit Parties
of this Agreement or any other Loan Document to which it is or is to be a party
or for the consummation of the transactions contemplated thereby, (ii) the grant
by any of the Credit Parties of the Liens granted by them pursuant to the
Security Documents, (iii) except as contemplated in Section 4.01(s), the
perfection or maintenance of the Liens created by the Security Documents
(including the first priority nature thereof), or (iv) the exercise by the
Security Trustee or any Lender of their rights under the Loan Documents or the
remedies in respect of the Collateral pursuant to the Security Documents, except
for the authorizations, approvals, consents, actions, notices and filings which
have been duly obtained, taken, given or made and are in full force and effect.

         (d) BINDING EFFECT. This Agreement has been, and the Note and each
other Loan Document when delivered hereunder will have been, duly executed and
delivered by each of the Credit Parties as applicable thereto. This Agreement
is, and the Note and each other Loan Document when delivered hereunder will be,
the legal, valid and binding obligations of the Credit Parties thereto,
enforceable against such Credit Parties in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforceability of creditor's rights generally and to general
principles of equity. The Borrowers are entering into this Agreement and
borrowing hereunder for their own account.

         (e) FINANCIAL INFORMATION. The balance sheets, as at the date of this
Agreement, of each of the Credit Parties are complete and correct, and fairly
present the financial condition of each

                                       29
<PAGE>

such Credit Party. The Credit Parties have no contingent obligation, liability
for taxes or unusual forward or long-term commitment except as specifically set
forth in the balance sheets. Since the date of this Agreement no dividend or
other distribution has been declared or paid or made to any shareholder of any
of the Credit Parties except as permitted in Section 6.01(h) or (i).

         (f) NO LITIGATION. Except as disclosed in Schedule 4.01(f), there is no
pending or, to the best knowledge of the Borrowers threatened, action,
proceeding, governmental investigation or arbitration affecting any of the
Borrowers before any court, governmental agency or arbitrator, in which there is
a reasonable possibility of an adverse decision which could result in a Material
Adverse Effect or which in any manner draws into question the legality,
validity, binding effect or enforceability of the Loan Documents or the
consummation of the transactions contemplated hereby or thereby.

         (g) COMPLIANCE WITH ERISA. (i) Schedule 4.01(g) sets forth each Plan
maintained by the Credit Parties; each Plan, other than any Multiple Employer
Plan, (and each related trust, insurance contract or fund) is in substantial
compliance with its terms and with all applicable laws, including without
limitation ERISA and the Code; each Plan, other than any Multiple Employer Plan,
(and each related trust, if any) which is intended to be qualified under Section
401(a) of the Code has received a determination letter from the Internal Revenue
Service to the effect that it meets the requirements of Sections 401(a) and
501(a) of the Code; no Reportable Event has occurred; to the best knowledge of
the Credit Parties or ERISA Affiliates no Plan which is a Multiple Employer Plan
is insolvent or in reorganization; no Plan has an Unfunded Current Liability in
an amount material to a Credit Party's operation; no Plan (other than a Multiple
Employer Plan) which is subject to Section 412 of the Code or Section 302 of
ERISA has an accumulated funding deficiency, within the meaning of such sections
of the Code or ERISA, or has applied for or received a waiver of an accumulated
funding deficiency or an extension of any amortization period, within the
meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all
contributions required to be made with respect to a Plan have been or will be
timely made (except as disclosed on Schedule 4.01(g)); neither the Credit
Parties nor any of their Subsidiaries nor ERISA Affiliate has incurred any
material liability (including any indirect, contingent or secondary liability)
to or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or
4975 of the Code or expects to incur any such liability under any of the
foregoing sections with respect to any Plan; no condition exists which presents
a material risk to the Credit Parties, any of their Subsidiaries or any ERISA
Affiliate of incurring a liability to or on account of a Plan pursuant to the
foregoing provisions of ERISA and the Code; no proceedings have been instituted
by the PBGC to terminate or appoint a trustee to administer any Plan (in the
case of a Multiple Employer Plan, to the best knowledge of the Credit Parties or
ERISA Affiliates) which is subject to Title IV of ERISA; no action, suit,
proceeding, hearing, audit or investigation with respect to the administration,
operation or the investment of assets of any Plan (other than routine claims for
benefits) is pending, or, to the best knowledge of the Credit Parties, expected
or threatened which could reasonably be expected to have a Material Adverse
Effect; using actuarial assumptions and computation methods consistent with Part
1 of subtitle E of Title IV of ERISA, the Credit Parties, any of their
Subsidiaries and ERISA Affiliates would have no liabilities to any Plans which
are Multiple Employer Plans in the event of a complete withdrawal therefrom in
an amount which could reasonably be expected to have a Material Adverse Effect;
each group health plan (as defined in Section 607(1) of ERISA or Section
4980B(g)(2) of the Code) which covers or has covered employees or former
employees

                                       30
<PAGE>

of the Credit Parties, their Subsidiaries or any ERISA Affiliate has at all
times been operated in material compliance with the provisions of Part 6 of
subtitle B of Title I of ERISA and Section 4980B of the Code; no lien imposed
under the Code or ERISA on the assets of the Credit Parties or any of their
Subsidiaries or any ERISA Affiliate exists nor has any event occurred which
could reasonably be expected to give rise to any such lien on account of any
Plan; and the Credit Parties and their Subsidiaries do not maintain or
contribute to any employee welfare plan (as defined in Section 3(1) of ERISA)
which provides benefits to retired employees or other former employees (other
than as required by Section 601 of ERISA) or any Plan the obligations with
respect to which could reasonably be expected to have a Material Adverse Effect.

         (ii) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. All
contributions required to be made with respect to a Foreign Pension Plan have
been or will be timely made. None of the Credit Parties nor any of their
Subsidiaries has incurred any obligation in connection with the termination of
or withdrawal from any Foreign Pension Plan that could reasonably be expected to
have a Material Adverse Effect. None of the Credit Parties nor any of its
Subsidiaries maintains or contributes to any Foreign Pension Plan the
obligations with respect to which could in the aggregate reasonably be expected
to have a Material Adverse Effect.

         (h) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as disclosed in Schedule
4.01(h), the operations and properties of each of the Credit Parties comply with
all Environmental Laws, all necessary Environmental Permits have been obtained
and are in effect for the operations and properties of the Credit Parties and
the Credit Parties are in compliance with all such Environmental Permits. Except
as disclosed in Schedule 4.01(h), no circumstances exist that are reasonably
likely to (i) form the basis of an Environmental Action against any of the
Credit Parties or any of their respective properties or (ii) cause any such
property to be subject to any restrictions on ownership, occupancy, use or
transferability under any Environmental Law that would, in the case of either
(i) or (ii) above, be reasonably likely to result in a Material Adverse Effect,
and no Environmental Incident has occurred that would be reasonably likely to
result in a Material Adverse Effect.

         (i) COMPLIANCE WITH STATUTES, ETC. Each of the Credit Parties is in
compliance in all material respects with all other applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property, except such noncompliance as could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Without limiting the generality of the foregoing, and except as
set forth on Schedule 4.01(i)(1), each Mortgaged Vessel is, or will be upon
acquisition, operated in material compliance with all applicable maritime laws,
rules and regulations. Schedule 4.01(i)(2) correctly lists all ISM Code
Documentation required to be maintained in respect of each of the Mortgaged
Vessels.

         (j) MARGIN STOCK. The Credit Parties do not own and do not have any
intention of acquiring any "margin stock" as defined in Regulations G, T, U or X
of the Board of Governors of the Federal Reserve System. None of the Credit
Parties is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock and no proceeds of the Loan will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of

                                       31
<PAGE>

purchasing or carrying any margin stock. The Credit Parties, nor any agent
acting on their behalf, have not taken or will not take any action which might
cause the transactions contemplated herein or in any other Loan Document to
violate Regulation G, T, U or X or any other regulation of the Board of
Governors of the Federal Reserve System, as now in effect or as the same may
hereafter be in effect.

         (k) SUBSIDIARIES AND MATERIAL ASSETS. None of the Borrowers has any
direct or indirect Subsidiaries. Schedule 4.01(k)(1) correctly lists all direct
and indirect Subsidiaries of Seabulk International and the percentage of capital
stock of each such Subsidiary owned, directly or indirectly, by Seabulk
International. Schedule 4.01(k)(2) lists all of the material assets owned or
leased by each Credit Party.

         (l) NOT "INVESTMENT COMPANY", "HOLDING COMPANY" OR "PUBLIC UTILITY".
None of the Credit Parties is (i) subject to the Investment Company Act of 1940,
as amended, or (ii) a "holding company" or a "subsidiary company" of a "holding
company" or an affiliate of a "holding company" or of a "subsidiary company" of
a "holding company" or a "public utility" within the meaning of the Public
Utility Holding Company of 1935, as amended, or (iii) a "public utility" within
the meaning of the Federal Power Act of 1920, as amended. Neither the making of
any Advances nor the application of the proceeds or repayment thereof by the
Borrowers, nor the consummation of the other transactions contemplated hereby,
will constitute a violation by the Borrowers of any provision of such acts or
any rule, regulation or order of the U.S. Securities and Exchange Commission
thereunder.

         (m) OTHER OBLIGATIONS. None of the Borrowers is a party to any other
loan or security agreement except as disclosed previously to the Lenders, and
has not filed or permitted to be filed any financing statement, mortgage, pledge
or charge with respect to any assets owned by it and, as of the date hereof,
there is no security interest, lien, charge or encumbrance of any kind on any of
its properties or assets except in favor of the Security Trustee. Schedule
4.01(m) correctly lists the principal amount and maturity date of all material
financings and lease agreements of each of the Credit Parties as well as the
name of the lender(s) or lessor, the borrower(s) or lessee and all guarantors.

         (n) TAXES. Each of the Credit Parties has filed, has caused to be filed
or has been included in all tax returns (federal, state, local and foreign)
required to be filed by it, and has paid all taxes shown thereon to be due,
together with applicable interest and penalties.

         (o) PLACE OF BUSINESS. The location of each of the Borrowers for
purposes of Article 9 of the Uniform Commercial Code is Florida.

         (p) USE OF PROCEEDS. The Borrowers are using the proceeds of the
Advances solely for the purpose of financing up to 80% of the aggregate purchase
price of the Mortgaged Vessels.

         (q) ASSET CONTROL. Neither of the Borrowers is a "national" of any
"designated foreign country", within the meaning of the Foreign Asset Control
Regulations or the Cuban Asset Control Regulations of the U.S. Treasury
Department, 31 C.F.R., Subtitle B, Chapter V, as amended, or any regulations or
rulings issued thereunder. Neither the making of the Advances nor the use of the
proceeds thereof nor the performance by the Borrowers of this Agreement

                                       32
<PAGE>

violates any statute, regulation or executive order restricting loans to,
investments in, or the export of assets to, foreign countries or entities doing
business there.

         (r) SOLVENCY. Each of the Credit Parties is Solvent.

         (s) LIENS. The provisions of each of the Security Documents create in
favor of the Security Trustee a valid, binding and enforceable security interest
and Lien in all right, title and interest in the Collateral therein described,
and shall, upon execution by the parties thereto, constitute a fully perfected
first priority security interest in favor of the Security Trustee in all right,
title and interest in such Collateral, subject to the following (which the
Borrowers will do or cause to be done on or as of the relevant Drawdown Date):
(1) the recordation of each of the Mortgages in accordance with the laws of the
Republic of Liberia, (2) the filing proper financing statements in such
jurisdiction as shall be necessary or advisable in respect of each Assignment of
Earnings, and (3) to notice being given to underwriters and protection and
indemnity clubs, and their consent being obtained where policy provisions or
club rules so require in respect of each Assignment of Insurances. Upon
execution and delivery by the relevant Borrower and recording in accordance with
the laws of the Republic of Liberia, each Mortgage will be a "preferred
mortgage" within the meaning of the United States Ship Mortgage Act, 1920, as
amended, recodified at 46 U.S.C. ss.31301 ET. SEQ. (the "Ship Mortgage Act") and
will qualify for the benefits accorded a "preferred mortgage" under the Ship
Mortgage Act, and no other filing or recording or refiling or rerecording or any
other act is necessary or advisable to create or perfect such security interest
under the Mortgage or in the mortgaged property therein described. No consent,
approval or authorization of any Person is necessary or desirable for the
realization of the benefits afforded by the Security Documents or for
enforcement of the rights and remedies therein contained by the Security
Trustee.

         (t) OWNERSHIP OF BORROWERS, SEABULK GLOBAL CARRIERS AND SEABULK
TANKERS. The outstanding capital stock of each of the Borrowers and all other
ownership interests and rights to acquire ownership interests in the Borrowers
is owned of record by Seabulk Global Carriers and the outstanding capital stock
of each of Seabulk Global Carriers and Seabulk Tankers and all other ownership
interests and rights to acquire ownership interests in each of Seabulk Global
Carriers and Seabulk Tankers is owned of record by Seabulk International.

         (u) NO MONEY LAUNDERING. In performing and discharging its obligations
and liabilities under or as contemplated by this Agreement and the Security
Documents to which it is a party, each Borrower is acting for its own account
and such performance and discharge will not involve or lead to contravention of
any law, official requirement or other regulatory measure or procedure
implemented to combat "money laundering" (as defined in Article 1 of the
Directive (91/308/EEC) of the Council of the European Communities).

         (v) TRUE AND COMPLETE. No representation, warranty or statement made,
or certificate, document or financial statement provided, by the Credit Parties,
in or pursuant to this Agreement or any other Loan Document, or in any other
document furnished in connection therewith, is untrue or incomplete in any
material respect or contains any misrepresentation of a material fact or omits
to state any material fact necessary to make any such statement herein or
therein not misleading.

                                       33
<PAGE>

         (w) NO IMMUNITY. None of the Credit Parties, nor any of their
respective properties, have any right of immunity on the grounds of sovereignty
or otherwise from the jurisdiction of any court or from setoff or any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) under the laws of any
jurisdiction. The execution and delivery of the Loan Documents by the Credit
Parties and the performance by them of their respective obligations thereunder
constitute commercial transactions.

         (x) SURVIVAL OF REPRESENTATIONS. All representations and warranties
made by the Credit Parties herein or made in any certificate delivered pursuant
hereto shall survive the making of each Advance and the execution and delivery
to the Agent of the Note.

                                    ARTICLE V

                              AFFIRMATIVE COVENANTS

         SECTION 5.01. AFFIRMATIVE COVENANTS. Except as otherwise indicated,
each of the Credit Parties covenants and agrees that, so long as this Agreement
shall remain in effect or any of the Obligations shall be outstanding, it shall,
unless the Credit Parties shall have received the prior written consent of the
Majority Lenders:

         (a) EXISTENCE. Do or cause to be done all things necessary to preserve
and keep in full force and effect its existence (except as permitted by Section
6.16), rights and franchises and comply with all laws applicable to it and at
all times be qualified to do business in the jurisdictions where failure to
qualify could reasonably be expected to result in a Material Adverse Effect.

         (b) PAYMENT OF DEBTS. Pay its debts, liabilities and obligations when
due, except (i) any such debts, liabilities and obligations that are being
contested in good faith by appropriate proceedings, (ii) any single debt,
liability or obligation, which does not, in the case of Seabulk International,
exceed US$2,500,000 or, in the case of any other Credit Party, exceed
US$500,000, and (iii) any debts, liabilities and obligations, which in the
aggregate do not exceed US$5,000,000.

         (c) ACCOUNTS AND RECORDS. Keep and maintain full and accurate accounts
and records in accordance with GAAP consistently applied.

         (d) PAYMENT OF TAXES AND CLAIMS. Prepare and timely file all tax
returns required to be filed by it and pay and discharge all Taxes imposed upon
it or in respect of any of its property and assets before the same shall become
in default, as well as all lawful claims (including, without limitation, claims
for labor, materials and supplies) which, if unpaid, might become a lien or
charge upon the Collateral or any part thereof, except (i) in each case, for any
such Taxes as are being contested in good faith by appropriate proceedings or
(ii) with respect to foreign Taxes, the failure of which to pay or discharge
could not reasonably be expected to result in a Material Adverse Effect.

         (e) FINANCING STATEMENTS. In the case of the Collateral, execute,
financing statements or other documents deemed necessary or desirable by the
Agent to perfect, maintain or preserve

                                       34
<PAGE>

any security interest granted pursuant to the Security Documents and pay the
filing costs pursuant to law. Without limiting the generality of the foregoing,
the Security Trustee will execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as may
be reasonably necessary or desirable, or that the Agent may reasonably request,
to protect and preserve the Liens granted or purported to be granted hereby and
by the other Security Documents. Each of the Lenders hereby authorizes the
Security Trustee to file one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the Collateral without the
signature of such Lender, where permitted by law.

         (f) COMPLIANCE WITH LAW. Comply in all material respects with all
applicable federal, state, local and foreign laws, ordinances, rules, orders and
regulations now in force or hereafter enacted, including, without limitation,
all laws and regulations relating to environmental laws and employee benefit
plans, failure to company with which could reasonably be expected to result in a
Material Adverse Effect.

         (g) FINANCIAL STATEMENTS. Furnish to the Agent the following financial
statements:

                  (i) as soon as available but not later than ninety (90) days
                  after the end of each fiscal year of (1) Seabulk
                  International, complete copies of the consolidated financial
                  reports of Seabulk International and its Subsidiaries, all in
                  reasonable detail, which shall include at least the
                  consolidated balance sheet of Seabulk International and its
                  Subsidiaries as of the end of such year and the related
                  consolidated statements of income and sources and uses of
                  funds for such year, which shall be audited reports prepared
                  by independent certified public accountants of international
                  standing; (2) each of the Borrowers, complete copies of
                  financial reports of each Borrower, all in reasonable detail,
                  which shall include at least the balance sheet of such
                  Borrower as of the end of such year and the related statements
                  of income and sources and uses of funds for such year, which
                  shall be unaudited, but certified to be true and complete by
                  the chief financial officer of such Borrower; and (3) each of
                  the Lightship Tanker Entities, complete copies of financial
                  reports of each of the Lightship Tanker Entities, all in
                  reasonable detail, which shall include at least the balance
                  sheet of each of the Lightship Tanker Entities as of the end
                  of such year and the related statements of income and sources
                  and uses of funds for such year, which shall be unaudited, but
                  certified to be true and complete by the chief financial
                  officer of Seabulk International;

                  (ii) as soon as available but not later than ninety (90) days
                  after the end of each fiscal year of Seabulk International,
                  complete copies of the consolidated financial reports of
                  Seabulk International and its Subsidiaries (excluding the
                  Lightship Entities), all in reasonable detail, which shall
                  include at least the consolidated balance sheet of Seabulk
                  International and its Subsidiaries (excluding the Lightship
                  Entities), as of the end of such year and related consolidated
                  statements of income and sources and uses of funds for such
                  year, which shall be unaudited, but certified to be true and
                  complete by the chief financial officer of Seabulk
                  International;

                                       35
<PAGE>

                  (iii) as soon as available but not less than forty-five (45)
                  days after the end of each of the first three quarters of each
                  fiscal year of (1) Seabulk International, a quarterly interim
                  consolidated balance sheet of Seabulk International and its
                  Subsidiaries and the related consolidated profit and loss
                  statements and sources and uses of funds, all in reasonable
                  detail, unaudited, but certified to be true and complete by
                  the chief financial officer of Seabulk International; (2) each
                  of the Borrowers, a quarterly interim balance sheet of such
                  Borrower and the related profit and loss statements and
                  sources and uses of funds, all in reasonable detail,
                  unaudited, but certified to be true and complete by the chief
                  financial officer of such Borrower; and (3) each of the
                  Lightship Tanker Entities, a quarterly interim balance sheet
                  of each of the Lightship Tanker Entities and the related
                  profit and loss statements and sources and uses of funds, all
                  in reasonable detail, unaudited, but certified to be true and
                  complete by the chief financial officer of Seabulk
                  International;

                  (iv) within ten (10) days of the filing thereof, copies of all
                  registration statements and reports on Forms 10-K, 10-Q and
                  8-K (or their equivalents) and other material filings which
                  Seabulk International shall have filed with the U.S.
                  Securities and Exchange Commission or any similar governmental
                  authority;

                  (v) promptly upon the mailing thereof to the shareholders of
                  Seabulk International, copies of all financial statements,
                  reports, proxy statements, notices and other communications
                  transmitted to all of Seabulk International's shareholders;

                  (vi) at such time as the financial statements described in
                  Sections 5.01(g)(i), (ii) and (iii) are delivered, a
                  certificate of Seabulk International's chief financial officer
                  (a "Compliance Certificate") certifying (A) compliance by each
                  of the Credit Parties with each of the covenants contained in
                  this Agreement and, with respect to the covenants in Sections
                  5.01(n), (o), (p) and (q) hereof, showing the calculations
                  thereof in reasonable detail, (B) that the financial
                  statements delivered in accordance with Sections 5.01(g)(i),
                  (ii) and (iii) are complete and correct in all material
                  respects and present fairly the financial condition and
                  results of operations of Seabulk International and its
                  Subsidiaries, or each Borrower or each Lightship Tanker
                  Entity, as the case may be, as of the dates and for the
                  periods indicated, in accordance with GAAP consistently
                  applied (subject as to interim statements to normal year-end
                  adjustments), and (C) that no Default or Event of Default has
                  occurred or is continuing; and

                  (vii) any other information regarding the Credit Parties that
                  is material to the making and performance of the Loan as the
                  Agent may reasonably request.

         Upon receipt the Agent shall promptly deliver the above referenced
financial statements to the Lenders.

         (h) ACCESS TO BOOKS AND RECORDS; INSPECTION OF MORTGAGED VESSELS.
Permit the Agent and each Lender, and their respective duly authorized agents
and officers, during normal business hours and upon reasonable notice to (i)
examine the books and records of each of the

                                       36
<PAGE>

Credit Parties and to make copies and extracts therefore, (ii) discuss the
affairs, finances and accounts of each of the Credit Parties, and be advised as
to the same by, the officers of each of the Credit Parties, and (iii) inspect
the Mortgaged Vessels, as shall be relevant to the performance or observance of
the terms, covenants or conditions of this Agreement, the other Loan Documents
or the financial condition of the Credit Parties or as the Agent considers
necessary or appropriate in order to keep informed as to the then existing state
of the Collateral.

         (i) NOTIFICATIONS. Give prompt written notice to the Agent of (i) any
Default of which any of the Credit Parties has actual knowledge or an Event of
Default specifying the same and the steps being taken to remedy the same, (ii)
any litigation or governmental proceeding pending or, to the best knowledge of
any of the Credit Parties, threatened against any of the Credit Parties which
could reasonably be expected to result in a Material Adverse Effect, (iii) the
withdrawal of any Mortgaged Vessel's rating by its Classification Society or the
issuance by such Classification Society of any material recommendation or
notation affecting class and (iv) any other event or condition which could
reasonably be expected to result in a Material Adverse Effect.

         (j) PERFORMANCE OF OBLIGATIONS. Not take, or fail to take, any action,
or fail to use commercially reasonable efforts to prevent any action to be taken
by others, (i) which would release any Person from any of such Person's
covenants or obligations under any agreement or instrument included in the
Security Documents, or (ii) which would result in the amendment, hypothecation,
subordination, termination or discharge of, or impair the validity or
effectiveness of, any such agreement or instrument in a manner adverse to the
Agent or the Lenders.

         (k) ENVIRONMENTAL MATTERS. Promptly, and in any event within five (5)
Business Days after an officer of any of the Credit Parties obtains actual
knowledge thereof, give written notice to the Agent of one or more of the
following environmental matters, unless, in each case, such environmental
matters could not, individually or when aggregated with all other such
environmental matters, be reasonably expected to result in a Material Adverse
Effect:

                  (i) any pending or threatened in writing Environmental Action
                  against any of the Credit Parties or any properties owned or
                  operated by any of them;

                  (ii) any condition or occurrence on or arising from any
                  property owned or operated by any of the Credit Parties that
                  (A) results in noncompliance by such Credit Party with any
                  applicable Environmental Law or (B) could reasonably be
                  expected to form the basis of any Environmental Action against
                  any of the Credit Parties or any of their respective
                  properties;

                  (iii) any condition or occurrence on any property owned or
                  operated by any of the Credit Parties that could reasonably be
                  expected to cause such property to be subject to any
                  restrictions on the ownership, occupancy, use or
                  transferability by any of the Credit Parties of such property
                  under any Environmental Law; and

                  (iv) the taking of any removal or remedial action in response
                  to the actual or alleged presence of any Hazardous Material on
                  any real property owned or operated by any of the Credit
                  Parties as required by any Environmental Law or any
                  governmental or other administrative agency; PROVIDED THAT in
                  any event the

                                       37
<PAGE>

                  Credit Parties shall deliver to the Agent all material notices
                  received after the date hereof by them from any governmental
                  authority under, or pursuant to, any Environmental Law.

All such notices shall describe in reasonable detail the nature of the claim,
investigation, condition, occurrence or removal or remedial action and the
Borrowers or such Guarantor's response thereto. In addition, upon the request of
the Agent, each of the Credit Parties will provide the Agent with copies of all
material communications with any governmental authority relating to any
Environmental Law, all material communications with any Person (other than their
attorneys) relating to any Environmental Action of which notice is required to
be given pursuant to this Section 5.01(l), and such detailed reports of any such
Environmental Action as may reasonably be requested by the Agent.

         (l) LOAN DOCUMENT OBLIGATIONS. Pay the Note according to the reading,
tenor and effect thereof, and do and perform every act and discharge all of the
obligations provided to be performed by the Credit Parties under the Loan
Documents, including this Agreement, at the time or times and in the manner
specified.

         (m) ERISA. Promptly upon learning of the occurrence or the expected
occurrence of (i) any material liability of any Credit Party or any ERISA
Affiliate pursuant to ERISA in connection with the termination of any Plan or
withdrawal or partial withdrawal of any Multiple Employer Plan, (ii) a failure
to satisfy the minimum funding standards of Section 412 of the Code or Part 3 of
Title I of ERISA by any Plan for which any Credit Party or any ERISA Affiliate
is plan administrator (as defined in ERISA) other than to the extent such
failure could not reasonably be expected to result in a Material Adverse Effect,
(iii) a plant closing or mass layoff (as defined in the Worker Adjustment and
Retraining Notification Act) of either of the Borrowers, any of the Guarantors
or any ERISA Affiliate; (iv) any of the Borrowers, the Guarantors or any ERISA
Affiliate becoming liable for material increases in retiree medical, life
insurance or other death benefits (contingent or otherwise) (other than as a
result of a continuation of medical coverage required under Section 4980B of the
Code or the insurance coverage continuation provisions of applicable state law);
or (v) a failure to satisfy the conditions represented or warranted to in this
Agreement other than to the extent such failure could not reasonably be expected
to result in a Material Adverse Effect, furnish or cause to be furnished to the
Agent written notice thereof.

         (n) MINIMUM ADJUSTED EBITDA TO ADJUSTED INTEREST EXPENSE. With respect
to Seabulk International, maintain a ratio determined as of the last day of each
of Seabulk International's fiscal quarters commencing March 31, 2004 of Adjusted
EBITDA to Adjusted Interest Expense as follows:

                  (i)      thereafter, until the fiscal quarter ending December
                           31, 2004, not less than 2.75 to 1.00;

                  (ii)     thereafter, until the fiscal quarter ending December
                           31, 2005, not less than 3.00 to 1.00; and

                  (iii)    thereafter, not less than 3.25 to 1.00.

                                       38
<PAGE>

         (o) MINIMUM ADJUSTED TANGIBLE NET WORTH. With respect to Seabulk
International, maintain an Adjusted Tangible Net Worth of not less than One
Hundred Million Dollars ($100,000,000) PLUS fifty percent (50%) of Seabulk
International's cumulative positive annual net income (on a consolidated basis),
PLUS seventy-five percent (75%) of the net proceeds received by Seabulk
International (or any of its Subsidiaries) from the issuance of equity issued
after the date of this Agreement.

         (p) MAXIMUM ADJUSTED FUNDED DEBT RATIO. With respect to Seabulk
International, maintain an Adjusted Funded Debt Ratio determined as of the last
day of each of Seabulk International's fiscal quarters commencing March 31, 2004
as follows:

                  (i)      through the fiscal quarters ending June 30, 2004 and
                           September 30, 2004, not more than 4.80 to 1.00;

                  (ii)     thereafter, through the fiscal quarter ending
                           December 31, 2004, not more than 4.65 to 1.00; and

                  (iii)    thereafter, not more than 3.50 to 1.00.

         (q) MINIMUM FAIR MARKET VALUE OF THE MORTGAGED VESSELS. Maintain, until
March __, 2006, a ratio of the aggregate Fair Market Value of the Mortgaged
Vessels to the aggregate outstanding principal amount of the Loan at all times
equal to or greater than 1.15 to 1.00 and at all times thereafter a ratio equal
to or greater than 1.25 to 1.00.

         (r) OWNERSHIP OF BORROWERS, SEABULK GLOBAL CARRIERS AND SEABULK
TANKERS. With respect to Seabulk International, own, directly or indirectly, all
of the equity interests of each of Seabulk Global Carriers and Seabulk Tankers.
With respect to Seabulk Global Carriers, own, directly or indirectly, all of the
equity interests of each of the Borrowers.

         (s) VESSEL OPERATIONS AND MANAGEMENT. (i) Procure that each of the
Mortgaged Vessels shall at all times be (A) managed by the Manager or such other
manager acceptable to the Majority Lenders in accordance with vessel management
agreements acceptable to the Majority Lenders, (B) flagged under the law of the
Republic of Liberia and (C) classed in the highest classification and rating for
vessels of the same age and type without any outstanding conditions or
recommendations affecting class (other than those for which the time prescribed
for curing the condition or recommendation has not passed) with the
Classification Society; PROVIDED, HOWEVER, if a Mortgaged Vessel is reflagged
under the laws of a jurisdiction other than the Republic of Liberia that has
been approved by the Majority Lenders, it shall be a condition to such
reflagging that the relevant Borrower deliver to the Agent (A) evidence
(including an opinion of counsel) that such Mortgaged Vessel has been registered
in the name of such Borrower under the laws of such jurisdiction; (B) evidence
(including an opinion of counsel) that the related Mortgage has been properly
recorded under the laws of such jurisdiction and constitutes a first priority
mortgage; (C) evidence that all necessary governmental or regulatory approvals,
licenses and authorities which are necessary to the operation of such Mortgaged
Vessel have been obtained; (D) evidence that insurances in compliance with the
requirements of the Mortgage have been obtained; and (E) such other items as the
Agent may reasonably require.

                                       39
<PAGE>

         (ii) Comply in all material respects or to procure that the operator of
each of the Mortgaged Vessels will comply in all material respects within the
requisite applicable time limits for vessels of the same type, size, age and
flag of the Mortgaged Vessels with the ISM Code or any replacement of the ISM
Code and in particular, without prejudice to the generality of the foregoing, as
and when required to do so by the ISM Code and at all times thereafter, (A) to
hold or to procure that the operator of each of the Mortgaged Vessels holds, a
valid DOC and SMC, (B) to provide the Agent with copies of any such DOC and SMC
promptly following the issuance thereof and after every renewal and (C) to keep
or to procure that there is kept, on board each of the Mortgaged Vessels a copy
of any such DOC and the original of any such SMC.

         (t) APPRAISALS. At such time as the financial statements described in
Sections 5.01(g)(i) and (ii) are delivered, at the Borrowers' expense, furnish
the Agent with appraisals from an Acceptable Broker for each of the Mortgaged
Vessels; PROVIDED, HOWEVER, that nothing herein shall prohibit the Agent from
obtaining, at its own expense and at any time such appraisals from an Acceptable
Broker for each of the Mortgaged Vessels as the Agent may deem appropriate.

         (u) REIMBURSEMENT FOR EXPENSES. Reimburse the Agent and/or the Security
Trustee promptly, with interest at the interest rate applicable to the Note, for
any and all expenditures which the Agent and/or the Security Trustee may from
time to time make in providing protection in respect of insurance, discharge or
purchase of liens, taxes, dues, assessments, governmental charges, fines and
penalties lawfully imposed, repairs, attorneys' fees, necessary translation fees
for documents made in a language other than English and other matters, in each
case in respect of which the Borrowers have defaulted in their obligation
hereunder with respect to such matters to provide. Such obligation of the
Borrowers to reimburse the Agent shall be an additional indebtedness due from
the Borrowers, secured by the Collateral and the Security Documents, and shall
be payable by the Borrowers on demand. Neither the Agent nor the Security
Trustee, though privileged to do so, shall be under any obligation to the
Borrowers to make any such expenditures, nor shall the making thereof relieve
the Borrowers of any default in that respect.

         (v) FURTHER ASSURANCES. From time to time, at the Borrowers' expense,
duly execute and deliver to the Agent, such further documents and assurances as
the Lenders may request to effectuate the purposes of this Agreement, the Note
and the Security Documents.

         (w) CHANGE OF ADDRESS. Notify promptly the Agent and the Lenders of any
change in the location of its principal place of business.

         (x) CONSENTS, LICENSES, APPROVALS. Obtain and maintain all such
governmental licenses, authorizations, consents, permits and approvals as may be
required for each of the Credit Parties to perform their obligations under this
Agreement and all other Loan Documents to which each is a party, and deliver
promptly to the Agent and the Lenders copies of all consents, licenses and
approvals of governmental authorities that may be required for the making or
performance of this Agreement or any instrument contemplated hereby.

         (y) USE OF PROCEEDS. Use the proceeds of the Advances solely for the
purpose of financing up to 80% of the aggregate acquisition cost of the
Mortgaged Vessels.

                                       40
<PAGE>

         (z) TRANSACTIONS WITH AFFILIATES. Conduct all transactions otherwise
permitted under this Agreement to be conducted with Affiliates (if any) on terms
that are fair and reasonable and no less favorable to the Borrowers than would
be obtained in a comparable arm's-length transaction with a Person that is not
an Affiliate.

                                   ARTICLE VI

                               NEGATIVE COVENANTS

         SECTION 6.01. NEGATIVE COVENANTS. Except as otherwise indicated, each
of the Credit Parties covenants and agrees that, so long as this Agreement shall
remain in effect or any of the Obligations shall be outstanding, it shall not,
without the prior written consent of the Agent:

         (a) LIENS. Create, assume, permit or suffer to exist any mortgage,
pledge, encumbrance, security interest or other Lien securing an obligation on
all or any part of (i) the capital stock of the Borrowers, or (ii) the
Collateral, except Permitted Encumbrances with respect to the Mortgaged Vessels
and Customary Permitted Liens with respect to the Collateral other than the
Mortgaged Vessels.

         (b) ASSET SALES. With respect to the Borrowers, sell, lease, transfer,
assign or otherwise dispose of any Mortgaged Vessel unless after giving effect
to such sale, lease, transfer, assignment or disposition, the Borrowers are in
compliance with Section 5.01(q) hereof.

         (c) OBLIGATIONS OF OTHERS. With respect to the Borrowers, except as
created or permitted by this Agreement or the Security Documents, assume,
guarantee, endorse or become liable on the obligation of any person, firm or
corporation except by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.

         (d) ASSIGNMENT OF INSURANCES. With respect to the Borrowers, grant an
assignment or permit or suffer to exist any mortgage, pledge, encumbrance,
security interest or other Lien on the insurances relating to a Mortgaged Vessel
other than the applicable Assignment of Insurances.

         (e) SALE OF NOTES OR ACCOUNTS RECEIVABLE. Sell, lease, transfer, assign
or otherwise dispose of any notes, accounts receivable or other obligations owed
to by any Person, except (i) for the purpose of collection in the ordinary
course of its business and (ii) to the extent that, both before and after giving
effect to any such sale, lease, transfer, assignment or disposition (taking into
account any prepayment to be made to the Lenders under this Agreement from the
net proceeds of any such sale, lease, transfer, assignment or disposition), no
Default or Event of Default would exist hereunder.

         (f) CHANGE OF CONTROL. Permit (without the prior written consent of the
Lenders, such consent not to be unreasonably withheld) a Change of Control to
occur.

         (g) SALE AND LEASEBACK. Enter into any arrangements, directly or
indirectly, with any Person whereby it shall sell or transfer any property,
whether real or personal, and used and useful in its business, whether now owned
or hereafter acquired, if it, at the time of such sale or

                                       41
<PAGE>

disposition, intends to lease or otherwise acquire the right to use or possess
(except by purchase) such property or like property for a substantially similar
purpose.

         (h) RESTRICTED PAYMENTS. With respect to Seabulk International, declare
or pay any dividend or make any distribution on its capital stock or purchase,
redeem, acquire or otherwise retire any capital stock for value (in each case, a
"Restricted Payment"); PROVIDED, HOWEVER, that Seabulk International may make a
Restricted Payment so long as, at the time of, and after giving effect to, the
proposed Restricted Payment: (i) no Default or Event of Default shall have
occurred and be continuing and (ii) the aggregate amount expended for all
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the board of directors of Seabulk International)
would not exceed fifty percent (50%) of the aggregate amount of the consolidated
net income of Seabulk International and its consolidated Subsidiaries excluding
the Lightship Tanker Entities for the fiscal year ended immediately prior to the
fiscal year in which such proposed Restricted Payment is to be made determined
in accordance with GAAP. Notwithstanding the preceding sentence, (1) Seabulk
International may make Restricted Payments with the proceeds of substantially
concurrent capital contributions made by its stock holders so long as no Default
or Event of Default shall have occurred and be continuing prior to or after
giving effect thereto, (2) Seabulk International may declare and pay dividends
with respect to its equity interests payable solely in additional shares of its
common stock, (3) Subsidiaries of Seabulk International may declare and pay
dividends ratably with respect to their equity interests, and (4) Seabulk
International may make Restricted Payments pursuant to and in accordance with
stock option plans or other benefit plans for management, directors or employees
of Seabulk International and its Subsidiaries.

         (i) RESTRICTION ON PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. Create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction (other than pursuant to this Agreement) on the ability of any
Subsidiary of any of the Credit Parties to (i) pay dividends or make any other
distributions on its capital stock or any other interest or participation in its
profits or pay any Debts owed to a Credit Party, (ii) make advances or loans to
a Credit Party or (iii) transfer any of its properties or assets to a Credit
Party, except for such encumbrances or restrictions existing under or by reason
of applicable law.

         (j) FINANCING STATEMENTS. File or permit to be filed any financing
statement under the Uniform Commercial Code of any state of the United States in
respect of any property except in favor of the Security Trustee.

         (k) INVESTMENTS. Make any Investment unless, with respect to Seabulk
International, at the time of, and after giving effect to, the making of any
proposed Investment, no Default or Event of Default has occurred and is
continuing or would occur as a consequence of the making of such Investment.
Notwithstanding the foregoing sentence, Seabulk International and the other
Guarantors may make the following Investments at any time: (i) direct
obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America (or by any agency
thereof to the extent such obligations are backed by the full faith and credit
of the United States of America), in each case maturing within one year from the
date of acquisition thereof, and (ii) investments in certificates of deposit,
banker's acceptances and time deposits maturing within 180 days from the date of
acquisition thereof issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by, any domestic office of any commercial
bank organized under the laws of the United States of

                                       42
<PAGE>

America or any State thereof which has a combined capital and surplus and
undivided profits of not less than $500,000,000.

         (l) ACCOUNTING CHANGES. Make or permit any change in accounting
policies affecting (i) the presentation of financial statements or (ii)
reporting practices, except in either case as required or permitted by GAAP.

         (m) AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. With respect to the
Borrowers, amend its organizational documents.

         (n) CHANGE OF FLAG. With respect to the Borrowers, transfer or change
the flag or port of documentation of any Mortgaged Vessel.

         (o) INDEBTEDNESS. With respect to the Borrowers and Seabulk Global
Carriers, create, incur, assume or suffer to exist any Debt except (i) Debt to
the Lenders, (ii) Debt not in excess of an amount satisfactory to the Lenders
which shall be subordinate and subject in right of payment to the prior payment
in full of the Obligations, as evidenced by a subordination agreement or
provisions satisfactory in form and substance to the Lenders, (iii) current Debt
which shall not be outstanding longer than ninety (90) days incurred in the
normal course of its business, (iv) Debt in respect of the Bond and the
obligations contained in the Indenture but only insofar as each of the Borrowers
and Seabulk Global Carriers are "Guarantors" for purposes of the Indenture, and
(v) Debt secured by Liens permitted by subsection (i) above.

         (p) CHANGE IN BUSINESS. Engage (directly or indirectly) in any business
other than the business of Seabulk International and its Subsidiaries as of the
Effective Date and other businesses reasonably related thereto.

         (q) TRANSACTIONS WITH AFFILIATES. Enter into any transaction or series
of related transactions, whether or not in the ordinary course of business, with
any Affiliate, other than on terms and conditions substantially as favorable to
such Person as would be obtainable by such Person at the time in a comparable
arm's-length transaction with a Person other than an Affiliate. Notwithstanding
the foregoing, the restrictions set forth in this Section 6.01(q) shall not
apply to (i) the payment of reasonable and customary fees to directors of the
Borrowers or the Guarantors who are not employees of the Borrowers or the
Guarantors, (ii) any other transaction with any employee, officer or director of
the Borrowers or any of the Guarantors pursuant to employee benefit plans and
compensation arrangements in amounts customary for corporations similarly
situated to the Borrowers or any of the Guarantors and entered into the ordinary
course of business and approved by the board of directors or any committee
thereof of the Borrowers or the Guarantors, as the case may be, (iii)
transactions between or among the Borrowers and the Guarantors and not involving
any other Affiliate, and (iv) any Restricted Payment permitted by Section
6.01(h).

         (r) CHANGES IN OFFICES OR NAMES. Change the location of the chief
executive office of any Credit Party or the office of the chief place of
business any such parties unless the Agent shall have received thirty (30) days
prior written notice of such change.

         (s) CHANGES IN FISCAL YEAR. Change its fiscal year.

                                       43
<PAGE>

         (t) CONSOLIDATION, MERGER AND SALE OF ASSETS. Consolidate with, or
merge with or into, any other Person or convey, sell, lease or otherwise dispose
of (or agree to do any of the foregoing at any future time) all or substantially
all of its property or assets, unless each of the following conditions is
satisfied:

                  (i) The entity formed by such consolidation or into which such
         Credit Party is merged or the Person which acquires by conveyance or
         transfer substantially all of the assets of such Credit Party as an
         entirety shall expressly assume all of the obligations of such Credit
         Party under this Agreement and the other Loan Documents pursuant to a
         written supplement to this Agreement and such other Loan Documents;

                  (ii) Immediately prior to and after giving effect to such
         transaction, no Default or Event of Default shall have occurred and be
         continuing and the Agent shall have received a certificate from an
         executive officer of such Credit Party to such effect;

                  (iii) The Agent shall have received an opinion of counsel
         regarding the merged or consolidated entity, the legality, validity and
         enforceability of this Agreement and the other Loan Documents, the
         title to the related Mortgaged Vessels and the priority of the
         Mortgages, as applicable; and

                  (iv) Upon any consolidation or merger, or any conveyance or
         transfer of substantially all of the assets of such Credit Party as an
         entirety in accordance with this Section 6.01(t), the successor entity
         formed by such consolidation or into which such Credit Party is merged,
         or to which such conveyance or transfer is made shall succeed to, and
         be substituted for, and may exercise every right and power of, such
         Credit Party under this Agreement and the other Loan Documents with the
         same effect as if such successor entity had been named as a Credit
         Party herein. No such conveyance or transfer of substantially all of
         the assets of such Credit Party as an entirety shall have the effect of
         releasing such Credit Party or any successor entity which shall
         theretofore have become such in the manner prescribed in this Section
         6.01(t) from its liability hereunder.

                                   ARTICLE VII

                             AGREEMENT TO GUARANTEE

         SECTION 7.01. GUARANTEE. (a) The Guarantors, jointly and severally,
hereby unconditionally guarantee, absolutely and irrevocably on a full recourse
basis, as a guarantor and not merely as a surety, the full and punctual payment,
performance and observance when due, whether at stated maturity, by acceleration
or otherwise, and at all times thereafter, of all amounts due and to become due
from, and all actions or undertakings to be performed by, the Borrowers under or
pursuant to the Loan Agreement and the other Loan Documents to which the
Borrowers are or will become a party (collectively, the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) incurred by the Agent, any of the Lenders or the
Security Trustee in enforcing any rights under this guarantee. This guarantee
will be senior indebtedness of each of the Guarantors, ranking PARI PASSU in
right of payment with all existing and future unsubordinated indebtedness and
senior in right of payment to all existing and future subordinated indebtedness
of each of the Guarantors. Without limiting the generality of the foregoing, the
Guarantors' liability shall extend to all amounts

                                       44
<PAGE>

which constitute part of the Guaranteed Obligations and would be owed by the
Borrowers under any of the Loan Documents even if such Loan Documents are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower.

         (b) The Guarantors also, jointly and severally, agree to pay from time
to time on demand all amounts which the Borrowers are at any time liable to pay
under the Loan Agreement and the other Loan Documents to which the Borrowers are
a party and which have become due and payable but have not been paid at the time
such demand is made.

         (c) This Guaranty is a guaranty of performance and of payment when due
and not of collection.

         SECTION 7.02. INDEMNITY. As a separate, additional, continuing and
primary obligation, the Guarantors hereby, jointly and severally,
unconditionally and irrevocably undertake to the Agent, the Lenders and the
Security Trustee, by way of indemnity, that, should any amount in respect of the
Guaranteed Obligations not be recoverable from the Guarantors, or should the
Guarantors, for any reason (including by reason of any incapacity of any of the
Guarantors or by reason of any provision of the Loan Agreement, or any other
Loan Document to which the Borrowers are a party, being or becoming void,
unenforceable or otherwise invalid under any applicable law), be unable to
perform any of their obligations in respect of any of the Guaranteed
Obligations, then, notwithstanding that such reason may have been known to the
Agent, the Lenders or the Security Trustee, the Guarantors shall, upon first
written demand by the Agent, the Lenders or the Security Trustee, indemnify the
Agent, the Lenders and/or Security Trustee against all losses, claims, costs,
charges and expenses to which the Agent, the Lenders or the Security Trustee may
be subject or which the Agent, the Lenders or the Security Trustee may incur as
a consequence of such non-recovery or inability to perform.

         SECTION 7.03. GUARANTY ABSOLUTE. Each of the Guarantors guarantees that
the Guaranteed Obligations will be paid strictly in accordance with their
respective terms, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Agent, the Lenders or the Security Trustee with respect thereto. The liability
of the Guarantors under this Guaranty for the Guaranteed Obligations shall be
absolute and unconditional irrespective of:

         (a) any lack of validity or enforceability of the Loan Agreement or any
of the other Loan Documents or any other agreement or instrument relating
thereto;

         (b) any failure to make any demand on the Borrowers or any other Person
for payment of all or any part of the Guaranteed Obligations or any rescission
of any such demand;

         (c) any failure to make or give any other notice, demand, diligence,
presentment, protest or other action of any kind upon or against the Borrowers
or any other Person;

         (d) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other amendment
or waiver of or any consent to departure from the Loan Documents or any other
agreement or instrument delivered pursuant or

                                       45
<PAGE>

relating thereto, including, without limitation, any increase in the Guaranteed
Obligations resulting from the extension of additional credit to the Borrowers
or otherwise;

         (e) any taking, exchange, release or non-perfection of any Collateral,
or any taking, release or amendment or waiver of or consent to departure from
any other guarantee, for all or any of the Guaranteed Obligations;

         (f) any manner of application of Collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any Collateral for all or any of the Guaranteed Obligations or
any other assets of the Borrowers;

         (g) any change, restructuring or termination of the corporate structure
or existence of the Borrowers;

         (h) any compromise, settlement, release, renewal, extension,
indulgence, change in or waiver or modification of any of the Guaranteed
Obligations, or any failure, omission or delay of Security Trustee, the Lenders
or the Agent to enforce, assert or exercise any right, power or remedy conferred
on it in this Agreement or the other Loan Documents, or the release or discharge
of either of the Borrowers from the performance or observance of any of the
Guaranteed Obligations by operation of law;

         (i) any setoff, counterclaim, abatement, recoupment, defense or other
right whatsoever that the Guarantors or the Borrowers may have against any other
person, whether or not related to the transactions contemplated by the Loan
Agreement or the other Loan Documents, including, without limitation, those
which have been waived by the Guarantors pursuant to Section 7.04 hereof;

         (j) any waiver of any right, power or remedy, or of any default, with
respect to the Guaranteed Obligations or any part thereof or the Loan Agreement
or any other Loan Document or any other agreement relating to the Guaranteed
Obligations or any part thereof;

         (k) any transfer, assignment or mortgaging or the purported transfer,
assignment or mortgaging by the Borrowers or the Guarantors of its interest, or
any part thereof, in and to the Loan Documents;

         (l) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all the assets and liabilities of, or
the voluntary or involuntary receivership, insolvency, bankruptcy, assignment
for benefit of creditors, reorganization, arrangement, composition or
readjustment of, or other similar proceeding affecting, the Borrowers or the
Guarantors or the disaffirmance of the Loan Documents in any such proceeding;

         (m) any limitation imposed by law on the liability or obligations of
the Borrowers or the Guarantors under the Loan Documents or any term thereof or
any lack of power or authority of any Person to enter into any Loan Document;

         (n) any failure by the Borrowers to comply with any requirement of any
law, regulation or order;

                                       46
<PAGE>

         (o) any damage to, or loss, destruction, requisition, seizure,
forfeiture or marshal's or other sale of any Mortgaged Vessel or any exercise of
rights by Security Trustee, in its capacity as mortgagee, with respect to any of
the Mortgaged Vessels under the Mortgages or as assignee under any of the other
Security Documents;

         (p) any libel, attachment, levy, detention, sequestration or taking
into custody of any of the Mortgaged Vessels, or any interruption or prevention
of or restriction on or interference with the use of possession of any of the
Mortgaged Vessels;

         (q) any title defect or encumbrance or any dispossession from any of
the Mortgaged Vessels by title paramount or otherwise;

         (r) any act, omission, misrepresentation or breach on the part of the
Borrowers or the Guarantors or any other Person under any of the Loan Documents
or under any applicable law;

         (s) any defect in the seaworthiness, condition, design, operation or
fitness for use of any of the Mortgaged Vessels or the ineligibility of any of
the Mortgaged Vessels for any particular trade; or

         (t) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Borrowers or the Guarantors.

         This guarantee shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned upon the insolvency, bankruptcy or
reorganization of a Borrower or otherwise, all as though such payment had not
been made.

         The obligations of the Guarantors are independent of the Guaranteed
Obligations, and a separate action or actions may be brought and prosecuted
against the Guarantor to enforce this guarantee, irrespective of whether any
action is brought against the Borrowers or whether either of the Borrowers is
joined in any such action or actions.

         SECTION 7.04. WAIVERS AND ACKNOWLEDGMENTS. Each of the Guarantor hereby
waives:

         (a) promptness, diligence, notice of acceptance and any other notice
with respect to any of the Guaranteed Obligations and this guarantee;

         (b) any requirement that the Agent, the Lenders or the Security Trustee
protect, secure, perfect or insure any security interest or Lien on any property
subject thereto or exhaust any right or take any action against the Borrowers or
any other Person or entity or any Collateral;

         (c) any right to revoke this guarantee and each of the Guarantors
acknowledges that this guarantee is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future;

         (d) notice of the existence, creation, payment, non-payment,
performance or non-performance of all or any of the Guaranteed Obligations;

                                       47
<PAGE>

         (e) all diligence in collection or protection of or realization upon
the Guaranteed Obligations or any thereof, any obligation hereunder or any
security for or guarantee of any of the foregoing, including, without
limitation, (i) any right to require the Agent, the Lenders of the Security
Trustee to proceed against the Borrowers or any other Person or to proceed
against or exhaust any security held by the Agent, the Lenders or the Security
Trustee at any time or to pursue any other remedy in the Agent's, the Lenders'
or the Security Trustee's power or under any other agreement before proceeding
against the Guarantors hereunder and (ii) any right or claim or right to cause a
marshalling of the assets of the Guarantors;

         (f) an assertion or claim that the automatic stay provided by 11 U.S.C.
ss.362 (arising upon the voluntary or involuntary bankruptcy proceeding of
either of the Borrowers) or any other stay provided under any other debtor
relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, shall operate or be interpreted to stay, interdict, condition,
reduce or inhibit the ability of the Agent, the Lenders or the Security Trustee
to enforce any of its rights, whether now or thereafter required, which the
Agent, the Lenders or the Security Trustee may have against the Guarantors or
any Collateral for the Guaranteed Obligations;

         (g) any modification of the Loan Documents or any obligation of the
Borrowers relating thereto by operation of law or by action of any court,
whether pursuant to any other debtor relief law (whether statutory, common law,
case law or otherwise) of any jurisdiction whatsoever, now or hereinafter in
effect, or otherwise;

         (h) any defense, available to the Guarantors, now or at any time
hereafter, including, without limitation, any defense that may arise by reason
of (i) the incapacity, lack of authority, death or disability of any other
Person, or (ii) the inaccuracy of the representations and warranties made by the
Guarantors herein or by the Borrowers in any of the Loan Documents, or (iii) the
Agent's, the Lenders' or the Security Trustee's failure to file or enforce a
claim against the estate (in administration, bankruptcy or any other proceeding)
of any other Person, or (iv) the Agent's, the Lenders' or the Security Trustee's
failure to record or to file any financing statement (or the Agent's, the
Lenders' or the Security Trustee's improper recording or filing thereof) or to
otherwise perfect, protect, secure, or insure any lien or security interest
given as security for the Guaranteed Obligations; and

         (i) all other principles or provisions of law, if any, that conflict
with the terms of this guarantee, including, without limitation, the effect of
any other circumstances that may or might constitute a legal or equitable
discharge of a guarantor or surety.

         The Guarantors acknowledge that they will receive direct and indirect
benefits from the financing arrangements contemplated by this Agreement and that
the waiver set forth in this subsection is knowingly made in contemplation of
such benefits.

         SECTION 7.05. SUBROGATION. Each of the Guarantors hereby irrevocably
waives any claim or other rights that it may now or hereafter acquire against
the Borrowers that arise from the existence, payment, performance or enforcement
of the Guaranteed Obligations under this guarantee or the Loan Documents,
including without limitation, any right of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to participate in any
claim or remedy of the Agent, the Lenders or the Security Trustee against the
Borrowers or the

                                       48
<PAGE>

Mortgaged Vessels, whether or not such claim, remedy or right arises in equity
or under contract, statute or common law, including, without limitation, the
right to take or receive from the Borrowers, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security on
account of such claim, remedy or right. If any amount shall be paid to the
Guarantors in violation of the preceding sentence at any time prior to the
payment in full of the Guaranteed Obligations and all other amounts payable
under this guarantee, such amount shall be held in trust for the benefit of the
Lenders and shall forthwith be paid to the Agent to be credited and applied to
the Guaranteed Obligations and all other amounts payable under this guarantee,
whether matured or unmatured, in accordance with the terms of the Loan
Agreement, or to be held as collateral for any Guaranteed Obligations or other
amounts payable under this guarantee thereafter arising.

         SECTION 7.06. NO COMPETITION. In the event of the liquidation or
winding up of either of the Borrowers at any time after any monies shall have
become payable or shall have been paid under this guarantee, until all the
Guaranteed Obligations shall have been indefeasibly paid in full, the Guarantors
shall not prove in competition with the Agent, the Lenders or the Security
Trustee in respect of any monies owing to the Guarantors by such Borrower on any
account whatsoever, but shall give the Agent, the Lenders or the Security
Trustee the benefit of any such proof and of all monies to be received in
respect thereof. If, notwithstanding the foregoing, the Guarantors shall receive
any amount in respect of any such monies as aforesaid before the Guaranteed
Obligations have been indefeasibly paid in full, the Guarantors shall hold the
same in trust for Lenders, notify the Agent of the receipt thereof and promptly
pay the amount thereof to the Agent.

         SECTION 7.07. TAXES. (a) The Guarantors shall pay or cause to be paid
all Taxes, other than taxes, if any, payable on the overall net income of the
Lenders, on or in connection with the payment of any and all amounts due under
this guarantee that are now or in the future levied or imposed by any
governmental or taxing authority or any jurisdiction through or out of which a
payment is made.

         (b) All payments, fees and other amounts due under this guarantee shall
be made without deduction for or on account of any Taxes.

         (c) If the Guarantors are prevented by operation of law or otherwise
from making or causing to be made those payments without deduction, the amounts
due under this guarantee shall be increased to such amount as may be necessary
so that the Lenders receives the full amount it would have received (taking into
account any Taxes payable on amounts payable by the Guarantors under this
subsection) had those payments been made without that deduction.

         (d) If Section 7.07(c) applies and the Agent so requests, the
Guarantors shall deliver to the Agent official tax receipts evidencing payment
(or certified copies of them) within thirty (30) days of the date of that
request.

         SECTION 7.08. PERMITTED ACTIONS. The Agent, the Lenders and the
Security Trustee may from time to time, in their sole discretion and without
notice to or consent of the Guarantors, take any or all of the following
actions:

                                       49
<PAGE>

         (a) retain or obtain a security interest in any assets of the
Borrowers, the Guarantors or any third party to secure any of the Guaranteed
Obligations;

         (b) retain or obtain the primary or secondary obligation of any obligor
or obligors, in addition to the Guarantors, with respect to any of the
Guaranteed Obligations;

         (c) extend or renew for one or more periods (whether or not longer than
the original period), alter or exchange any of the Guaranteed Obligations;

         (d) waive, ignore or forbear from taking action or otherwise exercising
any of its rights or remedies with respect to any default under the Loan
Documents;

         (e) release, waive or compromise any obligation of the Guarantors
hereunder or any obligation of any nature of any other obligor primarily or
secondarily obligated with respect to any of the Guaranteed Obligations;

         (f) release its Lien on or in, or surrender, release or permit any
substitution or exchange for, all or any part of the Mortgaged Vessels or any
other Collateral now or hereafter securing any of the Guaranteed Obligations or
any obligation hereunder, or extend or renew for one or more periods (whether or
not longer than the original period) or release, waive compromise, alter or
exchange any obligations of any nature of any obligor with respect to any such
property; and

         (g) demand payment or performance of any of the Guaranteed Obligations
from the Guarantors at any time from time to time, whether or not the Agent, the
Lenders or the Security Trustee shall have exercised any of its rights or
remedies with respect to any property securing any of the Guaranteed Obligations
or any obligation hereunder, or proceeded against any other obligor (including
the Borrowers) primarily or secondarily liable for payment or performance of any
of the Guaranteed Obligations.

         SECTION 7.09. FINANCIAL CONDITION OF THE BORROWERS. Each of the
Guarantors represents and warrants that it is fully aware of the financial
condition of the Borrowers, and each of the Guarantors delivers this Guaranty
based solely upon its own independent investigation of the Borrowers' financial
condition and in no part upon any representation or statement of the Agent, the
Lenders or the Security Trustee with respect thereto. Each of the Guarantor
further represents and warrants that it is in a position to and hereby does
assume full responsibility for obtaining such additional information concerning
the Borrowers' financial conditions as such Guarantor may deem material to its
obligations hereunder, and such Guarantor is not relying upon, nor expecting the
Agent, the Lenders or the Security Trustee to furnish it any information in the
Agent's, the Lenders' or the Security Trustee's possession concerning the
Borrowers' financial condition or concerning any circumstances bearing on the
existence or creation, or the risk of non-payment or non-performance of the
Guaranteed Obligations. The Guarantors hereby waive any duty on the part of the
Agent, the Lenders or the Security Trustee to disclose to the Guarantors any
facts it may now or hereafter know about the Borrowers, regardless of whether
the Agent, the Lenders or the Security Trustee has reason to believe that any
such facts materially increase the risk beyond that which the Guarantors intend
to assume, or has reason to believe that such facts are unknown to the
Guarantors. The Guarantors hereby knowingly accept the full range of risk
encompassed within a contract of

                                       50
<PAGE>

"Continuing Guaranty" which includes, without limitation, the possibility that
the Borrowers will contract for additional indebtedness for which the Guarantors
may be liable hereunder after the Borrowers' financial condition or ability to
pay its lawful debts when they fall due has deteriorated.

         SECTION 7.10. CONTINUING GUARANTY. It is declared and agreed that this
guarantee as continuing security for the Guaranteed Obligations, and that it
shall not be satisfied by an intermediate payment or satisfaction of any part of
the Guaranteed Obligations and that it shall be in addition to and shall not in
any way be prejudiced or affected by any Collateral or other security now or
hereafter held by the Agent, the Lenders or the Security Trustee for all or any
part of the Guaranteed Obligations. This guarantee may be enforced either
before, after or concurrently with the enforcement of any other collateral
security for the Guaranteed Obligations or any of them and shall not be affected
by any release of, or delay in enforcing or failure to enforce, any such other
collateral security.

         SECTION 7.11. RIGHTS CUMULATIVE; NO WAIVER. Each and every right, power
and remedy herein given to the Agent, the Lenders and the Security Trustee shall
be cumulative and shall be in addition to every other right, power and remedy of
the Agent, the Lenders and the Security Trustee now or hereafter existing at
law, in equity or by statute, and each and every right, power and remedy,
whether herein given or otherwise existing, may be exercised from time to time,
in whole or in part, and as often and in such order as may be deemed expedient
by the Agent, the Lenders or the Security Trustee, and the exercise or the
commencement of the exercise of any right, power or remedy shall not be
construed to be a waiver of the right to exercise at the same time or thereafter
any other right, power or remedy. No delay or omission by the Agent, the Lenders
or the Security Trustee in the exercise of any right or power in the pursuance
of any remedy arising from any breach or default by the Guarantors shall impair
any such right, power or remedy or be construed to be a waiver of any such
right, power or remedy or to be an acquiescence therein; nor shall the
acceptance by the Agent, the Lenders or the Security Trustee of any security or
of any payment of or on account of any of the amounts due from the Guarantors to
the Lenders and maturing after any breach or default or of any payment on
account of any past breach or default be construed to be a waiver of any right
with respect to any future breach or default or of any past breach or default
not completely cured thereby.

                                  ARTICLE VIII

                                EVENTS OF DEFAULT

         SECTION 8.01. EVENTS OF DEFAULT. If any of the following events of
default (herein called "EVENTS OF DEFAULT") shall have occurred and be
continuing:

         (a) the Borrowers shall fail to pay any principal of or interest on any
Advance on the date when the same becomes due and payable; or

         (b) the Borrowers shall fail to pay any fees or any other amount
payable to the Lenders or the Agent under the Loan Documents within five Banking
Days after the same becomes due and payable; or

                                       51
<PAGE>

         (c) any representation or warranty made by the Borrowers under or in
connection with any Loan Document shall prove to have been incorrect in any
material respect when made or deemed made or confirmed; or

         (d) except as otherwise stipulated in this Section 8.01, any Credit
Party shall fail to perform or observe, in any material respect, any term,
covenant or agreement contained in this Agreement on its part to be performed
and such failure to perform or observe shall continue for 30 days after written
notice; or

         (e) any Credit Party shall fail to perform or observe, in any material
respect, any term, covenant or agreement contained in Sections 5.01(n), 5.01(o),
5.01(p), 5.01(q) or Article VI of this Agreement to be performed; or

         (f) any Credit Party shall fail to perform or observe, in any material
respect, any term, covenant or agreement contained in any Loan Document other
than this Agreement on its part to be performed, and the period of grace
therefor, if any, shall have expired; or

         (g) any material provision of the Loan Documents shall cease to be in
full force and effect in accordance with its terms; or

         (h) an Event of Loss shall have occurred and the underwriters shall
have disclaimed coverage in respect of such Event of Loss or shall have failed
to pay the proceeds of insurance within 120 days after the Event of Loss; or

         (i) it becomes impossible or unlawful for any of the Credit Parties to
fulfill any of the covenants and obligations required to be fulfilled in any
Loan Document or any of the instruments granting or creating rights in any of
the Collateral or for the Security Trustee or the Lenders or the Swap Provider
to exercise any of the rights or remedies vested in them under any Loan
Document; or

         (j) a Change of Control shall occur;

         (k) any of the Credit Parties (i) fails to make any payment of any
principal of or interest on any Debt which is outstanding when and as due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), or (ii) defaults in the performance of any other obligation under
any agreement or instrument relating to any of its Debt or any other event
occurs if the effect of such default or other event is to cause, or (with the
giving of any notice or the lapse of time or both) to permit the holder or
holders of such Debt (or a trustee or agent on behalf of such holder or holders)
to cause, such Debt to become due or to be prepaid in full (other than by a
regularly scheduled required prepayment), whether by redemption, purchase or
otherwise, before its stated maturity;

         (l) any of the Credit Parties shall be unable to pay its debts as they
fall due or admit in writing that it is insolvent or bankrupt or make an
assignment for the benefit of creditors, or seek to take advantage of any
bankruptcy law or other law or procedure for the relief of debtors or consent to
the appointment of a trustee or receiver, or a trustee or a receiver shall be
appointed for such Credit Party or for any of its property without its consent,
or bankruptcy, reorganization,

                                       52
<PAGE>

arrangement or insolvency proceedings shall be instituted by or against such
Credit Party and remains undismissed, undischarged or unbonded for a period of
sixty (60) days; or

         (m) any license, permit, consent or approval of any governmental or
quasi-governmental authority now or hereafter necessary or required in
connection with the performance by either of the Borrowers of its obligations
set forth in this Agreement, the Note or the Security Documents or in connection
with the operation of the relevant Mortgaged Vessel, shall be modified, revoked,
withdrawn or shall fail to remain in full force and effect and such
modification, revocation, withdrawal or failure to remain in full force and
effect shall continue for thirty (30) days; or

         (n) an "Event of Default" as defined in the Master Agreement shall have
occurred and be continuing; or

         (o) any Security Document after delivery thereof shall for any reason
(other than pursuant to the terms thereof) cease to create a valid and perfected
first priority Lien on the Collateral purported to be covered thereby except if
such cessation is caused by an act or omission of the Security Trustee or the
Lenders; or

         (p) any of the obligations, representations, warranties or covenants of
the Guarantors under Article VII hereof shall have been breached or Article VII
shall cease to remain in full force and effect, except as a result of any act or
omission of the Agent, the Security Trustee or the Lenders,

then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Lenders, by notice to the Borrowers, declare the obligation of
each Lender to make Advances to be terminated, whereupon the same shall
forthwith terminate, and (ii) shall at the request, or may with the consent, of
the Lenders, by notice to the Borrowers, declare all the Advances then
outstanding, all interest thereon and all other amounts payable under this
Agreement, the Note and the Master Agreement to be forthwith due and payable,
whereupon the Advances then outstanding, all such interest and all such amounts
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Borrowers; PROVIDED, HOWEVER, that in the case of an Event of Default
referred to in clause (l) of this Section 8.01, (1) the obligation of each
Lender to make Advances shall automatically be terminated and (2) the Advances
then outstanding, all such interest and all such amounts shall automatically
become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by the Borrowers.

         SECTION 8.02. APPLICATION OF MONEYS. (a) All moneys received by the
Agent, the Lenders or the Swap Provider under or pursuant to this Agreement or
any of the other Loan Documents after the happening of any Event of Default
(unless cured to the satisfaction of the Lenders) shall be applied by the Agent
in the following manner:

                  (1) first, in or towards the payment or reimbursement of the
         costs and expenses of the Agent, the Security Trustee and the Lenders
         in respect of the ascertainment and enforcement of their rights under
         this Agreement and the other Security Documents and any other amounts
         owing to the Agent, the Security Trustee or

                                       53
<PAGE>

         the Lenders under any of the Security Documents including those under
         Section 9.03 of this Agreement and reasonable fees and out-of-pocket
         expenses of counsel for the Agent, the Security Trustee and the Lenders
         with respect to advising them of their rights and responsibilities, or
         the preservation of their rights or interests under the Loan;

                  (2) second, in or towards the payment of all accrued interest
         and break funding with respect to the Advances;

                  (3) third, in or towards payment of all remaining principal
         with respect to the Advances;

                  (4) fourth, to the Swap Provider in payment of any amounts
         then due under the Master Agreement; and

                  (5) fifth, to the Borrowers or as directed by a court of
         competent jurisdiction.

         SECTION 8.03. POSITION OF SWAP PROVIDER. The Agent shall not be
obliged, in connection with any action taken or proposed to be taken under or
pursuant to the foregoing provisions of Section 8.01, to have any regard to the
requirements of the Swap Provider except to the extent that the Swap Provider
may also be a Lender. The rights of the Swap Provider to payment under the
Master Agreement shall be subordinated to the prior payment to the Lenders under
this Agreement and the Note in accordance with the provisions of Section 8.02
hereof.

                                   ARTICLE IX

                       THE AGENT AND THE SECURITY TRUSTEE

         SECTION 9.01. APPOINTMENT AND GRANTING. (a) THE AGENT. Each Lender
irrevocably appoints and authorizes each of the Agent to act as its agent
hereunder and under any of the other Loan Documents with such powers as are
specifically delegated to the Agent by the terms of this Agreement and of any of
the other Loan Documents, together with such other powers as are reasonably
incidental thereto.

         (b) THE SECURITY TRUSTEE. (i) AUTHORIZATION OF SECURITY TRUSTEE. Each
of the Lenders, the Agent and the Swap Provider has authorized the execution and
delivery of this Article IX pursuant to which the Security Trustee will act as
the Mortgagee of each of the Mortgaged Vessels and as Assignee and secured party
with respect to the other Security Documents, and as to any proceeds derived
from enforcement thereof.

                  (ii) GRANTING CLAUSE. To secure the payment of all sums of
         money from time to time owing to the Lenders under this Agreement, the
         Note and the Security Documents in the maximum principal amount of
         $49,600,000 plus any amounts due under the Master Agreement and accrued
         interest thereon and all other amounts owing to the Lenders, the Agent,
         the Swap Provider or the Security Trustee pursuant to this Agreement,
         the Note and the Security Documents, and the performance of the
         covenants of the Borrowers and any other obligor herein and therein
         contained, and in consideration of the premises and of the covenants
         herein contained and of the extensions of credit by the Lenders, the
         Security Trustee does hereby declare that it will hold as such trustee
         in trust for the benefit of the

                                       54
<PAGE>

         Lenders, the Agent, and the Swap Provider, from and after the execution
         and delivery thereof, all of its right, title and interest as mortgagee
         in, to and under each of the Mortgages and its right, title and
         interest as Assignee and secured party under the other Security
         Documents. The right, title and interest of the Security Trustee in and
         to the property, rights and privileges described above, from and after
         the execution and delivery thereof, and all property hereafter
         specifically subjected to the lien of the indenture created hereby and
         by the Security Documents by any amendment hereto or thereto are herein
         collectively called the "ESTATE". TO HAVE AND TO HOLD the Estate unto
         the Security Trustee and its successors and assigns forever. BUT IN
         TRUST, NEVERTHELESS, for the equal and proportionate benefit and
         security of the Lenders, the Agent, the Swap Provider and their
         respective successors and assigns without (except as otherwise set
         forth in Sections 9.02 and 9.03 of this Agreement) any priority of any
         one over any other. UPON CONDITION that, unless and until an Event of
         Default under this Agreement shall have occurred and be continuing, the
         Borrowers shall be permitted, to the exclusion of the Security Trustee,
         to possess and use the Mortgaged Vessels. IT IS HEREBY COVENANTED,
         DECLARED AND AGREED that all property subject or to become subject
         hereto is to be held, subject to the further covenants, conditions,
         uses and trusts hereinafter set forth, and the Borrowers, for
         themselves and their respective successors and assigns, hereby covenant
         and agree to and with the Security Trustee and its successors in said
         trust, for the equal and proportionate benefit and security of the
         Lenders, the Agent and the Swap Provider as hereinafter set forth.

                  (iii) ACCEPTANCE OF TRUSTS. The Security Trustee hereby
         accepts the trusts imposed upon it as Security Trustee by this
         Agreement, and the Security Trustee covenants and agrees to perform the
         same as herein expressed and agrees to receive and disburse all monies
         constituting part of the Estate in accordance with the terms hereof.

         (c) SCOPE OF DUTIES. Neither the Agent nor the Security Trustee (which
terms as used in this sentence and in Section 9.05 and the first sentence of
Section 9.06 hereof shall include reference to their respective affiliates and
their own respective and their respective affiliates' officers, directors,
employees, agents and attorneys-in-fact): (i) shall have any duties or
responsibilities except those expressly set forth in this Agreement and in any
of the Collateral, and shall not by reason of this Agreement or any of the
Security Documents be (except, with respect to the Security Trustee, as
specifically stated to the contrary in this Agreement) a trustee for a Lender;
(ii) shall be responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement or in any of the
Collateral, or in any certificate or other document referred to or provided for
in, or received by any of them under, this Agreement or any of the Collateral,
or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any of the Collateral or any other document
referred to or provided for herein or therein or for any failure by either of
the Borrowers or any other Person to perform any of its obligations hereunder or
thereunder or for the location, condition or value of any property covered by
any lien under any of the Collateral or for the creation, perfection or priority
of any such lien; (iii) shall be required to initiate or conduct any litigation
or collection proceedings hereunder or under any of the Collateral unless
expressly instructed to do so in writing by the Lenders; and (iv) shall be
responsible for any action taken or omitted to be taken by it hereunder or under
any of the Collateral or under any other document or instrument referred to or
provided for herein or therein or in connection herewith or therewith, except
for its own gross negligence or willful misconduct. Each of the Security Trustee
and the Agent may employ agents and attorneys-in-fact and neither

                                       55
<PAGE>

the Security Trustee nor the Agent shall be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good faith.
Each of the Security Trustee and the Agent may deem and treat the payee of the
Note as the holder thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof shall have been filed with the
Agent.

         SECTION 9.02. RELIANCE . Each of the Security Trustee and the Agent
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telefacsimile, 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, independent accountants and other experts selected by the
Security Trustee or the Agent, as the case may be. As to any matters not
expressly provided for by this Agreement or any of the Collateral, each of the
Security Trustee and the Agent shall in all cases be fully protected in acting,
or in refraining from acting, hereunder or thereunder in accordance with
instructions signed by the Lenders, and such instructions of any one of the
Lenders and any action taken or failure to act pursuant thereto shall be binding
on all of the Lenders.

         SECTION 9.03. KNOWLEDGE. Neither the Security Trustee nor the Agent
shall be deemed to have knowledge or notice of the occurrence of a Default or
Event of Default (other than, in the case of the Agent, the non-payment of
principal of or interest on the Loan or any Advance) unless each of the Security
Trustee and the Agent has received notice from a Lender or the Borrowers
specifying such Default and stating that such notice is a "Notice of Default".
If the Agent received such a notice of the occurrence of such Default or Event
of Default, the Agent shall give prompt notice thereof to the Security Trustee
and the Lenders (and shall give each Lender prompt notice of each such
non-payment). Subject to Section 9.08 hereof, the Security Trustee and the Agent
shall take such action with respect to such Event of Default or other event as
shall be directed by the Lenders, except that, unless and until the Security
Trustee and the Agent shall have received such directions, each of the Security
Trustee and the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Event of Default or other
event as it shall deem advisable in the best interest of the Lenders.

         SECTION 9.04. SECURITY TRUSTEE AND AGENT AS LENDERS. Each of the
Security Trustee and the Agent (and any successor acting as Security Trustee or
Agent, as the case may be) in its individual 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 as the Security Trustee or the
Agent, as the case may be, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include each of the Security Trustee and the Agent
in their respective individual capacities. Each of the Security Trustee and the
Agent (and any successor acting as Security Trustee and Agent, as the case may
be) and their respective affiliates may (without having to account therefor to a
Lender) accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with the Borrowers (or any of them and any of
their respective subsidiaries or affiliates) as if it were not acting as the
Security Trustee or the Agent, as the case may be, and each of the Security
Trustee and the Agent and their respective affiliates may accept fees and other
consideration from the Borrowers for services in connection with this Agreement
or otherwise without having to account for the same to the Lenders.

         SECTION 9.05. INDEMNIFICATION OF SECURITY TRUSTEE AND AGENT. The
Lenders agree to indemnify each of the Agent and the Security Trustee (to the
extent not reimbursed under other provisions of this Agreement, but without
limiting the obligations of the Borrowers under said

                                       56
<PAGE>

other provisions, ratably in accordance with the aggregate principal amount of
each Lenders' participation in the Loan), for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Security Trustee or the Agent in any way
relating to or arising out of this Agreement or any of the Collateral or any
other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby (including, without limitation, the costs and
expenses which the Borrowers are to pay hereunder, but excluding, unless an
Event of Default has occurred and is continuing, normal administrative costs and
expenses incident to the performance of their respective agency duties
hereunder) or the enforcement of any of the terms hereof or thereof or of any
such other documents, except 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.

         SECTION 9.06. RELIANCE ON SECURITY TRUSTEE OR AGENT. Each Lender agrees
that it has, independently and without reliance on the Security Trustee, the
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Borrowers and decision
to enter into this Agreement and that it will, independently and without
reliance upon the Security Trustee, the 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 Collateral. None of the Security Trustee or
the Agent shall be required to keep itself informed as to the performance or
observance by the Borrowers of this Agreement or any of the Collateral or any
other document referred to or provided for herein or therein or to inspect the
properties or books of any of the Borrowers. Except for notices, reports and
other documents and information expressly required to be furnished to the
Lenders by the Security Trustee or the Agent hereunder, neither the Security
Trustee nor the Agent shall have any duty or responsibility to provide a Lender
with any credit or other information concerning the affairs, financial condition
or business of the Borrowers or any of its parents or affiliates which may come
into the possession of the Security Trustee, the Agent or any of their
respective affiliates.

         SECTION 9.07. ACTIONS BY SECURITY TRUSTEE AND AGENT. Except for action
expressly required of the Security Trustee or the Agent hereunder and under the
other Collateral, each of the Security Trustee, the Security Trustee and the
Agent shall in all cases be fully justified in failing or refusing to act
hereunder and thereunder unless it shall receive further assurances to its
satisfaction from the Lenders of their indemnification obligations under Section
9.05 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.

         SECTION 9.08. RESIGNATION. Subject to the appointment and acceptance of
a successor Security Trustee or Agent (as the case may be) as provided below,
each of the Security Trustee and the Agent may resign at any time by giving
notice thereof to the Lenders and the Borrowers, and the Security Trustee or the
Agent may be removed at any time with or without cause by the Lenders. Upon any
such resignation or removal, the Lenders shall have the right to appoint a
successor Security Trustee or Agent, as the case may be. If no successor
Security Trustee or Agent, as the case may be, shall have been so appointed by
the Lenders or, if appointed, shall not have accepted such appointment within 30
days after the retiring Security Trustee's or Agent's, as the case may be,
giving of notice of resignation or the Lenders' removal of the retiring Security
Trustee or Agent, as the case may be, then the retiring Security Trustee or
Agent, as the case may

                                       57
<PAGE>

be, may, on behalf of the Lenders, appoint a successor Security Trustee or
Agent, as the case may be, which shall be a Lender, or a Lender with an
affiliate, which has an office in New York, New York. Upon the acceptance of any
appointment as Security Trustee or Agent hereunder by a successor Security
Trustee or Agent, such successor Security Trustee or Agent, as the case may be,
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Security Trustee or Agent, as the case may
be, and the retiring Security Trustee or Agent shall be discharged from its
duties and obligations hereunder. After any retiring Security Trustee or Agent's
resignation or removal hereunder as Security Trustee or Agent, as the case may
be, the provisions of this Article IX 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 the Security Trustee or the Agent, as the case may be.

         SECTION 9.09. RELEASE OF COLLATERAL. Without the prior written consent
of the Majority Lenders, neither the Security Trustee nor the Agent will consent
to any modifications, supplement or waiver under any of the Collateral nor
without the prior written consent of all of the Lenders release any collateral
or otherwise terminate any lien under the Collateral, except that no such
consent is required, and each of the Security Trustee and the Agent is
authorized, to release any lien covering property if the Obligations have been
paid and performed in full or which is the subject of a disposition of property
permitted hereunder or to which the Majority Lenders have consented.

                                    ARTICLE X

                                  MISCELLANEOUS

         SECTION 10.01. JUDGMENT CURRENCY. If for the purpose of obtaining
judgment in any court in any country it becomes necessary to convert into any
other currency (herein called a "Judgment Currency") any amount of the Loan or
any Advance thereof payable hereunder or other sum payable by the Borrowers
under this Agreement, the Note, the Collateral or any instrument granting or
creating rights in any of the Collateral, then such conversion shall be made at
the Rate of Exchange (as hereinafter defined) prevailing one Banking Day before
the day on which judgment is given. For this purpose "Rate of Exchange" means
for the Agent or any Lender, as the case may be, the rate at which the Agent or
such Lender is able on the relevant date of conversion to purchase the relevant
amount of the Loan or any Advance thereof or other sum as aforesaid with the
Judgment Currency. If there is a change in the Rate of Exchange prevailing
between the Banking Day before the day on which the judgment is given and the
actual date of payment of the amount due, the Borrowers agree to pay such
additional or lesser amounts as the case may be (if any) as may be necessary to
ensure that the amount thus paid on such date is the amount in the Judgment
Currency which when computed at the Rate of Exchange prevailing on the date of
payment is the amount then due and payable under this Agreement in the currency
of the Loan before conversion into the Judgment Currency was made. Any amount
due from the Borrowers under this Section shall be due and payable as a separate
debt and shall not be affected by judgment being obtained for any other sums due
under or in respect of this Agreement.

         SECTION 10.02. BOOKS OF LENDERS AND THE AGENT CONCLUSIVE. To determine
the amount and origin of any amount due to a Lender or to the Agent, as the case
may be, at any time by the Borrowers pursuant to this Agreement, the Note, the
Collateral or any instrument granting or creating rights in any of the
Collateral, the books and accounts of each Lender and the Agent shall

                                       58
<PAGE>

(save in the case of manifest error) always be conclusive that payment of any
amount being claimed by such Lender or the Agent is due and payable and payment
can at no time be suspended or withheld by the Borrowers by reason of a dispute
on what is due and payable, without prejudice, however, to the obligation of
such Lender and the Agent to repay any amount collected or received in excess.

         SECTION 10.03. COSTS AND EXPENSES; INDEMNITY. (a) Whether or not any
Advances are made or the transactions contemplated by this Agreement are
consummated (including, without limitation, the proposed execution and delivery
of the other Loan Documents), the Borrowers agree, jointly and severally, to pay
on demand all reasonable costs and expenses of the Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents and the other documents to be delivered hereunder, including,
without limitation, (i) all due diligence, transportation, computer,
duplication, appraisal, audit and insurance expenses and fees and expenses of
consultants engaged with the prior consent of the Borrowers (which consent shall
not be unreasonably withheld) and (ii) the reasonable fees and out-of-pocket
expenses of counsel for the Agent with respect thereto and for advising the
Agent as to its rights and responsibilities under this Agreement. The Borrowers
further agree, jointly and severally, to pay on demand all costs and expenses of
the Agent, the Swap Provider and the Lenders (including, without limitation,
reasonable counsel fees and expenses, including such counsel who are employees
of the Lenders, the Swap Provider and the Agent), for the enforcement (whether
through negotiations, legal proceedings or otherwise) of the Loan Documents and
the other documents to be delivered hereunder, including, without limitation,
reasonable counsel fees and expenses for the enforcement of rights under this
Section 10.03(a).

         (b) The Borrowers agree, jointly and severally, to indemnify and hold
harmless the Agent and each Lenders and each of their respective Affiliates,
control persons, officers, directors, employees and agents (each an "Indemnified
Party") from and against any and all claims, damages, losses, liabilities and
expenses (including, without limitation, reasonable fees and disbursements of
counsel) for which any of them may become liable or which may be incurred by or
asserted against any of them in connection with or by reason of (or in
connection with the preparation for a defense of) any investigation of,
preparation for or defense of any pending or threatened claim or any action or
proceeding arising out of, related to or in connection with the transactions
described herein or the use of proceeds of any Advance, whether or not any
Indemnified Party or a Borrower is a party thereto, whether or not the
transactions contemplated hereby are consummated and whether or not any such
claim, investigation, litigation or proceeding is brought by a Borrower or any
other person (excluding any claims, damages, liabilities or expenses found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct).

         (c) If any payment of principal of any Borrowing is made by the
Borrowers to or for the account of a Lender other than on the last day of the
Interest Period for such Borrowing for any reason other than in accordance with
Section 2.07(c) or acceleration of the maturity of the Note pursuant to Section
8.01, the Borrowers shall, upon demand by such Lender (with a copy of such
demand to the Agent), pay to the Agent for the account of such Lender any
amounts required to compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such payment, including,
without limitation, any loss, cost or expense incurred by

                                       59
<PAGE>

reason of the liquidation or reemployment of deposits or other funds acquired by
any Lender to fund or maintain such Advance.

         (d) The indemnities provided in this Section 10.03 shall survive the
repayment of the Advances and the termination of this Agreement.

         SECTION 10.04. NOTICES. All communications provided for or permitted
hereunder shall be in writing or by telex or telefacsimile confirmed in writing
and shall be delivered, air mailed, telexed or transmitted to the following
addresses:

If addressed to:

         The Borrowers:    c/o Seabulk International, Inc.
                           2200 Eller Drive, Building 27
                           Fort Lauderdale, Florida 33316
                           Attention: Legal Dept.
                           Fax: 954-527-1772

         The Guarantors:   c/o Seabulk International, Inc.
                           2200 Eller Drive, Building 27
                           Fort Lauderdale, Florida 33316
                           Attention: Legal Dept.
                           Fax: 954-527-1772

         The Agent, the Security Trustee or the Swap Provider:

                           Nordea Bank Finland Plc, New York Branch
                           437 Madison Avenue
                           New York, New York 10022
                           Fax:  212-421-4420
                           Attention: Martin Lunder and Anne Engen

         Any Lender:       To the address set forth for each Lender on
                           Schedule 1 hereto.

or to such other address as any party to receive such communication may
designate by written notice to the other. Any such communication shall be deemed
to have been validly given and received on the date of dispatch (or, if received
after normal business hours, on the next Banking Day following such date) if
sent by telefacsimile (as verified by automatic telefacsimile verification by
the sender's machine and confirmed in writing) and five (5) Banking Days after
having been posted if sent by first class airmail post.

         SECTION 10.05. SUCCESSORS AND ASSIGNS. (a) BINDING EFFECT. This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders and the Agent and their respective successors and assigns, except where
the context otherwise requires.

         (b) ASSIGNMENTS AND PARTICIPATIONS.

                                       60
<PAGE>

                  (i) None of the Credit Parties may assign or transfer any of
         their rights hereunder without the prior written consent of the
         Majority Lenders.

                  (ii) Each Lender shall be entitled to assign its rights and
         obligations under this Agreement or grant participation(s) in its
         Commitment hereunder to any subsidiary, holding company or other
         Affiliate of such Lender, to any subsidiary or other Affiliate company
         of any thereof or, with the consent of the Borrowers, not to be
         unreasonably withheld, to any other bank or financial institution, and
         such Lender shall forthwith give notice of any such assignment or
         participation to the Borrowers and the Agent; PROVIDED, HOWEVER, that
         any such assignment must be made pursuant to an Assignment and
         Acceptance. The Borrowers will take all reasonable actions requested by
         the Agent or any Lender to effect such assignment, including, without
         limitation, the execution of a written consent to such assignment. Any
         such assignment pursuant to this Section 10.05 shall be at no
         additional cost to the Borrowers.

                  (iii) The Agent shall maintain at its address referred to in
         Section 10.04 a copy of each Assignment and Acceptance delivered to and
         accepted by it and a register for the recordation of the names and
         addresses of the Lenders and the Commitment of, and principal amount of
         the Advances owing to, each Lender from time to time (the "Register").
         The entries in the Register shall be conclusive and binding for all
         purposes, absent manifest error, and the Borrowers, the Agent, and the
         Lenders may treat each Person whose name is recorded in the Register as
         a Lender hereunder for all purposes of this Agreement. The Register
         shall be available for inspection by the Borrowers or any Lender at any
         reasonable time and from time to time upon reasonable prior notice.

                  (iv) Upon its receipt of an Assignment and Acceptance executed
         by an assigning Lender and an assignee, the Agent shall, if such
         Assignment and Acceptance has been completed and is in substantially
         the form of Exhibit A hereto, (A) accept such Assignment and
         Acceptance, (B) record the information contained therein in the
         Register and (C) give prompt notice thereof to the Borrowers.

                  (v) In the event a Lender sells a participation to one or more
         banks or other entities in or to all or a portion of its rights and
         obligations under this Agreement (including without limitation, all or
         a portion of its Commitment and the Advances owing to it): (A) such
         Lender's obligations under this Agreement (including, without
         limitation, its Commitment to the Borrowers hereunder) shall remain
         unchanged, (B) such Lender shall remain solely responsible to the other
         parties hereto for the performance of such obligations, (C) such Lender
         shall remain the Lender for all purposes of this Agreement, (D) the
         Borrowers, the Agent and the other Lenders shall continue to deal
         solely and directly with such Lender in connection with such Lender's
         rights and obligations under this Agreement and (E) no participant
         under any such participation shall have any right to approve any
         amendment or waiver of any provision of any Loan Document, or any
         consent to any departure by the Borrowers therefrom.

                  (vi) Any Lender may, in connection with any assignment or
         participation or proposed assignment or participation pursuant to this
         Section 10.05, disclose to the assignee or participant or proposed
         assignee or participant, any information relating to the Borrowers to
         be furnished to such Lender by or on behalf of the Borrowers.

                                       61
<PAGE>

         (c) ASSIGNMENT TO FEDERAL RESERVE LENDER. Notwithstanding any other
provision in this Agreement, a Lender may at any time create a security interest
in all or any portion of its rights under this Agreement, the Note and/or any of
the Collateral (including, without limitation, its participation in the Loan) in
favor of any Federal Reserve Lender of the Board of Governors of the Federal
Reserve System.

         SECTION 10.06. FINANCING STATEMENTS. The Agent is hereby authorized to
sign and file Financing Statements and amendments thereto (including Forms UCC-1
and UCC-3) on behalf of the Borrowers as provided in Article 9 of the Uniform
Commercial Code.

         SECTION 10.07. MODIFICATION OF AGREEMENT. Except as otherwise provided
in this Agreement, this Agreement or any term hereof may be amended, modified,
waived, discharged or terminated only by an instrument in writing, signed by the
Credit Parties, the Agent and the Lenders or by the Credit Parties and the Agent
acting with the consent of the Lenders; except that no amendment, modification
or waiver shall, unless by an instrument signed by all the Lenders or by the
Agent acting with the consent of all of the Lenders: (i) increase the commitment
of any Lender or increase or extend the term, or extend the time or waive any
requirement for the reduction or termination, of any Advance, (ii) extend the
date fixed for the payment of principal or interest on any Advance, (iii) reduce
the amount of any payment of principal thereof or the rate at which interest is
payable thereon or any fee is payable hereunder, (iv) alter the terms of this
Section 10.07, (v) waive any of the conditions precedent set forth in Article
III, or (vi) release any Collateral, except as contemplated in the this
agreement.

         SECTION 10.08. GOVERNING LAW. This Agreement and the Note shall be
governed by and construed in accordance with the laws of the State of New York.

         SECTION 10.09. WAIVER OF JURY TRIAL. THE CREDIT PARTIES IRREVOCABLY
WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE DOCUMENTS
OR TRANSACTIONS CONTEMPLATED HEREBY.

         SECTION 10.10. WAIVER OF IMMUNITIES. IF A CREDIT PARTIES ACQUIRES ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS WHETHER
SERVICE OR NOTICE, ATTACHMENT BEFORE JUDGMENT, ATTACHMENT IN AID OF EXECUTION,
EXECUTION OR OTHERWISE WITH RESPECT TO ITSELF, ITS PROPERTY OR REVENUES, SUCH
CREDIT PARTY, TO THE FULLEST EXTENT PERMITTED BY LAW, IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS HEREUNDER, UNDER THE NOTES OR THE
COLLATERAL.

         SECTION 10.11. CONSENT TO JURISDICTION. Each of the parties hereby
agrees that any legal action or proceeding with respect to this Agreement, the
Note or any of the Collateral or any instrument granting or creating rights in
any of the Collateral, or to enforce any judgment obtained against any of the
Credit Parties may be brought in the courts of any jurisdiction where a Credit
Party or any of its assets may be found or located, or in the courts of the
State of New York, Borough of Manhattan, or in the United States Federal courts
in Southern District of New York, or in the courts of any other appropriate
jurisdiction, as such party may elect; and by

                                       62
<PAGE>

execution and delivery of this Agreement, each party irrevocably submits to each
such jurisdiction and service of process may be made as provided by law.

         The Credit Parties hereby irrevocably designate, appoint and empower
Corporate Creations Network Inc., 15 North Mill Street, Nyack, NY 10960, United
States of America, as their authorized agent solely to receive for and on its
behalf service of summons or other legal process in any action, suit or
proceeding the Security Trustee, the Agent or any of the Lenders may bring with
respect to this Agreement or any of the other Loan Documents within the
jurisdictions of courts of the State of New York, Borough of Manhattan, or in
the United States Federal courts in Southern District of New York, or in the
courts of any other appropriate jurisdiction, as such party may elect. As long
as this Agreement remains in force, the Credit Parties shall maintain a duly
appointed and authorized agent to receive for and on their behalf service of any
summons, complaint or other legal process in any action, suit or proceeding the
Security Trustee, the Agent or any of the Lenders may bring with respect to this
Agreement or any of the other Loan Documents within the jurisdictions of courts
of the State of New York, Borough of Manhattan, or in the United States Federal
courts in Southern District of New York, or in the courts of any other
appropriate jurisdiction, as such party may elect with respect to this
Agreement. The Credit Parties shall keep the Agent advised of the identity and
location of such agent.

         Final judgment against any of the Credit Parties (a certified or
exemplified copy of which shall be conclusive evidence of the fact and of the
amount of any indebtedness of such company therein described) in any such action
or proceeding shall be conclusive and may be enforced in any other jurisdiction
by suit on the judgment. THE CREDIT PARTIES IRREVOCABLY WAIVE ANY CLAIM THAT ANY
SUCH ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.

         SECTION 10.12. RIGHT OF SET-OFF. 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, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender to or for the credit or the account of the Borrowers (except for
fiduciary and custody accounts or deposits held to or for the credit of the
Borrowers and which were identified as such at the establishment of such account
in accordance with normal banking practice) against any and all of the
obligations of the Borrowers to all of the Lenders, pro rata, now or hereafter
existing under this Agreement, whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. Each
Lender agrees promptly to notify the Borrowers and the Agent after any such
set-off and application made by such Lender, PROVIDED that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of each Lender under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which such
Lender may have.

         SECTION 10.13. NO WAIVER; REMEDIES. No failure on the part of any
Lender or the Agent or the Security Trustee to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

                                       63
<PAGE>

         SECTION 10.14. SEVERABILITY. Any provision of this Agreement which 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.

         SECTION 10.15. EXECUTION IN COUNTERPARTS; INTEGRATION. This Agreement
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. This Agreement and the exhibits and schedules hereto constitute the
entire agreement and understanding among the parties hereto and supersede any
and all prior agreements and understandings, oral or written, relating to the
subject matter hereof.

         SECTION 10.16. JOINT AND SEVERAL. The obligations of the Credit Parties
under this Agreement and the other Loan Documents and under each provision
hereof are joint and several whether or not so specified in any provision
hereof. Each Borrower shall be entitled to rights of contribution as against the
other Borrower, provided, however, that such rights of contribution shall (a)
not in any way condition or lessen the liability of any Borrower as a joint and
several borrower for the whole of the obligations owed to the Lenders hereunder,
under the Note or under the Loan Documents and (b) be fully subject and
subordinate to the rights of the Lenders hereunder, under the Note and under the
Loan Documents.

         SECTION 10.17. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                                       64
<PAGE>
         WHEREFORE, the parties hereto have caused this Loan Agreement to be
executed by their officers or representatives thereunto duly authorized on the
day, month and year first above written.

SEABULK GLOBAL TRANSPORT, INC.,               SEABULK OVERSEAS TRANSPORT, INC.,
as Borrower                                   as Borrower

By /s/ L. Stephen Willrich                    By  /s/ L. Stephen Willrich
   ------------------------------                -------------------------------
Name:  L. Stephen Willrich                    Name:  L. Stephen Willrich
Title: President                              Title: President

SEABULK INTERNATIONAL, INC.
SEABULK GLOBAL CARRIERS, INC.
SEABULK TANKERS, INC.,
as Guarantors

By /s/ Vincent J. deSostoa
   ------------------------------
Name: Vincent J. deSostoa
Title: Senior Vice President

NORDEA BANK NORGE ASA,
Grand Cayman Branch, as Lender

By /s/ Martin Lunder                          By /s/ Anne Engen
   ------------------------------                -------------------------------
Name:  Martin Lunder                          Name:   Anne Engen
Title: Senior Vice President                  Title:  Vice President

NORDEA BANK FINLAND PLC,
New York Branch, as Arranger and Agent

By /s/ Martin Lunder                          By /s/ Anne Engen
   ------------------------------                -------------------------------
Name:  Martin Lunder                          Name:   Anne Engen
Title: Senior Vice President                  Title:  Vice President

NORDEA BANK FINLAND PLC,
New York Branch, as Security Trustee

By /s/ Martin Lunder                          By /s/ Anne Engen
   ------------------------------                -------------------------------
Name:   Martin Lunder                         Name:   Anne Engen
Title:  Senior Vice President                 Title:  Vice President

NORDEA BANK FINLAND PLC,
New York Branch, as Swap Provider

By /s/ Martin Lunder                          By /s/ Anne Engen
   ------------------------------                -------------------------------
Name:   Martin Lunder                         Name:   Anne Engen
Title:  Senior Vice President                 Title:  Vice President

                                       65
<PAGE>
                                                                      SCHEDULE 1

                             LENDERS AND COMMITMENTS

Lender                                                         Commitment
------                                                         ----------

NORDEA BANK NORGE ASA                                         $49,600,000
Grand Cayman Branch
437 Madison Avenue
New York, New York 10022
Attention: Martin Lunder and Anne Engen

Facsimile: 212-421-4420

WITH A COPY TO:

NORDEA BANK FINLAND PLC
New York Branch
437 Madison Avenue
New York, New York 10022
Attention: Martin Lunder and Anne Engen

Facsimile: 212-421-4420

<PAGE>

                                                                     EXHIBIT "A"

                        FORM OF ASSIGNMENT AND ACCEPTANCE

Dated as of _______________

         Reference is made to the Loan Agreement dated as of March 18, 2004 (as
the same may be from time to time amended, supplemented or otherwise modified,
the "Loan Agreement") among (i) SEABULK GLOBAL TRANSPORT, INC. and SEABULK
OVERSEAS TRANSPORT, INC., each a Liberian corporation, as joint and several
borrowers (each, a "Borrower" and collectively, the "Borrowers"), (ii) the
Guarantors named therein, (iii) the banks and financial institutions named
therein as Lenders (each, a "Lender", and collectively, the "Lenders"), (iv)
Nordea Bank Finland plc, New York Branch, as agent (the "Agent"), (v) Nordea
Bank Finland plc, New York Branch, as Arranger, and (vi) Nordea Bank Finland
plc, New York Branch, as Swap Provider, pursuant to which the Lenders agreed to
lend to the Borrowers up to US$49,600,000 to finance the acquisition of the
Liberian registered vessels SEABULK RELIANT and SEABULK TRUST. Terms defined in
the Loan Agreement are used herein with the same meanings.

         ______________________ (the "Assignor") and ________________________
(the "Assignee") agree as follows:

         1. As of the Effective Date (defined in Paragraph 4 below), the
Assignor hereby sells and assigns to the Assignee, and the Assignee hereby
purchases and assumes from the Assignor, that interest in and to all of the
Assignor's rights and obligations under the Loan Agreement which represents the
Percentage Interest specified in Section 1 of Annex 1 hereto in the Assignor's
Commitment and the Advance owing to the Assignor. After giving effect to such
sale and assignment, the Assignee's Commitment and the amount of the Advance
owing to the Assignee will be as set forth in Section 2 of Annex 1.

         2. The Assignor (i) represents and warrants 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; and (ii) makes no
representation or warranty and assumes no responsibility with respect to (a) any
statements, warranties or representations made in or in connection with the Loan
Agreement, the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Agreement, or any other instrument or document
furnished pursuant thereto and (b) the financial condition of the Borrowers or
the performance or observance by the Borrowers of any of its obligations under
the Loan Agreement or any other instrument or document furnished pursuant
thereto.

         3. The Assignee (i) confirms that it has received a copy of the Loan
Agreement and the other Loan Documents, together with copies of the financial
statements referred to in the Loan Agreement, and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (ii) 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

<PAGE>

make its own credit decisions in taking or not taking action under the Loan
Agreement; (iii) 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; (iv) agrees that it will be bound by the Loan
Agreement and perform in accordance with its terms all of the obligations which
by the terms of the Loan Agreement are required to be performed by it as a
Lender; (v) specifies as its address for notices the offices set forth beneath
its name on the signature page hereof; and (vi) attaches hereto an executed
counterpart signature page to the Loan Agreement (reflecting the Assignee's
aggregate commitment after giving effect hereto).

         4. The effective date (the "Effective Date") for this Assignment and
Acceptance shall be the date of acceptance hereof by the Agent, unless a later
date is specified in Annex 1 hereto, PROVIDED THAT no Assignment and Acceptance
shall be effective until and unless the terms and conditions of Section 10.05 of
the Loan Agreement are complied with. Following the execution of this Assignment
and Acceptance, two counterparts will be promptly delivered by the Assignee to
the Agent, and the Agent shall promptly forward a counterpart to the Borrowers.

         5. Upon such acceptance and recording, as of 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.

         6. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments under the Loan Agreement in respect of
the assignment effected hereby (including, without limitation, all payments of
principal, interest and commitment fees with respect thereto) to the Assignee.
The Assignor and Assignee shall make all appropriate adjustments in payments
under the Loan Agreement for periods prior to the Effective Date directly
between themselves.

         7. This Assignment and Acceptance shall be governed by, and shall be
construed in accordance with, the laws of the State of New York.

NAME OF ASSIGNOR

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

NAME OF ASSIGNEE

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

Address for Notices:

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

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

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

                                       2
<PAGE>

                                     Annex 1
                                       to
                            Assignment and Acceptance
                            Dated as of ____________

SECTION 1

         Percentage Interest:

SECTION 2

         Assignee's Commitment:                               $

         Aggregate Outstanding Principal
         Amount of Advances owing to
         the Assignee:                                        $

SECTION 3

         Effective Date:

                                            NAME OF ASSIGNOR

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

                                       3
<PAGE>

                                                                     EXHIBIT "B"

                         FORM OF ASSIGNMENT OF EARNINGS

<PAGE>

                                                                     EXHIBIT "C"

                        FORM OF ASSIGNMENT OF INSURANCES

<PAGE>

                                                                     EXHIBIT "D"

                           FORM OF DESIGNATION NOTICE

ADDRESS

                            Transaction Reference #

         The purpose of this letter agreement (this "Confirmation") is to
confirm the terms and conditions of the Swap Transaction entered into between
(a) Nordea Bank Finland Plc, New York Branch ("Party A"), and (b) Seabulk Global
Transport, Inc., Seabulk Overseas Transport, Inc. and Seabulk International,
Inc. (collectively, "Party B"), on the Trade Date specified below. This is a
Designated Transaction for purposes of the Loan Agreement dated as of March 18,
2004 among Seabulk Global Transport, Inc. and Seabulk Overseas Transport, Inc.,
as joint and several Borrowers, the Seabulk International, Inc. and the other
guarantors named therein, as joint and several Guarantors, the banks and
financial institutions listed on Schedule 1 thereto as Lenders, Nordea Bank
Finland Plc, as Agent, Nordea Bank Finland Plc, as Security Trustee, and Party
A, as Swap Provider.

         The definitions and provisions contained in the 2000 ISDA Definitions,
as published by the International Swaps and Derivatives Association, Inc.
("ISDA") are incorporated in this Confirmation. In the event of any
inconsistency between those definitions and provisions and this Confirmation,
this Confirmation will govern.

1.       This Confirmation supplements, forms part of, and is subject to, the
         ISDA Master Agreement dated as of _____ __, 2004, as amended and
         supplemented from time to time (the "Agreement"), between Party A and
         Party B. All provisions contained in the Agreement shall govern this
         confirmation except as expressly modified below.

2.       The terms of the particular Swap Transaction to which this Confirmation
         relates are as follows:

         Notional Amount:

         Trade Date:

         Effective Date:

         Termination Date:                     , subject to adjustment in
                                               accordance with the Modified
                                               Following Business Day Convention

Fixed Amounts:

         Fixed Rate Payer:                     Party  B

<PAGE>

         Fixed Rate Payer Payment Dates:                 , subject to adjustment
                                               in accordance with the Modified
                                               Following Business Day Convention

         Fixed Rate:

         Fixed Rate Day Count Fraction:        Actual/360

Floating Amounts:
         Floating Rate Payer:                  Party  A

         Floating Rate Payer Payment Dates:                         , subject to
                                               adjustment in accordance with the
                                               Modified Following Business Day
                                               Convention

Floating Rate for Initial Calculation Period:

         Floating Rate Option:

         Spread:                               Inapplicable

         Floating Rate Day Count Fraction:     Actual/360

         Reset Dates:                          The first day of each Calculation
                                               Period, subject to adjustment in
                                               accordance with the modified
                                               following Business Day

         Compounding:                          Inapplicable

         Business Days:

         Calculation Agent:                    Party A

3.       Account Details:

         Payments to Party A: Nordea Bank, Helsinki, for Nordea Bank Plc, New
         York

         Payments to Party B: Nordea Bank Finland Plc, New York Branch, pursuant
         to the terms of the Loan Agreement

4.       Offices:

         (a)      The Office of Party A for the Swap Transaction is New York,
                  New York

                                       2
<PAGE>

         (b)      The Office of Party B for the Swap Transaction is Fort
                  Lauderdale, Florida

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing one copy of this Confirmation and returning it to us.

                                       NORDEA BANK FINLAND Plc,

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

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

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

Confirmed as of the date
first written above:

SEABULK GLOBAL TRANSPORT, INC.,        SEABULK OVERSEAS TRANSPORT, INC.,
as Borrower                            as Borrower

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

SEABULK INTERNATIONAL, INC.

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

                                       3
<PAGE>

                                                                     EXHIBIT "E"

                                FORM OF MORTGAGE

<PAGE>

                                                                     EXHIBIT "F"

                                  FORM OF NOTE

<PAGE>

                                                                     EXHIBIT "G"

                           FORM OF NOTICE OF DRAWDOWN

                               NOTICE OF DRAWDOWN

March __, 2004

NORDEA BANK FINLAND PLC, New York Branch
As Agent
437 Madison Avenue
New York, NewYork 10022

Ladies and Gentlemen:

The undersigned refers to the Loan Agreement dated as of March 18, 2004 (the
"Loan Agreement") among (i) the undersigned as Borrowers, (ii) the Guarantors
named therein, (iii) the banks and financial institutions named therein as
Lenders, (iv) Nordea Bank Finland plc, New York Branch, as Agent, (v) Nordea
Bank Finland plc, New York Branch, as Security Trustee, and (vi) Nordea Bank
Finland plc, New York Branch, as Swap Provider. All capitalized terms not
otherwise defined have the meaning ascribed to them in the Loan Agreement.

The undersigned hereby gives you irrevocable notice that it hereby requests an
Advance under the Loan Agreement as follows:

         (a)      The Drawdown Date of the proposed Advance is March __, 2004.

         (b)      The aggregate principal amount of the Advance is $__________,
                  consisting of a Tranche A portion in the amount of $__________
                  and a Tranche B portion in the amount of $_____________ and
                  the initial Interest Period is _______ month(s).

         (c)      The proceeds of the Advance are to be used to acquire the
                  Panamanian registered vessel WORLD __________ (t.b.r SEABULK
                  ___________ and reflagged under Liberian flag) from its
                  present owner, _______________.

         (d)      The payment instructions for the Advance are as follows:

                  Amount:                   $_______________

                  For Credit to:            the account of HSH Nordbank, London
                                            Branch, with Wachovia Bank, N.A.,
                                            New York

                  SWIFT Code:               PNBPUS3NNYC

<PAGE>

                  For Further Credit to:    the account of ___________, Account
                                            Number _________, with HSH Nordbank,
                                            London Branch, SWIFT Code: HSHNGB2L

                  Reference:                Sale of M/T _________

                  -and-

                  Amount:                   $_________

                  Bank:                     Citibank N.A.
                                            111 Wall Street
                                            NY, NY 10005

                  Wire Instructions:        ABA Number 0210-00089
                                            Attention: Private Banking for
                                            credit to Watson, Farley & Williams

                  Account No.:              37348799

                  Value Date:               March __, 2004

The undersigned hereby certify that before and after giving effect to the
proposed Advance, unless waived by the Agent or the Lenders, (i) no Default or
Event of Default shall have occurred and be continuing or would result therefrom
and (ii) all representations and warranties contained in Section 4.01 of the
Loan Agreement shall be true and correct in all material respects as though such
representations and warranties had been made on and as of the date of making of
the Advance.

Very truly yours,

SEABULK GLOBAL TRANSPORT, INC.,           SEABULK OVERSEAS TRANSPORT, INC.,
as Borrower                               as Borrower

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

                                       2<PAGE>

                                                                   EXHIBIT 10.13

            AGREEMENT FOR RESALE OF LOCAL WIRELINE TELECOMMUNICATIONS
                  SERVICES AND PROVISION OF ANCILLARY SERVICES

                                     Between

                           Z-TEL COMMUNICATIONS, INC.

                                       and

                       SPRINT COMMUNICATIONS COMPANY L. P.

                                   dated as of

                                February 4, 2003

     Materials contained in this exhibit have been omitted pursuant to a
request for confidential treatment submitted to the Securities and Exhchange
Commission.  Those omitted materials have been filed separately.  Omitted
materials are indicated by placing *** characters in
lieu at the omitted materials.
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                      <C>
PREAMBLE ...........................................................................................      1

AGREEMENT ..........................................................................................      1

DEFINITIONS ........................................................................................      2

Section I. Scope of Services 16
           1.1. Statement of Work ..................................................................     16
           1.2. Agency and Resale Modes ............................................................     16
                    1.2.1. Migration ...............................................................     17
                    1.2.2. Implementation ..........................................................     17
                    1.2.3. Modification ............................................................     17
           1.3. Geographic Scope of Services .......................................................     17
                    1.3.1. Compliance with Regulations .............................................     17
           1.3.2. Service Area Additions ...........................................................     17
                    1.3.3. Service Area Limitations ................................................     17
           1.4. Local Wholesale Services ...........................................................     17
                    1.4.1. Termination of Long Distance Calls ......................................     18
                    1.4.2. Access to Toll Free Services ............................................     18
           1.5. Z Node Services ....................................................................     18
                    1.5.1. Extension of Capabilities ...............................................     18
           1.6. Long Distance Services .............................................................     18
           1.7. Travel Card Services ...............................................................     18
           1.8. Inside Wire Services ...............................................................     18
           1.9. OSS Services Supplied by Z-Tel .....................................................     19
                    1.9.1. Inbound Sales ...........................................................     19
                    1.9.2. Third Party Verification ................................................     19
                    1.9.3. Provisioning ............................................................     20
           1.9.4. Customer Care Escalations ........................................................     20
                    1.9.5. Access Charges ..........................................................     20
                    1.9.6. End User Billing ........................................................     20
                    1.9.7. Payment Posting .........................................................     20
                    1.9.8. CDR Processing ..........................................................     20
                    1.9.9. Responding to Subpoenas .................................................     21
                    1.9.10. Reports ................................................................     21
                    1.9.11. LEC Relations ..........................................................     21
                    1.9.13. Repair .................................................................     21
                    1.9.13. Collections ............................................................     21
                    1.9.14. Training ...............................................................     21
                    1.9.15. Fraud Detection ........................................................     21
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                      <C>
                    1.9.16. Long Distance Services Exception .......................................     21
           1.10. OSS Functions Provided by Sprint ..................................................     21
                    1.10.1. Marketing ..............................................................     22
                    1.10.2. Customer Acquisition and TPV ...........................................     22
                    1.10.3. Order Entry ............................................................     22
                    1.10.4. Customer Care (Customer Interface and Tier 1 Resolution)................     22
                    1.10.5. Change Orders ..........................................................     22
                    1.10.6. Lockbox ................................................................     22
                    1.10.7. Tax Reconciliation/Filings/Remittances .................................     22
                    1.10.8. Transport (to Z-Node) ..................................................     22
           1.10.9. Fulfillment .....................................................................     23
                    1.10.10. Investigating Complaints ..............................................     23
                    1.10.11. Commission Program ....................................................     23
                    1.10.12. Additional Executive Reports ..........................................     23
                    1.10.13. Sprint Retained or Assumed Function ...................................     23
           1.11. Ancillary Services ................................................................     24
           1.12. Upgrades, Updates and New Z-Tel Services or Functionalities .......................     24
                    1.12.1. Upgrades and Updates ...................................................     24
                    1.12.2. New Services or Functionalities ........................................     24

                    1.12.3. Timing of Availability .................................................     25
                    1.12.4. Pricing ................................................................     25
                    1.12.5. Proprietary Work Requested by Sprint ...................................     25
                    1.12.6. Similarly Situated .....................................................     25
           1.13. Promotional Programs Excluded .....................................................     25
           1.14. Maintenance .......................................................................     26
           1.15. Notice of Changes .................................................................     26
           1.16. Grandfathering ....................................................................     27

Section II. Term, Termination and Transition .......................................................     27
           2.1. Initial Term .......................................................................     27
           2.2. Renewal Term .......................................................................     28
           2.3. Termination ........................................................................     28
                    2.3.1. Termination by Sprint ...................................................     28
                    2.3.2. Termination by Z-Tel ....................................................     30
           2.4. Obligations upon Expiration or Termination .........................................     30
                    2.4.1. Sprint's Obligations ....................................................     30
                    2.4.2. Z-Tel's Obligations .....................................................     31
                    2.4.3. Removal of Property .....................................................     32
           2.5. Transition of Customers ............................................................     32

                    2.5.1. Compliance with Law .....................................................     33
                    2.5.2. Failure to Pay During Transition ........................................     33
                    2.5.3. Assistance ..............................................................     33
                    2.5.4. New Orders ..............................................................     34
                    2.5.5. Transition Costs ........................................................     34
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                      <C>
                    2.5.6. Transition Period Duration ..............................................     36
           2.6. Exit from Telecommunications Service by Sprint .....................................     37
           2.7. Lawful Purposes ....................................................................     37

Section III. Reserved ..............................................................................     38

Section IV. Fees and Charges .......................................................................     38
           4.1. Basis of Fees ......................................................................     38
           4.2. Interface Establishment Fee ........................................................     38
                    4.2.1. Development of PCS Interfaces ...........................................     38
           4.3. Service Fee Prepayment and Resulting Credit ........................................     39
                    4.3.1. Use Stimulation .........................................................     39
           4.4. Excluded Activities ................................................................     39
           4.5. SLC and PICC Charges ...............................................................     39
           4.6. Z-Tel OSS Support ..................................................................     39
                    4.6.1. Gross-Up of Expense .....................................................     39
                    4.6.2. Allocation of Employee Expense ..........................................     42
                    4.6.3. Pre-approved ............................................................     42
                    4.6.4. Adjustment to Headcount .................................................     42
                    4.6.5. Escalation of Headcount Matters .........................................     43
                    4.6.6. Level of Support ........................................................     43
                    4.6.7. Cost of Living Adjustment ...............................................     43
                    4.6.8. Minimization of Expense .................................................     44
           4.7. Allocation of **** and Usage Fees ..................................................     44
                    4.7.1. Allocation of **** Fees .................................................     44
                    4.7.2. Allocation of Usage Fees ................................................     44
           4.8. Slamming and Cramming Impact Expenses ..............................................     44
           4.9. Changes in Fees and Direct Costs ...................................................     45
                    4.9.1. Adjustment Process for ***** Fees Not in *****...........................     45
                    4.9.2. Resolution of Fee Change Disputes .......................................     45
                    4.9.3. ***** Fee Adjustments in *****...........................................     46
                    4.9.4. *****....................................................................     46
           4.10. Recovery of Taxes and Regulatory Fees .............................................     46
           4.11. Permitted Fees and Charges ........................................................     46

Section V. Billing and Billing Disputes ............................................................     47
           5.1. Invoicing of Fees ..................................................................     47
                    5.1.1. Invoice Date ............................................................     47
                    5.1.2. **** Recurring Fees .....................................................     47
                    5.1.3. Z-Tel Dedicated Support Fees ............................................     47
                    5.1.4. Receipt Credits .........................................................     47
           5.2. Back Billing .......................................................................     47
           5.3. Billing Disputes ...................................................................     47
                    5.3.1. No Withholding of ***** Fees ............................................     48
                    5.3.2. Withholding of ***** Fees ...............................................     48
                    5.3.3. Notice of Billing Dispute ...............................................     48
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                      <C>
                    5.3.4. Payment Will Not Prejudice ..............................................     48
                    5.3.5. Restitution .............................................................     49
                    5.3.6. Resolution Period .......................................................     49
                    5.3.7. Joint Effort Regarding Third-Party Disputes .............................     49

Section VI. Payments ...............................................................................     49
           6.1. Responsibility .....................................................................     49
           6.2. Payment Schedule ...................................................................     49
                    6.2.1. **** Recurring Fees .....................................................     49
                    6.2.2. Other **** Fees .........................................................     50
                    6.2.3. Z-Tel Dedicated Support Fees ............................................     50
                    6.2.4. All Other Fees ..........................................................     50
           6.3. Currency and Payment Method ........................................................     50
           6.4. Late Payment Fees ..................................................................     50
                    6.4.1. Undisputed Amounts ......................................................     50
                    6.4.2. Disputed Amounts ........................................................     50
           6.5. Sprint Adjustments .................................................................     50

Section VII. Relationship to End Users .............................................................     51
           7.1. Serving End Users ..................................................................     51
           7.2. Points of Contact ..................................................................     51
           7.3. End User Interfaces ................................................................     51

Section VIII. Authorizations .......................................................................     51
           8.1. Listing Information ................................................................     51
           8.2. Authorization and Verification Requirements ........................................     52
                    8.2.1. Z-Tel Verification and Retention ........................................     52
                    8.2.2. Sprint Verification and Retention .......................................     52

Section IX. Z-Tel Responsibilities and Warranties ..................................................     52
           9.1. Z-Tel Cooperation ..................................................................     52
           9.2. Good Standing ......................................................................     52
           9.3. Z-Tel Compliance with Laws .........................................................     53
           9.4. Prior Consent for Branding .........................................................     53
           9.5. Sprint End User Interaction ........................................................     53
           9.6. No Contravention ...................................................................     53
           9.7. Sufficiency of Z-Tel Fundamental Technology ........................................     53
           9.8. Non-Discrimination .................................................................     54
           9.9. Toll-Free Access ...................................................................     54
           9.10. Restricting Service ...............................................................     54
           9.11. Tariffs ...........................................................................     55
           9.12. Material Threat ...................................................................     55
           9.13. Network Protection ................................................................     55
           9.14. Responding to Subpoenas ...........................................................     55
           9.15. Insurance .........................................................................     55
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                      <C>
                    9.15.1. Certificates of Insurance ..............................................     56
                    9.15.2. No Limitation ..........................................................     57
           9.16. Fee Increases .....................................................................     57
           9.17. Change of Control .................................................................     57

Section X Sprint Responsibilities and Warranties ...................................................     57
           10.1. Sprint Compliance with Laws .......................................................     57
                    10.1.1. Authority in Place .....................................................     57
                    10.1.2. Demonstrated Proof of Authority ........................................     57
           10.2. Subscriber Fees ...................................................................     57
           10.3. No Contravention ..................................................................     57
           10.4. Hazards, Interference, Etc ........................................................     58
           10.5. Security ..........................................................................     58
           10.6. Subpoenas .........................................................................     58
           10.7. Sprint Compliance with Laws .......................................................     58
           10.8. Acceptable Use ....................................................................     58
           10.9. Long Distance Choice ..............................................................     58
                    10.9.1. PIC Selection ..........................................................     58
                    10.9.2. Carrier Arrangements ...................................................     58
                    10.9.3. Proof of Authorization .................................................     58
                    10.9.4. Responsibility for ANI Usage ...........................................     59
                    10.9.5. Manual Processing ......................................................     59
           10.10. Connectivity to Z-Node ...........................................................     59
           10.11. Fraud ............................................................................     59
           10.12. Forecasts ........................................................................     60
           10.13. Compliance with Regulatory Rules .................................................     60
           10.14. Future Services ..................................................................     60
           10.15. Use of Service ...................................................................     60
           10.16. Insurance ........................................................................     61
                    10.16.1. Coverage ..............................................................     61
                    10.16.2. Certificates of Insurance .............................................     62
                    10.16.3. No Limitation .........................................................     62
                    10.16.4. Self Insurance ........................................................     62
           10.17. Material Threat ..................................................................     62
           10.18. Reverse Engineering ..............................................................     63
           10.19. Interconnection Agreements .......................................................     63
           10.20. Z-Tel Vendors ....................................................................     63

Section XI. Service Level and Remedy ...............................................................     63
           11.1. SLAs ..............................................................................     63
                    11.1.1. Performance Levels .....................................................     63
                    11.1.2. Actions by ILECs and Regulatory Authorities ............................     63
           11.2. Force Majeure Application .........................................................     63

Section XII. Disaster Recovery, Back-up System .....................................................     64
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                      <C>
           12.1. On-Site Disaster Recovery Plan ....................................................     64
           12.2. Back-Up Plan ......................................................................     64
                    12.2.1. Plan Contents ..........................................................     64
                    12.2.2. Plan Development .......................................................     65
                    12.2.3. Joint Disaster Planning Team ...........................................     65
           12.3. Material Breach ...................................................................     65
           12.4. Implementation of Back-Up Plan; Back-Up System ....................................     65
                    12.4.1. Timing of Implementation ...............................................     65
                    12.4.2. Location ...............................................................     66
                    12.4.3. Z-Tel's Assistance and Cooperation .....................................     66
                    12.4.4. Back-up System Operations ..............................................     66
                    12.4.5. Operating Methods and Procedures .......................................     66
                    12.4.6. Title ..................................................................     68
           12.5. Testing of Back-Up System .........................................................     68
                    12.5.1. Z-Tel Back-Up Materials ................................................     68
                    12.5.2. Restrictions on Sprint's Access and Use of Z-Tel Back-Up Materials .....     68
                    12.5.3. Z-Tel's Assistance .....................................................     69

Section XIII. Third Party Agreements ...............................................................     69
           13.1. Third-Party Agreements ............................................................     69

Section XIV. Technology Delivery, Technology License and Escrow ....................................     69
           14.1. Technology License Grant ..........................................................     69
           14.2. Triggering Event ..................................................................     70
                    14.2.1. Exercise of Option .....................................................     70
                    14.2.2. Royalty Payment ........................................................     71
           14.3. Technology Escrow .................................................................     71
           14.4. Technology Escrow Materials .......................................................     71
                    14.4.1. Deposit ................................................................     71
           14.4.2. Upgrades and Updates of Technology Escrow Materials .............................     72
           14.5. Audit of Technology Escrow Materials ..............................................     73
           14.6. Release of Technology Escrow Materials ............................................     73
           14.7. Bankruptcy ........................................................................     73
           14.8. Disputes Regarding Delivery or Release of Technology Escrow Materials .............     73
           14.9. Assignment of Technology License ..................................................     74
           14.10. Remedies Limited .................................................................     74

Section XV. Confidentiality ........................................................................     74
           15.1. Confidentiality ...................................................................     74
           15.2. Return or Destruction of Confidential Information .................................     75
           15.3. Third Party Disclosure Requests ...................................................     75
           15.4. Required Disclosures ..............................................................     75
           15.5. Equitable Relief ..................................................................     75
           15.6. Survival ..........................................................................     76
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                      <C>
Section XVI. Property Rights; License; Trademarks ..................................................     76
           16.1. Property Rights and Usage .........................................................     76
           16.2. Title to Equipment ................................................................     76
           16.3. Grant of Use License ..............................................................     76
                    16.3.1. Retail Limitation ......................................................     77
                    16.3.2. Brand Limitation .......................................................     77
                    16.3.3. Sales Agents ...........................................................     77
           16.4. Trademarks ........................................................................     77
                    16.4.1. Sprint Branding Exception ..............................................     77
                    16.4.2. Z-Tel Branding Exception ...............................................     77

Section XVII. Disclaimer of Warranties .............................................................     77
           17.1. Disclaimer of Warranties ..........................................................     77

Section XVIII. Limitations on Liability ............................................................     78
           18.1. Limitations .......................................................................     78
           18.2. Application .......................................................................     78

Section XIX. Indemnification .......................................................................     78
           19.1. Indemnification ...................................................................     78
           19.2. Damages ...........................................................................     79
           19.3. Procedure .........................................................................     79

Section XX. Audits .................................................................................     80
           20.1. Adequate Books and Records ........................................................     80
           20.2. Right to Audit ....................................................................     80
           20.3. Verification of Third Party Charges ...............................................     81
           20.4. Disclosure ........................................................................     81

Section XXI. Miscellaneous .........................................................................     81
           21.1. Good Faith Performance ............................................................     81
           21.2. No Exclusivity ....................................................................     81
           21.3. Taxes .............................................................................     81
           21.4. Noninterference ...................................................................     82
           21.5. Dispute Resolution ................................................................     82
                    21.5.1. Escalation Procedures ..................................................     82
                    21.5.2. Negotiations ...........................................................     82
                    21.5.3. Disputes Involving Billing .............................................     82
                    21.5.4. Continued Performance ..................................................     82
           21.6. Entire Agreement ..................................................................     82
           21.7. Compliance with Ethical Business Practices ........................................     83
           21.8. Assignment ........................................................................     83
           21.9. Binding Agreement .................................................................     83
           21.10. Litigation Venue .................................................................     83
           21.11. Governing Law ....................................................................     83
           21.12. Legal Fees .......................................................................     83
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                      <C>
           21.13. Letter of Agency .................................................................      83
           21.14. Notices ..........................................................................      83
                    21.14.1. Deemed Delivery .......................................................      83
                    12.14.2. Super Notice ..........................................................      84
                    21.14.3. Saturday, Sunday or Legal Holiday .....................................      84
           21.15. Waiver ...........................................................................      84
           21.16. Relationship of the Parties ......................................................      84
           21.17. Third Party Beneficiaries ........................................................      84
           21.18. Construction .....................................................................      84
           21.19. Severability .....................................................................      85
           21.20. Survival .........................................................................      85
           21.21. Counterparts .....................................................................      85
           21.22. Law Enforcement Cooperation ......................................................      85
           21.23. Emergency Interfaces .............................................................      85
           21.24. Payphone Services Prohibited .....................................................      86
           21.25. Sprint Services ..................................................................      86
           21.26. Waiver of Jury Trial .............................................................      86

List of Schedules and Exhibits .....................................................................      88

Schedule A Statement of Work .......................................................................      89

Schedule B Service Level Agreement and Remedies ....................................................      89

           Definitions .............................................................................      90

           1.0 SLA Generic Types ...................................................................      93
           1.1 Stabilization Period SLAs ...........................................................      93
           1.2 Operational SLAs ....................................................................      94
           1.3 Triggering Event SLAs ...............................................................      96
           2.0 Roles and Responsibilities ..........................................................      99
           3.0 Reporting ...........................................................................     100
           4.0 Exclusions ..........................................................................     101
           5.0 Service Level Agreement Change Process ..............................................     103
                  Attachment A .....................................................................     105
                  Attachment B .....................................................................     108
                  Metric Definition ................................................................     108

Schedule C Pricing Schedule ........................................................................     109

</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                      <C>
Schedule D Z-Tel Fundamental Technology ............................................................     111

Schedule E Existing Z-Tel Technology ...............................................................

Schedule 10.8 Acceptable Use Policy ................................................................     113

Schedule 13.1 Conditions, Restrictions, Rules, Policies, Procedures, Limitations and Rights
              Imposed or Granted under Z-Tel's Third Party Agreements and Licenses .................     116

Designee Schedule Sprint and Z-Tel Contact Information .............................................     117

Exhibit A Form Transition Escrow Agreement .........................................................     120

Exhibit B Technology Escrow Agreement ..............................................................     130

Exhibit C Form of Text for Initial SEC Filing and Press Release ....................................     131

Exhibit D Form of Blanket Agency Agreement Letter for Local Service Providers ......................     132
</TABLE>

<PAGE>

                     AGREEMENT FOR RESALE OF LOCAL WIRELINE
             TELECOMMUNICATIONS SERVICES AND PROVISION OF ANCILLARY
                                    SERVICES

         THIS AGREEMENT, dated as of February 4, 2003, is between Z-TEL
COMMUNICATIONS, INC. ("Z-Tel") a Delaware corporation having its principal place
of business at 601 South Harbour Island Boulevard, Suite 220, Tampa, Florida
33602, on the one hand, and SPRINT COMMUNICATIONS COMPANY L.P. ("Sprint") a
Delaware limited partnership having its principal place of business at 6200
Sprint Parkway, Overland Park, KS 66251, on the other. Z-Tel and Sprint are
sometimes referred to collectively in this Agreement as the "Parties" and
individually as a "Party."

                                    PREAMBLE

         Z-Tel and Sprint are both Competitive Local Exchange Carriers. Z-Tel
provides bundled packages of local, long-distance and enhanced
telecommunications services, primarily to residences and small businesses. Z-Tel
provides its Telephone Exchange Services using the unbundled network elements
("UNES") of Incumbent Local Exchange Carriers ("ILECS") under Interconnection
Agreements and tariffs on file with State Public Utility Commissions ("PUCS").
This Agreement sets forth the terms and conditions under which Z-Tel will
provide to Sprint:

                  (a) certain Z-Tel Telecommunications Services and Information
         Services to be branded by Sprint for resale to Sprint's End Users,

                  (b) certain ancillary services and functions for Sprint's own
         use and for use in providing Telecommunications Services and
         Information Services to such Sprint End Users, and

                  (c) Operation Support Systems Services.

                                    AGREEMENT

         NOW THEREFORE, in reliance upon the foregoing Preamble, the mutual
covenants and agreements contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged by
each Party to the other, Z-Tel and Sprint agree to the following terms and
conditions.

                                       1
<PAGE>

                                   DEFINITIONS

AFFILIATE means:

         (a) any Person affiliated with, controlling, controlled by, under
         common control with, or directly or indirectly operated by a party to
         this Agreement,

                  (b) any Person in which a party to this Agreement has a direct
         or indirect beneficial ownership (as defined in Rule 13d-3 under the
         Securities Exchange Act of 1934, as amended) of fifty percent (50%) or
         more of the voting stock of such Person or in which a party to this
         Agreement has a controlling interest, and

         (c) with respect to Sprint, any Person that is engaged in the sale of
         Sprint-branded products.

The Persons described in paragraphs (a) and (b) are Owned Affiliates and the
Persons described in paragraph (c) are Contractual Affiliates.

ALTERNATIVELY BILLED SERVICES or ABS refers to (a) local and long distance calls
placed through an operator and billed to the called party (e.g., collect) or to
a third number, and (b) information provider per fee calls via dedicated NPA/NXX
codes such as 900 and 976.

ANCILLARY SERVICES means any facility or service that is requested by Sprint
that is not a Telecommunications Service or an Information Service that is
necessary or desirable to directly support delivery by Sprint of
Telecommunications Services and Information Services to its End Users and is not
identified as a function to be performed by Z-Tel in the SOW.

ANI or AUTOMATIC NUMBER IDENTIFICATION means the automatic identification of the
calling station used for routing and billing.

AUP or AUTHORIZED USE PLAN has the meaning set forth in Section 10.8.

BACK-UP PLAN has the meaning set forth in Section 12.2.

BACK-UP SYSTEM has the meaning set forth in Section 12.2.

BANKRUPTCY or BANKRUPT means the happening of any of the following events
concerning a Party:

         (a) the filing of an application for, or a consent to, the appointment
         of a trustee,

                                       2
<PAGE>

         receiver or liquidator for all or any substantial portion of the
         Party's assets;

         (b) the filing of a voluntary petition in bankruptcy;

         (c) the filing of a pleading in any court of record admitting inability
         to pay debts as they come due;

         (d) the making of an assignment for the benefit of creditors;

         (e) the consenting to, or default in the answering of, a bankruptcy
         petition filed;

         (f) the entry of a judgment or decree in any bankruptcy or insolvency
         proceeding adjudicating bankruptcy or insolvency;

         (g) the entry of an order for any relief in any bankruptcy or
         insolvency proceeding;

         (h) when one hundred twenty (120) calendar days after the commencement
         of any involuntary proceeding seeking reorganization, arrangement,
         composition, readjustment, liquidation, dissolution, or similar relief
         under any statute, law or regulation, the proceeding has not been
         dismissed; and

         (i) when ninety (90) calendar days after the appointment, without the
         Party's consent or acquiescence, of a trustee, receiver or liquidator
         of the Party or all or any substantial portion of the Party's assets,
         the appointment has not been vacated or stayed or when ninety (90)
         calendar days after the stay the appointment has not been vacated.

BILLING DATE means the date on which the bill is transmitted to the receiving
Party.

BILLING DISPUTE means any claim on any contractual basis that any dollar amount
in any bill issued for services performed under this Agreement is not rightly
due and payable.

BUSINESS DAY means any day that is not a Saturday, Sunday or legal holiday.

CHANGE OF CONTROL means the occurrence of any of the following events:

                  (a) Any "person" (as that term is defined in Sections 3(a)(9),
         13(d), and 14(d) of the Securities Exchange Act of 1934 (the "EXCHANGE
         ACT") and the rules under the Exchange Act, including Rule 13d-5(b))
         acquires, directly or indirectly, "beneficial ownership" (as determined
         under Rule 13d-3 under the Exchange Act) of securities entitled to vote
         generally in the election of Z-Tel's directors ("VOTING SECURITIES") so
         that, after the acquisition, the "person" holds, directly or
         indirectly, shares of voting securities representing forty percent
         (40%) or more of the combined voting power of Z-Tel's then outstanding
         voting securities, other than an acquisition of voting securities:

                                       3
<PAGE>

                           (i) by a trustee or other fiduciary holding the
                  securities under any employee benefit plan (or related trust)
                  sponsored or maintained by Z-Tel or any person that Z-Tel
                  controls,

                           (ii) by any employee benefit plan (or related trust)
                  sponsored or maintained by Z-Tel or any person that Z-Tel
                  controls,

                           (iii) by Z-Tel,

                           (iv) by a corporation owned, directly or indirectly,
                  by Z-Tel's stockholders in substantially the same proportions
                  as their ownership of Z-Tel stock, or

                           (v) in a transaction that would not be a Change in
                  Control under clause (c) below.

                  Notwithstanding the foregoing, an event is not a "Change of
         Control" under this subparagraph (a) unless:

                                    (A) the "person" is one or more Change of
                           Control Companies or any of their respective
                           Affiliates or successors, or

                                    (B) the "person" includes one or more Change
                           of Control Companies or any of their respective
                           Affiliates or successors, and any included Change of
                           Control Company, Affiliate or successor owns,
                           controls or otherwise holds (together with its
                           Affiliates and successors) voting securities
                           representing in aggregate ***** or more of the
                           combined voting power of the "person's" then
                           outstanding voting securities.

                  For purposes of this Agreement, the "CHANGE OF CONTROL
         COMPANIES" are *****************************************************
         ********************************************************************
         ********************************************************************
         For the avoidance of doubt, nothing in the proceeding will limit
         the effectiveness of the exclusions set forth in clauses (i), (ii),
         (iii), (iv), and (v) of this subparagraph (a).

                           (b) A change occurs in the composition of Z-Tel's
         Board of Directors that causes less than a majority of Z-Tel's
         directors to be directors that meet one or more of the following
         descriptions:

                           (i) a director who:

                           (A) has been a director of Z-Tel for a continuous
                  period of at least the previous twelve (12) months, or

                                       4
<PAGE>

                            (B) was a director of Z-Tel as of the Effective Date
                  and has continued that role continuously without interruption
                  since the Effective Date,

                           (ii) a director whose election or nomination as
                  director was approved by a vote of at least two-thirds of the
                  then directors described in this clause (b) by prior
                  nomination or election, but excluding, for the purpose of this
                  subclause (b)(ii), any director whose initial assumption of
                  office occurred as a result of:

                                    (A) an actual or threatened election contest
                           with respect to the election or removal of directors
                           or other actual or threatened solicitation of proxies
                           or consents by or on behalf of a person or group
                           other than Z-Tel's Board of Directors, or

                                    (B) a tender offer, merger, sale of
                           substantially all of Z-Tel's assets, consolidation,
                           reorganization or business combination that would be
                           a Change in Control under clause (c) below, or

                           (iii) a director who was serving on Z-Tel's Board of
                  Directors as a result of the consummation of a transaction
                  that would not be a Change in Control under clause (c) below.

                  Notwithstanding the foregoing, an event is not a "Change of
         Control" under this subparagraph (b) unless after the event a majority
         of Z-Tel's directors are representing (through any arrangement,
         agreement, or understanding), were designated by, or are employed by,
         one or more of the Change of Control Companies or any of their
         respective Affiliates or successors.

                  (c) Z-Tel consummates (whether directly involving Z-Tel or
         indirectly involving Z-Tel through one or more intermediaries):

                           (i) a merger, consolidation, reorganization or
                  business combination,

                           (ii) a sale or other disposition of all or
                  substantially all of its assets, or

                           (iii) the acquisition of assets or stock of another
                  entity,

in each case, other than in a transaction:

                                    (A) that results in Z-Tel's voting
                           securities outstanding immediately before the
                           transaction continuing to represent (either by
                           remaining outstanding or by being converted into
                           voting securities of Z-Tel or the person that, as a
                           result of the transaction,

                                       5
<PAGE>

                           controls, directly or indirectly, Z-Tel or owns,
                           directly or indirectly, all or substantially all of
                           Z-Tel's assets or otherwise succeeds to Z-Tel's
                           business (Z-Tel or such person, the "SUCCESSOR
                           ENTITY")) directly or indirectly, at least *****
                           *********** of the combined voting power of the
                           Successor Entity's outstanding voting securities
                           immediately after the transaction,

                                    (B) after which more than **********
                           ***** of the members of the Successor Entity's Board
                           of Directors were members of Z-Tel's Board of
                           Directors when Z-Tel's Board of Director's approved
                           the transaction (or whose election or nomination was
                           approved by a vote of at least two-thirds of the
                           members who were members of Z-Tel's Board of
                           Directors at that time), and

                                    (C) after which no person or group
                           beneficially owns voting securities representing
                           ********** or more of the combined voting
                           power of the Successor Entity (but no person or group
                           will be treated for purposes of this clause (C) as
                           beneficially owning ********** or more of
                           combined voting power of the Successor Entity solely
                           because of the voting power the person or group held
                           in Z-Tel before the consummation of the transaction.

                  Notwithstanding the foregoing, an event is not a "Change of
         Control" under this subparagraph (c) unless it results, whether through
         one transaction or a series of related transactions occurring during
         any 365-day period, in the "ultimate parent entity" (as defined in the
         Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
         the rules and regulations promulgated under such act, but using a *****
         rather than a **********) of Z-Tel becoming any of the Change of
         Control Companies or any of their respective Affiliates or successors.

                  (d) Z-Tel liquidates or dissolves.

CHANGE IN FEE NOTICE has the meaning set forth in Section 4.9.1.

CLAIM has the meaning set forth in Section 19.1.

CLLI means Common Language Location Identifier.

CLEC means a Competitive Local Exchange Carrier.

CLEC FEES mean fees and charges imposed upon Z-Tel by a CLEC other than Sprint
in connection with services that Z-Tel provides to Sprint under this Agreement.

COMMITTED FORECAST has the meaning set forth in Section 10.12.

                                       6
<PAGE>

COMPLEX TRANSITION has the meaning set forth in Section 2.5.5(b)(ii).

CONFIDENTIAL INFORMATION means and includes the following information:

         (a) customer information, supplier information, distributor
         information, material terms of any contracts (including this
         Agreement), marketing philosophies, strategies, techniques and
         objectives (including service roll-out dates and volume estimates),
         legal and regulatory positions and strategies, advertising and
         promotional copy, competitive advantages and disadvantages, performance
         specifications, non-published financial data, network configurations,
         product or service plans, attributes, designs, technical and functional
         specifications, costs, prices and names, computer software (including
         third party software), inventions, discoveries, technological
         developments, "know how," business opportunities (including planned or
         proposed financings, mergers, acquisitions, ventures and partnerships)
         and methodologies and processes (including the look and feel of
         computer screens and reports) for provisioning (whether in connection
         with interexchange carriers or incumbent local exchange carriers),
         customer assistance, order acceptance and tracking, repairs and
         commissions; and

         (b) information for which the disclosing Party has an obligation of
         confidentiality if the disclosing party discloses the obligation to the
         recipient Party in writing before or contemporaneously with the
         disclosure.

Notwithstanding the foregoing, Z-Tel Fundamental Technology, Z-Tel Technology
and Z-Tel Technical Information constitute Confidential Information of Z-Tel.

"Confidential Information" excludes information that:

                           (i) is not designated in writing (at the time of
                  delivery or promptly thereafter) or conspicuously marked as
                  "confidential" or "proprietary" or likewise using words of
                  similar import or is not otherwise specifically identified in
                  this Agreement as Confidential Information;

                           (ii) is or becomes generally known or available by
                  publication, commercial use or otherwise through no fault of
                  the receiving Party;

                           (iii) is known and has been reduced to tangible form
                  by the receiving Party at the time of disclosure and is not
                  subject to restriction;

                           (iv) is independently developed by the receiving
                  Party without use of the disclosing Party's Confidential
                  Information;

                           (v) is lawfully obtained from a third party who has
                  the right to make such disclosure; or

                           (vi) is released in writing for publication by the
                  disclosing Party.

Notwithstanding the foregoing, any information disclosed to a Party by the other
Party

                                       7
<PAGE>

before the Effective Date in connection with the negotiation of this Agreement,
the SOW, the SLAs, the October Letter Agreement and the December Letter
Agreement, or disclosed in connection with an audit under Section 20.2 is
presumed to be Confidential Information of the disclosing Party, even if:

                  (A)      it was not designated in writing (at the time of
                           delivery or promptly thereafter) or conspicuously
                           marked as "confidential" or "proprietary" or likewise
                           using words of similar import, or

                  (B)      is not otherwise specifically identified in this
                           Agreement as Confidential Information, unless the
                           information falls within one or more of the
                           exclusions described in clauses (ii) through (vi)
                           above.

CRAMMING means the submission or inclusion of unauthorized, misleading or
deceptive charges for products or services on End User's bills.

CUSTOM SOFTWARE means software that Z-Tel owns or exclusively licenses (and
related documentation).

CUSTOMER BILLING means the process of maintaining customer usage information,
calculating taxes and fees (with the exception of fees determined by applicable
state and federal regulatory agencies, such fees will be determined in Sprint's
sole discretion), and preparing and delivering customer invoices and printing
additional invoices for past due accounts. Z-Tel's billing services are
described in greater detail in the SOW.

CUSTOMER DATA RECORDS or CDRS refers to information relating to the quantity,
location and amount of use pertaining to telephone exchange service or telephone
toll service not necessarily contained in a customer's bill but available from
carriers on an ANI or CLLI code basis.

CPNI or CUSTOMER PROPRIETARY NETWORK INFORMATION means:

         (a) information that relates to the quantity, technical configuration,
         type, destination, location, and amount of use of a Telecommunications
         Service subscribed to by any customer of a telecommunications carrier,
         and that is made available to the carrier by the customer solely by
         virtue of the carrier-customer relationship; and

         (b) information contained in the bills pertaining to telephone exchange
         service or telephone toll service received by a customer of a carrier.

This term does not include subscriber list information.

DECEMBER LETTER AGREEMENT means the letter agreement dated December 10, 2002,
between Sprint (signed by Gary Owens) and Z-Tel (signed by N. Dumas Garrett).

DISCONNECT means the process by which dial tone is disabled by the serving
carrier in

                                       8
<PAGE>
association with an End User line.

DISPATCH and NO DISPATCH refers to whether or
not a telephone technician is required to undertake fieldwork or visit the End
User's premises in establishing or maintaining/repairing Telecommunications
Service.

EFFECTIVE DATE means the date first written above.

END USER means, with respect to any party, the party's retail customers
including business users. "Sprint's End Users" (and derivatives thereof)
includes any End User of Sprint's Affiliates who are purchasing Local Wholesale
Services.

ESCROW ACCOUNT has the meaning set forth in Section 2.5.5(c).

FCC means the Federal Communications Commission.

FORECAST has the meaning set forth in Section 2.5.5 (c)(ii)(A).

FORCE MAJEURE EVENT means any of the following events, if not the result of any
act or omission of the Party asserting its rights under Section 11.2:

                  (a) acts of God, such as fire, flood, earthquake or other
         natural cause,

                  (b) terrorist events, riots, insurrections, explosions, war or
         national emergency, vandalism,

                  (c) strikes, boycotts, lockouts or other labor difficulties,

                  (d) judicial, legal or other action of any governmental
         authority, which action makes performance of this Agreement
         impracticable, and

                  (e) utility curtailments, power failures, cable cuts, failure
         caused by telecommunications provider(s) (including failures or delays
         caused by ILECs in provisioning facilities or services or in providing
         or maintaining those facilities or services).

ILEC or INCUMBENT LOCAL EXCHANGE CARRIER means with respect to an area, the
local exchange carrier that:

         (a) on the date of enactment of the Telecommunications Act of 1996,
         provided telephone exchange service in such area; and

         (b) (i) on the date of enactment of the Telecommunications Act of 1996,
         was deemed to be a member of the exchange carrier association pursuant
         to Section 69.601(b) of the FCC's regulations (47 C.F.R. *69.601(b));
         or (ii) is a person or entity that, on or after such date of enactment,
         became a successor or assign of a member described in clause (i).

ILEC FEES means fees and charges that an ILEC imposes upon Z-Tel for

                                       9
<PAGE>

interconnection, provisioning, change orders and other operational support
services, unbundled access, network elements, ABS and any other services the
ILEC provides to Z-Tel under applicable tariffs, Interconnection Agreements, or
associated agreements, including any penalties or fees that the ILEC imposes for
Slamming or other infractions that result from actions of Sprint or its
employees, agents or contractors (other than Z-Tel or its third party vendors
acting outside the scope of this Agreement).

INDEMNIFYING PARTY has the meaning set forth in Section 19.1.

INDEMNITEES has the meaning set forth in Section 19.1.

IXC means Interexchange Carrier.

INFORMATION SERVICE(S) has the meaning set forth in Section 3(20) of the
Communications Act of 1934, as amended, 47 U.S.C. Section 153(20).

INITIAL SOW means the SOW executed by the Parties as of the Effective Date and
attached to this Agreement as Schedule A.

INITIAL TERM is defined in Section 2.1.

INTELLECTUAL PROPERTY RIGHTS means any patent, copyright, trade name, trademark,
service mark, trade secret or any other intellectual property right, now or
hereafter owned, controlled or licensable by either party. Except as expressly
stated in this Agreement, neither Party may use any patent, copyrightable
materials, trademark, trade name, trade secret, or other intellectual property
right of the other Party except under a separate license agreement between the
Parties granting the rights.

INTERCONNECTION AGREEMENT means a contract (as it may be amended from time to
time) by and between Z-Tel and an ILEC or CLEC under which the ILEC or CLEC,
among other things, agrees to sell and provide to Z-Tel interconnection,
unbundled access and other services and functions for Z-Tel's use in providing
its Telecommunications Services.

INTERFACE ESTABLISHMENT FEE has the meaning set forth in Section 4.2.

JOINT DISASTER PLANNING TEAM has the meaning set forth in Section 12.2.3.

LAW means any code, law, ordinance, regulation, reporting or licensing
requirement, rule or statute (as amended from time to time) applicable to an
individual, entity or association or to an individual's, entity's or
association's assets, properties, liabilities or business, including:

         (a) those that any Regulatory Authority promulgates, interprets or
         enforces,

         (b) any judicial or regulatory interpretation of any of the foregoing,
         and

         (c) the common law.

                                       10
<PAGE>

LIQUIDATION EVENT means:

         (a) the filing of a voluntary petition in bankruptcy by Z-Tel under
         Chapter 7 of the United States Bankruptcy Code;

         (b) the conversion of an existing proceeding for reorganization of
         Z-Tel into a proceeding for liquidation, dissolution, or similar relief
         under Chapter 7 of the United States Bankruptcy Code;

         (c) when one hundred twenty (120) calendar days after the commencement
         of any involuntary proceeding seeking liquidation, dissolution, or
         similar relief against Z-Tel under Chapter 7 of the United States
         Bankruptcy Code, the proceeding has not been dismissed; or

         (d) Z-Tel ceases ongoing business operations.

LOCAL NUMBER PORTABILITY or LNP means the mechanism by which an End User may
move service from one carrier's local switch to another carrier's local switch
without changing telephone numbers.

LOCAL WHOLESALE SERVICES means:

         (a) Telephone Exchange Service that Z-Tel provides to other carriers
         for resale to their End Users, and other associated services through
         use of Z-Tel's OCN, such as basic and adjunct to basic vertical
         services, and exchange access functionality, and

         (b) Telephone Exchange Service that Z-Tel supports for sale by Sprint
         to its End Users, and other associated services through use of Sprint's
         OCN, such as basic and adjunct to basic vertical services and exchange
         access functionality.

LONG DISTANCE SERVICES means communications between two (2) End Users that
crosses predetermined local exchange boundaries. For purposes of this Agreement,
Long Distance Services are considered to be a subset of Telecommunications
Services and may include IntraLATA and InterLATA toll services (e.g., 1+
origination) and Toll Free Services.

LW BASED CUSTOMERS has the meaning set forth in Section 2.6.

LW BASED SERVICES means Telecommunications Services and information access based
upon the Local Wholesale Services.

MARKS means any and all trademarks, service marks, trade names, logos,
insignias, copyrights or other similar intellectual property belonging or
licensed to a party.

OCTOBER LETTER AGREEMENT means the letter agreement dated October 17, 2002,
between Z-Tel (signed by N. Dumas Garrett) and Sprint (signed by Harry
Campbell).

                                       11
<PAGE>

OCN means operating company number.

OSS SERVICES or OPERATIONS SUPPORT SYSTEM SERVICES means all functionalities (as
well as the hardware, software and documentation) that is reasonably necessary,
required or useful to directly or indirectly support delivery of LW Based
Services or Z-Tel Information Services to Sprint's End Users. Included within
OSS Services, without limitation, are the following functionalities: ordering,
provisioning, billing and collection, fulfillment, sales, preparing and handling
CDRs, and customer care. For the avoidance of doubt, "OSS Services" does not
include any Telecommunications Service, any Information Service or any
customization of Z-Tel Technology that is developed as an Ancillary Service.

PERSON means a natural person, sole proprietorship, corporation, limited
liability company, cooperative, partnership, trust, unincorporated association
or organization, body corporate or other entity with juridical personality, or
governmental authority or body, as well as a natural person acting in a Person's
capacity as trustee, executor, administrator or other legal representative.
Pronouns that refer to a Person have a similarly extended meaning.

PICC means Presubscribed Interexchange Carrier Charge as it relates to the FCC's
allowed recovery of interstate access costs through flat monthly charges imposed
on an End User's specified carrier of 1+ interstate interexchange traffic.

PRICING SCHEDULE has the meaning set forth in Section 4.1.

PROVISIONING SERVICES means the overall process and procedures by which Sprint
will be established as the primary local exchange and interexchange service
provider for Sprint's new End Users. A customer has been provisioned when the
customer's telephone line has a dial tone and can be used for both local
exchange and interexchange calling.

PUBLICITY has the meaning set forth in Section 15.3.

RECEIPT CREDITS has the meaning set forth in Section 5.1.4.

REGULATORY AUTHORITY means, as to any subject matter or Person, any of the
following entities having jurisdiction over the subject matter or Person:

         (a) any court,

         (b) any governmental, regulatory or administrative agency,

         (c) any commission, authority or instrumentality, and

         (d) any other public body, domestic or foreign.

REPAIR has the meaning set forth in Section 1.9.12.

RENEWAL TERM has the meaning set forth in Section 2.2.

                                       12
<PAGE>

SALES CHANNEL INTERFACE means the mechanized systems and interfaces by which
Z-Tel provides the Provisioning Services. The Sales Channel Interface involves
both Z-Tel proprietary and third party vendor proprietary components.

SERVICES means the Telecommunications Services, Information Services, Ancillary
Services, OSS Services, Provisioning Services, and any other services that Z-Tel
provides or is required to provide to Sprint under this Agreement.

SERVICE FEES means those fees charged by Z-Tel and required to be paid by Sprint
and identified in Schedule C as Z-Tel Support Service Recurring Fee and Z-Tel
Support Service Non-Recurring Fee.

SERVICE LEVEL AGREEMENTS or SLAS means specified levels of service that Z-Tel is
responsible to provide in relation to Local Wholesale Services, Z-Node Services
and OSS Services.

SHORT TERM DEFERRED REVENUE means revenues offset to future periods for revenue
recognition purposes that are included in current liabilities.

SLAMMING means a change of provider of Telecommunications Service without
obtaining a subscriber's authorization and verification under 47 C.F.R. Part 64.

SLC means Subscriber Line Charge as it relates to the FCC's allowed recovery of
interstate access costs through flat monthly charges on an End User's bill.

SPRINT DESIGNATED PROVIDER has the meaning set forth in Section 2.5(b).

SPRINT MARKET means the area of initial deployment and implementation in the
geographic locations specified in the Initial SOW, and such other locations or
franchise areas that are identified in subsequent SOWs.

SPRINT MARKS means any and all Marks belonging or licensed to Sprint.

SPRINT RETAINED FUNCTION means any support service or OSS Service that Sprint
has undertaken to perform for itself under this Agreement or under the SOW.

SPRINT TRIGGERING EVENT has the meaning set forth in Section 2.3.2(a).

STATEMENT OF WORK or SOW means a written document, in the form of Schedule A,
that the Parties execute and that sets forth the additional terms and conditions
governing specific Services, together with all modifications and supplements
thereto, now existing or hereafter arising.

SUPER NOTICE has the meaning set forth in Section 21.14.2.

TECHNICAL INFORMATION means configuration, interface, system integration and
other related data, information and materials.

                                       13
<PAGE>

TECHNOLOGY ESCROW AGENT has the meaning set forth in Section 14.3.

TECHNOLOGY ESCROW AGREEMENT has the meaning set forth in Section 14.3.

TECHNOLOGY ESCROW MATERIALS has the meaning set forth in Section 14.4.1.

TECHNOLOGY LICENSE has the meaning set forth in Section 14.1.

TECHNOLOGY USE LICENSE has the meaning set forth in Section 16.3.

TELECOMMUNICATIONS means the transmission, between or among points specified by
the user, of information of the user's choosing, without change in the form or
content of the information as sent and received.

TELECOMMUNICATIONS SERVICES means the offering of telecommunications for a fee
directly to the public, or to such classes of users as to be effectively
available directly to the public, regardless of the facilities used.

TELEPHONE EXCHANGE SERVICE means:

         (a) service within a telephone exchange, or within a connected system
         of telephone exchanges within the same exchange area operated to
         furnish to subscribers intercommunicating service of the character
         ordinarily furnished by a single exchange, and which are covered by the
         exchange service charge, or

         (b) comparable service provided through a system of switches,
         transmission equipment, or other facilities (or combination thereof) by
         which a subscriber can originate and terminate a Telecommunications
         Service.

Telephone Exchange Service involves the combination of loop, switch port and any
other necessary elements required to provide an unbroken signal of 350 + 440 Hz
reflecting that telephone service is currently provided and that the telephone
company is ready to receive dialed digits.

TERM means the Initial Term, all Renewal Terms and any transition period.

TIER 1 RESOLUTION means discussion/resolution at the first level of management.
For purposes of this Agreement, the Tier 1 Resolution will typically be at the
Manager or Supervisor job title.

TIER 2 RESOLUTION means discussion/resolution at the second level of management.
For purposes of this Agreement, the Tier 2 Resolution will typically be at the
Director job title.

TIER 3 RESOLUTION means discussion/resolution at the third level of management.
For purposes of this Agreement, the Tier 3 Resolution will typically be at the
Assistant Vice President or Vice President job title.

                                       14
<PAGE>

TOLL FREE SERVICE means a Long Distance Service whereby subscribers receive
calls from specified areas with no charge to the person who is calling. Instead,
all charges are billed to the called party.

TPV or THIRD PARTY VERIFICATION means corroboration, by an independent authority
in compliance with applicable law, of an End User's intent regarding selection
of local and interexchange carrier(s).

TRANSITION has the meaning set forth in Section 2.5.

TRANSITION DATE has the meaning set forth in Section 2.5.5(c).

TRANSITION ESCROW AGENT has the meaning set forth in Section 2.5.5(c).

TRANSITION ESCROW AGREEMENT has the meaning set forth in Section 2.5.5(c).

TRANSITION FEES has the meaning set forth in Section 2.5.5(c).

TRANSITION SERVICE has the meaning set forth in Section 2.5.

TRAVEL CARD SERVICES means services that allow End Users to make local and long
distance calls from a telephone number other than their subscribed location and
have those calls billed to their Z-Tel-provided LW Based Service account. Access
to Travel Card Services is typically provided through a customer dialed toll
free number where the customer is then asked to input both account and dialing
information.

TRUSTEE has the meaning set forth in Section 14.7.

USE STIMULATION CREDIT has the meaning set forth in Section 4.3.1.

USE STIMULATION PERIOD has the meaning set forth in Section 4.3.1.

Z-TEL BACK-UP MATERIALS has the meaning set forth in Section 12.5.1.

Z-TEL DEDICATED SUPPORT FEES has the meaning set forth in Section 4.6.

Z-LINE PLATFORM or Z-NODE means the facilities that Z-Tel owns or controls
through which Z-Tel provides Z-Node Services. The term excludes facilities that
Z-Tel leases from any ILEC, Internet service provider, interexchange carrier,
wireless provider or any other Telecommunications Service provider or
Information Service provider.

Z-NODE SERVICES means any proprietary Z-Tel Information Service or Z-Tel Adjunct
to Basic Service provided as a vertical feature through the Z-Line Platform.
Available Z-Node Services include Voice Mail, Family Mail Box, Find Me, On-Line
Account Maintenance, Notify Me, and Web Access. For the avoidance of doubt,
Z-Node Services will not include access to Z-Tel's Personal Voice Assistant
service ("PVA(tm) service").

Z-TEL FUNDAMENTAL TECHNOLOGY means, collectively:

                                       15
<PAGE>

         (a) all Custom Software that Z-Tel uses in the performance of its
         obligations under this Agreement, and

                  (b) all Technical Information that Z-Tel owns

(as itemized in Schedule E) in each case to the extent necessary to enable
Sprint (through the use of reasonably trained technicians, and when used in
combination with the third-party hardware, software, information, materials,
products and services that are identified on Schedule 9.7 of this Agreement) to
establish complete operational systems capable of generating and providing
products and services substantially the same as those Z-Tel provides to Sprint
under this Agreement.

Z-TEL MARKS means any and all Marks belonging to Z-Tel.

Z-TEL PERSONNEL means any and all Z-Tel employees, agents, and independent
contractors, and the employees, agents and independent contractors of these
agents and independent contractors, that Z-Tel directly or indirectly supplies
or otherwise uses to perform Services for Sprint under this Agreement.

Z-TEL TECHNOLOGY means, collectively, all Z-Tel Fundamental Technology and all
other software (including all related documentation), and all other
configuration, interface, system integration and other data, information and
material that Z-Tel owns that is necessary to enable Sprint (through the use of
reasonably trained technicians, and when used in combination with third-party
hardware, software, information, materials, products and services) to establish
operational systems capable of generating and providing products and services
substantially the same as those Z-Tel provides to Sprint under this Agreement
(as itemized in Schedule E).

Z-TEL TRIGGERING EVENT has the meaning set forth in Section 2.3.1(a).

                         SECTION I. - SCOPE OF SERVICES

         1.1. STATEMENT OF WORK. The initial SOW attached to this Agreement as
Schedule A describes and defines the services and support that Z-Tel will
provide to Sprint to enable Sprint to provide Telecommunications and related
services. The initial SOW sets forth the respective responsibilities of the
Parties and includes the procedures for requesting the provisioning of Local
Wholesale Services and the other services described in this Agreement. The
Parties will work together to amend the Statement of Work to effect changes in
environment such as to facilitate ongoing Z-Tel Services for Sprint End Users on
a Sprint OCN.

         1.2. AGENCY AND RESALE MODES. Z-Tel will perform its obligations under
this Agreement (and, in particular, under this Section I and under the SOW) for
the benefit of Sprint both * **************** *******

                                       16
<PAGE>

*******************************************************************************
************************ In the latter case, Z-Tel will serve as Sprint's
subcontractor to facilitate the furnishing of the Services to Sprint and the
Sprint End User.

                  1.2.1. MIGRATION. From time to time during the Term, Sprint
         may, in its sole discretion, migrate Sprint End Users from Z-Tel's
         ******************* and thereafter utilize the Z-Tel Services in the
         same or lesser manner as before, as Sprint determines and communicates
         to Z-Tel in writing. Z-Tel will assist and cooperate with Sprint on all
         Sprint End User migrations, including any necessary amendments to the
         Statement of Work. The Parties will use their respective best efforts
         to accomplish these migrations in an expeditious, economical manner,
         minimizing any disruption of service to the Sprint End User. For any
         Sprint End Users not migrated to ************* before August 2, 2003,
         the migration escrow provisions under Sections 2.5.5(c) through
         2.5.5(i) will apply.

                  1.2.2. IMPLEMENTATION. The Services that Z-Tel will provide
         under this Agreement will be implemented in accordance with the
         implementation schedule set forth in the SOW.

                  1.2.3. MODIFICATION. Z-Tel and Sprint will cooperate to amend
         the SOW from time to time to alter the procedures or responsibilities
         or to include any additional procedures or services. A SOW may be
         amended only with the written consent of both Sprint and Z-Tel.

         1.3. GEOGRAPHIC SCOPE OF SERVICES. Upon the schedule described in the
SOW, Z-Tel will provide Local Wholesale Services, associated Z-Node Services and
OSS Services to Sprint in every geographic area in which Z-Tel offers retail
services directly to End Users or wholesale services and that is also in a
service area covered by a Regional Bell Operating Company (including former
G.T.E. territory).

                  1.3.1. COMPLIANCE WITH REGULATIONS. The geographic areas in
         which Z-Tel is required to provide the Services under this Agreement
         may be limited to the extent necessary to comply with regulations,
         orders, or policies that are issued by the FCC or by state public
         service commissions.

                  1.3.2. SERVICE AREA ADDITIONS. Upon the addition of a new
         Z-Tel retail service area or upon Sprint's written request to add
         additional service areas, Sprint and Z-Tel will work together to update
         the SOW, allowing for reasonable timeframes for deployment and
         implementation of the Service to Sprint within the new service area.

                  1.3.3. SERVICE AREA LIMITATIONS. Certain optional services
         (such as Long Distance Service or Inside Wiring Service) may have a
         more limited service area than Local Wholesale Services. Service area
         limitations for Z-Tel's products will be described in the SOW.

         1.4. LOCAL WHOLESALE SERVICES. Z-Tel will provide Local Wholesale
Services to

                                       17
<PAGE>

Sprint for Sprint's use solely in providing retail Telecommunications Services
to Sprint's End Users. Z-Tel will provide the Local Wholesale Services to Sprint
to substantially the same extent and in substantially the same manner that Z-Tel
makes retail and wholesale Telecommunications Services available under tariff or
in a general offering, on the Effective Date of the Agreement, incorporating all
features and functionality included in a general release and made available to
its customers but, to avoid doubt, excluding PVA(tm) service. Sprint may not
wholesale the Local Wholesale Service to any carrier providing
Telecommunications Services under alternative certification or tariff issued by
or filed with the FCC or any state public service commission without Z-Tel's
written consent. Notwithstanding the foregoing (or any other retail restriction
in this Agreement to the contrary), Sprint may wholesale Local Wholesale
Services to its Contractual Affiliates to the extent necessary to facilitate
their furnishing of the Services to their End Users who use Sprint-branded
products and services.

                  1.4.1. TERMINATION OF LONG DISTANCE CALLS. Local Wholesale
         Service lines that Z-Tel provides as part of its basic service offering
         allow basic termination of domestic and international toll traffic for
         which the originating party pays.

                  1.4.2. ACCESS TO TOLL FREE SERVICES. Local Wholesale Service
         lines that Z-Tel provides as part of its basic service offering allow
         basic dialed access to Toll Free Services that other parties offer.

         1.5. Z NODE SERVICES. Z-Tel will provide to Sprint, for Sprint's use
solely in conjunction with providing retail Telecommunications Services to
Sprint's End Users utilizing Local Wholesale Services, the Z-Node Services that
Z-Tel, as of the Effective Date, offers to Z-Tel's own retail customers.

                  1.5.1. EXTENSION OF CAPABILITIES. If Sprint desires to offer
         Z-Node Services in a manner that does not utilize Z-Tel's Local
         Wholesale Services, the Parties will negotiate in good faith on the
         terms and conditions of such an offering and, when setting rates for
         such an offering, the Parties will take into account aggregate Sprint
         volumes across all points of service in setting volume discounts.

         1.6. LONG DISTANCE SERVICES. End User billed Long Distance Services
(e.g., out dial toll via 1+ or 0+ dialing, toll free services) are not provided
under this Agreement. Z-Tel's provision and support of Toll Free services is
limited to domestic applications.

         1.7. TRAVEL CARD SERVICES. Z-Node supported Travel Card Services are
not provided under this Agreement. Under the SOW, Z-Tel will bill Sprint Travel
Card usage in conjunction with Local Wholesale Services provisioned via this
Agreement.

         1.8. INSIDE WIRE SERVICES. Subject to availability, Z-Tel will provide,
upon Sprint's written request, support for Sprint's End Users relative to
on-premise wiring (i.e., wiring on the customer side of the network interface
device) in selected markets through arrangements with third party vendors.

                                       18
<PAGE>

         1.9. OSS SERVICES SUPPLIED BY Z-TEL. As and to the extent described in
the SOW, Z-Tel will provide to Sprint, and Sprint will utilize, the OSS Services
that are necessary to implement Section 1.2 of this Agreement. When providing
these OSS Services, Z-Tel:

                           (a) will utilize various internal and external OSS
                  Services,

                           (b) may provide Sprint with direct access to certain
                  of these OSS Services, and

                           (c) may utilize the products and services of the
                  approved vendors described in the SOW. The Parties may add or
                  delete vendors from this approved list by amending the SOW.

         If Z-Tel procures one or more products or services from a different
vendor than the vendor providing the products or services as of the Effective
Date, Z-Tel will make reasonable efforts to obtain the products or services from
the new vendor on terms and conditions at least as favorable to Sprint as those
existing as of the Effective Date.

         If Z-Tel's breach of its agreement with a vendor leads to the loss of
the vendor (except for a Z-Tel breach caused, in whole or in part, by Sprint's
act or omission), thereby necessitating a change to a new vendor, Z-Tel will
bear the difference, if any, by which the pricing terms that the new vendor
offers for the products or services exceed the pricing terms that Z-Tel and
Sprint previously enjoyed with the replaced vendor.

         If Z-Tel desires to obtain any products or services from a vendor that
is not on the approved vendor list under the SOW, the Parties will negotiate in
good faith concerning the selection of the alternative vendor. If the Parties
are unable to select a mutually acceptable alternative vendor, Sprint will have
the right either:

                           (d) to designate a vendor for providing the product
                  or service in conjunction with LW Based Services, or

                  (e) to undertake, with Z-Tel's transition assistance, to
         provide the product or service itself in conjunction with LW Based
         Services through Sprint's own internal operations.

         Specific functions that Z-Tel will perform in connection with Sprint's
rendering of Telecommunications and related services to Sprint's End Users
include the following functions, each of which is described more fully in the
SOW.

                  1.9.1. INBOUND SALES. Inbound sales is the process by which
         customer orders are received and processed internally.

                  1.9.2. THIRD PARTY VERIFICATION. In conjunction with Sprint's
         marketing associated with the Services Z-Tel provides under this
         Agreement, Z-Tel will interface with independent third party(ies) who
         will verify that Sprint's End User acquisition efforts fully comply
         with all state and federal regulations related to

                                       19
<PAGE>

         Slamming (but only to the extent that Sprint directs).

                  1.9.3. PROVISIONING. Through the provisioning process, Sprint
         will be established as the local exchange and the primary interexchange
         service provider for Sprint's new End Users.

                  1.9.4. CUSTOMER CARE ESCALATIONS. When customer inquiries,
         change orders, repair orders and other customer-related matters cannot
         be handled through normal operational interfaces, they are escalated to
         higher levels of management. After the initial escalation at the
         Manager level (which Sprint will handle), Z-Tel will seek satisfactory
         resolution regarding the service problems by contacting higher levels
         of management for the associated service provider or third party
         vendor.

                  1.9.5. ACCESS CHARGES. Z-Tel will bill, on its behalf and at
         its rates, all access fees charged to interexchange carriers in
         connection with interexchange calls made or received by Sprint End
         Users provisioned through Z-Tel's *** under this Agreement. Sprint will
         bill, either itself or through a third party, at Sprint's rates, all
         access fees charged to interexchange carriers in connection with
         interexchange carriers calls made or received by Sprint End Users
         provisioned through Sprint's *** under this Agreement. Z-Tel will, if
         asked by Sprint, direct data feeds from the ILECs to Sprint or its
         third party provider at Z-Tel's cost.

                  1.9.6. END USER BILLING. The End User billing services that
         Z-Tel will provide to Sprint under this Agreement will incorporate the
         maintenance of customer usage information, inclusion of taxes and fees
         in customer invoices, preparing and delivering customer invoices and
         printing additional invoices for past due accounts. A prototype of a
         Sprint End User bill is incorporated into the Initial SOW. Sprint may
         determine, to the extent technically feasible and legally permissible:

                           (a) the look, feel, appearance and content of the End
                  User bill from commercially feasible options described in the
                  SOW,

                           (b) the types of charges, surcharges, taxes and other
                  fees appearing on the End User bill, and the descriptions
                  thereof, and

                           (c) the form and content of any messages included on
                  or in the End User bills.

                  1.9.7. PAYMENT POSTING. Upon its receipt of payment
         information (e.g., payment received, NSF payment, etc.) from Sprint or
         Sprint's vendor in a manner and format described in the SOW, Z-Tel will
         update customer account information within Z-Tel's support system.

                  1.9.8. CDR PROCESSING. Z-Tel will process ILEC call records in
         a manner compatible with Sprint's and Z- Tel's billing requirements as
         documented in the SOW.

                                       20
<PAGE>

                  1.9.9. RESPONDING TO SUBPOENAS. In response to subpoenas,
         court orders and administrative agency orders to produce information,
         including those calling for call detail records, when the targeted
         telephone numbers belong to Sprint End Users using Z-Tel's OCN, Z-Tel
         will produce information as required by Law. Sprint and Z-Tel will
         cooperate in complying with these subpoenas, court orders and
         administrative agency orders.

                  1.9.10. REPORTS. Z-Tel will provide Sprint with periodic and
         real-time reports detailing the transaction activity for Sprint's End
         Users who are receiving Services, in the format and frequency jointly
         developed by Z-Tel and Sprint and incorporated into the SOW.

                  1.9.11. LEC RELATIONS. When Sprint is utilizing Z-Tel's
         services through Z-Tel's *** for any Sprint End User, Z-Tel will act as
         the primary interface for operational escalations, Interconnection
         Agreement interpretation and all other matters involving local exchange
         carriers associated with the furnishing of Z-Tel's Local Wholesale
         Services to those Sprint End Users (except carrier to carrier Slamming
         complaints under FCC rules). At Sprint's direction, Z-Tel may provide
         additional LEC relations support in association with Sprint End Users
         that Z-Tel provisions utilizing Sprint's ***.

                  1.9.12. REPAIR. Z-Tel will be the interface with the End User
         for the report and resolution of service issues ("REPAIR"). Z-Tel will
         provide Tier 1 Resolution, Tier 2 Resolution and Tier 3 Resolution of
         service issues.

                  1.9.13. COLLECTIONS. Z-Tel will be responsible for all
         collections and collection activities associated with Sprint customers
         using LW Based Services except as otherwise expressly agreed to in
         writing by Sprint and Z-Tel.

                  1.9.14. TRAINING. As more fully described in the SOW, Z-Tel
         will provide reasonable training to Sprint's employees and
         representatives in the use of the Z-Tel systems and interfaces
         including the Sales Channel Interface.

                  1.9.15. FRAUD DETECTION. Z-Tel will initiate service orders
         that block Sprint End User dial-around originating calls, calls to
         information services providers, collect calls and other traffic that
         poses a high potential risk of fraud unless otherwise instructed by
         Sprint. Z-Tel will not be responsible for the failure of ILEC systems
         to properly restrict End User calling through the mechanisms described
         in the preceding sentence. Z-Tel's liability for fraud is set forth in
         Section 10.11.

                  1.9.16. LONG DISTANCE SERVICES EXCEPTION. In accordance with
         the SOW, Z-Tel will provide Long Distance Services to Sprint's End
         Users in limited instances (e.g., Z-Node Find Me Service) through
         Z-Tel's third-party providers.

         1.10. OSS FUNCTIONS PROVIDED BY SPRINT. As more fully described in the
SOW,

                                       21
<PAGE>

Sprint will provide the following support services without Z-Tel's direct
involvement in connection with Sprint's rendering of Telecommunications and
related services to Sprint's End Users.

                  1.10.1. MARKETING. Sprint will be responsible for all
         marketing, advertising and product development and management in
         association with the services it seeks to sell to End Users.

                  1.10.2. CUSTOMER ACQUISITION AND TPV. Sprint will be
         responsible for all activity associated with acquiring End User
         commitments to purchase Sprint services. Sprint will also be
         responsible for selecting, directing, managing and paying the Third
         Party Verification vendor(s).

                  1.10.3. ORDER ENTRY. Sprint will initiate order entry for
         Services through Z-Tel's Sales Channel Interface. For this purpose,
         Z-Tel will provide to Sprint access to Z-Tel's Sales Channel Interface.

                  1.10.4. CUSTOMER CARE (CUSTOMER INTERFACE AND TIER 1
         RESOLUTION). Sprint will be the primary interface with its End Users
         for all customer care functions except Repair. Sprint-provided customer
         care functions will include customer inquiries, change orders and
         matters related to Sprint End User requests and inquiries. Sprint will
         also escalate customer care problems that require unique handling to
         the Manager level for the associated service provider or third party
         vendor.

                  1.10.5. CHANGE ORDERS. Sprint will be the primary interface
         with its End Users for requests for changes in Service deliverables.
         Sprint will enter change orders through Z-Tel's Sales Channel
         Interface. For this purpose, Z-Tel will provide to Sprint access to
         Z-Tel's Sales Channel Interface.

                  1.10.6. LOCKBOX. Sprint will receive payments from its End
         Users and reconcile the payments with billing invoices. Sprint will be
         responsible for transmitting data necessary for Z-Tel's posting of the
         payment information to back office systems.

                  1.10.7. TAX RECONCILIATION/FILINGS/REMITTANCES. Sprint will be
         responsible for all remittances (including documentation) to taxing
         authorities in connection with Z-Tel's furnishing of Services to Sprint
         and Sprint's End Users, except for any taxes on Z-Tel's gross income,
         Z-Tel's payroll taxes and withholdings, Z-Tel's real and personal
         property taxes, and any other taxes for which the Law imposes the
         remittance obligation on Z-Tel. For the avoidance of doubt, this
         Section 1.10.7 does not alter the allocation of tax payment obligations
         set forth in Section 4.10 of this Agreement.

                  1.10.8. TRANSPORT (TO Z-NODE). Sprint will separately
         establish and pay for transport in association with connectivity to the
         Z-Node (e.g., "00" transport and call forwarding associated with the
         call forward/don't answer and call forward/busy central office
         features).

                                       22
<PAGE>

                  1.10.9. FULFILLMENT. Fulfillment involves the delivery of new
         account materials to Sprint's new End Users.

                  1.10.10. INVESTIGATING COMPLAINTS. Sprint will investigate and
         resolve all Sprint End User and carrier to carrier complaints. Z-Tel
         will support these efforts as Sprint requests from time to time as set
         forth in the SOW. Each Party will support the other Party's complaint
         investigation and resolution efforts upon the other Party's reasonable
         request.

                  1.10.11. COMMISSION PROGRAM. Sprint will administer, as well
         maintain any records necessary to administer, any commission program
         associated with its agents and sales force.

                  1.10.12. ADDITIONAL EXECUTIVE REPORTS. Sprint may develop
         service management reports in addition to those that Z-Tel provides
         under this Agreement. For this purpose, Z-Tel will provide to Sprint
         access to standardized data through its report portal and training in
         the use of the report portal.

                  1.10.13. SPRINT RETAINED OR ASSUMED FUNCTION. Sprint may
         assume responsibility for any OSS function that Z-Tel then provides:

                           (a) upon at least ninety (90) calendar days' prior
                  notice by Sprint and appropriate modification of the SOW,

                           (b) immediately upon the occurrence of any
                  Liquidation Event with concurrent Super Notice to Z-Tel, and

                           (c) upon the occurrence of any Z-Tel Triggering Event
                  that is not a Liquidation Event and at least thirty (30)
                  calendar days' prior Super Notice by Sprint and appropriate
                  modification of the SOW.

                  In the event of Sprint's assumption of a function under this
         Section 1.10.13 when SOW modification(s) is required to effect Sprint's
         take-over of an OSS function outside the provisions of release of the
         Technology Escrow Materials (Section 14.6), Sprint:

                   (d) will not require Z-Tel's approval to the extent it
                  pertains to whether Sprint's assumption of the function
                  occurs, and

                   (e) will require Z-Tel's approval to the extent it pertains
                  to:

                                    (i) the technical and logistical manner in
                           which the Parties accomplish the transfer of the
                           function, and

                                    (ii) the Parties' resolution of any material
                           adverse technical effects that the Parties reasonably
                           expect Sprint's assumption of the function (or
                           Sprint's subsequent performance of the function) to
                           have on Z-Tel's continued furnishing of other
                           Services under this Agreement.

                                       23
<PAGE>

                  In the event of Sprint's assumption of an OSS function under
         this Section 1.10.13, Z-Tel will provide the assistance described in
         Sections 2.4.2(g) and 2.5.3 as they pertain to the OSS function.

         1.11. ANCILLARY SERVICES. Z-Tel will have no obligation to perform for
Sprint any Ancillary Service that is a Sprint Retained Function or any service
that Z-Tel does not perform in the ordinary course of providing
Telecommunications Services to its own End Users.

         1.12. UPGRADES, UPDATES AND NEW Z-TEL SERVICES OR FUNCTIONALITIES.

                  1.12.1. UPGRADES AND UPDATES. Z-Tel may deploy, upgrade,
         migrate and maintain its network, services and operational support
         systems at its discretion and modify its network, services and
         operational support systems to the extent applicable Law permits,
         whether through the incorporation of new equipment or software or
         otherwise. Z-Tel will provide reasonable notification in writing of
         changes to the Z-Tel network, services, and operational support systems
         that will impact Sprint's operations or performance.

                  If Z-Tel develops an upgrade of, or update to, the Z-Line
         Platform or the Z-Tel Fundamental Technology, then the Parties will
         negotiate in good faith regarding the related service fee(s) that would
         be payable to Z-Tel, if any, for the upgrade or update.

                  Unless initiated, or reasonably required, to maintain
         interfaces with ILEC operational support systems, Z-Tel will not
         implement the upgrade or update for the furnishing of the Services to
         Sprint and Sprint's End Users without Sprint's consent (which Sprint
         will not unreasonably withhold or delay) if it:

                           (a) would cause Sprint to incur more than *****
                  for internal changes that Sprint must reasonably make to
                  utilize the upgrade or update,

                           (b) would cause a material disruption in the
                  provision of services to Sprint's End Users, or

                           (c) would materially reduce the functionality or
                  quality of the Z-Tel Services to Sprint and Sprint's End
                  Users.

                 In accordance with the SLAs, Z-Tel will avoid service
         disruption to Sprint and Sprint's End Users resulting from these
         changes.

                  1.12.2. NEW SERVICES OR FUNCTIONALITIES. If Z-Tel desires to
         deploy additional service functionality (e.g., DSL) on a general
         release basis to its retail or wholesale users (whether because the
         additional functionality is newly developed, newly acquired, newly
         available or otherwise) and Sprint desires to

                                       24
<PAGE>

         internally utilize the additional functionality or make it available to
         Sprint's End Users, then the Parties will negotiate in good faith an
         amendment of the scope of services under this Agreement and a
         corresponding adjustment in Z-Tel Service Fees (if appropriate given
         the circumstances) before Z-Tel makes these additional features and
         functions available to Sprint and Sprint's End Users.

                  1.12.3. TIMING OF AVAILABILITY. Z-Tel will make additional
         services and functionalities available for use by Sprint and Sprint's
         End User on the timetable described in the appropriate SOW, but with
         Z-Tel offered service availability no more than thirty (30) calendar
         days after making the services and functionality available on a general
         release basis or to similarly situated Z-Tel customers. Notwithstanding
         the foregoing, when capacity constraints exist Z-Tel may phase in new
         services and functionalities to Sprint End Users on a pro rata basis
         with Z-Tel's other wholesale customers based upon parameters to be
         negotiated between the Parties in conjunction with the adoption of a
         SOW.

                  1.12.4. PRICING. Z-Tel will make additional services and
         functionalities described in Section 1.12 available to Sprint on
         pricing terms *********************************************************
         *********************************************************************.

                  1.12.5. PROPRIETARY WORK REQUESTED BY SPRINT. If Sprint
         requests that Z-Tel undertake product modifications or development of
         new service functionalities, Z-Tel and Sprint will negotiate in good
         faith an applicable Statement of Work concerning the terms and
         conditions (including costs, timeframes and deliverables) on which
         Z-Tel will develop, and make available to Sprint and Sprint's End
         Users, the product modifications or service functionalities. If the
         Parties do not agree on these terms and conditions, nothing in the
         preceding sentence obligates Z-Tel to undertake the product
         modifications or the development of new service functionalities. *****
         stated otherwise in the SOW, ******************************************
         ***********************************************************************
         ***********************************************************************
         ************************************************************incorporate
         pre-existing Z-Tel intellectual or proprietary property or rights,
         Z-Tel will license, for the term of this Agreement, the pre-existing
         intellectual or proprietary property or rights to Sprint for use in
         connection with the works made for hire for the term of this Agreement.

                  1.12.6. ***************. For purposes of Section ****, a
         customer that is "*****************" to Sprint is a customer purchasing
         Services on ******* ***************************************************
         **********************************************************************.

         1.13. PROMOTIONAL PROGRAMS EXCLUDED. Sprint will not be entitled to
participate in any Z-Tel plan, program, discount or promotion under which Z-Tel
End Users or prospective Z-Tel customers may obtain products or services in
return for trying, subscribing to or using any Z-Tel Services, including any
Z-Tel Telecommunications Service or Information Access.

                                       25
<PAGE>

         1.14. MAINTENANCE. Subject to the customer notification requirements,
under applicable Law, if any, Z-Tel may perform any routine or emergency
maintenance under the SOW that may limit or suspend the availability of the
Services despite Z-Tel's best efforts to avoid adverse effects on the Services.
The suspension of the availability of any of the Services under this Section
1.14 will not be deemed to be a violation by Z-Tel of any of its obligations
under this Agreement. Unless Sprint requests expedited treatment, Z-Tel will
give Sprint:

                           (a) at least ******* Business Days' prior written
                  notice of scheduled outages affecting Sprint's End Users for
                  maintenance purposes, and

                           (b) at least ******* Business Days' prior written
                  notice of scheduled maintenance work that is reasonably
                  expected to affect the OSS Systems.

         1.15. NOTICE OF CHANGES. Z-Tel may discontinue or withdraw any Service
during the Term under the following terms:

                           (a) Z-Tel's action is subject to any notice
                  requirements under the Law.

                           (b) Z-Tel's action is subject to Sprint's compliance
                  with any requirement under the Law in any jurisdiction:

                                    (i) that Sprint provide certain notice to
                           its End Users or others before effecting the exit or
                           withdrawal of the Service from the jurisdiction, or

                                    (ii) that Sprint obtain regulatory approval
                           before exiting or withdrawing the Service from the
                           jurisdiction and accomplish any required steps toward
                           that end.

                           (c) Subject to Z-Tel's compliance with subsections
                  (a) and (b) above, Z-Tel must provide Sprint with at least
                  sixty (60) calendar days' written notice of the proposed
                  discontinuation or withdrawal of the Service except in the
                  case of:

                                    (i) a discontinuation or withdrawal of a
                           Service that is required by applicable Law, for which
                           Z-Tel will give Sprint as much advance written notice
                           as reasonably possible;

                                    (ii) a Service that Sprint is no longer
                           utilizing under this Agreement; or

                                    (iii) termination of this Agreement by Z-Tel
                           under Section II of this Agreement.

                                       26
<PAGE>

         Upon receipt of written notice from Z-Tel concerning Z-Tel's desire to
discontinue or withdraw any Service, Sprint will use commercially reasonable
efforts to expeditiously:

                           (d) provide any legally required notice to the
                  affected Sprint End Users,

                           (e) obtain any necessary regulatory approval relating
                  to the exit or withdrawal, and

                           (f) take any actions that are necessary or
                  appropriate in connection with the regulatory approval.

         Except when Service termination is required by Law or in the event of a
Z-Tel termination under Section 2.3.2 or an expiration under Sections 2.1 and
2.2, Z-Tel will bear the cost of any required notification of Sprint End Users
associated with Z-Tel's discontinuance or withdrawal of any Service that Z-Tel
provides to Sprint under this Agreement.

         1.16. GRANDFATHERING. To the extent permitted by applicable Law, Z-Tel
will provide grandfathered Services to Sprint's End Users under the same
conditions by which Z-Tel grandfathers Services to its own End Users. Among
these conditions are those that the Services:

                           (a) will be available only to Sprint End Users who
                  already have the service;

                           (b) may not be moved to another location;

                           (c) will be available only to the extent facilities
                  are available to provide the service, and

                           (d) will be available for a maximum period of two (2)
                  years following the end of:

                                    (i) the Initial Term, or

                                    (ii) if this Agreement is renewed for one or
                           more Renewal Terms, the last Renewal Term.

                 SECTION II. - TERM, TERMINATION AND TRANSITION

         2.1. INITIAL TERM. This Agreement is effective and the Parties'
obligations commence upon the Effective Date and will expire at midnight on
January 31, 2006 ("INITIAL TERM"), unless this Agreement is terminated earlier
under its terms.

                                       27
<PAGE>

         2.2. RENEWAL TERM. Upon expiration of the Initial Term, this Agreement
will renew automatically on a year-by-year basis (each year a "RENEWAL TERM")
until:

                           (a) either Party notifies the other in writing at
                  least one hundred eighty (180) calendar days before the end of
                  the then current term of its desire that this Agreement expire
                  at the end of that term (in which case this Agreement will
                  terminate then), or

                           (b) this Agreement is otherwise terminated under this
                  Section II.

         2.3. TERMINATION.

                  2.3.1. TERMINATION BY SPRINT.

                           (a) Sprint may, by written Super Notice to Z-Tel
                  (including a description of the relevant event(s)), terminate
                  this Agreement immediately upon the occurrence of any of the
                  following events (each a "Z-TEL TRIGGERING EVENT"):

                                    (i) Z-Tel materially breaches any provision
                           of this Agreement and fails to cure the breach within
                           thirty (30) calendar days after receiving written
                           notice from Sprint;

                                    (ii) Z-Tel's performance under this
                           Agreement as measured by applicable SLAs for order
                           processing, billing, OSS availability, Repair, data
                           file transmission or Z-Node availability fails to
                           meet the triggering event criteria as established in
                           Schedule B and Z-Tel fails to cure this variance
                           within thirty (30) calendar days after receiving
                           written notice from Sprint;

                                    (iii) there occurs a Disconnect of Z-Tel
                           ILEC UNE services affecting greater than
                           **************** of Sprint's End Users that Z-Tel is
                           then serving through any particular ILEC;

                                    (iv) there is a material adverse change in
                           Z-Tel's regulatory environment, including any change
                           in applicable Laws that materially and adversely
                           affects Z-Tel's ability to perform its obligations
                           under this Agreement;

                                    (v) there is a Change of Control;

                                    (vi) there is a material adverse change in
                           Z-Tel's financial condition, evidenced by:

                                             (A) simultaneously meeting three or
                                    more of the following criteria:

                                             (1) Z-Tel fails to hold cash and
                                    cash equivalents of at least **********.

                                       28
<PAGE>

                                                     (2) Z-Tel fails to maintain
                                    a ****************************************
                                    ****************************************
                                    ****************************************,

                                                     (3) Z-Tel fails to maintain
                                    a ****************************************
                                    ****************************************
                                    ****************************************

                                                     (4) Z-Tel fails to maintain
                                    ****************************************
                                    ****************************************
                                    ****************************************

                                                     (5) *******************
                                    ****************************************
                                    ****************************************
                                    ****************************************
                                    ****************************************

                                                     (6) Z-Tel materially
                                             breaches any agreement for borrowed
                                             money (including any material
                                             violation of a debt covenant); or

                                    (B) Z-Tel receives a going concern
                           qualification from its auditors;

                                    (vii) Z-Tel ceases ongoing business
                           operations; or

                                    (viii) Z-Tel becomes Bankrupt, makes a
                           general assignment for benefit of creditors or has a
                           receiver appointed for its assets, or a court of
                           competent jurisdiction issues an order for Z-Tel's
                           winding up.

                           For purposes of this Section 2.3.1, cash and cash
                  equivalents exclude any restricted amounts.

                           (b) Within ***** calendar days after the end of
                  each month, Z-Tel will provide a certificate to Sprint by
                  Super Notice signed by Z-Tel's Chief Financial Officer,
                  providing:

                                    (i) the current numerical value for each of
                           the criteria under Section 2.3.1(a)(vi)(A) with
                           supporting good faith financial statements, and

                                       29
<PAGE>

                                    (ii) certifying that the information
                           contained in the certificate is accurate as of the
                           date of the certificate.

                           Z-Tel will provide Sprint with final financial
                  statements in supplement to the statements provided under
                  Section 2.3.1(b)(i) promptly when the final statements become
                  available.

                           (c) Sprint may terminate this Agreement under an
                  express termination right of Sprint provided in this
                  Agreement.

                  2.3.2. TERMINATION BY Z-TEL. Z-Tel may terminate this
         Agreement under any of the following conditions:

                           (a) Z-Tel may, by written Super Notice to Sprint,
                  terminate this Agreement immediately upon the occurrence of
                  any of the following events (each a "SPRINT TRIGGERING
                  EVENT"):

                                    (i) Sprint fails to fulfill any of its
                           payment obligations concerning undisputed amounts set
                           forth in this Agreement (to the extent any amounts
                           may be disputed under this Agreement) and fails to
                           cure the breach within ten (10) Business Days after
                           receiving written Super Notice from Z-Tel;

                                    (ii) Sprint materially breaches any
                           provision of this Agreement and fails to cure the
                           breach within thirty (30) calendar days after
                           receiving written notice from Z-Tel; and

                                    (iii) there is a material adverse change in
                           Sprint's regulatory environment, including any change
                           in applicable Laws that materially and adversely
                           affects Sprint's ability to perform its obligations
                           under this Agreement.

                           (b) Z-Tel may terminate this Agreement under an
                  express termination right of Z-Tel provided in this Agreement.

         2.4. OBLIGATIONS UPON EXPIRATION OR TERMINATION.

                  2.4.1. SPRINT'S OBLIGATIONS. Upon the expiration of the Term
         or the earlier termination of this Agreement under Section 2.3 or
         Section 4.9.2, within thirty (30) calendar days after the end of the
         Term, in addition to any other post-termination obligations that this
         Agreement imposes on Sprint:

                           (a) Sprint will pay to Z-Tel when due all undisputed
                  charges owing to Z-Tel for the Services that Z-Tel renders
                  under this Agreement through the end of the Term (net of
                  amounts that Z-Tel owes to Sprint, such as Receipt Credits and
                  Use Stimulation Credits).

                                       30
<PAGE>

                           (b) Sprint will pay Z-Tel, within thirty (30)
                  calendar days after the end of the Term, for any software or
                  hardware that Z-Tel acquired to support Sprint's Services that
                  are non-standard to the Z-Tel Services.

                           (c) Sprint will remove from Z-Tel's premises within
                  forty-five (45) calendar days after the end of the Term all
                  property that Sprint owns.

                           (d) Sprint will return to Z-Tel within forty-five
                  (45) calendar days after the end of the Term all software,
                  access keys and any other property that Z-Tel provides to
                  Sprint under this Agreement (other than items for which Sprint
                  already paid Z-Tel), subject, however, to Sprint's rights
                  under the Technology License described in Section 14.1.

                           (e) In connection with termination (except under
                  Sections 2.1 and 2.2), Sprint will pay to Z-Tel an amount
                  equal to ******** the remainder of the charges or
                  ************** the early termination fees (whichever is less)
                  for any leased line(s) that Z-Tel purchased for Sprint if
                  these charges and fees are imposed upon Z-Tel by an underlying
                  service provider other than Sprint and Z-Tel does not utilize
                  these facilities in servicing other customers. However,
                  Sprint's obligations under this Section 2.4.1(e) as to any
                  leased line will not exceed ************ months of the
                  scheduled lease charges if the lessor is not Sprint or any of
                  its Owned Affiliates.

                           (f) In connection with termination (except under
                  Sections 2.1 and 2.2), Sprint will pay to Z-Tel an amount
                  equal to all of the remainder of the charges or all of the
                  early termination fees (whichever is less) for any leased
                  line(s) that Z-Tel purchased for Sprint if these charges and
                  fees are imposed upon Z-Tel by Sprint or a Sprint Owned
                  Affiliate as the underlying service provider and Z-Tel does
                  not utilize these facilities in servicing other customers.

                  2.4.2. Z-TEL'S OBLIGATIONS. Upon the expiration of the Term or
         the earlier termination of this Agreement under Section 2.3 or Section
         4.9.2, Z-Tel will, in addition to any other post-termination
         obligations that this Agreement imposes on Z-Tel:

                           (a) pay to Sprint within ************** after the end
                  of the Term all Use Stimulation Credits and other charges
                  owing to Sprint in connection with the Services that Z-Tel
                  renders under this Agreement through the end of the Term,

                           (b) credit to Sprint via bill credits all collected
                  Receipt Credits within ten (10) calendar days after Z-Tel
                  collects the Receipt Credits,

                           (c) return to Sprint within forty-five (45) calendar
                  days after the end of the Term all equipment and other
                  property that Sprint provides to Z-Tel under this Agreement,

                                       31
<PAGE>

                           (d) deliver to Sprint within forty-five (45) calendar
                  days after the end of the Term all of Z-Tel's right, title and
                  possession in and to the software or hardware that Z-Tel
                  acquired to support Sprint's Services that are non-standard to
                  the Z-Tel Services and for which Sprint has paid Z-Tel under
                  Section 2.4.1(b),

                   (e) perform all requested Services under this Agreement
                  during the notice or transition period except as provided
                  under the first paragraph of Section 2.5, and under Sections
                  2.5.2 and 2.5.4,

                   (f) provide Sprint technical assistance (at Sprint's expense)
                  and access to the Z-Node during the notice or transition
                  period except as provided under the first paragraph of Section
                  2.5, and under Sections 2.5.2 and 2.5.4, for the purpose of
                  developing and implementing a plan and interface to transfer
                  Sprint End User data to any system that Sprint designates, to
                  the extent feasible using Z-Tel's existing technology, and
                  otherwise cooperate with Sprint (at Sprint's request and
                  expense) with the transfer of all Sprint End Users from
                  Z-Tel's ************************** that Sprint otherwise
                  designates,

                   (g) for any Sprint End User, on Sprint's behalf and direction
                  submit any required orders to the appropriate ILEC to change
                  from Z-Tel's **** to any system that Sprint designates,

                   (h) for any Sprint End User, redirect Z-Node homing to any
                  system or location that Sprint designates, to the extent
                  feasible using Z-Tel's existing technology,

                   (i) mitigate the charges and fees otherwise payable to Sprint
                  under Section 2.4.1(e), and

                   (j) refund any amounts that Sprint pays under Section
                  2.4.1(e) with respect to lease charges paid, to the extent
                  Z-Tel utilizes leased line(s) originally purchased for Sprint.

                  2.4.3. REMOVAL OF PROPERTY. Any Party's property that the
         Party does not remove from the other Party's premises within forty-five
         (45) calendar days after the termination or expiration of the Term will
         be considered abandoned property that the possessing Party may dispose
         of without paying any compensation to the abandoning Party. Nothing in
         this Section 2.4.3 affects the rights of any Party under Section XV
         with respect to the return or destruction of Confidential Information.

         2.5. TRANSITION OF CUSTOMERS. Upon the expiration, or a termination, of
this Agreement under Section II or Section 4.9.2 of this Agreement, or at any
other time upon Sprint's written request, and in each case only if Sprint has
paid all prior undisputed

                                       32
<PAGE>

balances involving charges set forth in this Agreement (net of amounts that
Z-Tel owes to Sprint, such as Receipt Credits and Use Stimulation Credits),
Sprint may cause a transition (a "TRANSITION") of LW Based Services and OSS
Services (the process of moving, the "TRANSITION SERVICE") from Z-Tel or a Z-Tel
third party service provider to:

         (a) a Sprint Owned Affiliate,

         (b) a third party service provider that Sprint selects (each of (a) and
         (b), a "SPRINT DESIGNATED PROVIDER"), or

         (c) directly to Sprint.

                  2.5.1. COMPLIANCE WITH LAW. Sprint and not Z-Tel will be
         responsible for establishing a process for the Transition of each
         Sprint End User in compliance with all relevant Law, including all Laws
         regarding authorization and verification of changes in the selection of
         a provider of Telecommunications Service.

                  2.5.2. FAILURE TO PAY DURING TRANSITION. During the
         Transition, Z-Tel will be entitled to the continuing payment of all
         undisputed fees and charges set forth in this Agreement relating to the
         Services Z-Tel is still providing. Any failure by Sprint to make any
         undisputed payment in a timely manner during a Transition will give
         rise to Z-Tel's right to suspend providing Transition Services to
         Sprint upon ten (10) Business Days' prior written Super Notice. If
         Z-Tel suspends providing Transition Services to Sprint under this
         Section 2.5.2, Z-Tel will reinstate providing Transition Services to
         Sprint within 24 hours of receipt of payment in full by Sprint of all
         undisputed payments then due and owing (net of amounts that Z-Tel owes
         to Sprint, such as Receipt Credits and Use Stimulation Credits).

                  2.5.3. ASSISTANCE. During a Transition, Z-Tel will provide the
         following assistance to Sprint, and Sprint and Z-Tel will use their
         respective best efforts to accomplish the following:

                           (a) coordinate the Transition between Z-Tel or the
                  applicable Z-Tel third party service provider and the Sprint
                  Designated Provider or Sprint (as Sprint directs) through the
                  provision and use of applicable CLLI (Bellcore - Common
                  Language Location Identification) Codes, CIC (Carrier
                  Identification Code) Codes, OCN Codes, ACNA (Access Customer
                  Name Abbreviation) Codes, LRN (Local Routing Numbers) used for
                  LNP (Local Number Portability) or other necessary
                  telecommunication provider information to minimize service
                  interruptions during the Transition of the operation, service
                  and control of the Transition Service;

                           (b) ensure that users of the Transition Service will
                  continue to have access to the Service during the Transition;

                                       33
<PAGE>

                           (c) ensure that the Transition does not affect
                  either:

                                    (i) other Z-Tel-provided services that are
                           not subject to the Transition, or

                                    (ii) other Transition Services that have
                           already been transitioned;

                           (d) ensure that the Transition does not disrupt
                  Sprint's End Users use of any Transition Service; and

                           (e) settle all outstanding bills, invoices and
                  prepayments in a manner that is consistent with this
                  Agreement.

                  2.5.4. NEW ORDERS. After termination of this Agreement and
         during any Transition period, Z-Tel will accept orders for new service
         solely in its discretion.

                  2.5.5. TRANSITION COSTS.

                           (a) Following a notice of termination under Section
                  2.3 or Sprint's decision to migrate End Users, the Parties
                  will negotiate in good faith to determine what additional work
                  and services are reasonably appropriate or necessary in
                  connection with the Transition.

                           (b) On a monthly basis during the Transition Z-Tel
                  will provide Sprint detailed invoices describing services
                  rendered and the costs of performing those services. Sprint
                  will reimburse Z-Tel for all undisputed transition fees and
                  charges within thirty (30) calendar days after its receipt of
                  Z-Tel's invoice as follows:

                                    (i) Sprint will pay to Z-Tel *************
                           per Transition line for its additional work and
                           services to effect the transition of Sprint's End
                           Users without service interruption to the extent the
                           Transition solely involves movement to Sprint's OCN
                           serviced via Telution and when the Transition solely
                           involves configuration, manipulation of account data
                           or both and Sprint utilizes Z-Tel to Transition
                           service under the contract as an Ancillary Service.

                                    (ii) When the Transition involves more than
                           configuration, manipulation of account data or both,
                           or utilizes an account vendor other than Telution (a
                           "COMPLEX TRANSITION"), Z-Tel will make available to
                           Sprint or its contractor, documentation and data
                           necessary to effect self development of a Transition
                           procedure and will cooperate with Sprint in
                           implementation of any resultant Transition program.

                                    (iii) If Z-Tel's subject matter experts are
                           required to spend time in support of development of a
                           Sprint Transition Plan or its

                                       34
<PAGE>

                           implementation, Z-Tel will bill Sprint for such
                           support on a time and material basis.

                                    (iv) Sprint will also pay any fees and
                           charges that would apply from ILEC and Third Party
                           Vendors under Schedule C.

                           (c) Sprint will deliver to Commerce Bank, N.A. (the
                  "TRANSITION ESCROW AGENT") under the terms of an escrow
                  agreement in the form attached to this Agreement as Exhibit A
                  (the "TRANSITION ESCROW AGREEMENT") for deposit into an escrow
                  account (the "ESCROW ACCOUNT") certain funds for Z-Tel
                  Dedicated Support fees, Basic System Support fees,
                  **********************************************, and Third
                  Party unit based fees (the "TRANSITION FEES") for the Sprint
                  End Users that have not been Transitioned by either ninety
                  (90) calendar days after the notice of termination date or
                  August 2, 2003, whichever occurs first (the "TRANSITION
                  DATE").

                                    (i) The purpose of the escrow is to secure
                           Sprint's payment obligations to Z-Tel. No amounts
                           will be escrowed if the Transition has not occurred
                           because Z-Tel has not completed the necessary work on
                           ILEC interfaces.

                           (ii) The specific amount that Sprint will escrow is
                           determined as follows:

                                             (A) if the Transition has been
                                    delayed beyond the Transition Date for two
                                    (2) months or less, the amount to be
                                    escrowed is one months Transition Fees
                                    (based on the most current of the forecasts
                                    described in Section 10.12, the "FORECAST")
                                    for the Sprint End Users that have not yet
                                    been Transitioned, and

                                             (B) if the Transition has been
                                    delayed beyond the Transition Date for more
                                    than two (2) months, the amount to be
                                    escrowed is two (2) months Transition Fees
                                    (based on the Forecast) for the Sprint End
                                    Users that have not yet been Transitioned.

                           (iii) Upon completion of the Transition of all
                           Sprint End Users off Z-Tel's OCN and payment of all
                           non-disputed due fees due Z-Tel for Transitioned
                           Sprint End Users for Services provided while served
                           by Z-Tel's OCN, Z-Tel will direct the Transition
                           Escrow Agent to return to Sprint all funds remaining
                           in the Escrow Account within ten (10) calendar days
                           after the Transition completion date.

                                    (d) If the Transition has not occurred
                  because Z-Tel has not

                                       35
<PAGE>

                  completed the necessary work on ILEC interfaces, then for any
                  new Sprint End Users added to Z-Tel's OCN after the Transition
                  Date, Sprint will not be obligated to escrow any fees or pay
                  the **************** per transition line under Sections
                  2.5.5(b), (c) and (d).

                           (e) After establishment of the Escrow Account, Sprint
                  will continue to pay Z-Tel's invoices when due and Z-Tel is
                  not required to seek payment for its invoices from the
                  Transition Escrow Agent.

                           (f) Sprint and Z-Tel will true-up the Escrow Account
                  balance on a monthly basis until the termination of the
                  Transition Escrow Agreement as follows:

                                    (i) Within a reasonable period after the end
                           of each month after the Transition Date, the
                           Transition Escrow Agent will provide to Sprint and
                           Z-Tel a statement reflecting the balance of funds in
                           the Escrow Account.

                                    (ii) Within five (5) Business Days after
                           receiving the Transition Escrow Agent's statement,
                           Sprint will deposit in the Escrow Account the
                           additional funds that are necessary to cause the
                           balance of the Escrow Account to equal or exceed the
                           amount then required under Section 2.5.5(c)(ii).

                           (g) Sprint is entitled to disbursement from the
                  Escrow Account the amount by which the balance of the Escrow
                  Account reflected in the Transition Escrow Agent's statement
                  exceeds the amount then required under Section 2.5.5(c)(ii).

                           (h) Z-Tel is entitled to disbursements from the
                  Escrow Account from time to time during the term of the
                  Transition Escrow Agreement in amounts equal to any Transition
                  Fees payable by Sprint under this Agreement that Sprint does
                  not pay when due.

                           (i) The Transition Escrow Agent will disburse the
                  funds in the Escrow Account in accordance with the provisions
                  of the Transition Escrow Agreement.

                           (j) During any Transition period following
                  termination under this Agreement, so long as there are any
                  Sprint End Users utilizing Z-Tel's OSS Services, Sprint will
                  pay Z-Tel a monthly minimum Service Fee of **********.

                  2.5.6. TRANSITION PERIOD DURATION.

                           (a) For any termination under Section 4.9.2 of this
                  Agreement, Z-Tel's

                                       36
<PAGE>

                  obligation to assist Sprint in the Transition will cease
                  (subject to applicable Law) as of the later of:

                                    (i) **************** calendar days
                           after the termination of this Agreement, and

                                    (ii) the date on which Sprint or a Sprint
                           Designated Provider has obtained the consents and
                           approvals from ILECs or Regulatory Authorities that
                           are necessary or appropriate for processing
                           applicable service orders.

                  Sprint will diligently pursue the consents and approvals
         required in this Section 2.5.6(a).

                           (b) For any termination, or expiration, under Section
                  2.1 and 2.2 of this Agreement, the duration of the Transition
                  period will not be limited.

                           (c) For termination due to a Z-Tel Triggering Event
                  or a Sprint Triggering Event, Z-Tel's obligation to assist
                  Sprint in the Transition will cease the later of (subject to
                  applicable Law):

                                    (i) **************** calendar days
                           after termination of this Agreement, and

                                    (ii) until Sprint or a Sprint Designated
                           Provider obtains the consents and approvals from such
                           ILECs or Regulatory Authorities that are necessary or
                           appropriate for processing applicable service orders.

                  Sprint or the applicable Sprint Designated Provider will
         diligently pursue the consents and approvals required in this Section
         2.5.6(c).

         2.6. EXIT FROM TELECOMMUNICATIONS SERVICE BY SPRINT. Should Sprint
decide to cease providing LW Based Services to its End Users who receive those
services under this Agreement (collectively, the "LW BASED CUSTOMERS") or to
sell the LW Based Customers, then, to the extent allowed by Law, Sprint will
grant to Z-Tel, for the earlier of fifteen (15) Business Days or until Z-Tel
submits a bid, the right to bid on the purchase, in whole or in part, of the LW
Based Customers for future LW Based Services.

         2.7. LAWFUL PURPOSES. Z-Tel will furnish the Local Wholesale Services
subject to the condition that Sprint uses them only for lawful purposes. Z-Tel
may suspend any Local Wholesale Services that Sprint uses in violation of Law if
Z-Tel provides at least fifteen (15) Business Days' prior written Super Notice
to Sprint before the suspension. Z-Tel may suspend any Local Wholesale Services
immediately and without prior notice to Sprint (but with contemporaneous written
Super Notice to Sprint) if any law enforcement agency advises Z-Tel that its
Local Wholesale Services are being used in violation of applicable Law. Any
suspension of Local Wholesale Services by Z-Tel under this Section 2.7 will be
limited to the extent necessary to eliminate the unlawful purpose or use.

                                       37
<PAGE>

                             SECTION III. - RESERVED

                         SECTION IV. - FEES AND CHARGES

         4.1. BASIS OF FEES.

         (a) Z-Tel will provide Local Wholesale Services, Z-Node Services, Long
Distance Services and Z-Tel's OSS Services to Sprint as specified in this
Agreement and the SOW in accordance with the charges and fees described on
Schedule C to this Agreement (the "PRICING SCHEDULE") and Section 4.6 below.

         (b) Sprint and Z-Tel will negotiate fees and charges for new
functionality and services in accordance with Section 1.12.2 of this Agreement.
Fees and charges in association with the development of Ancillary Services will
be separately established within the applicable SOW for each project.

         (c) With the exception of ******************************************
*********************************************************************
************************************************************s.

         (d) The **********************************************************
**********************************************************************
********************************************************************.

         4.2. INTERFACE ESTABLISHMENT FEE. For initialization of Z-Tel service
and support interfaces, Z-Tel will be entitled to an one-time payment of
*************** from Sprint, and Sprint will pay to Z-Tel such fee in full in
immediately available funds within five (5) calendar days after the Effective
Date ("INTERFACE ESTABLISHMENT FEE") less any amounts that Sprint pays to Z-Tel
under the October Letter Agreement or the December Letter Agreement. The
Interface Establishment Fee compensates Z-Tel for its costs associated with
configuration of Operations Support System Services and its costs associated
with the hiring of appropriate and necessary employees to process and support
the Services that Z-Tel will provide to Sprint. Z-Tel will provide operational
interfaces capable of supporting Sprint's End User orders in accordance with the
time schedule set forth in the Initial SOW

                  4.2.1 DEVELOPMENT OF PCS INTERFACES. The development of
         interfaces by Z-Tel necessary to support a Sprint PCS offering is not
         incorporated into the initial interface establishment project or the
         Interface Establishment Fee. The Parties will jointly develop a
         separate SOW with respect to these additional interfaces. The target
         completion date for the additional SOW is February 15, 2003, and this
         SOW will itemize separate charges, scheduled delivery dates and high
         level project requirements. Upon completion of the additional SOW for
         PCS

                                       38
<PAGE>

         interface development, which the parties will expeditiously negotiate
         in good faith, and payment of any up front fees and charges required
         under that SOW, Z-Tel will develop interfaces necessary to support a
         Sprint PCS offering.

         4.3. SERVICE FEE PREPAYMENT AND RESULTING CREDIT. Within five (5)
Business Days after the Effective Date, Sprint will pay *************** to Z-Tel
as a prepayment towards Sprint's fees under Schedule C (net of any additional
amounts that Sprint pays to Z-Tel, beyond the Interface Establishment Fee, under
the October Letter Agreement or the December Letter Agreement (including the
$**************** Trial Payment (as defined in the December Letter) and
$*************** Extension Payment (as defined in the December Letter)).

                  4.3.1. USE STIMULATION. Beginning in the first month Sprint
         has ********* active End Users utilizing Local Wholesale Services that
         Z-Tel has provisioned (the "USE STIMULATION PERIOD"), Z-Tel will credit
         Sprint at the rate of up to *********** monthly to be credited against
         the Service Fee prepayment described in Section 4.3 ("USE STIMULATION
         CREDIT"). ********************
         ***********************************************************************
         ***********************************************************************
         ***********************************************************************
         ***********************************************************************
         ***********************************************************************
         ***********************************************************************
         ***********************************************************************
         ***********************************************************************
         ***********************************************************************
         ***********************************************************************
         **********.

         4.4. EXCLUDED ACTIVITIES. Indirect costs (such as general software or
processing enhancements, costs associated with increasing capacity generally and
costs supporting Z-Tel activities that Sprint has not pre-approved) will be
Z-Tel's responsibility. ****** **********..

         4.5. SLC AND PICC CHARGES. Sprint will solely determine the amount of,
and be entitled to, any End User access charges (e.g., SLC and PICC charges)
associated with Sprint End Users provisioned under this Agreement. SLC and PICC
charges will not accrue to Z-Tel.

         4.6. Z-TEL OSS SUPPORT. Z-Tel will be entitled to and, subject to
Section 5.3, Sprint will pay to Z-Tel when due, ****************************
***************** in support of Z-Tel's OSS Service offerings that Sprint and
Sprint's End Users utilize ("Z-TEL DEDICATED SUPPORT FEES").

                           4.6.1. GROSS-UP OF EXPENSE. In determining the
         *********************************** who are engaged in the furnishing
         of Z-Tel's OSS Services:

                                       39
<PAGE>

                           (a) ************************************************
                  **************************************************************
                  **************************************************************
                  ***************

                           (b) the following maximum rates per paid hour by
                  function will apply:

<TABLE>
<CAPTION>
                    FUNCTION                            PAID HOURLY RATE           GROSSED UP RATE
                    --------                            ----------------           ---------------
<S>                                                     <C>                        <C>
Reject (e.g., New Install, Migrate, Change              *********                  ************
Order, Suspend, Restore, Disconnect)

Support (Escalation)                                    ********                   ***********
                                                        ********                   *********
                                                        *********:                 *********
Support (Change Order)                                  **********
                                                                                   **********
                                                        *********                  **********
Support (all other activities, such as Repair           **********
Level II, TOS, Pending Order, Line Swap)                **********                 **********
                                                                                   **********
                                                        **********
                                                        **********
                                                        ***********
                                                        ***********
Repair Level I                                          ***********:               **********
                                                        ***********                **********:
</TABLE>

                           (c) Sprint will pay ****************************:

                  FUNCTION MAXIMUM WEEKS PAID

                  Reject: ******

                  Support:
                   Repair Level II: *******************************
                   TOS: ********************************
                   Escalation: ***********************************)
                   Pending Order: *************
                   Line SWAP: *********************

                                       40
<PAGE>

                   Repair Level 1:  ******************

                           Sprint will not pay for any (and Z-Tel will be
                  responsible for all) expenses related to
                  *************************. Sprint will not pay
                  ***************************************.

                   (d) Sprint and Z-Tel will negotiate in good faith to
                  determine the *******************************************
                  **************************************************.

                   (e) Z-Tel will meet the following productivity measures (AHT
                  and Utilization):

                           Trouble Tickets: ************

                           Repair Level 1 Tickets: *********

                           Support - Repair Level II Tickets: *********

                           Support - TOS Tickets: **************

                           Support - Escalation Tickets: ************

                           Support - Pending Order Changes: ********

                           Support - Line SWAP Request: *************

                   For purposes of the foregoing, "Utilization" means the time
                  spent working tickets divided by paid time. The agreed upon
                  Utilization rate will be **********************************

                           Sprint and Z-Tel will negotiate in good faith to
                  modify and true-up, as appropriate, the foregoing processes
                  and measures every six (6) months during the first year of the
                  Term and annually thereafter.

                   (f) Sprint unit costs as contained in this Section 4.6.1 will
                  not exceed ***** **********of the negotiated rate per function
                  unless Sprint pre-approves the exception in writing. Sprint's
                  Committed Forecast under Section 10.12 will include a unit
                  cost calculation for each function described in this Section
                  4.6. This calculation will take into consideration:

                                    (i) ************************,

                                    (ii) *****************************

                                    (iii) *****************************

                                    (iv) ******************************

                                    (v) **********************************

                                    (vi) *************************************

                                       41
<PAGE>

                                    (vii) *********************************.

                           Notwithstanding any other provision of this Section
                  4.6 or Schedule C, Sprint's costs for headcount under this
                  Agreement in any particular month will not exceed
                  ******************* of the aggregate unit cost calculations
                  under this Section 4.6.1(f) for that month except with
                  Sprint's written consent.

                           (g) Notwithstanding the above, charges associated
                  with Z-Tel personnel supporting the collection of past due
                  balances of Sprint End Users is separately incorporated in the
                  Pricing Schedule. For clarity purposes, the hourly fee
                  associated with collection activity, as stated in the Pricing
                  Schedule, is not subject to gross-up under subsection (a) of
                  this Section 4.6.1.

         4.6.2. ALLOCATION OF EMPLOYEE EXPENSE. For employee expenses, Z-Tel
will:

                           (a) identify employees that are exclusively
                  performing services for Sprint, and

                           (b) with respect to employees that do not exclusively
                  perform services for Sprint, establish a project code within
                  its payroll system for tracking and allocating, pro rata, the
                  expense of these employees by reference to hours worked for
                  Sprint.

          Sprint must approve the number of employees and the rate per employee
         charge back for each allocated employee expense. The maximum grossed-up
         cost per person per month for the following functions is:

                   CDR Processing: *********
                   Line Loss: *********
                   Payment Processing: *********
                   Payment / NSF Research: ********
                   Retail Billing: ********
                   Subscriber Management: ********
                   Applications: ********
                   Provisioning Support **********

                  4.6.3. PRE-APPROVED. Included in each Committed Forecast (as
         defined in Section 10.12) that Sprint submits to Z-Tel under Section
         10.12 will be an estimate of the Z-Tel headcount that is necessary to
         support Sprint's forecasted volume of business during the period for
         which the Committed Forecast applies. ****************** that Sprint
         submits in the Committed Forecast will be considered pre-approved by
         Sprint for purposes of Schedule C.

                  4.6.4. ADJUSTMENT TO ************. From the date of Z-Tel's
         receipt of

                                       42
<PAGE>

         Sprint's ******************, Z-Tel will have ********************** to
         submit a written objection to Sprint regarding the volumes and
         associated headcount reflected in Sprint's Committed Forecast. Z-Tel
         will be deemed to have accepted Sprint's ************************ does
         not provide this written objection in the specified time period. If
         Z-Tel provides a timely written objection to the volumes reflected in
         Sprint's Committed Forecast as they affect Z-Tel ********* (including
         with the objection an alternative Z-Tel volume forecast and a
         description of the disputed portion of the Committed Forecast), the
         Parties will negotiate in good faith to adjust the forecast in such a
         manner that:

                           (a) both parties are satisfied that the forecast
                  represents reasonable expectations of anticipated demand, and

                           (b) Z-Tel can perform the Services consistently with
                  the forecast and in compliance with its obligations under this
                  Agreement, including compliance with relevant SLAs.

                  4.6.5. ESCALATION OF ********* MATTERS. If the Parties cannot
         reach agreement regarding the volume and ********* forecast, they may
         utilize the dispute resolution process set forth in Section 21.5. If
         resolution between Parties cannot be reached within ***********
         calendar days after submission to the dispute resolution process, Z-Tel
         will use the most recent Sprint Committed Forecast as the basis of
         operations while the dispute resolution process proceeds. During the
         pendency of the dispute resolution process, Z-Tel will be relieved of
         all SLAs (other than SLAs concerning Utilization) that are affected or
         impacted by the difference between:

                           (a) ********* under the Committed Forecast, and

                           (b) ********* under the alternative forecast that
                  Z-Tel submits under Section 4.6.4 above.

                  4.6.6. LEVEL OF SUPPORT. Z-Tel will endeavor in good faith to
         fully perform the contracted-for Services to the extent practicable
         without regard to forecast levels.

                  4.6.7. COST OF LIVING ADJUSTMENT. On each anniversary date of
         the Effective Date during the Term, with ninety (90) calendar days
         prior written notice, Z-Tel may adjust ******************** established
         in this Section 4.6 to the extent it can reasonably document that
         Z-Tel's paid ********************* have risen since the inception of
         the Agreement or the last anniversary date (whichever is applicable).
         In no instance may the ******************** rise:

                                       43
<PAGE>

                           (a) more in any year than the consumer price index
                  for prior year as announced by the United States federal
                  government, and

                           (b) more than six percent (6%) in the aggregate over
                  the Initial Term.

                  4.6.8. MINIMIZATION OF EXPENSE. If Z-Tel believes that the
         actual headcount need (based on forecasted volumes) is less than the
         forecasted headcount, it will use commercially reasonable efforts to
         minimize the ******** ********* to Sprint.

         4.7. ******** ************** FEES.

                  4.7.1. ************* *********FEES. In allocating *******
         Fees, each LW Based services End User will be assigned a unique
         purchase order number consisting of the customer's ANI number,
         identifying the retail CLEC (that is, Z-Tel, Sprint or other Z-Tel
         Local Wholesale Services customer) and the CLLI code for the ILEC end
         office serving the End User. In those cases in which the ILEC reports
         usage based upon ANIs, Z-Tel will allocate the Local Wholesale Service
         *********************************************** customers based upon
         ANIs. *************************************************
         *****************************************:

                           (a****************************************** in the
                  area served by the end office times the aggregate number of
                  calendar days in the month that the customers were LW Based
                  Services customers,

                           (b) *****************************************
                  Wholesale Services customers have in the area served by the
                  end office ***********
                  ******************************************* that the customers
                  were customers,

                           (c)
                  *************************************************. 4.7.2.
                  *******************. In cases in which *********** are
                  reported on an aggregate basis, Z-Tel will
                  ********************************
                  **********************************************************.

         4.8. ******************* EXPENSES.

                           (a) Sprint, including its Affiliates, will pay all
                  ********** ************************************ ************
               ***************************

                            (i) Sprint's (or its Affiliates', employees' and
                           agents') failure to obtain a subscriber's
                           authorization and verification in accordance with the
                           procedures specified in 47 C.F.R. Part 64 to change a
                           provider or telecommunications service,

                                       44
<PAGE>

                            (ii) Sprint's (or its Affiliates', employees' and
                           agents') misrepresentation in the course of marketing
                           or obtaining or verifying consent to a change in
                           provider or telecommunications service, in connection
                           with this Agreement,

                            (iii) the failure of a Third Party Verification
                           provider if Sprint is providing its own Third Party
                           Verification Services from time to time under this
                           Agreement, or

                            (iv) Sprint's (or its Affiliates', employees' and
                           agents') acts or omissions

                           For purposes of clarification, Z-Tel will not be
                  deemed to be an agent to Sprint under this Section 4.8.

                           (b) Z-Tel will pay all fees, penalties, charges,
                  expenses and costs that any ILEC or Regulatory Authority
                  imposes on either Party to the extent they result from Z-Tel's
                  (or its Affiliates, employees and agents) actions or omissions
                  including the failure of a Third Party Verification provider
                  if Z-Tel is providing Third Party Verification Services from
                  time to time under this Agreement.

         4.9. CHANGES IN FEES AND DIRECT COSTS. Except for ************ charges
modified in conformance with Section 4.6.7, ************************** that
Sprint must pay under this Agreement will ******************* during the Term,
except as more fully described in this Section 4.9.

                  4.9.1. ADJUSTMENT PROCESS FOR ****** FEES NOT IN EXCESS OF
         MARKET RATE. Z-Tel will notify Sprint in writing (a "CHANGE IN FEE
         NOTICE") of any increase or decrease in the ******* Fees because of an
         ****************************************************************** or
         arbitration order. Z-Tel will use reasonable commercial efforts to
         provide this notice to Sprint at least thirty (30) calendar days before
         the effective date of the ******* Fee change. Z-Tel will notify Sprint
         through a Change in Fee Notice of any other increase or decrease in the
         ******** Fees within fifteen (15) calendar days after Z-Tel becomes
         aware of the increase or decrease (but, if the effective date of the
         *******Fee change is less than fifteen (15) calendar days after Z-Tel
         becomes aware of the change, Z-Tel will notify Sprint immediately upon
         becoming aware of the change).

                  With any Change in Fee Notice, Z-Tel will submit to Sprint a
         proposed revised Pricing Schedule (including the anticipated **** Fee
         change effective date) along with a summary of the underlying action
         necessitating the ***** Fee change. Subject to Section 4.9.2, absent a
         written objection by Sprint in response to a Z-Tel Change in Fee
         Notice, the changes in ****** Fees payable by Sprint under this
         Agreement will become effective as of the specified effective date.

                  4.9.2. RESOLUTION OF FEE CHANGE DISPUTES. If Sprint objects in
         writing to any proposed change in *****Fees, the Parties will negotiate
         in good faith

                                       45
<PAGE>

         concerning an appropriate modification in the ***** Fees payable under
         this Agreement. If the Parties do not reach an agreement on the new
         **** Fees within sixty (60) calendar days after the date of Z-Tel's
         Change in Fee Notice, then this Agreement will automatically terminate
         one hundred eighty (180) calendar days after the date of Z-Tel's Change
         in Fee Notice. In the event of termination under this Section 4.9.2,
         the **** Fee change will go into effect as of the specified effective
         date and Sprint will pay Z-Tel at the new rate from that date through
         the end of the Term.

                  4.9.3. **** FEE ADJUSTMENTS IN EXCESS OF MARKET RATE. Z-Tel
         will not implement any **** fee changes that are above market rates
         without Sprint's written consent.

                  4.9.4. CHANGE IN NON-ILEC FEES. Other than in accordance with
         Section 4.6.7 and in association with postage, Z-Tel will not change
         any ********** fees under this Agreement without Sprint's written
         consent unless:

                  (a) the fee change is reasonably not avoidable by Z-Tel;

                  (b) Z-Tel had given Sprint advance notice of at least ninety
                  (90) calendar days of contract negotiations and consulted with
                  Sprint on service and pricing issues related to the proposed
                  increase from the date of notice until any implementation of
                  the proposed fee change; and

                           (c) Z-Tel has made a good faith effort to minimize
                  the economic effects of the fee increase on Sprint's business.

                  4.9.5. CHANGE IN POSTAGE. Z-Tel will automatically implement
         and bill to Sprint any changes in rates of the United States Postal
         Service in association with providing billing of Sprint End Users on
         Sprint's behalf.

         4.10. RECOVERY OF TAXES AND REGULATORY FEES. The Party upon which
applicable Law imposes the payment obligation will bear any federal, state or
local excise, sales or use taxes (excluding any taxes levied on income) or
regulatory fees (e.g., fees from local 911) resulting from performance of this
Agreement even if this Agreement or applicable Law places the obligation to
collect and remit the taxes upon the other Party. But Z-Tel will pass through to
Sprint, and Sprint will bear, any sales or use tax or any regulatory fee arising
from the Services that Z-Tel provides to Sprint or Sprint's End Users.

         4.11. PERMITTED FEES AND CHARGES. Except as otherwise explicitly
described or contemplated under this Agreement (for avoidance of doubt,
including the SOW), the fees and charges set forth on Schedule C are the only
fees and charges that Z-Tel may bill to Sprint, and Sprint is obligated to pay
when due, for the Services that Z-Tel will provide under this Agreement to
Sprint and Sprint's End Users.

                                       46
<PAGE>

                    SECTION V. - BILLING AND BILLING DISPUTES

         5.1. INVOICING OF FEES. Z-Tel will provide invoicing to Sprint in an
electronic format that is acceptable to Sprint.

                  5.1.1. INVOICE DATE. Z-Tel will invoice all fees and charges
         payable by Sprint to Z-Tel under this Agreement, other than *********
         Fees and Z-Tel Dedicated Support Fees, monthly in arrears. Z-Tel will
         invoice Sprint no later than the 23rd day of each month. Each Z-Tel
         invoice will also reflect prior Sprint payments, Receipt Credits, Use
         Stimulation Credits and reconciliation.

                  5.1.2. ILEC RECURRING FEES. Each month, Z-Tel will calculate
         the actual ************** Fees relating to Sprint End Users based upon
         actual ****** billing. Z-Tel will then invoice Sprint for the following
         month's estimated ******* Recurring Fees, basing the estimate on the
         sales forecasts for the following month described in Section 10.12 and
         the SOW. The monthly invoice that Z-Tel sends to Sprint for the
         estimated *********** Fees will reflect:

                           (a) a true - up of the estimated ************ Fees
                  that Sprint previously paid for the prior month and the actual
                  ************ Fees relating to Sprint's End Users for the prior
                  month, and

                           (b) any settlement amount due from Sprint to Z-Tel or
                  from Z-Tel to Sprint because of the true-up.

                  5.1.3. Z-TEL DEDICATED SUPPORT FEES. Bi-weekly, Z-Tel will
         calculate the actual Z-Tel Dedicated Support Fees based upon
         ************** and Section 4.6. Z-Tel will then invoice Sprint for
         ************* as directed in Section 4.6.

                  5.1.4. RECEIPT CREDITS. Z-Tel will credit to Sprint, against
         Sprint's balance of usage charges due to Z-Tel, Z-Tel's usage base cash
         receipts (less direct costs, cost of collections and uncollected
         amounts) in connection with the local Telecommunications Services
         provided to Sprint through Z-Tel ("RECEIPT CREDITS"). Z-Tel will apply
         this credit for any month no later than thirty (30) calendar days after
         collection.

         5.2. BACK BILLING. Notwithstanding anything to the contrary contained
in this Agreement (but subject to Section 5.3), Sprint will pay any invoices
without regard to whether this Agreement has expired or been terminated,
rescinded or cancelled, to the extent the fees are related to services provided
to Sprint by Z-Tel during the Term. Z-Tel will credit or remit to Sprint any
overpayment associated with the true-up of prior invoices without regard to
whether this Agreement has expired or been terminated, rescinded or cancelled.

         5.3. BILLING DISPUTES. Notwithstanding any other provision of this
Agreement, disputes between the Parties concerning any invoice that Z-Tel
presents to Sprint for

                                       47
<PAGE>

payment will be resolved in accordance with this Section 5.3.

                  5.3.1. NO WITHHOLDING OF ****** FEES. Under no circumstances
         will Sprint withhold payment of any Z-Tel bill for ******* Fees. If
         Sprint withholds any ******* Fee invoiced by Z-Tel for a given month
         for any reason, Z-Tel's duty to perform its obligations under this
         Agreement will be suspended until one (1) Business Day after Z-Tel
         receives the unpaid invoiced Sprint ***** Fees. Z-Tel's right to
         suspend service under this Section 5.3.1 is in addition to and not in
         lieu of any other remedies available to it under this Agreement and
         under applicable Law. Sprint stipulates and agrees that:

                           (a) Sprint's withholding of ******* Fees will cause
                  irreparable harm to Z-Tel, and.

                           (b) Sprint will consent to the granting of emergency
                  relief by any court of competent jurisdiction, including
                  injunctive relief.

                  5.3.2. WITHHOLDING OF ********* FEES. In the event of any good
         faith dispute about the amount due from Sprint to Z-Tel for *********
         fees, Sprint may withhold up to a maximum of *************** of the
         amount invoiced for non-ILEC fees for a given month. But if Z-Tel
         incorrectly billed more than ****** ********* of any monthly bill, then
         Sprint may thereafter withhold up to *** ******************* of any
         disputed amount.

                  If Sprint withholds any amount greater than this Section 5.3.2
         permits of the amount invoiced by Z-Tel for *********** fees for a
         given month for any reason, Sprint stipulates and agrees that:

                           (a) such withholding will cause irreparable harm to
                  Z-Tel, and

                           (b) it will consent to the granting of emergency
                  relief by any court of competent jurisdiction, including but
                  not limited to injunctive relief.

                  5.3.3. NOTICE OF BILLING DISPUTE. A Party wishing to raise a
         Billing Dispute must notify the other party in writing of the dispute
         within one hundred eighty (180) calendar days (but this deadline will
         be tolled during any audit) after the Billing Date, describing the
         billing discrepancies in reasonable detail together with supporting
         documentation so the billing party can fully understand the nature of
         the dispute. Except in situations involving Audits under this
         Agreement, any party that does not notify the other of a Billing
         Dispute in writing within one hundred eighty (180) calendar days after
         the Billing Date thereby waives any claim it may otherwise have
         regarding that bill or any part not disputed within one hundred eighty
         (180) calendar days, regardless of when the claim was discovered. This
         section will not limit either Party to pursue any remedies available by
         law or equity against the other Party for fraudulent acts.

                  5.3.4. PAYMENT WILL NOT PREJUDICE. Payment will not prejudice
         a Party's

                                       48
<PAGE>

         right to dispute charges so long as they are disputed in the manner and
         timeframe specified in this Agreement.

                  5.3.5. RESTITUTION. Disputed charges mutually agreed upon in
         favor of one Party will be paid by the other Party within five (5)
         Business Days of the resolution along with interest payments calculated
         based upon the lesser of ten percent (10%) per annum or the maximum
         allowed by law.

                  5.3.6. RESOLUTION PERIOD. The Parties will engage in good
         faith negotiations and use reasonable efforts to resolve Billing
         Disputes by the respective representatives of both Parties listed on
         the Designee Schedule within the timeframes and escalation process set
         forth below:

                           5.3.6.1. ESCALATION. If the Parties fail to resolve
                  the dispute within thirty (30) calendar days , the dispute
                  will be escalated to senior executives of each party for
                  resolution for a period of fifteen (15) calendar days.

                           5.3.6.2. FINAL RESOLUTION. If the Parties fail to
                  mutually resolve or settle the dispute within the aggregate
                  forty-five (45) calendar day period described in Section
                  5.3.6.1 (unless both Parties have agreed in writing to extend
                  such period), either Party may seek court resolution. Neither
                  Party may seek court resolution until expiration of the
                  resolution and escalation period.

                  5.3.7. JOINT EFFORT REGARDING THIRD-PARTY DISPUTES. Z-Tel and
         Sprint will work together to resolve disputes with ILECs and third
         parties arising from performance of the services described in this
         Agreement. But, to the extent Sprint has not migrated Sprint End Users
         to its own *** under Section 1.2, and notwithstanding any other
         provision in this Agreement, Z-Tel will have sole authority to resolve
         disputes with ILECs and third parties, and resolution of the disputes
         will be final. To the extent Sprint has migrated Sprint End Users to
         its own ***, Sprint will have sole authority to resolve disputes with
         ILECs and third parties related to those Sprint End Users on Sprint's
         ***.

                             SECTION VI. - PAYMENTS

         6.1. RESPONSIBILITY. Sprint will be responsible for and pay all
undisputed charges for the Services that Z-Tel provides to Sprint or Sprint's
End Users under this Agreement. Subject to Section 10.11, Sprint, and not Z-Tel,
will bear the risk of any failure by Sprint's End Users to pay charges to
Sprint.

         6.2. PAYMENT SCHEDULE. Sprint will pay Z-Tel by wire transfer the
undisputed amounts for fees incurred under this Agreement as follows.

                  6.2.1. ************** FEES.

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<PAGE>

                           (a) For Sprint End Users on Z-Tel's ***, Sprint will
                  prepay each month an amount equal to one month's estimated
                  recurring **** Fees, based on monthly forecasts, as described
                  in Section 10.12 and the SOW.

                           (b) Sprint will pay to Z-Tel the recurring **** Fees
                  within ********************** after receiving the invoice from
                  Z-Tel.

                  6.2.2. ********** FEES. Sprint will pay all other **** Fees
         within ********************** after receiving an invoice from Z-Tel.

                  6.2.3. Z-TEL DEDICATED SUPPORT FEES. Sprint will pay all Z-Tel
         Dedicated Support Fees within ********************** after receiving an
         invoice from Z-Tel.

                  6.2.4. ALL OTHER FEES. Sprint will pay all other fees for
         Services under this Agreement within ************************* after
         receiving the invoice from Z-Tel.

         6.3. CURRENCY AND PAYMENT METHOD. All payments will be made via wire
transfer in US Dollars in immediately available funds.

         6.4. LATE PAYMENT FEES.

          6.4.1. UNDISPUTED AMOUNTS. If any undisputed payment or undisputed
         portion of a payment is not received by Z-Tel when due, or if any
         undisputed portion of the payment is not in immediately available
         funds, then Sprint will pay a late fee to Z-Tel. The late fee will be
         equal to the lesser of one and one half percent (1.5%) or the maximum
         percentage allowed by Law multiplied by the undisputed portion of a
         payment not received by the due date. An additional late fee of the
         lesser of one and one half percent (1.5%) or the maximum percentage
         allowed by law multiplied by the undisputed portion of a payment not
         received by the due date will accrue each subsequent month during which
         the undisputed payment or undisputed portion of a payment is not made.
         Z-Tel will be entitled to these late payment fees in addition to and
         not in lieu of all other remedies available to Z-Tel under this
         Agreement or otherwise permitted by Law.

          6.4.2. DISPUTED Amounts. If Sprint makes any payment to Z-Tel that it
         previously disputed, whether the payment is made voluntarily or
         pursuant to a settlement or order, it will pay a late fee to Z-Tel. The
         late fee will be equal to the lesser of eighteen percent (18%) per
         annum or the maximum percentage allowed by law multiplied by the
         disputed amount and will be assessed from the initial due date until
         the date of dispute resolution or order and Sprint will pay the amount
         within five (5) Business Days. Z-Tel will be entitled to these
         late-payment fees in addition to and not in lieu of all other remedies
         available to Z-Tel under this Agreement or otherwise permitted by Law.

         6.5. SPRINT ADJUSTMENTS. Sprint will have the right, in its sole
discretion, to

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<PAGE>

adjust, via credit, refund or otherwise, the invoices of Sprint
End Users. These Sprint adjustments will not reduce payments due from Sprint to
Z-Tel under this Agreement.

                    SECTION VII. - RELATIONSHIP TO END USERS

         7.1. SERVING END USERS. Z-Tel may serve directly any End User and may
continue to market, sell and deliver its own Telecommunications Services and
other Services or otherwise establish independent relationships with any End
User. However, Z-Tel will not target Sprint End Users for switching to Z-Tel
retail services or use End User information gained from its performance of this
Agreement to market directly to Sprint End Users or for any other reason not
related to Z-Tel's performance of its obligations under this Agreement;
provided, however, that the foregoing prohibition does not prohibit Z-Tel from
advertising or offering services to any Sprint End User in connection with a
general advertising or sales effort made in geographic areas where there are
Sprint End Users.

         7.2. POINTS OF CONTACT. Except when documented in the SOW, Sprint will
be Z-Tel's single point of contact for all Services purchased and provided under
this Agreement. Except as otherwise provided in this Agreement, as modified and
supplement by the SOW, Z-Tel will not be required to have any contact with
Sprint's End Users, and Sprint will act as the single point of contact for
Sprint's End Users' service needs, including sales, service, design, order
taking, provisioning, change orders, training, maintenance, post sale servicing,
billing, collection and inquiry. Sprint will inform its End Users that they are
customers of Sprint. Z-Tel will refer Sprint's End Users who inadvertently
contact Z-Tel with questions regarding Sprint's services to Sprint. Likewise,
Sprint will refer Z-Tel customers who inadvertently contact Sprint with
questions regarding Z-Tel services to Z-Tel. Nothing in this Agreement will
prohibit either Party from discussing its products or services with End Users of
the other Party who solicit this information.

         7.3. END USER INTERFACES. From technically and commercially feasible
options documented in the SOW, Sprint will control the look, feel, appearance
and, as applicable, content of Z-Tel's presentation to and interaction with the
End User, including the following End User interfaces: Internet, fulfillment,
Third-Party Verification, system interfaces, voice mail, credit screening,
customer service, IVR and provisioning.

                         SECTION VIII. - AUTHORIZATIONS

         8.1. LISTING INFORMATION. Sprint authorizes Z-Tel to release Sprint
listing information regarding its End Users to other carriers and their
publishers for the purposes of publishing directories and providing directory
assistance, except to the extent Sprint's End Users have specifically requested
that they not be listed in a directory (i.e., non-publish or non-list) and
Sprint or the Sprint End User has communicated this End User request to Z-Tel.
Z-Tel will not be liable for the content or accuracy of the listing information.

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<PAGE>

         8.2. AUTHORIZATION AND VERIFICATION REQUIREMENTS. Simultaneously with
the execution of this Agreement, Sprint will execute and deliver to Z-Tel a
letter of authorization in substantially the same form as Schedule D to this
Agreement.

                  8.2.1. Z-TEL VERIFICATION AND RETENTION. To the extent set
         forth in the SOW, Z-Tel will obtain, in compliance with applicable
         regulatory requirements, authorization and verification of the
         selection of a provider of Telecommunications Service from Sprint's End
         Users in connection with Sprint's use of the Local Wholesale Services.
         When Z-Tel performs the services for Sprint, Z-Tel will:

                           (a) maintain records of those authorizations and
                  verifications in formats that meet ILEC and federal and state
                  regulatory requirements, as applicable, and

                           (b) deliver copies of any authorization or
                  verification records to Sprint, any ILEC or any Regulatory
                  Authority upon request, as soon as reasonably feasible, but in
                  no event more than seventy-two (72) hours after Z-Tel receives
                  Sprint's request.

                  8.2.2. SPRINT VERIFICATION AND RETENTION. Unless otherwise
         specified in the SOW, Sprint will obtain authorization and verification
         of the selection of a provider of Telecommunications Service from all
         End Users from whom Sprint employees or agents take orders in
         connection with Sprint's use of the Local Wholesale Services. In
         conjunction with performing authorization and verification, Sprint
         will:

                           (a) maintain records of those authorizations and
                  verifications in formats that meet ILEC and federal and state
                  regulatory requirements, as applicable; and

                           (b) deliver copies of any authorization or
                  verification records to Z-Tel, any ILEC or any Regulatory
                  Authority upon request, as soon as reasonably feasible, but in
                  no event more than seventy-two (72) hours after a regulatory
                  request is received.

               SECTION IX. - Z-TEL RESPONSIBILITIES AND WARRANTIES

         9.1. Z-TEL COOPERATION. Z-Tel will work reasonably and cooperatively
with Sprint to establish and modify the Telecommunications Services to be
offered by Sprint and, as modified by Sprint from time to time, utilizing the
Local Wholesale Services, Z-Node Services and other ancillary and support
services described in this Agreement.

         9.2. GOOD STANDING. Z-Tel represents and warrants that Z-Tel is and
will remain, at all times during the Term, in good standing with each applicable
ILEC and CLEC and under each applicable Interconnection Agreement. Z-Tel will
maintain Interconnection Agreements with ILECs that do not prohibit it from
performing the services that it is

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<PAGE>

obligated to perform under this Agreement. Z-Tel will notify Sprint in writing
within ten (10) calendar days after the change if there is a change in any
Interconnection Agreement, and promptly after Z-Tel becomes aware of the change
if there is a change in any Law, in each case giving rise to a material change
in Z-Tel's delivery of Local Wholesale Services under this Agreement.

         9.3. Z-TEL COMPLIANCE WITH LAWS. Z-Tel will be responsible for
obtaining and keeping in effect in all material respects all FCC, state
regulatory commission, franchise authority and other regulatory approvals that
are necessary in connection with the performance of its obligations under this
Agreement. Z-Tel will perform its obligations under this Agreement in compliance
in all material respects with all Laws. Z-Tel will reasonably cooperate with
Sprint in obtaining and keeping in effect the regulatory approvals for which
Sprint is responsible. Notwithstanding any other provision of the Agreement,
Z-Tel will have no obligation to perform under this Agreement in any state or
jurisdiction in which Sprint has not obtained authorization as required by Law
or Regulatory Authority for providing the Telecommunications Services or other
Services contemplated by this Agreement or for the conduct of business within
the state or jurisdiction.

         9.4. PRIOR CONSENT FOR BRANDING. Except as set forth in the SOW, any
use by a Party of the other Party's Marks is subject to obtaining the other
Party's prior written consent.

         9.5. SPRINT END USER INTERACTION. When Z-Tel Personnel must interact
with Sprint customers to perform Z-Tel's obligations under this Agreement, Z-Tel
Personnel will identify themselves as representing Sprint. Sprint consents to
Z-Tel's use of the necessary Sprint Marks solely for the foregoing purpose.

         9.6. NO CONTRAVENTION. Z-Tel represents and warrants that the execution
and delivery of this Agreement, the performance by Z-Tel of its obligations
under this Agreement and the exercise by Z-Tel of the rights created by this
Agreement do not and will not:

                  (a) violate Z-Tel's Certificate of Incorporation or bylaws, or

                  (b) constitute a breach of or a default under any agreement or
         instrument to which Z-Tel is a party to or by which it or its assets
         are bound, which breach or default would have a material adverse effect
         on Z-Tel's ability to perform its obligations under this Agreement.

         9.7. SUFFICIENCY OF Z-TEL FUNDAMENTAL TECHNOLOGY. Z-Tel represents and
warrants that the Z-Tel Fundamental Technology is sufficient to enable Sprint,
through the use of reasonably trained technicians, and when used in combination
with the other hardware, software, information, materials, products and services
listed on Schedule 9.7 of this Agreement, to establish complete operational
systems capable of generating and providing products and services substantially
the same as those that Z-Tel provides to Sprint under this Agreement.

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<PAGE>

         9.8. NON-DISCRIMINATION. Z-Tel will provide services to Sprint under
this Agreement that are equal or better in quality and provided within the same
time intervals as Z-Tel generally provides in the comparable metropolitan market
places the services to itself, its End Users and its wholesale customers with
similar or lesser volume than Sprint.

         9.9. TOLL-FREE ACCESS. If Z-Tel uses toll-free numbers in connection
with providing services under this Agreement, Z-Tel will assign the toll-free
number and select Sprint as the interexchange carrier serving the toll-free
number.

         9.10. RESTRICTING SERVICE. To the extent that applicable Law permits,
Z-Tel will, within one Business Day, submit to the relevant ILEC an order to cut
off or restrict service to any Sprint End User based upon Sprint's written
instructions to do so. If the ILEC order system is unavailable on the day that
Z-Tel receives Sprint's instructions to cut off or restrict service, Z-Tel will
submit the order as soon as practicable when the ILEC order system becomes
available. Further, if the ILEC rejects a Z-Tel order dealing with cut off or
restriction of service, then Z-Tel will work with Sprint to promptly correct the
order problems and resubmit the order. Subject to these conditions and Section
5.3, after Z-Tel receives Sprint's written instructions to cut off or restrict
service to a Sprint End User, Sprint will be liable for, and Z-Tel entitled to,
only those fees and costs in connection with the Sprint End User in question
that are:

                  (a) incurred through the third Business Day after Z-Tel's
         receipt of Sprint's written instructions; except that Sprint will also
         be liable for, and Z-Tel entitled to,

                           (i) fees and costs through the first Business Day
                  after Z-Tel resubmits an order to cut off or restrict service
                  that the ILEC rejected in processing, and

                           (ii) fees and costs through the second Business Day
                  after Z-Tel resubmits an order to cut off or restrict service
                  that was delayed because the ILEC order system was
                  unavailable, or

                  (b) incurred after that point for services that applicable Law
         does not permit to be cut off or restricted.

         In case of disagreement between the Parties as to whether applicable
Law permits the full implementation of any particular Sprint instruction to cut
off or restrict service that is being provided through Z-Tel's ***, Z-Tel will,
upon receiving a second written instruction from Sprint, fully implement the cut
off or restriction as Sprint instructs if Sprint executes, in a form that is
reasonably acceptable to Z-Tel, a written agreement to indemnify Z-Tel for any
damages, penalties, fine or expenses that Z-Tel may incur from the
implementation.

         Z-Tel will, immediately upon Sprint's written request, implement any
cut off or restriction of service if the service is being provided through
Sprint's ***.

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<PAGE>

         9.11. TARIFFS. If Z-Tel is required to file any tariff in connection
with wholesale services governed by this Agreement, then it will take all steps
necessary to ensure that such tariff is consistent with this Agreement and
preserves for Sprint the full benefit of the rights provided by this AGREEMENT.
Z-Tel will provide Sprint with prior written notice of the filing of any
material tariff modification filed under this Section 9.11. Four (4) times
annually upon Sprint's request, Z-Tel will provide Sprint with copies of all
wholesale tariffs. However, in the event of a conflict between this Agreement
and any Z-Tel tariff, to the extent that applicable Law permits, the Agreement
will prevail. Under no circumstances will Z-Tel voluntarily file any tariff that
raises any prices under this Agreement without Sprint's consent.

         9.12. MATERIAL THREAT. As soon as possible, but in any case within
fifteen (15) Business Days after Z-Tel learns in writing of the commencement of
any suit or administrative, arbitration or other proceeding against Z-Tel, any
of its Affiliates or their respective businesses, assets or properties, and in
each case only to the extent an adverse judgment in the suit or proceeding would
materially impact Z-Tel's ability to fulfill its obligations under this
Agreement, Z-Tel will provide to Sprint a reasonably detailed description of the
threat summarizing its potential impacts both operationally and financially.

         9.13. NETWORK PROTECTION. Z-Tel may, without incurring any liability,
cancel or suspend service in whole or in part, immediately upon contemporaneous
verbal notice and subsequent prompt written notice to Sprint, as set forth in
the SOW, if Z-Tel reasonably determines that this action is necessary to protect
its personnel, agents, facilities, certifications or services or to prevent or
to protect it, Sprint and their respective Affiliates against fraud. If the
activity involves a suspected criminal offense, Z-Tel may notify law enforcement
authorities.

         9.14. RESPONDING TO SUBPOENAS. In response to subpoenas, court orders
and administrative agency orders concerning the production of information,
including those calling for call detail records, when the targeted telephone
numbers belong to Sprint End Users using Sprint's OCN, Z-Tel will produce
information as the Law requires. Sprint and Z-Tel will cooperate in complying
with these subpoenas, court orders and administrative agency orders.

         9.15. INSURANCE. Z-Tel will obtain and keep in force during the Term
not less than the following insurance:

                           (a) Commercial General Liability insurance,
                  including:

                                    (i) bodily injury,

                                    (ii) property damage,

                                    (iii) personal and advertising injury
                           liability, and

                                    (iv) contractual liability covering
                           operations, independent contractor and
                           products/completed operations hazards,

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<PAGE>

                  with limits of not less than $1,000,000 combined single limit
                  per occurrence and $2,000,000 annual aggregated, naming
                  Sprint, its Affiliates and their respective officers,
                  directors and employees as additional insureds;

                           (b) Workers' Compensation insurance, as provided for
                  in any jurisdiction in which Z-Tel personnel who perform
                  Services under this Agreement work, with an Employer's
                  Liability limit of not less that $500,000 for bodily injury by
                  accident or disease;

                           (c) Business Auto insurance covering:

                                    (i) owned,

                                    (ii) non-owned, and

                                    (iii) hired autos,

                  with limits of not less than $1,000,000 combined single limit
                  per accident for bodily injury and property damage liability,
                  naming Sprint, its Affiliates and their respective officers,
                  directors and employees as additional insureds;

                           (d) Umbrella/Excess Liability with limits of not less
                  than $3,000,000 combined single limit in excess of the
                  above-references Commercial General Liability, Employer's
                  Liability and Business Auto Liability, naming Sprint, its
                  Affiliates and their respective officers, directors and
                  employees as additional insureds; and

                           (e) Professional Errors and Omissions Liability
                  Coverage with limits of not less than $1,000,000 per
                  occurrence and $3,000,000 annual aggregate, naming Sprint, its
                  Affiliates and their respective officers, directors and
                  employees as additional insureds.

                  9.15.1. CERTIFICATES OF INSURANCE.

                           (a) All required insurance policies will be issued by
                  insurers who are:

                                    (i) financially reputable, and

                                    (ii) licensed to do business in all
                           jurisdictions where Services are provided under this
                           Agreement.

                           (b) Z-Tel will provide Sprint with certificates of
                  insurance that:

                                    (i) are industry standard in form and
                           content,

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<PAGE>

                                    (ii) evidence that all the required
                           coverages are in force, and

                                    (iii) have been endorsed to provide that no
                           policy will be canceled or materially altered without
                           first giving Sprint thirty (30) calendar days' prior
                           written notice.

                  9.15.2. NO LIMITATION. Nothing contained in this Section 9.15
         limits Z-Tel's liability to Sprint to the limits of insurance certified
         or carried.

 9.16. FEE INCREASES. Z-Tel represents and warrants that no provisions in any
Z-Tel contract with Third Party Vendors contain any clause that will result in
an increase in the fees charged to Sprint upon the reduction of the volume of
services purchased by Z-Tel.

 9.17. CHANGE OF CONTROL. Z-Tel will provide Super Notice to Sprint of any
Change of Control within five (5) Business Days after Z-Tel becomes aware of the
Change of Control occurrence.

               SECTION X. - SPRINT RESPONSIBILITIES AND WARRANTIES

         10.1. SPRINT COMPLIANCE WITH LAWS. Sprint will obtain and keep in
effect in all material respects all approvals and authorizations from the FCC,
state regulatory commissions, franchise authorities and other regulatory
approvals necessary in connection with its use of Local Wholesale Services and
other Services as contemplated in this Agreement. Sprint will reasonably
cooperate with Z-Tel in obtaining and keeping in effect in, all material
respects, the regulatory approvals for which Z-Tel is responsible.

                  10.1.1. AUTHORITY IN PLACE. Sprint will not place orders for
         any Services under this Agreement (except for mutually agreeable
         technical trial orders and orders with due dates after any expected
         regulatory authorization or approval is due) unless all applicable
         regulatory authorizations and approvals are in place.

                  10.1.2. DEMONSTRATED PROOF OF AUTHORITY. Sprint will provide
         proof of any applicable regulatory authorization upon Z-Tel's written
         request.

         10.2. SUBSCRIBER FEES. Sprint will have sole and unilateral control of
the prices charged to Sprint End Users subscriber services.

         10.3. NO CONTRAVENTION. Sprint represents and warrants that its
execution and delivery of this Agreement, its performance of its obligations
under this Agreement, and its exercise of its rights under this Agreement do not
and will not:

                           (a) violate Sprint's Certificate of Incorporation or
                  bylaws, or

                           (b) constitute a breach of or a default under any
                  agreement or instrument to which Sprint is a party to or by
                  which it or its assets are bound, which breach or default
                  would have a material adverse effect on

                                       57
<PAGE>

                  Sprint's ability to perform its obligations under this
                  Agreement.

         10.4. HAZARDS, INTERFERENCE, ETC. Upon notice from Z-Tel, Sprint
promptly will eliminate any hazard, service obstruction or interference that any
Sprint hardware, software, use, content or action is causing or is likely to
cause to Z-Tel's technical operations to the extent that (i) Sprint's use of the
hardware, software or content, (ii) Sprint's action, or (iii) the hazard,
service obstruction or interference relates to or arises under this Agreement.
If Sprint requests that Z-Tel assist it in removing the hazard, service
obstruction or interference, Z-Tel may, but is not required to, assist in the
removal. Any such assistance Z-Tel may provide will be billed to and paid by
Sprint as a direct cost.

         10.5. SECURITY. Sprint or Sprint's End Users will be solely responsible
for selection of security, and use of any code, password or other means
necessary to restrict access to their computers, servers or other equipment
through the Services.

         10.6. SUBPOENAS. At Sprint's request and direction, Sprint authorizes
Z-Tel to comply with all subpoenas, court orders and administrative agency
orders to produce information, including those calling for detailed call
records, when the targeted telephone numbers belong to Sprint's End Users using
Sprint's OCN or Z-Tel's OCN. Sprint will cooperate with Z-Tel in complying with
these subpoenas, court orders and administrative agency orders.

         10.7. SPRINT COMPLIANCE WITH LAWS. In its performance of this Agreement
and its use of the Services, Sprint will comply in all material respects with
all applicable Law.

         10.8. ACCEPTABLE USE. When using the Services, Sprint will comply in
all material respects with Z-Tel's Acceptable Use Policy ("AUP"), a copy of
which is attached to this Agreement as Schedule 10.8. Notwithstanding the
foregoing provisions of this Section 10.8, to the extent that any term in
Schedule 10.8 is inconsistent with the terms of this Agreement (excluding
Schedule 10.8), the latter will prevail. The Parties do not intend that any
provision of Schedule 10.8 limit any right of Sprint under this Agreement.

         10.9. LONG DISTANCE CHOICE. Sprint will be responsible for providing
Z-Tel with the Sprint End User's choice of pre-subscribed interexchange carrier.

                  10.9.1. PIC SELECTION. Unless Sprint otherwise directs on an
         End User order, as part of the ILEC order, Z-Tel will PIC Sprint for
         all inter and intra LATA Services.

                  10.9.2. CARRIER ARRANGEMENTS. When Sprint acts as its own Long
         Distance Carrier or selects a carrier other than Z-Tel or Z-Tel's
         designated third-party provider, Sprint will be fully responsible to
         Sprint's End Users for the refusal of the long distance provider to
         provide a Sprint End User's long distance services.

                  10.9.3. PROOF OF AUTHORIZATION. Sprint is responsible for
         obtaining valid

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<PAGE>

         authorization and verification to establish or change long-distance
         providers and will provide copies of this authorization and
         verification to Z-Tel upon Z-Tel's written request.

                  10.9.4. RESPONSIBILITY FOR ANI USAGE. Except as otherwise
         provided in Section 10.11 regarding fraud, Sprint will be financially
         responsible for long distance usage generated under this Agreement by
         each End User ANI that Z-Tel activates on Sprint's behalf.

                  10.9.5. MANUAL PROCESSING. Z-Tel will manually process the
         pre-subscribed interexchange carrier when a Sprint End User purchases
         only local Telephone Exchange Service.

         10.10. CONNECTIVITY TO Z-NODE. Unless otherwise stated in the SOW,
Sprint will be responsible for establishing, maintaining and paying for the
physical facilities utilized to provide Sprint End User access to the Z-Node.

         10.11. FRAUD. Z-Tel and Sprint will work cooperatively and reasonably
with each other to develop systems for detecting, preventing and limiting fraud.

                           (a) Subject to Section 5.3, Sprint will be
                  responsible for paying Z-Tel for any costs, charges or fees
                  that Z-Tel incurs or are otherwise due to Z-Tel under this
                  Agreement that arise from consumer fraud involving Sprint End
                  Users (or Persons reasonably believed by Z-Tel to be Sprint
                  End Users because of order entry errors by Sprint, Sprint's
                  Affiliates or their respective contractors), except as set
                  forth in subparagraph (b) of this Section 10.11, and for
                  Sprint's internal fraud.

                           (b) *************************************************
                  **************************************************************
                  Annually, Z-Tel will be responsible for other fraud associated
                  with its ordinary negligence in the annual aggregate up to the
                  greater of:

                                    (i) ******************

                                    (ii) Two and one half percent (2.5%) of the
                           aggregate Z-Tel Service Fees that Sprint paid during
                           the immediately preceding twelve (12) month period.

                           (c) Sprint will limit its right to recover from Z-Tel
                  to the amount Z-Tel is able to recover from third parties,
                  concerning:

                                    (i) fraudulent usage by a Sprint End User;

                                    (ii) excessive billing of ILEC Fees
                           resulting in higher Local Wholesale Services to
                           Sprint; or

                                    (iii) excessive billing of non-ILEC fees
                           resulting in higher

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<PAGE>

                           Local Wholesale Services fees or Ancillary Service
                           fees to Sprint.

                           (d) If Sprint has taken full financial responsibility
                  for fraud under subsection (a) of this Section 10.11, Z-Tel
                  will assign to Sprint, within ten (10) calendar days after
                  Sprint's request, any claim against the Sprint End User, the
                  ILEC or the third party that arises from that fraud, but in
                  each case only to the extent it applies to the Sprint End
                  User.

                           (e) Notwithstanding the foregoing, this Section 10.11
                  does not cover Slamming/Cramming, which is addressed in
                  Section 4.8.

         10.12. FORECASTS. No later than the 20th calendar day of each month,
Sprint will provide Z-Tel with forecasts regarding the expected types, volumes
and locations of the Services that Sprint's End Users will purchase for each
month in the upcoming six (6) months during the Term, together with related
headcount forecasts. The forecast provided on or before the 20th calendar day of
any particular month will be a binding forecast, as further described in this
Section 10.12, for the second month during which the forecast is provided (this
forecast, for the second month, being the "COMMITTED FORECAST"). For example, a
forecast that Sprint provides on or before the 20th day of March will be binding
for the month of May. Sprint has no minimum purchase obligation; therefore, a
forecast may project zero purchase volume. Sprint will have no liability to
Z-Tel for the accuracy or inaccuracy of the forecasts except for headcount under
a Committed Forecast that has been accepted under Section 4.6.

         10.13. COMPLIANCE WITH REGULATORY RULES. Sprint represents and warrants
to Z-Tel that it has and will continue to comply in all material respects with
all applicable rules and regulations relating to End User listing information,
including CPNI and other related rules and regulations. Sprint further
represents that it will comply in all material respects with applicable Law
governing billing and disconnecting an End User's Telecommunication Service
(including any applicable Law requiring notice to End Users of disconnection for
non-payment of service fees). Upon Z-Tel's written request, Sprint will provide
documentation, within five (5) calendar days or as necessary to meet regulatory
demands, related to specific Sprint End User accounts proving compliance in all
material respects with these disconnect rules and regulations that may exist in
a given regulatory jurisdiction.

         10.14. FUTURE SERVICES. During the Term, Sprint will allow Z-Tel to bid
on future services and related Telecommunications Services that Sprint desires.
Sprint is not obligated to grant this opportunity to Z-Tel for the furnishing of
services clearly outside Z-Tel's areas of expertise.

         10.15. USE OF SERVICE.

                  (a) RETAIL SERVICES. Sprint represents and warrants that it
         will use Z-Tel-provided services solely to compete in and provide
         retail services (or wholesale

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         services to its Contractual Affiliates for use in selling
         Sprint-branded services at retail).

                  (b) DATA ENTRY. Sprint will not knowingly enter into any Z-Tel
         or third party system any data that is profane, threatening, indecent,
         libelous, defamatory or unlawful, or that violates or infringes any
         trademark, copyright or similar rights of others. Sprint will not
         knowingly enter any data that is false or misleading. Z-Tel will
         provide Sprint with reasonable notice and opportunity to cure any
         misuse unless the misuse is deemed by Z-Tel to be fraudulent or likely
         to result in irreparable harm to Z-Tel.

                  (c) NETWORK MISUSE. Sprint and its Affiliates and their
         respective End Users may not, without authorization:

                           (i) conduct any intrusion into any part of Z-Tel's
                           system,

                           (ii) tamper with non-Sprint End User accounts
                  resident on Z-Tel's system,

                           (iii) use any of Z-Tel's machines, files, accounts or
                  networks to access any non-Sprint system,

                           (iv) utilize any part of Z-Tel's system to seek
                  intentionally information on, obtain copies of, or modify
                  files, passwords or other data belonging to non-Sprint End
                  Users,

                           (v) scan Z-Tel's network (or other networks through
                  Z-Tel's system) with intent to breach security, or

                           (vi) use Z-Tel access to OSS systems or ILEC systems
                  for purposes not contemplated by this Agreement.

         Sprint has no obligation under this Section 10.15 concerning any
prohibited action described in this Section 10.15 by any Person other than
Sprint and Sprint's Owned Affiliates unless the Person accessed Z-Tel's systems
through a Sprint account under this Agreement.

         10.16. INSURANCE.

                  10.16.1. COVERAGE. Sprint will obtain and keep in force during
         the Term not less than the following insurance:

                           (a) Commercial General Liability insurance, including
                  bodily injury, property damage, personal and advertising
                  injury liability, and contractual liability covering
                  operations, independent contractor and products/completed
                  operations hazards, with limits of not less than $1,000,000
                  combined single limit per occurrence and $2,000,000 annual
                  aggregated,

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                           (b) Workers' Compensation insurance, as provided for
                  in any jurisdiction in which Sprint personnel who perform
                  Services under this Agreement work, with an employer's
                  liability limit of not less than $500,000 for bodily injury by
                  accident or disease,

                           (c) Business Auto insurance covering owned, non-owned
                  and hired autos, with limits of not less than $1,000,000
                  combined single limit per accident for bodily injury and
                  property damage liability, and

                           (d) Umbrella/Excess Liability insurance with limits
                  of not less than $3,000,000 combined single limit in excess of
                  the above-referenced Commercial General Liability, Employer's
                  Liability and Business Auto Liability.

                  10.16.2. CERTIFICATES OF INSURANCE.

                           (a) All required insurance polices will be issued by
                  insurers who are:

                                    (i) financially reputable, and

                                    (ii) licensed to do business in all
                           jurisdictions where Services are provided under this
                           Agreement.

                           (b) Sprint will provide certificates of insurance
                  that:

                                    (i) are industry standard in form and
                           content,

                                    (ii) evidence that all the required
                           coverages are in force, and

                                    (iii) have been endorsed to provide that no
                           policy will be canceled or materially altered without
                           first giving Z-Tel at least thirty (30) calendar
                           days' prior written notice.

                  10.16.3. NO LIMITATION. Nothing contained in this Section
         10.16 limits Sprint's liability to Z-Tel to the limits of insurance
         certified or carried.

                  10.16.4. SELF INSURANCE. At its option, Sprint may self insure
         all or part of the insurance requirements listed in this Section 10.16.
         If Sprint elects to self insure, Sprint will provide written notice to
         Z-Tel outlining its self insurance coverages. Notwithstanding its
         election to self insure, Sprint will remain responsible to Z-Tel for
         the occurrences listed in this Section 10.16 in the same manner as if
         Sprint had elected to obtain this insurance coverage from a third party
         insurer.

         10.17. MATERIAL THREAT. Sprint will provide notice to Z-Tel as soon as
possible, but in any case within fifteen (15) Business Days after Sprint learns
in writing of the

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commencement of any suit or administrative, arbitration or other proceeding
against Sprint, any of its Owned Affiliates or their respective businesses,
assets or properties, in each case only to the extent an adverse judgment in the
suit or proceeding would materially impact Sprint's ability to fulfill its
obligations under this Agreement. Sprint will provide a reasonably detailed
description of the threat summarizing its potential impacts both operationally
and financially.

         10.18. REVERSE ENGINEERING. Sprint will not copy (except for making
back-up copies and other uses expressly permitted in furtherance of this
Agreement), de-compile or reverse engineer Z-Tel Technology or create derivative
works from the Z-Tel Technology. Sprint acknowledges that a violation of this
Section 10.18 will cause immediate and irreparable harm to Z-Tel and that Z-Tel
would not have an adequate remedy at law for the violation and, therefore, in
the event of any violation or threatened violation, Z-Tel may seek an injunction
restraining the violation or further violation in this situation.

         10.19. INTERCONNECTION AGREEMENTS. Sprint acknowledges that
Interconnection Agreements between Z-Tel and local exchange carriers are
available for review and copying at the applicable state public utility or
public service commissions.

         10.20. Z-TEL VENDORS. Sprint will not enter into any agreement,
contract, arrangement or understanding with ********************* for purposes
of avoiding any Service Fees under this Agreement, or substituting any Service
contemplated to be provided by Z-Tel under this Agreement during the Term,
except solely in connection with the Back-Up Plan, Back-Up System or Technology
Escrow under Sections XII and XIV. Sprint acknowledges that violation or
threatened violation of this Section 10.20 will cause immediate and irreparable
harm to Z-Tel and, in this event, an injunction restraining the violation may be
entered.

                     SECTION XI. - SERVICE LEVEL AND REMEDY

         11.1. SLAS. Z-Tel will provide the Services in accordance with the
applicable service level agreement ("SLA") attached to this Agreement as
Schedule B.

                  11.1.1. PERFORMANCE LEVELS. The SLAs will detail service
         standards and available remedies when Z-Tel's Services do not meet
         specified standards. Z-Tel's service levels will meet or exceed the
         standard of service that the ILECs provide or that Z-Tel provides in
         general release to its own retail and wholesale customers.

                  11.1.2. ACTIONS BY ILECS AND REGULATORY AUTHORITIES. Neither
         Party will be liable for any delay or failure to the extent it results
         from the requirements of Law or the acts, delays or failures to act of
         any Regulatory Authority or any ILEC with which Z-Tel has an
         Interconnection Agreement.

         11.2. FORCE MAJEURE APPLICATION. If a Force Majeure Event interferes
with a Party's performance of its obligations under this Agreement, both Parties
are excused from their respective performance on a day-to-day basis to the
extent of the interference, but only if:

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                         (a) the Force Majeure Event is beyond the reasonable
                  control of the Party asserting its rights under this Section
                  11.2,

                         (b) the affected Party notifies the other Party as soon
                  as practicable concerning the nature and expected duration of
                  the asserted Force Majeure Event, and

                         (c) the affected Party uses all commercially reasonable
                  efforts to avoid or remove the causes of nonperformance and
                  resumes performance promptly after the causes have been
                  removed.

                SECTION XII. - DISASTER RECOVERY, BACK-UP SYSTEM

         12.1. ON-SITE DISASTER RECOVERY PLAN. Attached as Schedule 12.1 is a
Disaster Recovery Plan. During the Term, Z-Tel will materially comply with the
Disaster Recovery Plan.

                  12.2. BACK-UP PLAN. Z-Tel and Sprint will develop a written
implementation plan (the "BACK-UP PLAN") for a Back-Up System that will provide
in an emergency situation or upon a Z-Tel Triggering Event, when activated, an
alternative mechanism for providing access to OSS Services necessary to support
Sprint End Users' utilization of Local Wholesale Services (the "BACK-UP
SYSTEM"). The Back-Up Plan will describe the day-to-day maintenance and
operation of the Back-Up System.

                  12.2.1. PLAN CONTENTS. The Back-Up Plan will contain:

                           (a) key business objectives and associated
                  performance requirements,

                           (b) key assumptions,

                           (c) a high-level system strategic architecture,

                           (d) an itemization of the architecture elements to be
                  replicated,

                           (e) a bar chart showing an approximate timeframe for
                  assembling the strategic architecture,

                           (f) a detailed plan to cover the implementation
                  activity,

                           (g) a listing of equipment necessary to implement the
                  Back-Up Plan, along with projected ordering dates, prices (if
                  applicable), anticipated delivery dates and required
                  installation intervals,

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                           (h) engineering drawings and specifications,

                           (i) a listing of connectivity requirements,

                           (j) an itemization regarding Z-Tel cost recovery,

                           (k) procedures and timetables for testing of the
                  Back-Up System's ability to takeover primary OSS functions
                  from Z-Tel's Tampa system, and

                           (l) procedures and expectations concerning amendments
                  and updates of the Back-Up Plan.

                  12.2.2. PLAN DEVELOPMENT. Z-Tel will deliver a preliminary
        Back-Up Plan to Sprint on or before February 28, 2003. Z-Tel and Sprint
        will negotiate in good faith to agree on a finalized Back-Up Plan on or
        before March 31, 2003. When the Parties have agreed in writing upon the
        Back-Up Plan, it will be incorporated into this Agreement by this
        reference.

                  12.2.3. JOINT DISASTER PLANNING TEAM. The Parties will
         establish a joint planning team, which will consist of at least one,
         but no more than three, representatives from each Party (as designated
         by each Party), for the purpose of developing and supporting
         implementation of the Back-Up Plan (the "JOINT DISASTER PLANNING
         Team"). The Parties' respective representatives on the Joint Disaster
         Planning Team will be at a level that can make commitments for their
         respective Party concerning the development of the Back-Up Plan. They
         also will have appropriate qualifications and skills within the subject
         matter. The Joint Disaster Planning Team will meet as appropriate or
         necessary to meet the completion deadlines set forth above in this
         Section 12.2.

         12.3. MATERIAL BREACH. The Parties agree that time is of the essence in
developing the Back-Up Plan. Z-Tel's failure to meet the schedule for
development of the Back-Up Plan as set forth in Section 12.2 above will
constitute a material breach of this Agreement unless the failure was caused by
any delay attributable to Sprint.

         12.4. IMPLEMENTATION OF BACK-UP PLAN; BACK-UP SYSTEM. At any time or
times during the Term, Sprint may build a Back-Up System that replicates the OSS
systems and OSS functions included in the Z-Tel Fundamental Technology (and
related Z-Tel Technology and third party interfaces) in accordance with the
Back-Up Plan. The Back-Up System will not be in active operation unless and
until (i) Z-Tel requests Sprint to make the Back-Up System operational in an
emergency situation or (ii) Sprint elects to make the Back-Up System operational
in conjunction with the Technology License following a Z-Tel Triggering Event.

                  12.4.1. TIMING OF IMPLEMENTATION. Sprint may deploy the
         Back-Up System as it pertains to OSS systems and OSS functions (and
         related third party

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         interfaces) at any time or times during the Term, other than during a
         Transition period following the termination of this Agreement (and
         whether in one or more phases), in its sole discretion. In this case,
         Sprint will determine the timetable and manner in which the deployment
         of the Back-Up System will occur, based upon the implementation plan
         contained in the Back-Up Plan, except that:

                           (a) Sprint may delay or otherwise extend the
                  timetable for the deployment of the Back-Up System that is set
                  forth in the Back-Up Plan, in its sole discretion, but upon
                  reasonable notice to Z-Tel, and

                           (b) Sprint may accelerate the timetable for the
                  deployment of the Back-Up System that is set forth in the
                  Back-Up Plan with the written consent of Z-Tel which may not
                  be unreasonably withheld.

                  12.4.2. LOCATION. Sprint may construct the Back-Up System at
         one location of its choosing, utilizing equipment, connectivity and
         labor in compliance with the Back-Up Plan.

                  12.4.3. Z-TEL'S ASSISTANCE AND COOPERATION. Sprint may request
         reasonable assistance from Z-Tel in implementing the Back-Up Plan
         (including assistance concerning third party vendor and data
         interfaces) and constructing the Back-Up System. Z-Tel will render
         reasonable assistance as Sprint requests on a time and materials basis
         (the details of which the Parties will agree upon in the Back-Up Plan),
         but following Sprint's first request for implementation assistance,
         Z-Tel may delay the commencement of its assistance for up to thirty
         (30) calendar days with reasonable cause. Z-Tel must provide written
         notice of its delay request, together with an explanation of the cause,
         to Sprint via Super Notice.

                  12.4.4. BACK-UP SYSTEM OPERATIONS. Except as set forth in a
         mutually agreed upon SOW concerning Z-Tel's assistance with
         installation and maintenance:

                           (a) Sprint will be solely responsible for the
                  installation and maintenance of the Back-Up System on an
                  ongoing basis,

                           (b) Sprint will be solely responsible for the
                  operation of the Back-Up System upon a Z-Tel Triggering Event
                  and the Technology License becoming effective, and

                           (c) Sprint and Z-Tel will share operational
                  responsibility as directed in the Back-Up Plan in association
                  with utilization of the Back-Up System upon the occurrence of
                  a Z-Tel request to activate the Back-Up System in aid response
                  to an emergency situation.

                  12.4.5. OPERATING METHODS AND PROCEDURES.

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                           (a) Upon Z-Tel's request for the Back-Up System to
                  become operational in an emergency situation, to the extent
                  technologically possible, operation of the Back-Up System will
                  be in material compliance with standard Z-Tel methods and
                  procedures for the duration of the emergency.

                           (b) Upon activation of the Back-Up System by Sprint
                  upon the occurrence of a Triggering Event and the Technology
                  License becoming effective, to the extent technologically
                  possible and consistent with Sprint's providing and
                  maintaining service to Sprint End Users, Sprint will operate
                  the Back-Up System in material compliance with standard Z-Tel
                  methods and procedures for a period of forty-five (45)
                  calendar days.

                           (c) Sprint's obligations under the foregoing
                  subparagraphs (a) and (b) are subject to the following
                  conditions precedent:

                                    (i) that Z-Tel will furnish to Sprint a copy
                           of Z-Tel's standard methods and procedures upon
                           declaring an emergency threat or situation (whichever
                           is earlier) that may require activation of the
                           Back-Up System, and

                                    (ii) that Z-Tel's operation of its systems
                           is in material compliance with these standard methods
                           and procedures both (A) immediately before the
                           occurrence of the emergency or the Triggering Event
                           and (B) during the periods designated in this Section
                           12.4.5.

                           (d) Sprint will return to Z-Tel all copies it
                  possesses of the methods and procedures it receives from Z-Tel
                  under Section 12.4.5(c)(i) upon the return to standard
                  operations after the cessation of the emergency.

                           (e) During the periods designated in this Section
                  12.4.5, Z-Tel and Sprint will work together to address any
                  Sprint concerns or problems that Sprint raises with Z-Tel
                  concerning Z-Tel's standard methods and procedures in
                  association with operating and maintaining the Back-Up System.

                           (f) Notwithstanding any provision of this Section
                  12.4, Sprint will have no obligation for the operation of the
                  Back-Up System in material compliance with Z-Tel's standard
                  methods and procedures during the ********* calendar day
                  period following Sprint's receipt of them from Z-Tel or the
                  Technology Escrow Agent. In the event of an emergency, during
                  this ********************** period Sprint will operate the
                  Back-Up System as Z-Tel directs, and Z-Tel will be solely
                  responsible for Sprint's operation of the Back-Up System in
                  material compliance with Z-Tel's directions.

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                  12.4.6. TITLE. Sprint will retain all title to the Back-Up
         System equipment. Z-Tel will not take any action that would affect
         Sprint's title to the Back-Up System equipment.

         12.5. TESTING OF BACK-UP SYSTEM. Upon completing the Back-Up Plan
implementation, the Parties will cooperate in the initial testing of the Back-Up
System in accordance with the Back-Up Plan. Furthermore, the Parties will
cooperate in any subsequent testing of the Back-Up System under a schedule to be
adopted in the Back-Up Plan which will allow Sprint to request testing and
require Z-Tel to participate in testing (a) no more frequently than once every
six (6) months if Sprint has ************************************** this
Agreement during the month preceding a Sprint request, and (b) at least once a
year if Sprint has more than **************************************************
********** under this Agreement during the month preceding a Sprint request.
Notwithstanding the above the Parties may agree to conduct more frequent
testing. Testing will not involve live End Users

                  12.5.1. Z-TEL BACK-UP MATERIALS. In conjunction with the
         testing of the Back-Up System, Z-Tel make available for use in the
         testing the following, as they pertain to the OSS systems and OSS
         functionality and as more specifically described in the Back-Up Plan
         (the "Z-TEL BACK-UP MATERIALS"):

                           (a) necessary elements of the existing Z-Tel
                  Fundamental Technology,

                           (b) the Z-Tel Fundamental Technology that Z-Tel
                  subsequently utilizes on Sprint's behalf during the Term, and

                           (c) the operating systems and interfaces (as
                  designated within the existing Z-Tel Technology and to which
                  Z-Tel has the necessary license rights) necessary to operate
                  the Back-Up System.

                  12.5.2. RESTRICTIONS ON SPRINT'S ACCESS AND USE OF Z-TEL
         BACK-UP MATERIALS. Except for the limited purpose of testing the
         Back-Up System as described in this Section 12.5 with Z-Tel's
         assistance or as provided under the Technology License (upon the
         Technology License becoming effective), Sprint has no rights in or to
         the Z-Tel Back-Up Materials and will not, and will not permit its
         officers, Affiliates, employees or agents to:

                           (a) use the Back-Up Materials,

                           (b) use any source code for the Z-Tel Technology,

                           (c) modify, update, enhance or make derivative works
                  of the Z-Tel Technology, or

                           (d) translate, reverse engineer, decompile, recompile
                  or disassemble the object code version of any Z-Tel
                  Technology.

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                  12.5.3. Z-TEL'S ASSISTANCE. Z-Tel will assist Sprint with the
         development and testing of the Back-Up system as provided in this
         Section 12.5 and in the Back-Up Plan (including assistance concerning
         third party vendor and ILEC cooperation and interfaces, and assistance
         resolving any operational problems discovered in the testing) on a time
         and materials basis (the details of which the Parties will agree upon
         in the Back-Up Plan).

                     SECTION XIII. - THIRD PARTY AGREEMENTS

         13.1. THIRD-PARTY AGREEMENTS.

                  (a) When the Services that Z-Tel is to render under this
         Agreement require the use of third party services, software or
         facilities (including those of ILECs), this Agreement and Z-Tel's
         furnishing of Services under this Agreement will be subject to those
         conditions, restrictions, rules, policies, procedures, limitations and
         rights imposed or granted under the third party agreements or licenses,
         including Interconnection Agreements, that are described in the
         attached Schedule 13.1.

                  (b) Sprint will comply with the conditions, restrictions,
         rules, policies, procedures, limitations and rights contained in
         Schedule 13.1 of this Agreement with respect to third-party vendors
         providing or licensing products or services to Z-Tel or Sprint in
         connection with Z-Tel's furnishing of Services to Sprint. Z-Tel may
         reasonably amend or supplement Schedule 13.1 from time to time during
         the Term upon at least thirty (30) calendar days' written notice to
         Sprint. Any new condition, restriction, rule, policy, procedure,
         limitation or right that Z-Tel adds to Schedule 13.1 by amendment or
         supplement under this Section 13.1(b) will be binding on Sprint upon
         and after Sprint's receipt of Z-Tel's notice under this Section
         13.1(b).

                  (c) Except when the Parties have otherwise agreed in writing,
         Z-Tel will be responsible for securing all necessary rights, licenses
         and permissions for Sprint concerning Sprint's use during the Term of
         the third party services, software and facilities set forth in Schedule
         13.1, including Sprint's use under the license granted in Section 16.3
         of this Agreement.

       SECTION XIV. -- TECHNOLOGY DELIVERY, TECHNOLOGY LICENSE AND ESCROW.

         14.1. TECHNOLOGY LICENSE GRANT. Subject to Section 14.8, Z-Tel grants
to Sprint, effective upon the happening of a Z-Tel Triggering Event a worldwide,
perpetual, irrevocable, non-cancelable and non-terminable, non-exclusive,
non-assignable and non-sublicensable (except with respect to Sprint's Owned
Affiliates) right and license (the "TECHNOLOGY LICENSE"):

                  (a) to use:

                           (i) the Z-Tel Fundamental Technology,

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                           (ii) all pre-existing Z-Tel intellectual or
                  proprietary property or rights incorporated into the works for
                  hire belonging to Sprint that are described in Section 1.12.5,
                  and

                           (iii) any Z-Tel modifications of third party software
                  to the extent Z-Tel has a right to license the modified third
                  party software, and

                  (b) to exercise all rights in connection therewith (other than
         the right to alienate the same or to take any action to put it in the
         public domain), including the rights:

                           (i) to display, perform, execute, modify, develop and
                  otherwise create derivative works of the licensed technology,

                           (ii) to make copies of the licensed technology,
                  whether or not modified,

                           (iii) to use the licensed technology (including in
                  combination with any other information, data, materials or
                  intellectual property), and

                           (iv) to permit Sprint's independent contractors and
                  Sprint's Owned Affiliates to exercise any or all of the
                  foregoing rights solely for the benefit of Sprint and its
                  Affiliates and the Sprint End Users,

all solely to the extent reasonably necessary or useful to enable Sprint and its
Owned Affiliates to deploy, generate, test, develop, use for training, maintain
and support, market, sell and otherwise use and provide services comparable to
the Services under this Agreement, including as Sprint or any of its Owned
Affiliates may subsequently modify or develop them under this license.

         The Technology License includes Z-Tel Technology that Z-Tel does not
own only to the extent that it is, or will be, capable of being sublicensed by
Z-Tel to Sprint, and is subject to any license agreements between Z-Tel and the
licensors of this Z-Tel Technology.

         14.2. TRIGGERING EVENT.

                  14.2.1. EXERCISE OF OPTION. If a Z-Tel Triggering Event
         occurs, then:

                           (a) the Z-Tel Fundamental Technology will be subject
                  to the Technology License set forth in Section 14.1, and

                           (b) Sprint may obtain the release from escrow of the
                  source code for the Z-Tel Fundamental Technology and the other
                  Technology Escrow Materials in accordance with the Technology
                  Escrow Agreement with contemporaneous written Super Notice to
                  Z-Tel, and

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                           (c) upon Sprint's request, Z-Tel will immediately:

                                    (i) deliver to Sprint all of the
                           then-existing Z-Tel Fundamental Technology to the
                           extent that Z-Tel owns it or is capable of
                           sublicensing it under any applicable agreements
                           between Z-Tel and its licensors, and

                                    (ii) take all actions that are commercially
                           reasonable to facilitate Sprint's procurement and use
                           of any Z-Tel Fundamental Technology that Z-Tel does
                           not deliver under Section 14.2.1(c)(i) because Z-Tel
                           does not own or is prohibited from sublicensing the
                           Z-Tel Fundamental Technology.

                  14.2.2. ROYALTY PAYMENT. To the extent Sprint is not otherwise
         paying Service Fees under this Agreement for any individual Sprint ANI,
         then:

                           (a) If Sprint exercises its option under Section
                  14.2.1 because of a Liquidation Event, or if Z-Tel
                  subsequently has a Liquidation Event after a Z-Tel Triggering
                  Event, then Sprint will have no royalty obligation to Z-Tel
                  for the Technology License at either time.

                           (b) If Sprint exercises its option under Section
                  14.2.1 because of a Z-Tel Triggering Event that is not a
                  Liquidation Event, then Sprint will pay to Z-Tel a royalty for
                  its use of the Technology License equal to ********* ***** per
                  month per line for adjunct to basic and enhanced services
                  provided to Sprint End Users using the Technology License.
                  Sprint will pay the royalty payment due for any month to Z-Tel
                  or Z-Tel's assignee by the end of the following month.

                           (c) For any month in which Sprint pays Z-Tel Service
                  Fees under this Agreement for any particular line, Z-Tel will
                  credit against those fees all applicable royalty payments that
                  Sprint pays under this Section 14.2.2 for that month for that
                  particular line.

         14.3. TECHNOLOGY ESCROW. Contemporaneously with the execution of this
Agreement, the Parties will enter into a technology escrow agreement (the
"TECHNOLOGY ESCROW AGREEMENT") in substantially the form of the attached Exhibit
B with DSI Technology Escrow Services, Inc. (the "TECHNOLOGY ESCROW AGENT") to
secure Sprint's rights under this Section 14. This Technology Escrow will be
established and maintained at Sprint's expense for Sprint's sole benefit. If the
Technology Escrow Agreement terminates or otherwise expires for any reason
during the Term, Z-Tel will immediately enter into a new escrow arrangement with
the Technology Escrow Agent (or another independent escrow agent reasonably
acceptable to Sprint to serve as Technology Escrow Agent) substantially in the
form of Exhibit C and in accordance with this Section 14.3.

         14.4. TECHNOLOGY ESCROW MATERIALS.

                  14.4.1. DEPOSIT. Within forty-five (45) calendar days after
         the Effective

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         Date, Z-Tel will deposit into escrow with the Technology Escrow Agent,
         as provided for under the Technology Escrow Agreement, copies of all of
         the then existing Z-Tel Fundamental Technology, including all source
         code and:

                           (a) related documentation and materials (e.g.,
                  annotations, flow charts, schematics, statements of principles
                  of operations, operational methods and procedures, software
                  summaries, software design, program logic, program listings,
                  functional specifications, logical models and architecture
                  standards describing the data flows, data structures and
                  control logic):

                                    (i) for the Z-Tel Fundamental Technology,
                           and

                                    (ii) for all modifications and enhancements
                           that Z-Tel makes to third party software included in
                           the Z-Tel Technology (to the extent that Z-Tel has a
                           right to license them to Sprint),

                           (b) software development tools that Z-Tel (or any of
                  its Affiliates) uses to provide any Services under this
                  Agreement, and

                           (c) training materials related to the use of the
                  Z-Tel Fundamental Technology

         (collectively, together with the Z-Tel Fundamental Technology, the
         "TECHNOLOGY ESCROW MATERIALS").

                  Z-Tel acknowledges that the Z-Tel Technology contains embedded
         third party software. Z-Tel will assist Sprint in determining the
         identity of all third parties who have granted Z-Tel licenses to use
         their software in the Z-Tel Technology. Subject to Section 10.20 of
         this Agreement, Z-Tel grants Sprint the right to negotiate license
         agreements with any third party that has granted Z-Tel a software
         license that is embedded in the Z-Tel Technology.

                  14.4.2. UPGRADES AND UPDATES OF TECHNOLOGY ESCROW MATERIALS.

                           (a) If at anytime Z-Tel delivers a scheduled release
                  to any Z-Tel Fundamental Technology, Z-Tel will immediately
                  upgrade or update the Technology Escrow Materials. However, if
                  at anytime Z-Tel implements any upgrade, update, patch or
                  other change to the Z-Tel Fundamental Technology that is not a
                  scheduled release, Z-Tel will add these unscheduled release
                  materials to the Escrow Materials on a monthly basis.

                           (b) Not less frequently than on a monthly basis
                  during the Term, Z-Tel will either:

                                    (i) deposit copies of the then-current
                           Technology Escrow Materials with the Technology
                           Escrow Agent, subject to the Technology Escrow
                           Agreement, or provide to Sprint a written

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                           statement, signed by Z-Tel's Chief Technology
                           Officer, Senior Vice President Enterprise Systems or
                           more senior officer, that there has been no change in
                           the Z-Tel Fundamental Technology as of the date of
                           the statement, and

                                    (ii) provide to Sprint a written statement,
                           signed by Z-Tel's Chief Technology Officer, Senior
                           Vice President Enterprise Systems or more senior
                           officer, that the Technology Escrow Materials, as of
                           the date of the statement, are current and accurately
                           reflect the Z-Tel Fundamental Technology as of that
                           date.

                  These written statements will be part of the Technology Escrow
                  Materials.

         14.5. AUDIT OF TECHNOLOGY ESCROW MATERIALS. The Parties will designate
a mutually acceptable neutral third party who, at Sprint's expense and request
from time to time, will audit the Technology Escrow Materials that Z-Tel
deposits with the Technology Escrow Agent for purposes of determining whether
Z-Tel has fulfilled its deposit obligations under this Section XIV. This auditor
will be bound by reasonable confidentiality restrictions that prohibit him from
directly or indirectly providing to Sprint or any third party any information,
data or knowledge pertaining to the Z-Tel Fundamental Technology, except as
necessary for the limited purpose of disclosing to Sprint the existence of any
deficiency determined in the audit. Z-Tel will promptly, upon written notice
from Sprint, correct any deficiency that the audit discloses.

         14.6. RELEASE OF TECHNOLOGY ESCROW MATERIALS. Release of the Technology
Escrow Materials to Sprint will be on the terms and conditions (including
notice, redeposit and other provisions) set forth in the Technology Escrow
Agreement. Any release will, in any event, be granted to Sprint whenever Sprint
provides written notice to the Technology Escrow Agent, with a copy to Z-Tel,
stating that a Triggering Event has occurred and demanding release of the
Technology Escrow Materials to Sprint. Any Technology Escrow Materials released
to Sprint under this Section 14.6 will be subject to the Technology License.

         14.7. BANKRUPTCY. Z-Tel's obligations and rights under this Section 14
extend:

                  (a) to any trustee in bankruptcy, receiver, administrator or
         liquidator appointed for Z-Tel ("TRUSTEE"),

                  (b) to Z-Tel as debtor-in-possession, and

                  (c) to any other successor in interest to Z-Tel.

         14.8. DISPUTES REGARDING DELIVERY OR RELEASE OF TECHNOLOGY ESCROW
MATERIALS. If a court of competent jurisdiction determines that any delivery of
Technology Escrow Materials under this Section XIV or any release of the
Technology Escrow Materials should not have occurred and the court issues an
order against Sprint to that effect, then:

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                           (a) Sprint will return the Technology Escrow
                  Materials and all copies and records thereof to the Technology
                  Escrow Agent; and

                           (b) The Technology License will be rescinded, and

                           (c) Sprint will pay to Z-Tel within ten (10) Business
                  Days the difference between the fees and charges paid to Z-Tel
                  under Section 14.2.2 and the full fees and charges due Z-Tel
                  under Schedule C for Services Z-Tel has, or would have,
                  provided from the time of the rescinded release or delivery of
                  the Technology Escrow Materials through the date of
                  rescission.

         14.9. ASSIGNMENT OF TECHNOLOGY LICENSE. Sprint and its Owned Affiliates
may assign the Technology License, in whole or in part, at any time, only to a
successor in interest or to a purchaser of all or substantially all of Sprint's
assets or of the assets of that portion of Sprint's business (or any Affiliate's
business) to which the Technology License pertains.

         14.10. REMEDIES LIMITED. Subject to Section 14.8, Z-Tel expressly
acknowledges and agrees that the Technology License granted under Section 14.1
is perpetual, irrevocable, non-cancelable, non-terminable and royalty free
(except to the extent otherwise set forth in this Section XIV) and that in the
event of any dispute over the payment of any monies (other than royalties due
under this Section XIV) that Z-Tel contends are due and owing by Sprint under
this Agreement, or any breach of this Agreement in regard to the Technology
License, Z-Tel's sole and exclusive remedy will be a suit for damages and not
revocation, termination, cancellation or limitation of the Technology License.

                          SECTION XV. - CONFIDENTIALITY

         15.1. CONFIDENTIALITY. In connection with the performance of this
Agreement, either Party may gain access to or receive Confidential Information
of the other Party. Both Parties will hold the other Party's Confidential
Information in confidence and trust and strictly limit disclosure of it to their
employees and agents who have a need to know it for purposes of this Agreement.
Except with the other Party's prior written consent, neither Party will
disclose, use or permit (by Persons within their respective control) the use or
disclosure of the other Party's Confidential Information, except in satisfying
its obligations under this Agreement. Each Party will protect the other Party's
Confidential Information from inappropriate disclosure, whether inadvertent or
intentional, using at least the same degree of care they ordinarily use in
safeguarding and protecting their own proprietary information, but in no event
using less than reasonable care.

         Notwithstanding the foregoing, either Party may disclose the other
Party's Confidential Information if:

                           (a) the disclosure is required by applicable Law,
                  rule or regulation, a court order or an order of a similar
                  judicial or administrative body or the rules of any stock
                  exchange, and

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                           (b) the disclosing Party notifies the other Party in
                  writing of the requirement and cooperates reasonably with that
                  Party in obtaining a protective or similar order concerning
                  the disclosure.

         15.2. RETURN OR DESTRUCTION OF CONFIDENTIAL INFORMATION. Confidential
Information, disclosed in connection with this Agreement will remain the
exclusive property of the disclosing Party, in that Party's sole discretion.
Each Party will promptly return to the other Party or destroy or erase all
Confidential Information of the other Party in its possession or control upon
the earlier of (i) the receipt of the other Party's written request for return
or destruction of Confidential Information, and (ii) the termination of this
Agreement.

         15.3. THIRD PARTY DISCLOSURE REQUESTS. If either Party receives any
written or oral third party request, order, instruction or solicitation for the
disclosure of Confidential Information not in conformance with this Agreement or
becomes aware of any attempt by a third party to improperly gain access to
Confidential Information, the Party will immediately notify the other Party of
the request, order, instruction or solicitation, or of the attempt, and fully
disclose the details surrounding the request, order, instruction or solicitation
or attempt.

Notwithstanding the foregoing, publication of information relating to this
Agreement may occur through press releases, articles, interviews and speeches
("PUBLICITY") as described in this paragraph. Both Parties must approve the
content of any Publicity before its publication. Neither Party will, without the
other Party's prior written consent, make any news release, public announcement,
denial or confirmation of this Agreement, its value or its terms and conditions,
or in any other manner advertise or publish this Agreement, its value or its
terms and conditions. Nothing in this Agreement is intended to imply that either
Party will agree to any publicity whatsoever. Either Party may, in its sole
discretion, withhold its consent to any Publicity. The Parties will utilize the
text attached to this Agreement as Exhibit C for filing with the SEC in
association with a SEC Form 8-K report, if any, and its initial press release,
if any, pertaining to the execution of this Agreement. The Parties will use the
materials in Exhibit C and the statements set forth on Schedule 15.3 as the
basis of initial public verbal disclosures if any, regarding the execution of
this Agreement.

         15.4. REQUIRED DISCLOSURES. Notwithstanding any other provision of this
Agreement with at least five (5) Business Days' prior written notice and
consultation with the other Party, a Party may disclose its business
relationship with the other Party and the existence of this Agreement in the
exercise of reasonable judgment:

                  (a) under a request or requirement of any Regulatory
         Authority, or

                  (b) to the extent required under applicable Law or the rules
         of any securities exchange or automated quotation system.

         15.5. EQUITABLE RELIEF. Each Party acknowledges that a violation of
this Section XV will cause immediate and irreparable harm to the other Party.
Therefore, in such an

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event the other Party may seek an injunction restraining the violation or
further violation.

         15.6. SURVIVAL. The provisions of this Section XV will survive the
termination or expiration of the Term for five (5) years.

               SECTION XVI. - PROPERTY RIGHTS; LICENSE; TRADEMARKS

         16.1. PROPERTY RIGHTS AND USAGE. Sprint acknowledges:

                           (a) that ownership of and title to all of the
                  property and all other materials that Z-Tel or its suppliers
                  develop or provide in connection with this Agreement
                  (including any trade secrets, know-how, methodologies and
                  processes related to Z-Tel's Services, and including any
                  equipment, facilities, computer software (in object code and
                  source code form), script, programming code, data, information
                  or HTML script) will remain solely with and in Z-Tel or its
                  suppliers, as the case may be, and

                           (b) that Z-Tel or its suppliers, as the case may be,
                  retain all copyrights, trademarks, patents, trade secrets and
                  any other proprietary rights inherent in or appurtenant to the
                  property and other materials described in Section 16.1(a)
                  above, except as expressly provided under this Agreement.
                  Sprint may use this property and materials only as provided in
                  this Agreement or under the Technology License.

         16.2. TITLE TO EQUIPMENT. Subject to Sections XIV, this Agreement does
not convey to Sprint title of any kind to any of the equipment or transmission
facilities that Z-Tel uses to provide the Services.

         16.3. GRANT OF USE LICENSE. Z-Tel grants Sprint a limited, worldwide,
non-exclusive, non-transferable (except as provided in this Agreement), royalty
free (other than as provided in Schedule C), irrevocable license to access and
use, during the Term and exclusively in connection with fulfilling the terms and
conditions of this Agreement and marketing, selling and using the Services (the
"TECHNOLOGY USE LICENSE"):

                           (a) the Z-Tel Technology to the extent owned or
                  licensable by Z-Tel, the Sales Channel Interface, the Z-Line
                  Platform, the Z-Tel OSS Services, the Z-Node Services and all
                  other Services outlined in this Agreement, and

                           (b) all pre-existing Z-Tel intellectual or
                  proprietary property or rights incorporated into the works for
                  hire belonging to Sprint that are described in Section 1.12.5.

All rights concerning the Services, including intellectual property or similar
proprietary rights with respect thereto, belong solely and exclusively to Z-Tel,
whether or not they are embedded in any of the Services.

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                  16.3.1. RETAIL LIMITATION. This Technology Use License is only
         for Sprint's use in connection with providing LW Based Services
         directly (or indirectly through Sprint's Affiliates) to Sprint's End
         Users. Notwithstanding any other provision of this Agreement, Sprint
         will not be limited in its ability:

                           (a) to add features or functionality,

                           (b) to package, bundle, integrate, joint sell, or

                           (c) to engage in any other product, marketing or
                  other business approach (but Sprint will not offer Z-Node
                  Services on a stand-alone basis).

                  16.3.2. BRAND LIMITATION. Through this Technology Use License,
         Sprint may sell the LW Based Services by way of the Sprint Marks listed
         in the SOW.

                  16.3.3. SALES AGENTS. Nothing within this Section 16.3 will be
         interpreted to restrict Sprint's ability to use sales agents to procure
         retail End Users.

         16.4. TRADEMARKS. Each Party will not use any Mark of the other Party
in any manner whatsoever without the other Party's prior written approval,
except as expressly provided in this Agreement. Notwithstanding anything to the
contrary contained in this Agreement or in any approval or authorization
(existing now or in the future), a Party's Marks are and will remain solely and
exclusively the Party's property. Except as expressly provided in this Agreement
in this Section XVI, a Party will not, by virtue of this Agreement or any
activities under this Agreement, acquire any right, title, interest or license
in the other Party's Marks.

                  16.4.1. SPRINT BRANDING EXCEPTION. Z-Tel is authorized and
         required to use the Sprint Marks in providing Local Wholesale Services
         and related services to Sprint when Z-Tel is in direct contact with
         Sprint's End Users and acting on Sprint's authority. Z-Tel's use of
         Sprint Marks will comply with Sprint's brand usage guidelines (a copy
         of which is attached as Schedule 16.4.1). Sprint may update, modify and
         amend these guidelines at any time and from time to time during the
         Term, in its sole discretion, and in this event Sprint will provide to
         Z-Tel a copy of the update, modification or amendment through the
         notice provisions of Section 21.14.

                  16.4.2. Z-TEL BRANDING EXCEPTION. Sprint is authorized to use
         the Z-Tel Marks in referencing Sprint's underlying provider of network
         and enhanced services.

                    SECTION XVII. - DISCLAIMER OF WARRANTIES

         17.1. DISCLAIMER OF WARRANTIES. EXCEPT AS PROVIDED IN SECTION IX (Z-Tel
Responsibilities and Warranty), SECTION XI (Service Level and Remedy) AND THE
SLAs, Z-TEL PROVIDES THE SERVICES AND PRODUCTS "AS IS," WITHOUT WARRANTY OF ANY
KIND, WHETHER EXPRESS OR IMPLIED. Z-

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TEL DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Z-TEL DOES
NOT WARRANT THAT THE SERVICES WILL BE UNINTERRUPTED OR ERROR-FREE, OR THAT THE
SERVICES WILL MEET SPRINT'S REQUIREMENTS.

                    SECTION XVIII. - LIMITATIONS ON LIABILITY

         18.1. LIMITATIONS. Except as provided in Section XI (Service Level and
Remedy) or the SLAs referenced in Section XI and as otherwise expressly provided
in this Agreement, no Party will be liable to the other Party for any loss,
defect or equipment failure caused by the conduct of the other Party, the other
Party's agents, servants or contractors, ILECs or others acting in aid or
concert with, or as vendors to, the other Party. With the exception of fines and
penalties that regulatory or taxing authorities impose, in no event will either
Party have any liability whatsoever to the other Party for any indirect,
special, consequential, incidental or punitive damages, including, but not
limited to loss of anticipated profits or revenue or other economic loss in
connection with or arising from anything said, omitted or done under this
Agreement, even if the other Party has been advised of the possibility of these
damages. For purposes of this Section 18.1, Z-Tel will be deemed to not be an
agent, servant, contractor or Person acting in aid or concert with, or as vendor
to, Sprint. For purposes of this Section 18.1, Sprint will be deemed to not be
an agent, servant, contractor or Person acting in aid or concert with, or as
vendor to, Z-Tel.

         18.2. APPLICATION. The limitations of liability in this Agreement will
apply:

                           (a) whether the action in which recovery sought is
                  based on contract or non-intentional tort, or under a statute
                  or rule, and

                           (b) notwithstanding that a limited liability Party is
                  alleged to be jointly liable with one or more Parties or
                  otherwise.

                         SECTION XIX. - INDEMNIFICATION

         19.1. INDEMNIFICATION. Each Party (the "INDEMNIFYING PARTY") will
indemnify and hold harmless the other Party and its permitted assigns, and its
partners, officers, directors, employees and agents, and each of their
representatives, and its successors and assigns (collectively, the
"INDEMNITEES") at all times from and after the Effective Date against and in
respect of any Damages (defined in Section 19.2) suffered by the Indemnitees as
a result of any claims, actions or demands (collectively, a "CLAIM") by a third
party to the extent caused by or arising out of:

                           (a) any material breach by the Indemnifying Party of
                  any of its representations, warranties or covenants contained
                  in this Agreement;

                           (b) any grossly negligent act or omission, or any
                  willful misconduct or omission, by the Indemnifying Party,
                  including any grossly negligent or willful failure to comply
                  with due care with regard use or

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                  storage of CPNI, Slamming, Cramming or use or storage of
                  subscriber list information;

                           (c) subject to Sections 4.8 and 10.11, any fraud
                  associated with the Indemnifying Party's End Users or
                  accounts;

                           (d) the Indemnitee's use of the Indemnifying Party's
                  Marks in accordance with this Agreement;

                           (e) the Indemnifying Party's use of the Indemnitee's
                  Marks in violation of this Agreement; or

                           (f) any illegal acts by the Indemnifying Party or its
                  Affiliates, directors, officers, employees and agents.

         For purposes of subparagraph (f), Z-Tel is not an agent of Sprint, and
Sprint is not an agent of Z-Tel.

         19.2. DAMAGES. For the purposes of this Agreement and unless otherwise
specifically provided, the term "Damages" includes:

                           (a) all amounts finally awarded or charged against an
                  Indemnitee,

                           (b) any amounts paid in settlement as permitted by
                  this Section XIX, and

                           (c) all out-of-pocket expenses or costs incurred by
                  the Indemnitee(s), including reasonable professional and
                  attorneys' fees and expenses.

         19.3. PROCEDURE. Promptly upon the Indemnitee's receipt of prompt
written Super Notice of any demand, assertion, claim, action or proceeding,
judicial or otherwise, with respect to any matter as to which an Indemnifying
Party has agreed to indemnify an Indemnitee under this Agreement, the Indemnitee
will give prompt written Super Notice to the Indemnifying Party, together with a
statement of any material information respecting the matter that the Indemnitee
then possesses. The Indemnifying Party may contest and defend the Claim with
respect to which it has been called upon to indemnify the Indemnitee under this
Agreement, except that:

                           (a) the Indemnifying Party will deliver written
                  notice of its intention to contest the Claim to the Indemnitee
                  within twenty (20) calendar days after the Indemnifying
                  Party's receipt of notice of the Claim;

                           (b) the Indemnifying Party will pay all costs and
                  expenses of the contest or defense, including all reasonable
                  attorneys' and accountants' fees, and the cost of any bond
                  required by Law to be posted in connection with the contest or
                  defense;

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                           (c) the Indemnifying Party will contest or defend the
                  Claim through attorneys it has employed for that purpose, at
                  its sole cost and expense, but the Indemnitee may participate
                  in the contest or defense of the Claim through attorneys of
                  its own choosing, at its cost and expense without the
                  Indemnifying Party's contribution or indemnification for these
                  costs or expenses;

                           (d) if, after such opportunity, the Indemnitee does
                  not elect to participate in the contest or defense of the
                  Claim, the Indemnitee (subject to paragraph (f) below) will be
                  bound by the results that the Indemnifying Party obtains,
                  including any out-of-court settlement or compromise;

                           (e) If the Indemnifying Party assumes the contest or
                  defense of the Claim, the Indemnitee will not settle, or
                  attempt to settle, the Claim without the Indemnifying Party's
                  prior written consent, which consent the Indemnifying Party
                  may withhold in its good faith discretion; and

                           (f) the Indemnifying Party will not settle any Claim
                  without the Indemnitee's prior written consent, which consent
                  the Indemnitee may withhold in its good faith discretion,
                  unless the settlement contains a complete and unconditional
                  release of the Indemnitee and does not involve the imposition
                  of any nonmonetary relief on the Indemnitee.

                              SECTION XX. - AUDITS

         20.1. ADEQUATE BOOKS AND RECORDS. Each party will maintain, during the
Term and for at least three (3) years after the expiration or earlier
termination of the Term, the records pertaining to Services as are required to
be maintained under the SOW. Each Party represents and warrants to the other
Party that its records fairly and adequately substantiate the Services provided,
the fees due and the payments made and received under this Agreement.

         20.2. RIGHT TO AUDIT. Sprint and its accountants, attorneys and agents
will have the right to audit Z-Tel's records relating to its performance under
this Agreement at reasonable times and places upon prior written notice for the
sole purposes of confirming that all charges and payments have been made, and
all SLAs have been satisfied, each in accordance with this Agreement. The right
to audit will include the right to verify that costs associated with the ILECs
and other third party vendors fairly represent the direct costs incurred by
Z-Tel.

         The audits will in no event be more frequent than two (2) times per
year. Sprint will provide Z-Tel with at least twenty (20) calendar days' prior
notice of an audit, but Z-Tel may reasonably delay any audit if Z-Tel is
temporarily unable to assist Sprint and its auditors. In conjunction with the
audit notice, Sprint will give a written list of the materials requested for
review during the audit, but Sprint's auditors will not be limited by this list
if they discover that additional materials may be relevant or helpful to the
audit. Z-Tel will make the information that Sprint reasonably requires to
conduct the

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audit available on a timely basis during normal business hours and assist Sprint
and its internal or external auditors as reasonably necessary. Z-Tel may provide
to Sprint certain materials concerning Z-Tel operations not connected with the
furnishing of Services to Sprint only under a limited use release.

         Sprint will provide to Z-Tel the results of the audit. Z-Tel will not
be responsible for Sprint's expenses incurred for an audit, unless the audit
discloses an over billing in excess of five percent (5%) during the period the
audit covers, in which case Z-Tel will pay for the entire cost of the audit.
Z-Tel will immediately, but in no event more than ten (10) calendar days after
discovery of an over billing, reimburse Sprint for the over billing disclosed by
the audit, together with simple interest for the period of time between the date
on which overpayment was made and the date on which Sprint is reimbursed, at a
rate of one percent (1%) per month. Notwithstanding the foregoing, if Z-Tel
disputes that it has over billed Sprint, the dispute will be treated as a
Billing Dispute under this Agreement. Sprint will immediately, but in no event
more than ten (10) calendar days after discovery of an under billing, reimburse
Z-Tel for the under billing disclosed by the audit. Notwithstanding the
foregoing, if Sprint disputes that Z-Tel under billed Sprint, the dispute will
be treated as a Billing Dispute under this Agreement.

         20.3. VERIFICATION OF THIRD PARTY CHARGES. Upon Sprint's written
request, but no more than once annually, Z-Tel will provide a certificate signed
by Z-Tel's Chief Financial Officer (except in the case of certificates
concerning ILEC reconciliation, which will be signed by Z-Tel's Chief Technology
Officer) attesting that charges associated with third party services reflects
the fees contained in underlying Z-Tel vendor agreements and the charges that
Z-Tel has incurred on behalf of Sprint End Users.

         20.4. DISCLOSURE. The documents and information reviewed in connection
with the audits under Section 20.2 will be subject to the confidentiality
provisions set forth in Section XV unless they fall within one or more of the
exclusions (ii), (iii), (iv) or (v) from what constitutes Confidential
Information, as set forth in the Definitions section of this Agreement. Nothing
in this Section XX requires the disclosure of any other contract or agreement if
the disclosure would breach an agreement with a third party.

                          SECTION XXI. - MISCELLANEOUS

         21.1. GOOD FAITH PERFORMANCE. The Parties will act in good faith in the
performance of their obligations under this Agreement consistent with the
purposes of this Agreement. Except as otherwise specifically noted in this
Agreement, neither party will unreasonably delay, withhold or condition any
approval or consent that this Agreement requires or permits.

         21.2. NO EXCLUSIVITY. Neither party is required to deal exclusively
with the other Party. Both Parties are free to enter into similar agreements
with other parties, including competitors of one another.

         21.3. TAXES. The Party so obligated to pay taxes or regulatory fees may
contest the taxes or fees in good faith, at its own expense, and will be
entitled to the benefit of

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any refund or recovery, but the Party will not permit any lien to exist on any
asset of the other Party by reason of the contest.

         21.4. NONINTERFERENCE. During the Term and for a period of twelve (12)
months thereafter, neither Party, nor any of its Affiliates or representatives,
will induce or attempt to induce any person who is an employee, vendor or
supplier of the other Party to terminate such relationship. Neither Party will
use any scheme, artifice or device to circumvent the purposes of this Section
21.4.

         21.5. DISPUTE RESOLUTION.

                  21.5.1. ESCALATION PROCEDURES. The Parties will work in good
         faith to resolve informally any disputes internally by escalating them
         as necessary to progressively higher levels of management. The Parties
         will exchange escalation lists setting forth responsible officers,
         including names, departments, titles and telephone numbers.

                  21.5.2. NEGOTIATIONS. The Parties will attempt in good faith
         to resolve any claim, controversy, or dispute between them, their
         agents, employees, officers, directors or Affiliates through
         negotiation. This provision will not be construed as a waiver of a
         Party's rights to seek legal or regulatory intervention as provided by
         Law.

                  21.5.3. DISPUTES INVOLVING BILLING. Except as described in
         Section 21.5.4, this Section 21.5 does not apply to billing disputes.
         Billing Disputes are addressed in Section 5.3 of this Agreement.

                  21.5.4. CONTINUED PERFORMANCE. Unless performance is otherwise
         expressly excused under this Agreement, both Parties will continue to
         perform during the Dispute Resolution process, including with respect
         to Billing Disputes. Notwithstanding the foregoing, nothing in this
         Section 21.5.4 will affect any right of either Party to terminate this
         Agreement to the extent expressly permitted under Section II of this
         Agreement.

 21.6. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the Parties concerning the subject matter of this Agreement and supersedes all
prior agreements, understandings and arrangements, both oral and written,
between the Parties concerning the subject matter. Furthermore, this Agreement
has been negotiated and fully reviewed by counsel for both Parties.

         Except as otherwise provided in this Agreement, this Agreement may not
be modified, amended, altered or rescinded in any manner, except by written
instrument signed by both of the Parties. All exhibits, schedules and other
attachments to this Agreement are incorporated by this reference as integral
parts of this Agreement. To the extent there is any conflict between this
Agreement and any schedule or exhibit to this Agreement, this Agreement
(excluding the schedule or exhibit in question) will govern.

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         21.7. COMPLIANCE WITH ETHICAL BUSINESS PRACTICES. Each Party will
supervise and review all employees or agents engaged in marketing services to or
taking orders from End Users to prevent, to the maximum extent feasible, the
switching of any individual or entity's telephone service without that
individual or entity's permission.

         21.8. ASSIGNMENT. Neither Party may assign this Agreement without the
written consent of the other Party, which will not be unreasonably withheld. Any
attempt to assign this Agreement in contravention of the preceding sentence is
void. Notwithstanding the foregoing, Sprint may assign its rights and
obligations under this Agreement to any of its Owned Affiliates, but upon the
assignment and assumption, Sprint will remain obligated under this Agreement for
such assigned obligations.

         21.9. BINDING AGREEMENT. Subject to the preceding paragraph, this
Agreement will inure to the benefit of and be binding on the Parties and their
respective successors and permitted assigns.

         21.10. LITIGATION VENUE. In the event of litigation, the Parties agree
that venue will not be in Kansas or Florida.

         21.11. GOVERNING LAW. Provisions of this Agreement subject to the
jurisdiction of the FCC will be governed and interpreted in accordance with
applicable federal Laws. Provisions of this Agreement subject to the
jurisdiction of any state Regulatory Authority will be governed and interpreted
in accordance with applicable state Laws. In all other cases, this Agreement
will be governed and interpreted under the substantive Laws of Delaware, without
reference to its principles of conflicts or choice of law. The Parties
acknowledge that this Agreement will be performed in part in Delaware.

         21.12. LEGAL FEES. Regarding any dispute under this Agreement, a
prevailing party, as determined by a court of competent jurisdiction, will be
entitled to payment of the entire court costs and reasonable attorneys' fees
incurred in investigating, preparing and conducting any litigation that might
arise under this Agreement.

         21.13. LETTER OF AGENCY. Simultaneously with the execution of this
Agreement, Sprint will execute and deliver to Z-Tel a letter of authorization in
substantially the same form as Schedule D to this Agreement.

         21.14. NOTICES.

                  21.14.1. DEEMED DELIVERY. Any notices or deliveries permitted
         or required by this Agreement must be given by messenger or by
         overnight delivery with Federal Express, United Parcel Service,
         Airborne Express or a similarly nationally recognized overnight
         delivery service. These notices or deliveries will be deemed to have
         been given (i) upon delivery by messenger, if a receipt is obtained for
         delivery, (ii) one (1) calendar day after timely deposit for overnight
         delivery with Federal Express, United Parcel Service, Airborne Express
         or similar nationally recognized overnight delivery service, if the
         service obtains a confirmation of delivery, or (iii) three (3) Business
         Days after mailing, if mailed via certified or registered U.S. mail,
         return receipt requested; if the notice is

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         delivered, deposited for delivery, mailed or sent to the Party's
         address as set forth on the Designee Schedule:

                  21.14.2. SUPER NOTICE. For certain situations that under this
         Agreement expressly require "Super Notice," Super Notice means that the
         notice must be given both:

                           (a) as set forth in Section 21.14.1, and

                           (b) to the senior executives of the recipient listed
                  on the Designee Schedule, via electronic mail and overnight
                  delivery via Federal Express, United Parcel Service, Airborne
                  Express or a similarly nationally recognized overnight
                  delivery service, with delivery confirmation requested.

                  21.14.3. SATURDAY, SUNDAY OR LEGAL HOLIDAY. Notices deemed to
         have been given or delivered as set forth above on a Saturday, Sunday
         or legal holiday will instead be deemed to have been given or delivered
         on the next succeeding day that is not a Saturday, Sunday or legal
         holiday.

         21.15. WAIVER. No failure or delay by either Party to this Agreement in
the exercise of any right, power or remedy it may have will operate as a waiver,
nor will any single or partial exercise of any right, power or remedy by either
Party preclude any other or further exercise by the Party of that right, power
or remedy or the exercise of any other right, power or remedy. No express waiver
or assent by any Party to any breach of or default in any term or condition of
this Agreement will constitute a waiver of or assent to any succeeding breach of
or default in the same or any other term or conditions of this Agreement.

         21.16. RELATIONSHIP OF THE PARTIES. Nothing in this Agreement, or in
the course of dealing between the Parties under this Agreement, will be deemed
to create between the Parties (including their respective directors, officers,
employees and agents) a partnership, joint venture, association, employment
relationship or any other relationship, other than that of independent
contractors with respect to each other. Neither Party will have the authority to
commit or legally bind the other Party in any manner whatsoever, including, the
acceptance or making of any agreement, representation or warranty.

         21.17. THIRD PARTY BENEFICIARIES. Except as expressly stated in Section
21.8, this Agreement inures to the benefit of Z-Tel and Sprint only and no third
party will have any rights under this Agreement.

         21.18. CONSTRUCTION. This Agreement was negotiated at arms' length and
will not be construed more strongly against any Party regardless of which Party
was responsible for its preparation. Whenever from the context it appears
appropriate, each term stated in either the singular or the plural includes the
singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender include the other genders. The word "Agreement" and words of
similar import referring to this Agreement refer to this

                                       84
<PAGE>

Agreement as a whole, including the Schedules and Exhibits attached to it, and
not to any particular provision of this Agreement. Whenever the word "include,"
"includes" or "including" is used in this Agreement, it is deemed to be followed
by the words "without limitation."

         21.19. SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable, this Agreement will be constructively amended to the extent
necessary and possible to achieve the same objectives as the severed provision
was intended to achieve, and the remaining provisions of this Agreement will
continue in full force and effect.

         21.20. SURVIVAL. The Parties' obligations under the following
provisions will survive the termination or expiration of this Agreement
(following the Term): 1.9.9, 2.4, 2.5, 4.3.1, 4.8, 4.10, 4.11, 5.2, 5.3, 9.14,
10.4 (first sentence only), 10.6, 10.11 (excluding the first sentence), 11.2,
12.5.2, 14.1, 14.2.2, 14.7, 14.8, 14.9, 14.10, XV, 16.1, 16.4 (but not 16.4.1 or
16.4.2), XVII, XVIII, XIX, 20.1, 21.1, 21.4, 21.6, 21.8, 21.9, 21.10, 21.11,
21.12, 21.14, 21.15, 21.18, 21.19, 21.20, 21.26, and, any other provisions of
this Agreement that, by their terms or by their nature are contemplated to
survive (or to be performed after) termination of this Agreement will, in each
case, survive cancellation, expiration or termination of this Agreement and
continue in full force and effect. Furthermore, Z-Tel and Sprint obligations
regarding the retention of records will survive this Agreement until expiration
of applicable regulatory requirements.

         21.21. COUNTERPARTS. This Agreement may be executed in several
counterparts, all of which taken together will constitute one single agreement
between the Parties. Signed facsimile copies of this Agreement, addenda,
attachments, schedules and exhibits will legally bind the Parties to the same
extent as original documents.

         21.22. LAW ENFORCEMENT COOPERATION. Each Party may cooperate with law
enforcement authorities and national security authorities to the full extent
required or permitted by applicable Law in matters related to services provided
by it under this Agreement, including, the production of records, the
establishment of new lines or the installation of new services on an existing
line to support law enforcement or national security operations, and the
installation of wiretaps, trap-and-trace facilities and equipment, and dialed
number recording facilities and equipment. A Party will not be obligated to
inform the other Party or the other Party's End Users of actions taken in
cooperating with law enforcement or national security authorities, except to the
extent required by applicable Law.

         21.23. EMERGENCY INTERFACES. Z-Tel will use commercially reasonable
efforts to facilitate the prompt, robust, reliable and efficient interconnection
of Z-Tel systems to relevant 911/E-911 emergency platforms and systems. Z-Tel
and Sprint will comply with all applicable rules and regulations (including 911
taxes and surcharges as defined by local requirements) pertaining to the
provision of 911-E911 services. Each Party will be responsible for securing any
necessary certification from local public safety access points or county or
municipal coordinators required before that Party initiates service within a new
geographic area.

                                       85
<PAGE>

         21.24. PAYPHONE SERVICES PROHIBITED. Notwithstanding any other
provision of this Agreement, under no circumstances may Sprint use any facility
or service that Z-Tel provides under this Agreement in connection with public
pay telephone facilities or services.

         21.25. SPRINT SERVICES. Z-Tel will give Sprint the opportunity to bid
on Z-Tel's transport and wireless services by giving Sprint a request for
proposal at least thirty (30) calendar days before the date that Z-Tel intends
to decide on its service provider for these product offerings. Transport and
wireless services include wireless voice, wireline and wireless long distance,
Internet connectivity, and teleconferencing.

         If Sprint elects to submit a proposal to Z-Tel concerning Z-Tel's
desired services, the proposed prices will take into account Z-Tel's expected
volume. If Sprint's offer meets the service requirements that Z-Tel establishes
and matches or exceeds the most favorable terms and conditions among qualified
offers that Z-Tel receives from other vendors, then to the extent allowed under
Z-Tel's existing contracts, Z-Tel will select Sprint as its preferred service
provider for the services under bid and transfer those services to Sprint as its
current commitments expire and technical interfaces are established.

         If Sprint's offer does not match or exceed the most favorable terms and
conditions among qualified offers that Z-Tel receives from other vendors or does
not meet the service requirements that Z-Tel established in the initial bid,
request than Z-Tel will:

                           (a) advise Sprint promptly concerning why Sprint's
                  offer was not competitive or not compliant, suggesting the
                  change or changes that are needed to make Sprint's offer
                  competitive and/or compliant, and

                           (b) allow Sprint the opportunity to resubmit its
                  offer.

         Sprint will have no obligation to submit or resubmit any offer.

         If any Sprint revised offer meets the service requirements that Z-Tel
established in its initial bid request and matches or exceeds the most favorable
terms and conditions among qualified offers that Z-Tel receives from other
vendors, then to the extent allowed under Z-Tel's existing contracts Z-Tel will
select Sprint as its preferred service provider for the services under bid and
transfer those services to Sprint as its current commitments expire and
technical interfaces are established.

         In addition to the other requirements set forth in this Section 21.25,
Z-Tel will be required to select Sprint as its service provider only if Sprint
has paid to Z-Tel at least five-hundred-thousand dollars ($500,000) in Z-Tel
Service Fees in the month preceding Z-Tel's request for a proposal.

         21.26. WAIVER OF JURY TRIAL. Z-Tel and Sprint knowingly, voluntarily
and intentionally waive any rights they may have to a trial by jury in respect
of any litigation arising in based on, or arising out of, under or in connection
with, this Agreement or any other course of conduct, course of dealing,
statements (whether verbal or written) or

                                       86
<PAGE>

actions of Z-Tel or Sprint. This provision is a material inducement for the
Parties to enter into this Agreement.

         IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
Effective Date.

Z-TEL COMMUNICATIONS, INC.                SPRINT COMMUNICATIONS COMPANY L.P.

By:                                       By:
____________________________________      ______________________________________

Name:                                     Name:
____________________________________      ______________________________________

Title:                                    Title:
____________________________________      ______________________________________

Date:                                     Date:
____________________________________      ______________________________________

                                       87
<PAGE>

                         LIST OF SCHEDULES AND EXHIBITS

<TABLE>
<CAPTION>
SCHEDULE /
 EXHIBIT                                DESCRIPTION
--------                                -----------
<S>                  <C>
Schedule A           Initial Statement of Work

Schedule B           Service Level Agreement

Schedule C           Pricing Schedule

Schedule D           Z-Tel Fundamental Technology

Schedule E           Existing Z-Tel Technology

Schedule 10.8        Z-Tel's Acceptable Use Policy

Schedule 13.1        Conditions, Restrictions, Rules, Policies, Procedures,
                     Limitations and Rights Imposed or Granted under Z-Tel's
                     Third Party Agreements and Licenses

Designee Schedule    Contact Information for Notices Sent To Sprint and
                     Z-Tel

Exhibit A            Form of Transition Escrow Agreement

Exhibit B            Form of Technology Escrow Agreement

Exhibit C            Form of Text for Initial SEC Filing and Press Release

Exhibit D            Form of Blanket Agency Agreement Letter for Local Service
                     Providers
</TABLE>

                                       88
<PAGE>

                                   SCHEDULE A

                            INITIAL STATEMENT OF WORK

                                  See Attached.

                                      ****
This entire schedule, consisting of 123 pages, has been omitted pursuant to a
request for confidentiality.

                                       89
<PAGE>
                                   SCHEDULE B

                      SERVICE LEVEL AGREEMENT AND REMEDIES

           See Attached.SERVICE LEVEL AGREEMENT AND REMEDIES PREAMBLE

         A. Service Level Agreements (SLAs) will be put into place to ensure
                  that both Z-Tel and SPRINT jointly provide quality service at
                  the lowest cost while maximizing revenue opportunities and
                  complying with regulatory requirements.

         B. The Definitive Agreement (including the exhibits and schedules
                  attached to it) constitutes the entire agreement between the
                  Parties and supersedes all other agreements and
                  understandings, both written and oral, between the Parties,
                  with respect to the transactions between Sprint and Z-Tel
                  including this Schedule B. To the extent there is any conflict
                  between this Schedule B and the Definitive Agreement, the
                  Definitive Agreement (excluding Schedule B) will govern. All
                  capitalized terms used but not otherwise defined in this
                  Schedule B will have the meaning provided in the Definitive
                  Agreement.

         C. SLAs will be defined where the service level is objectively
                  measurable and one Party has the clear ability to control it.

         D. These service level agreements will be tied to the greatest extent
                  possible to one or more of the following key objectives
                  identified in the Statement of Work between the Parties:
                  quality, timeliness, cost and revenue.

         E. Both Parties will use their best efforts to provide services
                  hereunder that are at least equal in quality and provided
                  within the same time intervals as each Party provides to
                  itself or to its own end user customers, but at a minimum at a
                  level appropriate for a national common carrier class service
                  provider.

                                       90
<PAGE>

         DEFINITIONS

         ACTION PLAN

         An Action Plan is a plan to correct or minimize deviation from expected
         performance. Where appropriate, each Action Plan will include a defined
         implementation schedule. For clarity purposes, the Action Plan
         responding to any Significant Miss will include an implementation
         schedule.

         ATTACHMENT A

         Attachment A to this Schedule B is a matrix listing all Stabilization,
         Operational and Administrative SLAs.

         ATTACHMENT B

         Attachment B to this Schedule B are SLA Definition sheets identifying
         for each SLA details regarding calculation of each specific metric.

         BILL CREDITS

         Bill Credits are credits that are given to SPRINT on a Z-Tel bill. Bill
         Credits may also be applied to an ILEC bill.

         CACS

                                       91
<PAGE>

         CACs means Computer Aided Collection System.

         COMX

         COMX is *************** application that supports the provisioning of
         orders.

         CURE AND SIGNIFICANT MISS CURE PERIOD

         The Significant Miss Cure Period is the period of time to correct a
         condition where performance does not meet expectations. Unless
         otherwise stated in this document or the Definitive Agreement, the
         Significant Miss Cure Period for any operational SLA will be thirty
         (30) calendar days. For purposes of clarification, a Cure for any
         Operational SLA will only be deemed to have been effected if there is
         no reoccurrence of the Significant Miss during the following 30
         calendar day period. A cure for a Triggering Event SLA and the cure
         period for a Triggering Event SLA will be governed by the Definitive
         Agreement.

         DATA FEEDS

         Data Feeds are the electronic delivery of predefined information.

         DEFINITIVE AGREEMENT

         Definitive Agreement means the AGREEMENT FOR RESALE OF LOCAL WIRELINE
         TELECOMMUNICATIONS SERVICES AND PROVISION OF ANCILLARY SERVICES between
         SPRINT and Z-Tel.

         DEMARC

         Demarc means the meet point or point of interface between the two
         Parties.

         DISCONNECT

         Disconnect is the submission of a Local Service Order (LSR) to an ILEC
         to terminate local telephone service.

         EXPECTED SERVICE LEVEL

         Level of performance within any particular SLA which if met or exceeded
         will be deemed to be satisfactory by Z-Tel and Sprint.

         ILEC

         ILEC means Incumbent Local Exchange Carrier.

         LOCKBOX

         Lockbox is the process used to process payments.

         LSR

         LSR means Local Service Order.

         LSR SUBMISSION

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<PAGE>

         LSR Submission is the process used to submit a Local Service Order to
         an ILEC.

         PROVISIONING

         Provisioning is the process used to provide or set up service to a
         customer.

         REJECT

         A Reject is an LSR sent back from the ILEC without having been
         executed.

         REPORTS

         Reports are compilations of data prepared for management purposes.

         RESPONSE TIME

         Response Time is the time required for a system to reply to an inquiry
         or complete a function.

         ROOT CAUSE ANALYSIS

         Root Cause Analysis is the analysis performed to determine the actual
         cause of an event, condition or status.

         SALES

         Sales means the process used to enable customers to purchase a product.

         SIGNIFICANT MISS

         Performance below the Expected Service Level during any given month
         which is not Cured during the subsequent thirty (30) calendar day
         period.

         SLA

         SLA means Service Level Agreement.

         SERVICE MANAGEMENT COMMITTEE

         The Service Management Committee will consist of up to three
         representatives from each Party as designated by the individual Party.
         Designees will be at a level that can generally make commitments for
         the Party relative to this SLA document, SLA Metrics, SLA Remedies, and
         SLA Adjustments/Exclusions as described in Section 6 of this Schedule
         B. The Service Management Committee will meet monthly or as required to
         perform the functions designated in this document, including reviewing
         performance levels and developing Action Plans as necessary to correct
         any Significant Misses.

         SNIP

                                       93

<PAGE>

         SNIP is the process of suspending a customer's telephone service

         STABILIZATION PERIOD

         The Stabilization Period is from the Effective Date through April 30,
         2003.

         STABILIZATION PERIOD SLAS

         The Stabilization Period SLAs are the SLA measurements computed during
         the period from the Effective Date through April 30, 2003.

         STATEMENT OF WORK

         The Statement of Work is the document attached to the Definitive
         Agreement as Schedule A, that describes and defines, at a high level,
         the Services and Software that Z-Tel will provide to SPRINT so that
         SPRINT can provide its Local Wholesale (LW) Based Services to SPRINT
         customers.

         TRIGGERING EVENT PERFORMANCE LEVEL

         Level of performance which if not maintained will impact commercial
         viability of Sprint product offerings.

         Z-NODE

         The Z-Node is the combination of Z-Tel hardware and software that is
         used to provide some of the enhanced telephone services to be provided
         by Z-Tel under the Definitive Agreement.

1.0 SLA GENERIC TYPES

         There will be three (3) generic types of SLAs:

         1.1 STABILIZATION PERIOD SLAS

                  1.1.1 Stabilization Period SLAs will be utilized to measure
                           operational effectiveness and identify areas for
                           performance improvement.

                  1.1.2 Stabilization Period SLAs will be computed beginning
                           on the Effective Date of this Agreement (or as soon
                           as reasonably possible) through April 30, 2003.

                  1.1.3 Stabilization Period SLAs are identified in
                           Attachment A to this Agreement, which may be updated
                           from time to time pursuant to the process outlined in
                           Section 7.0 of this Agreement.

                  1.1.4  The Stabilization Period SLAs will be measured and
                           reviewed by the Service Management Committee.

                  1.1.5  Any SLA Significant Miss, as would be determined
                           under

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<PAGE>

                           Section 21.2.3 below, if applicable, will require
                           Z-Tel to develop and implement a plan of action to
                           correct material deviations from the expected result

                  1.1.6  No financial penalties or remedies will apply to
                           missed Stabilization Period SLAs.

                  1.1.7  The Significant Miss Cure Period for any
                           Stabilization Period SLA performance problems as
                           determined by the Service Management Committee will
                           be negotiated between the Parties.

                  1.1.8  The Stabilization Period SLAs will become Operational
                           SLAs on May 1, 2003.

         1.2 OPERATIONAL SLAS

                  1.2.1.  Operational SLAs will be utilized to measure
                           effectiveness of methods, procedures, hardware,
                           configurations and resource alignment and identify
                           areas for performance improvement.

                           1.2.1.1  Operational SLAs performance will be
                                      reported within **********************
                                      after each calendar month by Z-Tel.

                           1.2.1.2 Operational SLAs will be computed and
                                    applied only after April 30, 2003.

                           1.2.1.3 Operational SLAs are intended to provide
                                    insight on all key areas of performance.

                           1.2.1.4 All of the Operational SLAs will be reviewed
                                    at a monthly meeting of the Service
                                    Management Committee which meeting is to be
                                    held no later than **********************
                                    after each calendar month.

                           1.2.2.1 For each SLA, the documentation in the SLA
                                    Definition Pages (Attachment B) will
                                    identify (as appropriate):

                  1.2.2.   The operational SLAs subject to this agreement are as
                           identified in Attachment A and Attachment B to this
                           Service Level Agreement document, which may be
                           updated from time to time pursuant to the process
                           outlined in Section 7.0 of this Agreement.

                                       95

<PAGE>

                           a. a definition

                           b. special exclusions and/or exceptions

                           c. performance standard(s)

                           d. methodology and data source

                           e. calculation including numerator, denominator and
                                applicable periods of time

                  1.2.2.2  For each SLA the documentation will establish
                           performance and/or availability standards.

                           1.2.2.2.1  Service level goals incorporated
                                      into SLAs will be oriented to supporting a
                                      standard that would sustain general
                                      commercial operations at the level of
                                      performance which Z-Tel provides to its
                                      own retail customers, but at a minimum at
                                      a level appropriate for a national common
                                      carrier class service provider.

                            1.2.2.2.2 SLA documentation will establish
                                      an Expected Service Level for each
                                      Operational SLA, which is the level that
                                      should be met by Z-Tel.

         1.2.3. Operational SLA Remedies

                  1.2.3.1 For any Operational SLA, performance at or above the
                           Expected Service Level will be within expectations of
                           both parties and no remedy will apply.

                  1.2.3.2 Any performance below the Expected Service Level will
                           require an Action Plan (including Root Cause
                           Analysis) to be jointly developed by the Parties to
                           address and, wherever possible, correct material
                           deviations from the expected result.

                  1.2.3.2.1 The implementation period for any Action Plan will
                             be negotiated between the Parties based upon the
                             circumstances involved.

                                       96

<PAGE>

                  1.2.3.3 A Significant Miss for an Operational SLA will result
                           in the imposition of a one percent (1%) liquidated
                           damage provision calculated against the Z-Tel Service
                           Fees of the month in which service did not meet the
                           necessary standard and applied to the monthly invoice
                           next issued by Z-Tel.

                           1.2.3.3.1 Liquidated damage provisions will be
                                      implemented through bill credits.

                           1.2.3.3.2 Bill credits issued in conjunction with
                                      Section 1.2.3.3 may not be utilized to
                                      offset ILEC Fees.

                           1.2.3.3.3 In no event, will the accumulated penalties
                                      for SLA Significant Misses exceed ********
                                      ************  of the Z-Tel Service ******
                                      collected by Z-Tel under the Definitive
                                      Agreement for that month.

         1.3 TRIGGERING EVENT SLAS

                  1.3.1  Triggering Event SLAs will define situations where
                           there is a severe impact on SPRINT's ability to meet
                           minimal customer service or operational requirements
                           such that Z-Tel's failure to meet such SLAs would
                           permit SPRINT to terminate the Definitive Agreement
                           with cause upon providing to Z-Tel the appropriate
                           notice and opportunity to cure.

                  1.3.2  These Triggering Event SLAs will not be in effect for
                           the Stabilization Period..

                  1.3.3  Z-Tel's uncured failure to meet any Triggering Event
                           SLA requirements, as stated in Section 1.3.4.1.1
                           below, with proper notice by Sprint as described in
                           the Definitive Agreement may be deemed and designated
                           as a "Z-Tel Triggering Event" under the terms of the
                           Definitive Agreement.

                  1.3.4  Triggering Event SLAs

                           1.3.4.1 Triggering Event SLAs will be a subset of
                                    Operational SLAs as defined in Section
                                    12.2.2 and the attached Attachment A.

                                  1.3.4.1.1 Triggering Event SLAs and their
                                             associated Triggering Event Failure
                                             Levels are as follows:

                                       97

<PAGE>

<TABLE>
<CAPTION>
                                                                      TRIGGERING
                                                                        EVENT
ID    ACTIVITY      NAME          DESCRIPTION         MEASURE        PERFORMANCE
----  --------   ----------      --------------   --------------    ---------------
<S>   <C>        <C>             <C>              <C>               <C>
P 1   ********   ******          **************   ******            ***************
                 **********      **************   **************    ***************
                                 **************   **************    ***********
                                 **************   **************
                                 **************   **************
                                 **************   **************
                                 ****             **************
                                                  ********

P.2   *******    ********        **************   **************    ***************
                                 **************   **************    ***************
                                 **************   **************    *********
                                 **************   **************
                                 **************   **************
                                 **************   **************
                                 **************   **************
                                 ***********      ****

P 3   *******    ******          **************   **************    ***************
                 **********      **************   **************    ***************
                                 **************   **************    ***************
                                 **************   **************    ***************
                                 **************   **************    ***************
                                 **************   **************    ***************
                                 ****             **************    ************
                                                  ****
</TABLE>

                                       98

<PAGE>

<TABLE>
<S>   <C>        <C>             <C>              <C>               <C>
B 1A  *******    ******          **************   **************    ***************
                 **********      **************   **************    ***************
                                 **************   **************    ***************
                                 **************   **************    ***************
                                 **************   **************    ***************
                                 **************   **************    ***************
                                 ****             **************    ***************
                                                  ****              ************

B 1B  *******    ******          **************   **************    ***************
                 **********      **************   **************    ***************
                                 **************   **************    *************
                                 **************   **************
                                 **************   **************
                                 **************   **************
                                 ****             **************
                                                  ****

B 2   *******    ******          **************   **************    ***************
                 **********      **************   **************    ***************
                                 **************   **************    ***********
                                 **************   **************
                                 **************   **************
                                 **************   **************
                                 ****             **************
                                                  ****

S 1A  *******    ******          **************   **************    ***************
                 **********      **************   **************    ***************
                                 **************   **************    ***********
                                 **************   **************
                                 **************   **************
                                 **************   **************
                                 ****             **************
                                                  ****

S 2   *******    **********      **************   **************    ***************
                 **********      **************   **************    ***************
                                 **************   **************    ***********
                                 **************   **************
                                 **************   **************
                                 **************   **************
                                 ****             **************
                                                  ****
</TABLE>

                                       99

<PAGE>

                                1.3.4.1.2 No Triggering Event will be
                                             attributed where performance has
                                             been at or exceeded the Triggering
                                             Event Performance Level.

                                1.3.4.1.3 Where performance falls below the
                                             Triggering Event Performance Level
                                             after any Exclusions as defined in
                                             Section 5.0 or in the SLA Detail
                                             Sheets, Sprint may declare a
                                             Triggering Event.

                                1.3.4.1.4 Z-Tel's failure to meet Triggering
                                             Event SLA requirement(s) will not
                                             be deemed a Triggering Event if
                                             Z-Tel's failure is directly caused
                                             by a decision between the Parties
                                             not to agree to a specific
                                             headcount support level, until the
                                             dispute over the approval of the
                                             headcount in question is resolved.
                                             In order to invoke relief from
                                             performance remedies under Section
                                             4.6.5, Z-Tel must provide timely
                                             Super Notice, in writing, that such
                                             refusal by SPRINT to approve
                                             specific headcount level presents a
                                             substantial risk of causing Z-Tel
                                             to fail to meet the critical terms
                                             of such Triggering Event SLA.

                                1.3.4.1.5 For Triggering Event purposes, Reject
                                             Handling will be suspended as a
                                             Triggering Event Metric if percent
                                             rejects for Sprint exceeds the
                                             performance for Z-Tel's retail
                                             operations by more than *****

                                1.3.4.1.6 Triggering Event SLA changes may be
                                initiated from time to time through the Service
                                Management Committee. However, changes to the
                                list of Triggering Event SLAs and/or the
                                associated Triggering Event Failure Levels will
                                require an amendment to this document, signed by
                                both Parties.

2.0 ROLES AND RESPONSIBILITIES

         Roles and responsibilities in regard to SLAs are as stated below:

         2.1 Z-Tel Will:

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<PAGE>

                  2.1.1.   On schedules mutually agreed upon by Z-Tel and
                           SPRINT, measure and report to SPRINT on Z-Tel's
                           performance as it relates to those SLA performance
                           categories identified in this Schedule B.

                  2.1.2.   Use best efforts to promptly resolve all system and
                           service delivery matters as they pertain to the SLAs
                           identified in this Schedule B and applicable to the
                           services supported and managed by Z-Tel.

         2.2 SPRINT Will:

                  2.2.1.   Use Z-Tel Technology and equipment in accordance with
                           the feature and functionality descriptions.

                  2.2.2.   Provide workstation and system security.

                  2.2.3.   Provide any underlying data that is necessary in an
                           accurate timely fashion.

                  2.2.4.   Not create any queries and/or executables that will
                           perform any functions targeted at blocking access to
                           or interfering with components provided to them by
                           Z-Tel.

                  2.2.5.   Not create mechanisms to generate fictitious customer
                           service records (e.g., orders, trouble tickets,
                           SNIPS, billing errors, outages, etc.) as a method of
                           sampling Z-Tel compliance with SLAs except as agreed
                           to between the Parties.

3.0 Reporting.

         Unless otherwise specifically provided herein:

         3.1 During the Stabilization Period the Parties will further
                  define the details of how, when and the manner in which each
                  specific SLA will be measured, reported and tracked.

         3.2 After completion of the Stabilization Period, as soon as
                  reasonably practical after each calendar month-end, but not to
                  exceed 5 Business days after the end of a calendar month, each
                  Party will report to the other Party the actual service levels
                  for the previous calendar month for all SLAs specified in this
                  Schedule B.

         3.3 Reporting formats and media will be proposed by each Party and
                  agreed upon by the other Party during the Stabilization
                  Period.

                                      101

<PAGE>

4.0 EXCLUSIONS

         4.1    Notwithstanding exclusions contained in the normal calculation
                  of individual SLAs as described in Section 2.2.2.1 above,
                  Z-Tel may exclude from the determination of its actual
                  performance of any applicable Service Level the period of time
                  for which any of the conditions set forth below ("Exclusions")
                  adversely affect Z-Tel's ability to meet such Service Levels.

                  4.1.1  Outages for maintenance or the installation, upgrade
                           or replacement of equipment or software that are
                           scheduled and executed within the maintenance windows
                           agreed to by Z-Tel and SPRINT, and other times agreed
                           upon in advance by SPRINT. Z-Tel will schedule with
                           SPRINT, at least two (2) business days in advance
                           where possible, any additional scheduled maintenance
                           requiring system downtime for system software
                           upgrades.

                  4.1.2  As established in Section *** of the Definitive
                           Agreement ("Escalation of *********** Matters."),
                           Z-Tel's failure to meet the P1, P2, P3, or P4
                           Operational and Triggering Event SLA's will not be
                           deemed a Significant Miss if Z-Tel's failure is
                           directly caused by the decision between parties not
                           to agree to a specific *********** support levels,
                           until the dispute over the approval of the forecast
                           in question is resolved. In order to invoke Section
                           5.1.2, Z-Tel must provide timely Super Notice, in
                           writing, that such refusal by Sprint to approve
                           specific headcount level(s) presents a substantial
                           risk of causing Z-Tel to fail to meet the critical
                           terms of such Operational SLA. For purposes of
                           clarification, this provision will not have any
                           affect on any Operational and Triggering Event SLA's
                           other than P1, P2, P3, or P4.

                  4.1.3  During the period beginning on the Efffective Date
                           through July 2003, any Sprint forecast that
                           understates its actual demands for Z-Tel services in
                           the aggregate (i.e., all states combined for
                           residential and small business service) by more than
                           ***** ************ for any Committed Forecast will
                           relieve Z-Tel of its duty to fully perform in
                           accordance with the applicable P1, P2, P3, P4, B2 and
                           S1B Operational and Triggering Event SLAs for that
                           month provided that Z-Tel has made reasonable efforts
                           to respond to any updated forecast, taking into
                           consideration the time that the forecast was updated.
                           For purposes of clarification, this provision will
                           not have any affect on any Operational SLA's and
                           Triggering Event other than P1, P2, P3, P4, B2, and
                           S1B.

                                      102

<PAGE>
                  4.1.4  For the period beginning August 1, 2003 and
                           continuing through the Term of the Definitive
                           Agreement, any Sprint forecast that understates its
                           actual demands for Z-Tel services in the aggregate
                           (i.e., all states combined for residential and small
                           business service) by more than ******* *************
                           for any Committed Forecast will relieve Z-Tel of its
                           duty to fully perform in accordance with the
                           applicable P1, P2, P3, P4, B2 and S1B Operational and
                           Triggering Event SLAs for that month provided that
                           Z-Tel has made reasonable efforts to respond to any
                           updated forecast, taking into consideration the time
                           that the forecast was updated. For purposes of
                           clarification, this provision will not have any
                           affect on any Operational and Triggering Event SLA's
                           other than P1, P2, P3, P4, B2 and S1B.

                  4.1.5  Outages for maintenance or installation, upgrade or
                           replacement of equipment or software that are
                           scheduled and executed by ******.

                  4.1.6  Any transactions excluded by mutual written agreement
                           of Z-Tel and SPRINT and as documented in this
                           document or the SLA Details sheet (Attachment B).

                  4.1.7  If an event described as a Force Majeure Event in the
                           Definitive Agreement the relevant period for the
                           event will be subtracted from the applicable SLA
                           measurements. Nonetheless, Z-Tel will notify SPRINT
                           in advance if Z-Tel knows of a situation where an
                           event or special request will cause the
                           unavailability of the application.

                  4.1.8  Problems adversely affecting the delivery of Services
                           and resulting from components (hardware, software,
                           systems, network, switch failures, switch tape
                           failures and other related failures), for which
                           SPRINT (or any third party engaged by or acting on
                           behalf of SPRINT) is operationally and
                           administratively responsible, will not be considered
                           in calculating the applicable SLA measurements.
                           Nonetheless, Z-Tel will notify SPRINT in advance if
                           Z-Tel knows of a situation where problems with
                           components for which SPRINT is responsible will cause
                           a stoppage or delays of Z-Tel Services.

                  ILEC and IXC problems adversely affecting the
                           delivery of Services and resulting from components
                           (hardware, software, systems, network, switch
                           failures, switch tape failures, signaling and other
                           related failures), which are outside the control of
                           Z-Tel, its affiliates and primary vendors (i.e.,
                           ***************************************), will not be
                           considered in calculation of the applicable SLA
                           measurements. Nonetheless, Z-Tel shall notify SPRINT
                           in advance if Z-Tel knows of a situation where
                           problems with components

                                      103

<PAGE>

                           provided by third parties, other than its affiliates
                           and primary vendors, will cause a stoppage or delay
                           of Z-Tel Services.

                  4.1.10   Problems related to a prioritization or
                           reprioritization of tasks or incidents by SPRINT
                           where Z-Tel has apprised SPRINT with written warning
                           to the Service Management Committee within 72 hours
                           of Sprint's prioritization or reprioritization
                           request that such prioritization (or lack of
                           prioritization in the case of incidents) or
                           reprioritization may affect SLAs.

                  4.1.11   Delays due to non-receipt or late receipt of SPRINT
                           input, where the non-receipt or late receipt was
                           beyond the control of Z-Tel.

                  4.1.12   Temporary exclusions from Service Level Agreement
                           performance measurements requested by Z-Tel, and
                           approved in writing by SPRINT, to implement major
                           changes in applications, environments, conversions,
                           or systems software.

                  4.2.1  Both parties will work in good faith to resolve any
                           differences of opinion as they relate to the
                           appropriateness and accuracy of Exclusions as
                           described in Section 5.1 above.

         4.2  Within 5 days of providing Reports under Section 4.0 of this
                  SLA Agreement, Z-Tel will provide written notice along with a
                  reasonable explanation of any Exclusions pertaining to monthly
                  data as described in Section 5.1 which have been incorporated
                  into that month's reports.

5.0 Service Level Agreement Change Process

         5.1  New SLAs may be added or substituted or existing SLAs may be
                  modified or deleted, through the process set forth in this
                  Section.
                           5.1.1 It is the intent of the Parties to maintain a
                           fair, reasonable, attainable, accurate, meaningful,
                           and consistent

                                      104

<PAGE>

                           measurement of Z-Tel's performance of Services.

                           5.1.2 Relative to the above standard, all SLAs will
                           be reviewed at least annually.

                           5.1.3 Events or changes that materially affect
                           delivery of services by either Party could initiate
                           the need to delete or modify existing SLAs or add new
                           SLAs. Such events and changes may include: the
                           Parties' planning processes, changes in SPRINT's
                           business (e.g., business requirements, changes in
                           volumes), regulatory requirements, changes in ILEC
                           methods and procedures, vendor changes in methods and
                           procedures, and audit requirements.

                           5.2.1 Upon identifying the need to add, delete or
                           modify any SLA, Z-Tel or SPRINT will prepare a
                           written analysis that supports the SLA change (a
                           "Service Level Agreement Change Proposal") and submit
                           it to the other Party.

                           5.2.2 The Parties will then review the Service Level
                           Agreement Change Proposal and the receiving Party
                           will have sixty (60) calendar days to respond with an
                           assessment of the ramifications of the request (e.g.,
                           cost impacts, impact on business, etc.).

                           5.2.3 All Service Level Agreement Change Proposals
                           must be mutually agreed upon through the Service
                           Management Committee before any SLAs are added,
                           deleted or modified. If the Service Management
                           Committee is unable to reach consensus on any
                           proposed Service Level Agreement change, the Parties
                           will attempt to resolve the matter pursuant to the
                           escalation procedures in the Definitive Agreement.

                           5.2.4 Any new SLAs will not be enforced for ninety
                           days, unless otherwise agreed, after initial
                           publication of the metric as agreed to between the
                           Parties.

                           5.2.5 Additionally, by mutual written agreement,
                           which shall include accepted minutes of proceedings
                           of the Service Management Committee, major change
                           initiatives as determined by the Service Management
                           Committee may cause the suspension of one or more
                           SLAs for a period of one to three months after
                           implementation of the major change. During this
                           suspension period the involved service level(s) will
                           be pursued on a best efforts basis.

         5.2  SLA Change Process. Changes to SLAs will only be effected
                  through the following SLA Change Process.

Agreed to by the Parties, as signified below:

SPRINT Communications Company LP   Z-Tel Communications, Inc

BY:_____   BY:

Print Name       Print Name

Title        Title

Date        Date

                                      105

<PAGE>

                                  ATTACHMENT A

                                OPERATIONAL SLAS

<TABLE>
<CAPTION>
 ID    TYPE SLA   ACTIVITY     NAME    DESCRIPTION  MEASURE    TARGET    Source
<S>    <C>        <C>        <C>       <C>          <C>       <C>        <C>
P 1     ******    *******    *******     *******    *******   ********   ******
        ******    *******    *******     *******    *******   ********   ******
        **        *******    *******     *******    *******   *          ******
        ******    *******    *******     *******    *******   ********   ******
        ******    *******    *******     *******    *******   *******    **
        **        *****      *****       *****      *****
        ******    *******    *******     *******    *******
        ******    *******    *******     *******    *******
        ******
        ******
        **

P 2     ******    *******    *******     *******    *******   ********   ******
        ******    ******     *****       *******    *******   ******     ******
        ******    *******    *******     *******    *******   ********   ******
        ******    *******    *******     *******    *******   ******     ******
        ******                           *******    *******   ********   **
        **                               *****      *****     ****
                                         *******    *******   ********
                                         *******    *******   ******

P 3     ******    *******    *******     *******    *******   ********   ******
        ******    ******     *****       *******    *******   ******     ******
        ******    *******    *******     *******    *******   ********   ******
        ******    *******    *******     *******    *******   ******     ******
        ******                           *******    *******   ********   **
        **                               *****      *****     ****
                                         *******    *******   ********
                                         *******    *******   ******

P 4     ******    *******    *******     *******    *******   ********   ******
        ******    ******     *****       *******    *******   ******     ******
        ******    *******    *******     *******    *******   ********   ******
        ******    *******    *******     *******    *******   ******     ******
        ******                           *******    *******   ********   **
        **                               *****      *****     ****
                                         *******    *******   ********
                                         *******    *******   ******

B 1A    ******    *******    *******     *******    *******   ********   ******
        ******    ******     *****       *******    *******   ******     ******
        ******    *******    *******     *******    *******   ********   ******
        ******    *******    *******     *******    *******   ******     ******
        **                               *******    *******   ********   **
                                         *****      *****     ****
                                         *******    *******   ********
                                         *******    *******   ******
</TABLE>

                                      106

<PAGE>

<TABLE>
<S>    <C>        <C>        <C>       <C>          <C>       <C>        <C>
B 1B    ******    *******    *******     *******    *******   ********   ******
        ******    ******     *****       *******    *******   ******     ******
        ******    *******    *******     *******    *******   ********   ******
        ******    *******    *******     *******    *******   ******     ******
        **                               *******    *******   ********   **
                                         *****      *****     ****
                                         *******    *******   ********
                                         *******    *******   ******

B 2     ******    *******    *******     *******    *******   ********   ******
        ******    ******     *****       *******    *******   ******     ******
        ******    *******    *******     *******    *******   ********   ******
        ******    *******    *******     *******    *******   ******     ******
        **                               *******    *******   ********   **
                                         *****      *****     ****
                                         *******    *******   ********
                                         *******    *******   ******

S1A     ******    *******    *******     *******    *******   ********   ******
        ******    ******     *****       *******    *******   ******     ******
        ******    *******    *******     *******    *******   ********   ******
        ******    *******    *******     *******    *******   ******     ******
        **                               *******    *******   ********   **
                                         *****      *****     ****
                                         *******    *******   ********
                                         *******    *******   ******

S1B     ******    *******    *******     *******    *******   ********   ******
        ******    ******     *****       *******    *******   ******     ******
        ******    *******    *******     *******    *******   ********   ******
        ******    *******    *******     *******    *******   ******     ******
        **                               *******    *******   ********   **
                                         *****      *****     ****
                                         *******    *******   ********
                                         *******    *******   ******

S 2     ******    *******    *******     *******    *******   ********   ******
        ******    ******     *****       *******    *******   ******     ******
        ******    *******    *******     *******    *******   ********   ******
        ******    *******    *******     *******    *******   ******     ******
        **                               *******    *******   ********   **
                                         *****      *****     ****
                                         *******    *******   ********
                                         *******    *******   ******

S 3     ******    *******    *******     *******    *******   ********   ******
        ******    ******     *****       *******    *******   ******     ******
        ******    *******    *******     *******    *******   ********   **
        ******    *******    *******     *******    *******   ******     ******
        **                               *******    *******              ******
                                         *******    *******              **
                                         *****      *****
                                         *******    *******

</TABLE>

                                      107

<PAGE>

<TABLE>
<S>    <C>        <C>        <C>       <C>          <C>       <C>        <C>
S 4     ******    *******    *******     *******    *******   ********   ******
        *                                *******    *******   ******     *
                                         *******    *******   ********
                                         *******    *******   ******
                                         *******    *******   ********
                                         *****      *****     ****
                                         *******    *******   ********
                                         *******    *******   ******
</TABLE>

                                      108

<PAGE>

                                  ATTACHMENT B

                                METRIC DEFINITION

                                      ****

This entire attachment, consisting of 17 pages, has been omitted pursuant to a
request for confidentiality treatment.

                                      109

<PAGE>

                                   SCHEDULE C

                                PRICING SCHEDULE

                                      ****

This entire schedule, consisting of 11 pages, has been omitted pursuant to a
request for confidentiality treatment.

                                      110

<PAGE>

                                   SCHEDULE D

                          Z-TEL FUNDAMENTAL TECHNOLOGY

                                      ****

This entire schedule, consisting of 3 pages, has been omitted pursuant to a
confidential treatment request.

                                      111

<PAGE>

                                   SCHEDULE E

                           EXISTING Z-TEL TECHNOLOGY

                                      ****

This entire schedule, consisting of 15 pages, has been omitted pursuant to a
request for confidential treatment.

                                      112

<PAGE>

                                  SCHEDULE 10.8

                             ACCEPTABLE USE POLICY

This Acceptable Use Policy ("AUP") establishes guidelines for acceptable use of
e-mail, internet, networking and operational support system services (the "AUP
SERVICES") provided by Z-Tel Communications, Inc. ("WE" or "Z-TEL") to Sprint,
Sprint's Affiliates Sprint's End Users (each, a "SPRINT CUSTOMER" and
collectively "SPRINT CUSTOMERS"). Sprint has no obligation under this Schedule
10.8 concerning any prohibited action described in this Schedule 10.8 by any
Sprint Customer other than Sprint and Sprint's Owned Affiliates unless the
Sprint Customer accessed Z-Tel's systems through a Sprint account or Sprint
interface under this Agreement.

I.  SYSTEM AND NETWORK SECURITY.

Z-Tel reserves the right to take action against the unauthorized use or
attempted unauthorized use of Z-Tel's AUP Services or systems. Unauthorized use
or attempted unauthorized use includes, but is not limited to, password
cracking, defrauding others into releasing their passwords, denial-of-service
attacks, sending packets with an illegal packet size, UDP flooding,
ping-flooding, half-open TCP connection flooding, etc. A Sprint Customer may not
use Z-Tel's systems, programs, scripts and commands, nor send messages, with the
intent to interfere with any End User's terminal session.

         A Sprint Customer may not use the AUP Services in a manner that
encumbers Z-Tel's disk space, processors or other system resources beyond those
allowed by the specific type of account. A Sprint Customer may not make any
attempts to interfere with an AUP Service, overload an AUP Service or attempt to
disable a Z-Tel host. A Sprint Customer may not use any of the AUP Services or
Z-Tel's systems to transmit computer viruses, trojan horses, cancelbots, or
other destructive programming code. Non-authorized relays through any third
party systems are strictly prohibited.

         Each Sprint Customer must respect the privacy of others. Each Sprint
Customer will not represent itself as another person unless explicitly
authorized to do so by that person.

 Z-Tel may take actions reasonably necessary to protect its network, systems,
and relationships with third parties when a Sprint Customer's activity is
causing critical performance problems for Z-Tel. When any Sprint Customer's
service is compromised due to Z-Tel action under this policy, Z-Tel will provide
concurrent Super Notice to Sprint as described on the Designee Schedule.

         When a Sprint Customer is apparently violating this policy but the
activity is not causing significant performance problems for Z-Tel, Z-Tel will
provide notice of its intent to impair the service of the Sprint Customer at
least three Business Days before such action is taken. Z-Tel will work with
Sprint to avoid impairment to the service of a Sprint Customer by identifying
potential concerns with individual Sprint Customers and notifying Sprint so that
Sprint may work with the Sprint Customer to change its behavior before it
becomes a significant problem.

                                      113

<PAGE>

II.  E-MAIL

         Each Sprint Customer will not continue to send e-mail through Z-Tel's
systems to a recipient if that recipient has requested that the Sprint Customer
discontinue the communication. Each Sprint Customer will not, through Z-Tel's
systems, flood/spam newsgroups with commercial or non-commercial postings. The
Sprint Customers will not use Z-Tel's AUP Services to send unsolicited
advertising messages to non-Sprint End Users.

         Other activities that Sprint Customers are prohibited from engaging in
through Z-Tel's systems under this Agreement include:

                  (i)  transmission of e-mail or newsgroup postings that are
                           harassing, libelous, defamatory, legally obscene or
                           pornographic, threatening, abusive, or hateful to
                           non-consenting recipients;

                  (ii) forwarding or propagation of chain letters of any
                           type (including charity requests or petitions for
                           signatures);

                  (iii) "Mail bombing" or "Syn flood" attacks that overburden
                           a recipient computer system by sending a high volume
                           of spurious data which effectively impedes
                           functionality, or totally disables recipient
                           system(s), and any other methods of denial of
                           service;

                  (iv) forging header information on e-mail or any other
                           material transmitted through our servers;

                  (v)  impersonating any person or entity including, but not
                           limited to, any Z-Tel employee or officer;

                  (vi) forging headers or otherwise manipulate identifiers
                           in order to disguise the origin of any Content (as
                           defined in Section III below);

                  (vii) stalking or otherwise harassing another;

                  (viii) collecting or storing proprietary information about
                           non-Sprint End Users; and

                  (ix)  using the Sprint Customer's account, or network
                           connection, to collect replies of messages sent from
                           any another provider that violates the rules of this
                           AUP.

III.  CONTENT

         All information, data, text, sound, messages or other materials that
are publicly posted on a website or privately transmitted by a party (other than
Z-Tel) ("CONTENT") using Z-Tel's systems are the sole responsibility of the
person that originated the Content.

                                      114

<PAGE>
Z-Tel exercises no control whatsoever over the Content created on or passing
through its network and, therefore, does not guarantee the accuracy, integrity
or quality of the Content. Each Sprint Customer, and not Z-Tel, is entirely
responsible for all Content that it uploads, posts, emails or otherwise
transmits via the AUP Services. Under no circumstances will Z-Tel be liable in
any way for any Content, including, but not limited to, for any errors or
omissions in any Content, or for any loss or damage of any kind incurred as a
result of the use of any Content posted, emailed or otherwise transmitted by the
AUP Services. The inclusion of a link on any site managed by Z-Tel does not
imply an endorsement of the linked site by Z-Tel.

IV.  COMPLIANCE WITH LAW; COPYRIGHT AND OTHER INTELLECTUAL PROPERTY
          INFRINGEMENT.

         The Sprint Customers may not use any AUP Service to initiate a
transmission of or store any information, data, or material in a manner that
would intentionally or unintentionally violate any applicable local, state,
national or international treaties, laws, rules or regulations, including, but
not limited to:

                  (i) any applicable patent, trademark or copyright law,

                  (ii) any regulations promulgated by the U.S. Securities and
         Exchange Commission, or

                  (iii) any rules of any national or other securities exchange,
         including, without limitation, the New York Stock Exchange, the
         American Stock Exchange and any NASDAQ market.

         Z-Tel reserves the right to remove any and all materials from its
systems that it reasonably believes infringe on another's copyright or other
intellectual property rights. Z-Tel may remove these materials at any time upon
receiving a complaint or notice of alleged infringement. If Sprint has a good
faith belief that a user of Z-Tel's AUP Services is infringing on a copyright,
please notify us:

                   Legal Counsel

                   Z-Tel Communications, Inc.
                  601 S. Harbour Island Boulevard, Suite 220
                  Tampa, FL 33602

Any such notification should include the identity and location of the alleged
infringing material.

         The Sprint Customers cannot sue or recover any damages whatsoever from
Z-Tel as a result of Z-Tel's decision to remove offending material from Z-Tel's
server.

VII.  INTERNATIONAL USE

         Z-Tel makes no representation that materials on its site are
appropriate or available for use in locations outside the United States, and
accessing them from territories where their contents are illegal is prohibited.
Sprint Customers who choose to access Z-Tel's network or Web site from other
locations do so on their own initiative and are responsible for compliance with
local laws.

VIII.  GENERAL

Use of other organizations' networks or computing resources is subject to their
respective permission and usage policies.

                                      115

<PAGE>

                                  SCHEDULE 13.1

  CONDITIONS, RESTRICTIONS, RULES, POLICIES, PROCEDURES, LIMITATIONS AND RIGHTS
      IMPOSED OR GRANTED UNDER Z-TEL'S THIRD PARTY AGREEMENTS AND LICENSES

         To the extent Sprint or any Sprint Affiliate, or any of their
respective employees, gain, under this Agreement, access to or use of any
software, hardware, technology, technical information, documentation, or other
intellectual property ("THIRD-PARTY TECHNOLOGY") provided to Z-Tel by any
third-party vendor ("Z-TEL THIRD-PARTY VENDOR"), Sprint will comply with the
following obligations and ensure that the Sprint Affiliate or employee also
complies with the following obligations, but in each case only to the extent
that Z-Tel is obligated to do so.

         To the extent that any agent (including marketing agents) or other
independent contractor of any tier of Sprint or any Sprint Owned Affiliate, or
any Sprint End User, gains, under this Agreement through Sprint, access to or
use of any Third Party Technology provided to Z-Tel by any Z-Tel Third-Party
Vendor, Sprint will ensure that the agent, independent contractor or Sprint End
User complies with the obligations set forth below (but only to the extent Z-Tel
is obligated to do so).

         1. Sprint may use Third-Party Technology only in furtherance of this
Agreement and only on the terms and conditions of this Agreement. Sprint will
not copy, distribute, or disseminate any Third-Party Technology or any part
thereof, except as expressly permitted by and subject to the limits of Sprint's
license rights under this Agreement.

         2. Sprint will:

                  (a) hold Confidential Information of Z-Tel Third-Party Vendors
                           in strict confidence;

                                      116

<PAGE>

                  (b) limit disclosure of Z-Tel Third-Party Vendor
                           Confidential Information to Sprint's own employees
                           and others having a need to know the Confidential
                           Information;

                  (c) notify Z-Tel promptly of any unauthorized use or
                           disclosure of Z-Tel Third-Party Vendor Confidential
                           Information; and

                  (d) cooperate with and assist Z-Tel to stop or minimize
                           any such unauthorized use or disclosure.

         Sprint will protect the confidentiality of the Third-Party Technology,
using the same degree of care used to protect its own intellectual property of
like importance, but in any case using no less than a reasonable degree of care.

                                      117

<PAGE>

             DESIGNEE SCHEDULE SPRINT AND Z-TEL CONTACT INFORMATION

A. In accordance with Section 5.3.6 of the Agreement the following persons will
be contacted in the event of a billing dispute:

<TABLE>
<CAPTION>
                            Sprint (Name/Title)               Z-Tel (Name/Title)
                            -------------------               ------------------
<S>                         <C>                               <C>
Within ** calendar days     Mark A. Hall                      Linda Dellaero
                            Manager, Decision Support         Accounts Receivable
                            6360 Sprint Parkway               Manager
                            Mailstop  KSOPHE0406              601 South Harbour Island
                            Overland Park, KS  66251          Blvd.
                            mark.a.hall@mail.sprint.com       Suite 220
                            Phone: 913-762-1065               Tampa, FL 33602
                                                              ddellaero@z-tel.com
                                                              Phone:  813-233-4517

Within ** calendar days     Sean W. Garrett                   Frank Straub
                            Director, Decision Support        Director of Finance &
                            6360 Sprint Parkway               Accounting
                            Mailstop KSOPHE0406               601 South Harbour Island
                            Overland Park, KS  66251          Blvd.
                            sean.w.garrett@mail.sprint.com    Suite 220
                            Phone:  913-762-1525              Tampa, FL 33602
                                                              fstraub@z-tel.com
                                                              Phone:  813-233-4746
</TABLE>

                                      118
<PAGE>

<TABLE>
<S>                         <C>                               <C>
Within ** calendar days     Joe F. Meyer                      Don Davis
                            Vice President                    Vice President
                            6360 Sprint Parkway               601 South Harbour Island
                            Mailstop KSOPHE0402               Blvd.
                            Overland Park, KS 66251           Suite 220
                            joe.f.meyer@mail.sprint.com       Tampa, FL 33602
                            Phone: 913-762-7798               ddavis@z-tel.com
                                                              Phone:  813-233-4615
</TABLE>

B. In accordance with Section 21.14.1, all notices under the Agreement will be
sent:

         To Z-Tel:

                       Z-Tel Communications, Inc.
                       601 South Harbour Island Boulevard
                       Suite 220
                       Tampa, Florida  33602

         To Sprint:

                       Sprint Communications Company L.P.
                       Mailstop: KSOPHE 0410-4B177
                       6360 Sprint Parkway
                       Overland Park, Kansas 66251-1666
                       Attn:  David Palan

         and, if the notice is to Z-Tel, a copy, which will not constitute
         notice, is delivered, deposited for delivery, mailed or sent in the
         same manner to:

                       Andrew Graham, Esquire
                       Z-Tel Communications, Inc.
                       601 South Harbour Island Boulevard
                       Suite 220
                       Tampa, Florida  33602

         and, if the notice is to Sprint, a copy, which will not constitute
         notice, is delivered, deposited for delivery, mailed or sent in the
         same manner to:

                       Michelle Brown, Esquire
                       Sprint Communications Company L.P.
                       Mailstop: KSOPHN 0304-3B653
                       6450 Sprint Parkway
                       Overland Park, Kansas 66251-6100

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<PAGE>

Any Party may change the address to which notices are to be delivered by giving
notice of the change of address in the manner set forth above

C. In accordance with Section 21.14.2 of the Agreement, Super Notice will be
sent:

         If to Z-Tel:

                       Z-Tel Communications, Inc.
                       601 South Harbour Island Boulevard
                       Suite 220
                       Tampa, Florida  33602
                       Attn:  Robert A. Curtis
                       Email:  rcurtis@z-tel.com

         If to Sprint:

                       Sprint Communications Company L.P.
                       Mailstop: KSOPHE0402
                       6360 Sprint Parkway
                       Overland Park, Kansas 66251-1666
                       Attn:  Joe F. Meyer
                       Email: joe.f.meyer@mail.sprint.com

and if to Sprint under Schedule 10.8, also to:

              Liz Cecini
              6360 Sprint Parkway
              Carver A
              Mailstop: KSOPHE0402-4C450
              Overland Park, KS 66251-1666

                                      120

<PAGE>

                                    EXHIBIT A

                          TRANSITION ESCROW AGREEMENT

This Transition Escrow Agreement (the "Agreement") is dated as of ________,
2003, by and among COMMERCE BANK, NATIONAL ASSOCIATION, Kansas City, Missouri, a
national banking association duly organized and existing under the laws of the
United States (the "Escrow Agent"), SPRINT COMMUNICATIONS COMPANY L.P., a
Delaware limited partnership ("Sprint"), and Z-TEL COMMUNICATIONS, INC., a
Delaware corporation ("Z-Tel")(each a "Party" and collectively the "Parties").

Sprint and Z-Tel are parties to a Services Agreement (as defined in Section 1).
Under the terms of the Services Agreement, Sprint has agreed to deposit, as
security for payment, a portion of projected fees for Z-Tel services into escrow
with Escrow Agent upon execution of this Agreement.

In consideration of the mutual covenants set forth in this Agreement, the
Parties agree as follows:

         1. DEFINITIONS.

         "AUTHORIZED INVESTMENTS" means those investments acceptable to Sprint
         as communicated by Sprint to Escrow Agent from time to time, which
         investments will be in AAA rated, short-term, investment grade
         instruments that can be sold in a secondary market.

"AUTHORIZED REPRESENTATIVE" means, as to Sprint, _______________; and as to
Z-Tel, ___________________.

          "ESCROW ACCOUNT" means the escrow account created under Section 2 of
         this Agreement and maintained by Escrow Agent under this Agreement.

          "ESCROW AGENT" means Commerce Bank, National Association, Kansas City,
         Missouri, or its successor under this Agreement.

          "ESCROW ASSETS" means the assets deposited into the Escrow Account
         under Section 3 and any substitutions, replacements, investments or
         reinvestments of the assets under this Agreement.

                  "EXCESS BALANCE DISBURSEMENT REQUEST" has the meaning set
         forth in Section 6(a).

          "INVESTMENT INCOME" means earnings accrued from the investment of the
         Escrow Assets.

          "SERVICES AGREEMENT" means the Agreement for Resale of Local Wireline
         Telecommunications Services and Provision of Ancillary Services dated
         as of February __, 2003, between Sprint and Z-Tel.

          "UNPAID FEES DISBURSEMENT REQUEST" has the meaning set forth in
         Section 6(b).

         All capitalized terms used, but not defined in this Agreement have the
meaning set forth in the Services Agreement (which meanings are incorporated
into this Agreement by this reference).

         2. CREATION OF THE ESCROW ACCOUNT. Contemporaneously with the execution
and delivery of this Agreement, Escrow Agent will create and establish an escrow
account for the purpose of receiving and holding the Escrow Assets in trust
under this

                                      121

<PAGE>

Agreement (the "ESCROW ACCOUNT").

         3. OWNERSHIP AND REGISTRATION OF THE ESCROW ASSETS. The Escrow Assets
will be the property of Sprint until disbursed under this Agreement. Escrow
Agent will hold the Escrow Assets in bearer form (if not cash) or, if
registered, registered in the name of Escrow Agent or its nominee.

         4. INITIAL DEPOSIT TO THE ESCROW ACCOUNT.

                  (a) Under the Services Agreement, Sprint agreed to deliver to
         Escrow Agent for deposit into the Escrow Account certain funds for
         Basic System Support fees, ILEC Recurring fees, ILEC Non-Recurring
         fees, ILEC Usage fees, Z-Tel Dedicated Support fees and Third Party
         unit-based fees (collectively, the "TRANSITION FEES") for the Sprint
         End Users that have not been Transitioned. The purpose of the escrow is
         to secure Sprint's payment obligations to Z-Tel. No amounts would be
         escrowed if the Transition has not occurred because Z-Tel has not
         completed the necessary work on the ILEC interfaces.

                  (b) The specific amount that Sprint agreed to escrow is
determined as follows:

                           (i) if the Transition has been delayed beyond the
                  Transition Date (as defined in Section 2.5.5(c) of the
                  Services Agreement) for two (2) months or less, the amount to
                  be escrowed is one month's Transition Fees (as estimated
                  reasonably and in good faith and based on the most current
                  Committed Forecast described in Section 10.12 of the Services
                  Agreement, the "TRANSITION FEE FORECAST") for the Sprint End
                  Users that have not yet been Transitioned, and

                   (ii) if the Transition has been delayed beyond the Transition
                  Date for more than two (2) months, the amount to be escrowed
                  is two (2) months' Transition Fees (based on the Transition
                  Fee Forecast) for the Sprint End Users that have not yet been
                  Transitioned.

                   (iii) however, after the initial deposit, the Escrow Account
                  balance will not fall below an amount equal to at least fifty
                  (50) percent of the Escrow Account balance from the previous
                  month, without the prior consent of Z-Tel unless a final
                  disbursement of the Escrow Funds has occurred.

          (c) Upon execution of this Agreement Sprint will deposit into the
         Escrow Account the amount described in Section 4(b)(i). Sprint and
         Z-Tel agree that this amount is $____________.

    (d) Escrow Agent is not responsible for the sufficiency of the amount of
          the Escrow Assets. Escrow Agent will hold the Escrow Assets in trust
          and disburse them only as set forth in this Agreement.

                                      122

<PAGE>

         5. TRUE-UP OF ESCROW ASSET BALANCE. Sprint and Z-Tel will true-up the
Escrow Account Balance on a monthly basis until the termination of this
Agreement as follows:

         (a) Within a reasonable period after the end of each month after the
     Transition Date, Escrow Agent will provide to Sprint and Z-Tel a statement
     reflecting the balance of the Escrow Assets.

          (b) Within five (5) Business Days after receiving Escrow Agent's
     statement, Sprint will deposit in the escrow the additional funds that are
     necessary to cause the balance of the Escrow Assets to equal or exceed the
     amount then required under

         Section 4.

         6. DISBURSEMENTS.

                  (a) Sprint is entitled to disbursement from the escrow of the
         amount by which the balance of the Escrow Assets reflected in Escrow
         Agent's statement exceeds the amount then required under Section 4.
         Sprint may request this disbursement solely by sending to Z-Tel a
         written request for escrow disbursement. Z-Tel will within five (5)
         Business Days request disbursement from the escrow, of the amount by
         which the balance of the Escrow Assess reflected in the Escrow Agent's
         statement exceeds the amount then required under Section 4, by sending
         to the Escrow Agent a request for disbursement in the form attached to
         this Agreement as Attachment A (an "EXCESS BALANCE DISBURSEMENT
         REQUEST"), with a contemporaneous copy to Sprint.

   (b) Z-Tel is entitled to disbursements from the escrow from time to time
         during the term of this Agreement in amounts equal to any Transition
         Fees payable by Sprint under the Services Agreement that Sprint does
         not pay when due. Z-Tel may request this disbursement solely by sending
         to Escrow Agent a request for disbursement in the form attached to this
         Agreement as Attachment B (an "UNPAID FEES DISBURSEMENT REQUEST"), with
         a contemporaneous copy to Sprint.

   (c) Escrow Agent will disburse the Escrow Assets in accordance with the
         following provisions:

                   (i) If Escrow Agent receives an Excess Balance Disbursement
                  Request from Z-Tel requesting that all or any portion of the
                  Escrow Assets be disbursed to Sprint, Escrow Agent will
                  disburse the requested Escrow Assets to Sprint in accordance
                  with the instructions contained in the Excess Balance
                  Disbursement Request within ten (10) Business Days after
                  receiving the Excess Balance Disbursement Request.

                   (ii) If Escrow Agent receives a Unpaid Fees Disbursement
                  Request from Z-Tel (with Z-Tel's certification of its delivery
                  of the request to Sprint and

                                      123

<PAGE>

                  Z-Tel's certification that the Escrow Assets requested to be
                  disbursed to Z-Tel are for Transition Fees payable by Sprint
                  under the Services Agreement that Sprint has not paid when
                  due) requesting that all or any portion of the Escrow Assets
                  be disbursed to Z-Tel, Escrow Agent will disburse the
                  requested Escrow Assets to Z-Tel in accordance with the
                  instructions contained in the Unpaid Fees Disbursement Request
                  within ten (10) Business Days after receiving the Unpaid Fees
                  Disbursement Request without regard to any objection from
                  Sprint concerning the Unpaid Fees Disbursement Request.

                  (d) The Parties agree and acknowledge that (i) only Z-Tel may
         seek disbursement from the Escrow Agent, (ii) Z-Tel will be irreparably
         harmed by any delay in disbursement by the Escrow Agent relative to any
         Unpaid Fees Disbursement Request, and (iii) Sprint may not threaten to
         take or take any action to delay (other than obtaining a stay from a
         court of competent jurisdiction) the payment by the Escrow Agent.

         7. INCOME ON ESCROW ASSETS.

  (a) All Investment Income, if any, is solely Sprint's property.

          (b) At the time of the final disbursement of the Escrow Assets, Escrow
         Agent will immediately disburse to Sprint all Investment Income in the
         manner Sprint instructs except to the extent such Investment Income is
         disbursed to Z-Tel because the balance of the Escrow Assets falls short
         of the amount then required under Section 4.

         8. INVESTMENT OF ESCROW ASSETS. Escrow Agent will invest and reinvest
the Escrow Assets in Authorized Investments as Sprint directs in writing from
time to time. Escrow Agent will initially invest the Escrow Assets in the
Financial Square Treasury Obligation Fund.

         9. TERMINATION. This Agreement will continue in effect until Escrow
Agent has disbursed all of the Escrow Assets under this Agreement, at which time
this Agreement will terminate. The provisions of Sections 1, 4 through 8 and 10
through 23 will survive the termination of this Agreement.

         10. FEES AND EXPENSES. Escrow Agent will be entitled to the fees and
expenses set forth on Attachment B for performing its duties under this
Agreement. Sprint and Z-Tel will each pay for one-half (1/2) of all fees or
expenses payable to Escrow Agent under this Agreement.

         11. DUTIES OF ESCROW AGENT.

          (a) Escrow Agent is liable as a depository only, with its duties being
         only those specifically provided in this Agreement, which are
         ministerial in nature and not

                                      124

<PAGE>

         discretionary. Escrow Agent is not responsible for any mistake of fact
         or error in judgment, or for any acts or failure to act of any kind it
         takes in good faith and believes to be authorized or within the rights
         or powers conferred under this Agreement, unless there is shown willful
         misconduct or gross negligence.

          (b) Escrow Agent is not responsible for the sufficiency or accuracy of
         the form, execution or validity of the documents delivered or Escrow
         Assets deposited under this Agreement, nor for any description of
         property or other matter noted in the documents. Escrow Agent is not
         responsible for any default by Sprint or Z-Tel. Escrow Agent has no
         obligation to seek Sprint's and Z-Tel's performance of their respective
         obligations under this Agreement. Escrow Agent is not responsible for
         the lapsing of any rights under any statutes of limitation concerning
         the Escrow Assets. Escrow Agent is not liable for collection of items
         until it receives the cash proceeds of the items. Escrow Agent is not
         liable for interest on any deposit of money.

                  (c) Escrow Agent is not responsible for the identity,
         authority or rights of persons executing or delivering, or purporting
         to execute or deliver any document or item under this Agreement and
         when performing its duties under this Agreement it may rely absolutely
         and be fully protected in acting upon any item, document or other
         writing it believes to be authentic. Escrow Agent may, as a condition
         to the disbursement of money or property, require from the payee or
         recipient a receipt for the disbursement and, upon final payment or
         distribution, require a release from any liability arising out of its
         execution or performance of its obligations under this Agreement.

                  (d) Sprint and Z-Tel will jointly indemnify and hold harmless
         Escrow Agent from and against all costs, damages, liabilities and
         expenses Escrow Agent incurs in connection with or arising out of this
         Agreement that Escrow Agent incurs as a result of claims or actions by
         third parties. Escrow Agent may consult with and engage the services of
         legal counsel of its choice with respect to any matter pertaining to
         this Agreement. Sprint and Z-Tel will jointly and severally reimburse
         Escrow Agent for the reasonable costs and expenses of the legal
         counsel.

                  (e) Escrow Agent retains the right to resign upon giving at
         least thirty (30) calendar days' prior written notice to Sprint and
         Z-Tel.

 12. GOOD FAITH PERFORMANCE. The parties to this Agreement will act in good
faith in the performance of their obligations under this Agreement consistent
with the purposes of this Agreement. Except as otherwise specifically noted in
this Agreement, neither party will unreasonably delay, withhold or condition any
approval or consent that this Agreement requires or permits.

                                      125

<PAGE>

 13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the Parties concerning the subject matter of this Agreement and supersedes all
prior agreements, understandings and arrangements, both oral and written,
between the Parties concerning the subject matter. Furthermore, this Agreement
has been negotiated and fully reviewed by counsel for all Parties. Except as
otherwise provided in this Agreement, this Agreement may not be modified,
amended, altered or rescinded in any manner, except by written instrument signed
by both of the Parties. All attachments, schedules and other attachments to this
Agreement are incorporated by this reference as integral parts of this
Agreement.

 14. ASSIGNMENT. No Party may assign this Agreement without the written consent
of the other Parties, which will not be unreasonably withheld. Any attempt to
assign this Agreement in contravention of the preceding sentence is void.
Notwithstanding the foregoing, Sprint may assign its rights and obligations
under this Agreement to any of its Owned Affiliates, but upon the assignment and
assumption, Sprint will remain obligated under this Agreement for such assigned
obligations.

 15. BINDING AGREEMENT. Subject to the preceding paragraph, this Agreement will
inure to the benefit of and be binding on the Parties and their respective
successors and permitted assigns.

 16. LITIGATION VENUE. In the event of litigation arising from any dispute under
this Agreement, the Parties agree that venue will not be in Kansas or Florida.

 17. GOVERNING LAW. This Agreement will be governed and interpreted under the
substantive laws of Missouri, without reference to its principles of conflicts
or choice of law. The Parties acknowledge that this Agreement will be performed
in part in Missouri.

 18. LEGAL FEES. Regarding any dispute under this Agreement, a prevailing party,
as determined by a court of competent jurisdiction, will be entitled to payment
of the entire court costs and reasonable attorneys' fees incurred in
investigating, preparing and conducting any litigation that might arise under
this Agreement.

 19. NOTICES.

          (a) Any notices or deliveries permitted or required by this Agreement
         must be given by messenger or by overnight delivery with Federal
         Express, United Parcel Service, Airborne Express or a similarly
         nationally recognized overnight delivery service. These notices or
         deliveries will be deemed to have been given (i) upon delivery by
         messenger, if a receipt is obtained for delivery, (ii) one (1) calendar
         day after timely deposit for overnight delivery with Federal Express,
         United Parcel Service, Airborne Express or similar nationally
         recognized overnight delivery service, if the service obtains a
         confirmation of delivery, or (iii) three (3) Business Days after
         mailing, if mailed via certified or registered U.S. mail, return
         receipt requested; if the notice is delivered, deposited for delivery,
         mailed or sent to the Party's address as set forth below:

                                      126

<PAGE>

         To Commerce:

                          Commerce Bank, N.A.
                          Corporate Trust Department, TBMZ-5
                          P.O. Box 419248
                          Kansas City, MO 64141-6248

         To Commerce via messenger or overnight delivery:

                          Commerce Bank, N.A.
                          Attn: Corporate Trust Department
                          922 Walnut Street, 3rd Floor
                          Kansas City, MO 64106

         To Z-Tel:

                          Z-Tel Communications, Inc.
                          601 South Harbour Island Boulevard
                          Suite 220
                          Tampa, Florida  33602
                          Attn:  Donald C. Davis

         To Sprint:

                          Sprint Communications Company L.P.
                          Mailstop: KSOPHE 0410-4B177
                          6360 Sprint Parkway
                          Overland Park, Kansas 66251-1666
                          Attn:  David Palan

         and, if the notice is to Z-Tel, a copy, which will not constitute
         notice, is delivered, deposited for delivery, mailed or sent in the
         same manner to

                          Andrew Graham, Esquire
                          Z-Tel Communications, Inc.
                          601 South Harbour Island Boulevard
                          Suite 220
                          Tampa, Florida  33602

         and, if the notice is to Sprint, a copy, which will not constitute
         notice, is delivered, deposited for delivery, mailed or sent in the
         same manner to:

                                      127

<PAGE>

                          Michelle Brown, Esquire
                          Sprint Communications Company L.P.
                          Mailstop: KSOPHN 0304-3B653
                          6450 Sprint Parkway
                          Overland Park, Kansas 66251-6100

         Any Party may change the address to which notices are to be delivered
         by giving notice of the change of address in the manner set forth
         above.

          (b) Notices deemed to have been given or delivered as set forth above
         on a Saturday, Sunday or legal holiday will instead be deemed to have
         been given or delivered on the next succeeding day that is not a
         Saturday, Sunday or legal holiday.

 20. WAIVER. No failure or delay by any Party to this Agreement in the exercise
of any right, power or remedy it may have will operate as a waiver, nor will any
single or partial exercise of any right, power or remedy by either Party
preclude any other or further exercise by the Party of that right, power or
remedy or the exercise of any other right, power or remedy. No express waiver or
assent by any Party to any breach of or default in any term or condition of this
Agreement will constitute a waiver of or assent to any succeeding breach of or
default in the same or any other term or conditions of this Agreement.

 21. CONSTRUCTION. This Agreement was negotiated at arms' length and will not be
construed more strongly against any Party regardless of which Party was
responsible for its preparation. Whenever from the context it appears
appropriate, each term stated in either the singular or the plural includes the
singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender include the other genders. The word "Agreement" and words of
similar import referring to this Agreement refer to this Agreement as a whole,
including the Schedules and Attachments attached to it, and not to any
particular provision of this Agreement. Whenever the word "include," "includes"
or "including" is used in this Agreement, it is deemed to be followed by the
words "without limitation."

 22. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, this Agreement will be constructively amended to the extent
necessary and possible to achieve the same objectives as the severed provision
was intended to achieve, and the remaining provisions of this Agreement will
continue in full force and effect.

 23. COUNTERPARTS. This Agreement may be executed in several counterparts, all
of which taken together will constitute one single agreement between the
Parties. Signed facsimile copies of this Agreement, addenda, attachments,
schedules and attachments will legally bind the Parties to the same extent as
original documents.

                                      128

<PAGE>

 24. WAIVER OF JURY TRIAL. Z-Tel, Commerce, and Sprint knowingly, voluntarily
and intentionally waive any rights they may have to a trial by jury in respect
of any litigation arising in based on, or arising out of, under or in connection
with, this Agreement. This provision is a material inducement for the Parties to
enter into this Agreement.

This Agreement is executed as of the date first above written.

SPRINT COMMUNICATIONS        Z-TEL COMMUNICATIONS, INC.
COMPANY L.P.

By________________________   By
Name______________________   Name ______________________
Title ____________________   Title _______________________

COMMERCE BANK, N.A.

By _________________________
Name _______________________
Title ______________________

                                  ATTACHMENT A

                  FORM OF EXCESS BALANCE DISBURSEMENT REQUEST

This disbursement request (the "EXCESS BALANCE DISBURSEMENT REQUEST") is made as
of __________, by Z-Tel Communications, Inc., a Delaware corporation
("Z-TEL").

Z-Tel, Sprint Communications Company L.P, a Delaware limited partnership
("SPRINT"), and Commerce Bank, N.A., Kansas City, Missouri, a national banking
association duly organized and existing under the laws of the United States (the
"ESCROW AGENT"), are each parties to that certain Transition Escrow Agreement
dated ___________ (the "ESCROW AGREEMENT").

In accordance with Section 5 of the Escrow Agreement, Z-Tel requests that Escrow
Agent distribute [$___________ from] the Escrow Assets to Sprint pursuant to the
wire transfer instructions attached as Schedule I.

Z-Tel has caused this Excess Balance Disbursement Request to be executed by its
respective duly authorized officers on the date first written above.

Z-TEL COMMUNICATIONS, INC.

By: ____________________________
Name: __________________________
Title: _________________________

                                      129

<PAGE>

                                  ATTACHMENT B

                    FORM OF UNPAID FEES DISBURSEMENT REQUEST

This disbursement request (the "UNPAID FEES DISBURSEMENT REQUEST") is made as
of __________, by Z-Tel Communications, Inc., a Delaware corporation ("Z-TEL").

Z-Tel, Sprint Communications Company L.P., a Delaware limited partnership
("SPRINT"), and Commerce Bank, N.A., Kansas City, Missouri, a national banking
association duly organized and existing under the laws of the United States (the
"ESCROW AGENT"), are each parties to that certain Transition Escrow Agreement
dated ___________ (the "ESCROW AGREEMENT").

In accordance with Section 5 of the Escrow Agreement, Z-Tel requests that Escrow
Agent distribute [$_________ from] the Escrow Assets to Z-Tel pursuant to the
wire transfer instructions attached as Schedule I.

         Z-Tel certifies that it has delivered a copy of this Unpaid Fees
Disbursement Request to Sprint pursuant to the requirements of Section 19 of the
Escrow Agreement.

         Z-Tel certifies that the Escrow Assets requested to be disbursed to
Z-Tel are for Transition Fees payable by Sprint under the Services Agreement
that Sprint has not paid when due.

Z-Tel has caused this Unpaid Fees Disbursement Request to be executed by its
respective duly authorized officers on the date first written above.

Z-TEL COMMUNICATIONS, INC.

By: _______________________
Name: _____________________
Title: ____________________

                                   SCHEDULE I

                           WIRE TRANSFER INSTRUCTIONS

Bank:

                                      130
<PAGE>
                                   Exhibit B

                           TECHNOLOGY ESCROW AGREEMENT

                      Account Number ______________________

      This Technology Escrow Agreement ("Agreement") is effective February 4,
2003, among DSI TECHNOLOGY ESCROW SERVICES, INC. ("DSI"), Z-Tel Communications,
Inc., a Delaware corporation ("Company"), and SPRINT COMMUNICATIONS COMPANY L.P.
a Delaware limited partnership ("Sprint") (collectively the "PARTIES.")

      A. Company and Sprint have entered into an Agreement for Resale of Local
Wireline Telecommunications Services and Provision of Ancillary Services dated
as of February 4, 2003, pertaining in part to Sprint's use of certain
fundamental technology of Company (the "SERVICES AGREEMENT").

      B. Company desires to conceal its fundamental technology except under
certain limited circumstances.

      C. The availability of the fundamental technology of Company is critical
to Sprint in the conduct of its business and, therefore, Sprint needs access to
such fundamental technology under certain circumstances.

      D. Company and Sprint desire to establish an escrow with DSI to provide
for the retention, administration and controlled access of and to such
fundamental technology materials of Company.

      E. The parties desire this Agreement to be supplementary to the Services
Agreement under the United States Bankruptcy Code, specifically 11 USC Section
365(n).

                              ARTICLE 1 -- DEPOSITS

      1.1 OBLIGATION TO MAKE DEPOSIT. On or before March 21, 2003, Company will
deliver to DSI the fundamental technology and other materials required to be
deposited by the Services Agreement ("DEPOSIT MATERIALS"); the materials to be
delivered initially to DSI are identified on Attachment A. Attachment A has been
prepared and signed by Company and Sprint. DSI has and will have no obligation
with respect to the preparation, signing or delivery of Attachment A.

      1.2 IDENTIFICATION OF TANGIBLE MEDIA. Before each delivery of the Deposit
Materials to DSI, Company will conspicuously label for identification each
document, magnetic tape, disk or other tangible media upon which the Deposit
Materials are written or stored. Additionally, Company will complete a
Description of Deposit Materials in the form of Attachment B to this Agreement
by listing each such tangible media by the item label description, the type of
media and the quantity. Each Attachment B will be signed by Company and
delivered to DSI with the Deposit Materials. DSI will have no
<PAGE>
obligation with respect to this Agreement, except the obligation to notify the
Parties regarding the status of the account as required in Section 2.2 below,
unless and until Company makes the initial deposit with DSI.

      1.3 DEPOSIT INSPECTION. When DSI receives Deposit Materials and the
applicable Attachment B, DSI will conduct a deposit inspection by visually
matching the labeling of the tangible media containing the Deposit Materials to
the item descriptions and quantity listed on Attachment B. In addition to the
deposit inspection, Sprint may elect to cause a verification of the Deposit
Materials in accordance with Section 1.6 below.

      1.4 ACCEPTANCE OF DEPOSIT. At completion of each deposit inspection, if
DSI determines that the labeling of the tangible media matches the item
descriptions and quantity on the applicable Attachment B, DSI will date and sign
such Attachment B and mail a copy of it to Company and Sprint. If DSI determines
that the labeling does not match the item descriptions or quantity on such
Attachment B, DSI will:

            (a) note the discrepancies in writing on such Attachment B;

            (b) date and sign such Attachment B with the exceptions noted; and

            (c) mail a copy of such Attachment B to Company and Sprint. DSI's
      acceptance of the deposit occurs upon the signing of the applicable
      Attachment B by DSI.

      Delivery of the signed Attachment B to Sprint is Sprint's notice that the
Deposit Materials have been received and accepted by DSI.

      1.5 COMPANY'S REPRESENTATIONS. Company represents as follows:

            (a) Company lawfully possesses all of the Deposit Materials
      deposited with DSI;

            (b) With respect to all of the Deposit Materials, Company has the
      right and authority to grant to DSI and Sprint the rights as provided in
      this Agreement;

            (c) The Deposit Materials are not subject to any lien or other
      encumbrance;

            (d) The Deposit Materials consist of the fundamental technology and
      other materials identified in the Services Agreement and Attachment A; and

            (e) The Deposit Materials are readable and useable in their current
      form or, if any portion of the Deposit Materials is encrypted, the
      decryption tools and decryption keys have also been deposited.

                                      -2-
<PAGE>
      1.6 VERIFICATION. Sprint will have the right, at Sprint's expense, to
cause a verification of any Deposit Materials by DSI or another neutral party
that is acceptable to Z-Tel. Sprint will notify Company and DSI of Sprint's
request for verification. Company will have the right to be present at the
verification. Verification determines, in different levels of detail, the
accuracy, completeness, sufficiency and quality of the Deposit Materials. In the
event that DSI provides a verification for Sprint pursuant to this Section, DSI
will provide Sprint only information resulting from a Level One Verification as
a Level One Verification is described on Schedule 2.1 to this Agreement.

      1.7 DEPOSIT UPDATES. If at any time Company undergoes a scheduled release
to any Deposit Materials, Company will, pursuant to Section 14.4.2 of the
Services Agreement, immediately upgrade or update the Deposit Materials. If at
any time Company implements any upgrade, update patch or other change for any
Deposit Materials that is not a scheduled release, Company will, pursuant to
Section 14.4.2 of the Services Agreement, add these unscheduled release
materials to the Deposit Materials on a monthly basis. Not less frequently than
on a monthly basis during the Term, pursuant to Section 14.4.2 of the Services
Agreement, Company will either:

            (a) deposit copies of the then-current Deposit Materials with DSI or
      provide to Sprint and to DSI a written statement, signed by Company's
      Chief Technology Officer, Senior Vice President Enterprise Systems or more
      senior officer, that there has been no change in the Deposit Materials as
      of the date of the statement, or

            (b) provide to Sprint and to DSI a written statement, signed by
      Company's Chief Technology Officer, Senior Vice President Enterprise
      Systems or more senior officer, that the Deposit Materials, as of the date
      of the statement, are current and accurately reflect the Deposit Materials
      as of that date. These written statements will be part of the Deposit
      Materials.

      All deposit updates will be listed on a new Attachment B and Company will
sign the new Attachment B. Each Attachment B will be held and maintained
separately within the escrow account. An independent record will be created that
will document the activity for each Attachment B. The processing of all deposit
updates will be in accordance with Sections 1.2 through 1.6 above. All
references in this Agreement to the Deposit Materials will include the initial
Deposit Materials and any and all updates.

      1.8 REMOVAL OF DEPOSIT MATERIALS. The Deposit Materials may be removed
and/or exchanged only on written instructions signed by Company and Sprint or as
otherwise provided in this Agreement.

                 ARTICLE 2 -- CONFIDENTIALITY AND RECORD KEEPING

                                      -3-
<PAGE>
      2.1 CONFIDENTIALITY. DSI will maintain the Deposit Materials in a secure,
environmentally safe, locked facility that is accessible only to authorized
representatives of DSI. DSI will have the obligation to reasonably protect the
confidentiality of the Deposit Materials. Except as provided in this Agreement,
DSI will not disclose, transfer, make available or use the Deposit Materials.
DSI will not disclose the content of this Agreement to any third party. If DSI
receives a subpoena or any other order from a court or other judicial tribunal
pertaining to the disclosure or release of the Deposit Materials, DSI will
immediately notify the parties to this Agreement unless prohibited by law. It
will not be the responsibility of DSI to challenge any such order; provided,
however, that DSI does not waive its rights to present its position with respect
to any such order. DSI will not be required to disobey any order from a court or
other judicial tribunal. (See Section 7.5 below for notices of requested
orders.) In the event that DSI provides a verification for Sprint pursuant to
Section 1.6 of this Agreement, DSI will provide Sprint only information
resulting from a Level One Verification as a Level One Verification is described
on Schedule 2.1 to this Agreement.

      2.2 STATUS REPORTS. DSI will issue to Company and Sprint a report
profiling the account history at least semi-annually. DSI may provide copies of
the account history pertaining to this Agreement upon the request of any party
to this Agreement.

      2.3 AUDIT OF DSI RECORDS. During the term of this Agreement, Company and
Sprint will each have the right to inspect the written records of DSI pertaining
to this Agreement. Any inspection will be held during normal business hours and
following reasonable prior notice.

                       ARTICLE 3 -- GRANT OF RIGHTS TO DSI

      3.1 TITLE TO MEDIA. Upon delivery of media to DSI, Company transfers to
DSI the title to the media upon which the Deposit Materials are written or
stored. However, this transfer does not include ownership of the proprietary and
third party technology and materials contained on the media, such as any
copyright, trade secret, patent or other intellectual property rights.

      3.2 RIGHT TO MAKE COPIES. DSI will have the right to make copies of the
Deposit Materials as reasonably necessary to perform its duties under this
Agreement. DSI will copy all copyright, nondisclosure, and other proprietary
notices and titles contained on the Deposit Materials onto any copies made by
DSI. With all Deposit Materials submitted to DSI, Company will provide any and
all instructions as may be necessary to duplicate the Deposit Materials
including but not limited to the hardware and/or software needed.

      3.3 RIGHT TO TRANSFER UPON RELEASE. Company grants to DSI the right to
transfer a copy of the Deposit Materials media to Sprint upon any release of the
Deposit Materials for use by Sprint in accordance with Article 4 below. Except
upon such a

                                      -4-
<PAGE>
release or as otherwise provided in this Agreement, DSI will not transfer the
Deposit Materials.

                         ARTICLE 4 -- RELEASE OF DEPOSIT

4.1 RELEASE CONDITIONS. As used in this Agreement, "RELEASE CONDITION" means any
of the Company Triggering Events as described in the Services Agreement (which
descriptions are incorporated into this Agreement by this reference) including
each of the following Release Conditions:

            (i) Z-Tel materially breaches any provision of the Services
      Agreement and fails to cure the breach within thirty (30) calendar days
      after receiving written notice from Sprint;

            (ii) Z-Tel's performance under the Services Agreement as measured by
      applicable SLAs for order processing, billing, OSS availability, Repair,
      data file transmission or Z-Node availability fails to meet the triggering
      event criteria as established in Schedule B of the Services Agreement and
      Z-Tel fails to cure this variance within thirty (30) calendar days after
      receiving written notice from Sprint;

            (iii) there occurs a Disconnect of Z-Tel ILEC UNE services affecting
      greater than five percent (5%) of Sprint's End Users that Z-Tel is then
      serving through any particular ILEC;

            (iv) there is a material adverse change in Z-Tel's regulatory
      environment, including any change in applicable Laws that materially and
      adversely affects Z-Tel's ability to perform its obligations under this
      Agreement;

            (v) there is a Change of Control;

            (vi) there is a material adverse change in Z-Tel's financial
      condition, evidenced by:

                  (A) simultaneously meeting three or more of the following
            criteria:

                        (1) Z-Tel fails to hold cash and cash equivalents of at
                  least $6.5 million,

                        (2) Z-Tel fails to maintain a current ratio (current
                  assets/(current liabilities less Short Term Deferred Revenue))
                  greater than point six (0.6),

                        (3) Z-Tel fails to maintain a cash ratio ((cash and
                  marketable securities)/(current liabilities less Short Term
                  Deferred

                                      -5-
<PAGE>
                  Revenue)) greater than point one-five (0.15),

                        (4) Z-Tel fails to maintain working capital (current
                  assets minus current liabilities (less Short Term Deferred
                  Revenue)) greater than negative twenty million dollars (-$20
                  million),

                        (5) Z-Tel fails to maintain a ratio of working capital
                  (current assets minus current liabilities (less Short Term
                  Deferred Revenue)) divided by total assets greater than
                  negative point two-three (-0.23), and

                        (6) Z-Tel materially breaches any agreement for borrowed
                  money (including any material violation of a debt covenant);
                  or

                  (B) Z-Tel receives a going concern qualification from its
                  auditors;

            (vii) Z-Tel ceases ongoing business operations; or

            (viii) Z-Tel becomes Bankrupt, makes a general assignment for
            benefit of creditors or has a receiver appointed for its assets, or
            a court of competent jurisdiction issues an order for Z-Tel's
            winding up.

      For purposes of this Section cash and cash equivalents exclude any
restricted amounts.

      Capitalized terms used in this Section, but not defined in this Section
have the meanings set forth on Attachment E.

      4.2 FILING FOR RELEASE. If Sprint believes in good faith that a Release
Condition has occurred, Sprint may provide to DSI written notice of the
occurrence of the Release Condition and a request for the release of the Deposit
Materials by delivering a Notice to DSI and to Company in the form of Attachment
D to this Agreement executed by an officer of Sprint (a "RELEASE INSTRUCTION").
Upon receipt of such notice, DSI will provide a copy of the notice to Company by
commercial express mail.

      4.3 RELEASE OF DEPOSIT. Upon receipt of the Release Instruction from
Sprint, DSI has no obligation to determine independently whether a Release
Condition has occurred and no right to refuse to release the Deposit Materials
to Sprint. If Company disputes DSI's release of the Deposit Materials, Company
and Sprint will resolve the dispute as provided in the Services Agreement.
Regardless of whether Company disputes DSI's release of the Deposit Materials,
DSI is authorized and directed by Company and Sprint to release the Deposit
Materials to Sprint upon receipt of the Release Instruction. Any copying expense
in excess of $100 will be chargeable to Sprint. However, DSI is entitled to
receive any fees due DSI before making the release.

                                      -6-
<PAGE>
      4.4 RETURN OF DEPOSIT. During the term of this Agreement, upon the
resolution of any dispute pursuant to the Services Agreement requiring that the
Deposit Materials be returned to DSI, Sprint will deliver the Deposit Materials,
and all copies of these materials, in accordance with the order issued as a
result of dispute resolution and will certify in writing to Company that Sprint
has no copies of the Deposit Materials in Sprint's possession. Sprint will
conspicuously label for identification each document, magnetic tape, disk or
other tangible media upon which the Deposit Materials are written or stored.
Additionally, Sprint will complete a Description of Deposit Materials in the
form of Attachment B to this Agreement by listing each such tangible media by
the item label description, the type of media and the quantity. The Description
of Deposit Materials will be signed by Sprint and delivered to DSI with the
returned Deposit Materials. Upon receipt of the Deposit Materials DSI will
create a new Attachment B and hold and maintain that Attachment B separately
within the escrow account. DSI will create an independent record that will
document the activity for each above mentioned Attachment B.

      4.5 RETENTION BY DSI OF COPY OF DEPOSIT MATERIALS. Following release of
the Deposit Materials, DSI will retain a copy of the Deposit Materials for the
longer of (a) forty-five (45) calendar days and (b) the final resolution of any
dispute pursuant to the Services Agreement seeking the return of the Deposit
Materials to DSI (including the expiration of the time in which Sprint or
Company may seek judicial review of any order issued as a result of the dispute
resolution). DSI will then transfer to Company all copies of the Deposit
Materials then in its possession (including transferring to Company the title to
the media upon which the Deposit Materials are written or stored) and this
Agreement will terminate.

      4.6 VERIFICATION OF RETURNED DEPOSIT MATERIALS. If Sprint returns the
Deposit Materials to DSI as contemplated by Section 4.4 of this Agreement, DSI
will, upon written request from Z-Tel, compare file sizes and file names between
the returned Deposit Materials and the previously released Deposit Materials,
and take such other reasonable measures as are appropriate for purposes of
attempting to determine whether the returned Deposit Materials are different
from the previously released Deposit Materials. Sprint maintains the
responsibility to ensure the returned Deposit Materials are identical to those
that were released to Sprint pursuant to Section 4.3. The fees for DSI's
verification described in this Section 4.6 will be paid by Sprint.

                        ARTICLE 5 -- TERM AND TERMINATION

      5.1 TERM OF AGREEMENT. The initial term of this Agreement is for a period
of one year (the "INITIAL TERM"). After the Initial Term has expired, this
Agreement will automatically renew from year-to-year unless (a) Company and
Sprint jointly instruct DSI in writing that the Agreement is terminated; or (b)
DSI instructs Company and Sprint in writing that the Agreement is terminated for
nonpayment in accordance with Section 5.2 or by resignation in accordance with
Section 5.3. If the Deposit Materials are subject to another escrow agreement
with DSI, DSI reserves the right, after the Initial Term, to

                                      -7-
<PAGE>
adjust the anniversary date of this Agreement to match the then prevailing
anniversary date of the other applicable escrow arrangements.

      5.2 TERMINATION FOR NONPAYMENT. In the event of the nonpayment of fees
owed to DSI, DSI will provide written notice of delinquency to Sprint and
Company. Either Sprint or Company will have the right to make the payment to DSI
to cure the default. If the past due payment is not received in full by DSI
within sixty (60) calendar days after the date of the notice, then DSI will have
the right to terminate this Agreement at any time thereafter by sending written
notice of termination to all parties. DSI will have no obligation to take any
action under this Agreement so long as any payment due to DSI remains unpaid.

      5.3 TERMINATION BY RESIGNATION. DSI reserves the right to terminate this
Agreement, for any reason, by providing Company and Sprint with ninety (90)
calendar days' written notice of its intent to terminate this Agreement. Within
the ninety (90) day period, Company and Sprint may provide DSI with joint
written instructions authorizing DSI to forward the Deposit Materials to another
escrow company and/or agent or other designated recipient. If DSI does not
receive said joint written instructions within ninety (90) calendar days after
the date of DSI's written termination notice, then DSI will return or otherwise
deliver the Deposit Materials in accordance with Section 5.4.

      5.4 DISPOSITION OF DEPOSIT MATERIALS UPON TERMINATION. Subject to the
foregoing termination provisions, and upon termination of this Agreement, DSI
will return or otherwise deliver the Deposit Materials in accordance with
Company's instructions. If there are no instructions, DSI will return the
Deposit Materials to Company. DSI will have no obligation to return the Deposit
Materials if the Deposit Materials are subject to another escrow agreement with
DSI or have been released to Sprint in accordance with Section 4.3.

      5.5 SURVIVAL OF TERMS FOLLOWING TERMINATION. Upon termination of this
Agreement, the following provisions of this Agreement will survive:

            (a) Company's Representations (Section 1.5);

            (b) The obligations of DSI in Section 2.1 regarding confidentiality
      with respect to the Deposit Materials;

            (c) The rights granted in the sections entitled Right to Transfer
      Upon Release (Section 3.3), if a release of the Deposit Materials to
      Sprint has occurred before termination;

            (d) The obligation to pay DSI any fees and expenses due;

            (e) The provisions of Article 7; and

            (f) Any other provisions in this Agreement that specifically state
      they survive the termination of this Agreement.

                                      -8-
<PAGE>
                             ARTICLE 6 -- DSI'S FEES

      6.1 FEE SCHEDULE. Sprint will pay DSI its standard fees and expenses
applicable to the services provided. DSI will notify Sprint of DSI's fees at
least sixty (60) calendar days before any increase in fees. For any service not
listed on DSI's standard fee schedule, DSI will provide a quote before rendering
the service. Sprint will pay any fees charged by DSI for performing the services
described in Section 4.5 and Section 4.6 of this Agreement.

6.2 PAYMENT TERMS. DSI will not be required to perform any service unless the
payment for that service and any outstanding balances owed to DSI are paid in
full. Initial fees are due upon receipt of a signed contract or receipt of the
Deposit Materials, whichever is earliest. If invoiced fees are not paid within
sixty (60) calendar days after the date of invoice, DSI may terminate this
Agreement in accordance with Section 5.2.

                       ARTICLE 7 -- LIABILITY AND DISPUTES

      7.1 RIGHT TO RELY ON INSTRUCTIONS. DSI may act in reliance upon any
instruction, instrument, or signature from Sprint or Company authorized
representative that DSI believes to be genuine. DSI will not be required to
inquire into the truth or evaluate the merit of any statement or representation
contained in any notice or document. DSI will not be responsible for failure to
act as a result of causes beyond the reasonable control of DSI.

      7.2 INDEMNIFICATION. Company and Sprint each agree to indemnify, defend
and hold harmless DSI from any and all claims, actions, damages, arbitration
fees and expenses, costs, attorney's fees and other liabilities ("LIABILITIES")
incurred by DSI relating in any way to this escrow arrangement unless such
Liabilities were caused solely by the negligence or willful misconduct of DSI.

      7.3 DISPUTE RESOLUTION. In the event of a dispute between Company and
Sprint pursuant to a release of Deposit Materials under Article 4, Company and
Sprint will resolve such dispute in accordance with the Services Agreement. In
the event of any other dispute relating to or arising from this Agreement, DSI
may submit the matter to any court of competent jurisdiction in an interpleader
or similar action. Any and all costs incurred by DSI in connection with such
action, including reasonable attorneys' fees and costs, will be borne 50% by
each of Company and Sprint. DSI will perform any acts ordered by any court of
competent jurisdiction, without any liability or obligation to any party under
the order by reason of the act.

      7.4 CONTROLLING LAW. This Agreement will be governed and construed in
accordance with the laws of the State of Delaware, without regard to its
conflict of law provisions.

                                      -9-
<PAGE>
      7.5 NOTICE OF REQUESTED ORDER. If any party intends to obtain an order
from any arbitrator or any court of competent jurisdiction that may direct DSI
to take or refrain from taking any action, that party will:

            (a) Give DSI at least two (2) Business Days' prior notice of the
      hearing;

            (b) Include in any such order that, as a precondition to DSI's
      obligation, DSI be paid in full for any past due fees and be paid for the
      reasonable value of the services to be rendered under such order; and

            (c) Ensure that DSI not be required to deliver the original (as
      opposed to a copy) of the Deposit Materials if DSI may need to retain the
      original in its possession to fulfill any of its other duties.

      7.6 LIMITATION OF LIABILITY. In no event will DSI be liable for any
incidental, indirect, special, exemplary, punitive or consequential damages,
including, but not limited to, damages (including loss of data, revenue, and/or
profits) costs or expenses (including legal fees and expenses), whether
foreseeable or unforeseeable, that may arise out of or in connection with this
Agreement; and in no event shall the collective liability of DSI exceed ten
times the fees paid under this Agreement. The foregoing limitation of liability
does not apply with respect to any acts of gross negligence, personal injury
claims, property damage claims (excluding the Deposit), or intellectual property
infringement. The foregoing limitation of liability does not apply to any
unauthorized release of the Deposit Materials by DSI (whether intentionally or
negligently or otherwise), and DSI's liability is limited to adjudged, actual
damages (for the avoidance of doubt, actual damages includes incidental,
indirect, special, or consequential damages, but actual damages excludes
exemplary or punitive damages).

                         ARTICLE 8 -- GENERAL PROVISIONS

      8.1 ENTIRE AGREEMENT. This Agreement, which includes Attachments described
in this Agreement, embodies the entire understanding among the parties with
respect to its subject matter and supersedes all previous communications,
representations or understandings, either oral or written. DSI is not a party to
the Services Agreement between Company and Sprint. DSI's only obligations to
Company or Sprint are as set forth in this Agreement. No amendment or
modification of this Agreement will be valid or binding unless signed by all the
parties to this Agreement, except that Attachment A need not be signed by DSI,
Attachment B need not be signed by Sprint and Attachment C need not be signed.

      8.2 NOTICES. All notices, invoices, payments, deposits and other documents
and communications will be given to the parties at the addresses specified in
the attached Attachment C. It will be the responsibility of the parties to
notify each other as provided

                                      -10-
<PAGE>
in this Section in the event of a change of address. The parties will have the
right to rely on the last known address of the other parties. Unless otherwise
provided in this Agreement, all documents and communications may be delivered by
first class mail.

      8.3 SEVERABILITY. In the event any provision of this Agreement is found to
be invalid, voidable or unenforceable, the parties agree that unless it
materially affects the entire intent and purpose of this Agreement, such
invalidity, voidability or unenforceability will affect neither the validity of
this Agreement nor the remaining provisions in this Agreement, and the provision
in question will be deemed to be replaced with a valid and enforceable provision
most closely reflecting the intent and purpose of the original provision.

      8.4 SUCCESSORS. This Agreement will be binding upon and will inure to the
benefit of the successors and assigns of the parties. However, DSI will have no
obligation in performing this Agreement to recognize any successor or assign of
Company or Sprint unless DSI receives clear, authoritative and conclusive
written evidence of the change of parties.

      8.5 REGULATIONS. Company and Sprint are responsible for and warrant
compliance with all applicable laws, rules and regulations, including but not
limited to customs laws, import, export, and re-export laws and government
regulations of any country from or to which the Deposit Materials may be
delivered in accordance with the provisions of this Agreement.

Z-TEL COMMUNICATIONS, INC.               SPRINT COMMUNICATIONS COMPANY L.P.

By: _________________________________   By: _________________________________
Name:________________________________   Name:________________________________
Title:_______________________________   Title:_______________________________
Date:________________________________   Date:________________________________

                  DSI TECHNOLOGY ESCROW SERVICES, INC.

                  By:_______________________________________
                  Name:_____________________________________

                                      -11-
<PAGE>
                                  SCHEDULE 2.1

                               LEVEL 1 - INVENTORY

This series of tests provides insight into whether the necessary information
required to recreate the Depositor's development environment has been properly
stored in escrow. These tests detect errors that often inhibit effective use of
the escrow deposit.

Steps include: Analyzing deposit media readability, virus scanning, developing
      file classification tables, identifying the presence/absence of build
      instructions; and identifying materials required to recreate the
      Depositor's software development environment. At completion of testing,
      DSI will distribute a report to Preferred Beneficiary detailing DSI's
      investigation which will include attachments of any build instructions,
      file classification tables and listings, and listings of required software
      development materials, including without limitation, required source code
      languages and compilers, third-party software, libraries, operating
      systems, and hardware, as well as DSI's analysis of the deposit (when
      identifying materials required to recreate Depositor's software
      development environment, DSI will rely on (1) information provided in
      Depositor's completed questionnaire, this can be obtained via a DSI
      verification representative, and/or (2) DSI's testing experience).

                                      -12-
<PAGE>
                                  ATTACHMENT A

                            MATERIALS TO BE DEPOSITED

                      Account Number ______________________

Z-Tel represents to Sprint that Deposit Materials delivered to DSI will consist
of the following:

Z-Node OA&M Software
Z-Node Service Software and Configuration Specifications to support:
            Voice Mail
            Family Mailbox
            Find Me
            Notify Me
            On-Line Account Maintenance
            Web Access to Features
            Telution Configuration Specifications
Z-Tel Custom Software
            Local Calling Area Lookup
            Local Calling Cap Viewer
            Pre-Processor for CDR (Mediation and Rating)
            Bill Processing Scripts
            Post-Process Validation
Customer Care Interface (CCI) Software
Agent Desktop Phone (ADP) Software
Call Center IVR Scripts
Report Hierarchy & Menus
ILEC Gateway Software
RTS Provisioning Gateway
RTS middleware

For each item above Z-Tel will provide the applicable source code (where
applicable), related documentation, software development tools and training
materials.

_____________________________________    _____________________________________
Z-Tel Communications, Inc.               Sprint Communications Company L.P.

By: _________________________________    By: _________________________________
Name:________________________________    Name:________________________________
Title:_______________________________    Title:_______________________________
Date:________________________________    Date:________________________________

                                      -13-
<PAGE>
                                  ATTACHMENT B

                        DESCRIPTION OF DEPOSIT MATERIALS

Z-Tel Communications, Inc. ___________________________________________________

Account Number _______________________________________________________________

      F. Product Name Version

(Product Name will appear as the Attachment B Name on Account History report)

DEPOSIT MATERIAL DESCRIPTION:

Quantity    Media Type & Size            Label Description of Each Separate Item
______      Disk 3.5" or ____
______      DAT tape ____mm
______      CD-ROM
______      Data cartridge tape ____
______      TK 70 or ____ tape
______      Magnetic tape ____
______      Documentation
______      Other ______________________

PRODUCT DESCRIPTION:
Environment___________________________________________________________________

DEPOSIT MATERIAL INFORMATION:

Is the media or are any of the files encrypted? Yes / No If yes, please include
any passwords and the decryption tools.
Encryption tool name____________________________________ Version______________
Hardware required_____________________________________________________________
Software required_____________________________________________________________
Other required information____________________________________________

                                      -14-
<PAGE>
I certify for Z-TEL that the above described___________________________DSI has
inspected and accepted the above Deposit Materials have been transmitted to
DSI:________________________materials (any exceptions are noted above):

Signature________________________         Signature___________________________
Print Name_______________________         Print Name__________________________
Date_____________________________         Date Accepted_______________________
                                          Attachment B#_______________________

    Send materials to: DSI, 9265 Sky Park Ct., Suite 202, San Diego, CA 92123
                                 (858) 499-1600

                                      -15-
<PAGE>
                                  ATTACHMENT C

                               DESIGNATED CONTACT

                      Account Number ______________________

Notices, deposit material returns and    Invoices to Z-Tel should be
communications to Z-Tel                  addressed to:
should be addressed to:
                                         ____________________________________
                                         ____________________________________
Company Name:_______                     ____________________________________
Address:_______                          ____________________________________

Designated Contact:_______               Contact:_______

Telephone:_______                        ____________________________________
Facsimile:_______                        P.O.#, if required:_________________
E-mail:  _________________________
Verification Contact:  ___________                  (a) E-mail:
                                            _________________________________

Notices and communications to            Invoices to Sprint
Sprint should be addressed to:           should be addressed to:

Company Name:_______                     ____________________________________
                                         ____________________________________
Address:_______                          ____________________________________
Designated Contact:_______                      Contact:_______

Telephone:_______
Facsimile:_______                        P.O.#, if required:_________________
E-mail:  ________________________                    (b) E-mail:
                                            _________________________________

Requests from Z-Tel or Sprint to change the designated contact should be given
in writing by the designated contact or an authorized employee of Z-Tel or
Sprint.

Contracts, Deposit Materials and         Invoice inquiries and fee remittances
notices to                               to DSI should be addressed to:
DSI should be addressed to:

DSI Technology Escrow Services, Inc.     DSI Technology Escrow Services, Inc.
Contract Administration                  PO Box 45156
9265 Sky Park Court, Suite 202           San Francisco, CA  94145-0156
San Diego, CA 92123
Telephone: (858) 499-1600                (858) 499-1636
Facsimile: (858) 694-1919                (858) 499-1637
E-mail: ca@dsiescrow.com

Date:_________________________________

                                      -16-
<PAGE>
                                  ATTACHMENT D

                      TECHNOLOGY ESCROW RELEASE INSTRUCTION

To: DSI Technology Escrow Services, Inc.

From: Sprint Communications Company L.P

Re: Z-Tel/Sprint Technology Escrow

The undersigned Officer certifies, on behalf of Sprint Communications Company
L.P, that a Z-Tel Triggering Event has occurred within the meaning of the
Agreement for Wholesale Telephone Exchange Services, Z-Node Services, Ancillary
Services and Technology License dated February ____, 2003 between Z-Tel
Communications, Inc. and Sprint Communications Company L.P. That event is

_________________________________________________________
____________________________________________________________________________

OR

The undersigned Officer certifies, on behalf of Sprint Communications Company
L.P, that a Z-Tel Liquidation Proceeding has occurred within the meaning of the
Agreement for Wholesale Telephone Exchange Services, Z-Node Services, Ancillary
Services and Technology License dated February _____, 2003 between Z-Tel
Communications, Inc. and Sprint Communications Company L.P. That event is

_________________________________________________________
____________________________________________________________________________

The undersigned Officer also certifies, on behalf of Sprint Communications
Company L.P., that Sprint has tendered to Z-Tel in immediately available funds
all non-disputed fees and charges currently due Z-Tel.

The undersigned Officer demands, on behalf of Sprint Communications Company
L.P., the immediate release of the Technology Escrow Materials to Sprint.

SPRINT COMMUNICATIONS COMPANY L.P.

BY:__________________________
TITLE:_______________________
DATE:________________________

                                      -17-
<PAGE>
                                  ATTACHMENT E

                                   DEFINITIONS

ANCILLARY SERVICES means any facility or service that is requested by Sprint
that is not a Telecommunications Service or an Information Service that is
necessary or desirable to directly support delivery by Sprint of
Telecommunications Services and Information Services to its End Users and is not
identified as a function to be performed by Z-Tel in the SOW.

BANKRUPTCY OR BANKRUPT means the happening of any of the following events:

      (a) the filing of an application for, or a consent to, the appointment of
a trustee, receiver or liquidator for all or any substantial portion of the
party's assets;

      (b) the filing of a voluntary petition in bankruptcy;

      (c) the filing of a pleading in any court of record admitting inability to
pay debts as they come due;

      (d) the making of an assignment for the benefit of creditors;

      (e) the consenting to, or default in the answering of, a bankruptcy
petition filed;

      (f) the entry of a judgment or decree in any bankruptcy or insolvency
proceeding adjudicating bankruptcy or insolvency;

      (g) the entry of an order for any relief in any bankruptcy or insolvency
proceeding;

      (h) when one hundred twenty (120) calendar days after the commencement of
any involuntary proceeding seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any statute, law
or regulation, the proceeding has not been dismissed; and

      (i) when ninety (90) calendar days after the appointment, without the
party's consent or acquiescence, of a trustee, receiver or liquidator of the
Party or all or any substantial portion of the party's assets, the appointment
has not been vacated or stayed or when ninety (90) calendar days after the stay
the appointment has not been vacated.

CHANGE OF CONTROL means the occurrence of any of the following events:

      (a) Any "person" (as that term is defined in Sections 3(a)(9), 13(d), and
14(d) of the Securities Exchange Act of 1934 (the "EXCHANGE ACT") and the rules
under the Exchange Act, including Rule 13d-5(b)) acquires, directly or
indirectly, "beneficial ownership" (as determined under Rule 13d-3 under the
Exchange Act) of securities

                                      -18-
<PAGE>
entitled to vote generally in the election of Z-Tel's directors ("VOTING
SECURITIES") so that, after the acquisition, the "person" holds, directly or
indirectly, shares of voting securities representing forty percent (40%) or more
of the combined voting power of Z-Tel's then outstanding voting securities,
other than an acquisition of voting securities:

      (i) by a trustee or other fiduciary holding the securities under any
employee benefit plan (or related trust) sponsored or maintained by Z-Tel or any
person that Z-Tel controls,

      (ii) by any employee benefit plan (or related trust) sponsored or
maintained by Z-Tel or any person that Z-Tel controls,

      (iii) by Z-Tel,

      (iv) by a corporation owned, directly or indirectly, by Z-Tel's
stockholders in substantially the same proportions as their ownership of Z-Tel
stock, or

      (v) in a transaction that would not be a Change in Control under clause
(c) below.

      Notwithstanding the foregoing, an event is not a "Change of Control" under
this subparagraph (a) unless:

      (A) the "person" is one or more Change of Control Companies or any of
their respective Affiliates or successors, or

      (B) the "person" includes one or more Change of Control Companies or any
of their respective Affiliates or successors, and any included Change of Control
Company, Affiliate or successor owns, controls or otherwise holds (together with
its Affiliates and successors) voting securities representing in aggregate
************************* or more of the combined voting power of the "person's"
then outstanding voting securities.

      For purposes of this Agreement, the "CHANGE OF CONTROL COMPANIES" are
*****************************************************************************
**************************************************************************. For
the avoidance of doubt, nothing in the proceeding will limit the effectiveness
of the exclusions set forth in clauses (i), (ii), (iii), (iv), and (v) of this
subparagraph (a).

      (b) A change occurs in the composition of Z-Tel's Board of Directors that
causes less than a majority of Z-Tel's directors to be directors that meet one
or more of the following descriptions:

      (i) a director who:

            (A) has been a director of Z-Tel for a continuous period of at least
the previous twelve (12) months, or

            (B) was a director of Z-Tel as of the Effective Date and has
continued that role continuously without interruption since the Effective Date,

                                      -19-
<PAGE>
      (ii) a director whose election or nomination as director was approved by a
vote of at least two-thirds of the then directors described in this clause (b)
by prior nomination or election, but excluding, for the purpose of this
subclause (b)(ii), any director whose initial assumption of office occurred as a
result of:

      (A) an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person or group other than Z-Tel's Board of
Directors, or

      (B) a tender offer, merger, sale of substantially all of Z-Tel's assets,
consolidation, reorganization or business combination that would be a Change in
Control under clause (c) below, or

      (iii) a director who was serving on Z-Tel's Board of Directors as a result
of the consummation of a transaction that would not be a Change in Control under
clause (c) below.

      Notwithstanding the foregoing, an event is not a "Change of Control" under
this subparagraph (b) unless after the event a majority of Z-Tel's directors are
representing (through any arrangement, agreement, or understanding), were
designated by, or are employed by, one or more of the Change of Control
Companies or any of their respective Affiliates or successors.

      (c) Z-Tel consummates (whether directly involving Z-Tel or indirectly
involving Z-Tel through one or more intermediaries):

      (i) a merger, consolidation, reorganization or business combination,

      (ii) a sale or other disposition of all or substantially all of its
assets, or

      (iii) the acquisition of assets or stock of another entity,

      in each case, other than in a transaction:

      (A) that results in Z-Tel's voting securities outstanding immediately
before the transaction continuing to represent (either by remaining outstanding
or by being converted into voting securities of Z-Tel or the person that, as a
result of the transaction, controls, directly or indirectly, Z-Tel or owns,
directly or indirectly, all or substantially all of Z-Tel's assets or otherwise
succeeds to Z-Tel's business (Z-Tel or such person, the "SUCCESSOR ENTITY"))
directly or indirectly, at least ******************* of the combined voting
power of the Successor Entity's outstanding voting securities immediately after
the transaction,

      (B) after which more than ******************* of the members of the
Successor Entity's Board of Directors were members of Z-Tel's Board of Directors
when Z-Tel's Board of Director's approved the transaction (or whose election or
nomination was approved by a vote of at least two-thirds of the members who were
members of Z-Tel's Board of Directors at that time), and

                                      -20-
<PAGE>
      (C) after which no person or group beneficially owns voting securities
representing ******************* or more of the combined voting power of the
Successor Entity (but no person or group will be treated for purposes of this
clause (C) as beneficially owning ******************* or more of combined voting
power of the Successor Entity solely because of the voting power the person or
group held in Z-Tel before the consummation of the transaction.

      Notwithstanding the foregoing, an event is not a "Change of Control" under
this subparagraph (c) unless it results, whether through one transaction or a
series of related transactions occurring during any 365-day period, in the
"ultimate parent entity" (as defined in the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
under such act, but using a ******** rather than a ********* of Z-Tel becoming
any of the Change of Control Companies or any of their respective Affiliates or
successors.

      Z-Tel liquidates or dissolves.

      DISCONNECT means the process by which dial tone is disabled by the serving
carrier in association with an End User line.

      END USER means, with respect to any party, the party's retail customers
including business users. "Sprint's End Users" (and derivatives thereof)
includes any End User of Sprint's Affiliates who are purchasing Local Wholesale
Services.

      ILEC or INCUMBENT LOCAL EXCHANGE CARRIER means with respect to an area,
the local exchange carrier that:

      (a) on the date of enactment of the Telecommunications Act of 1996,
provided telephone exchange service in such area; and

            (b) (i) on the date of enactment of the Telecommunications Act of
1996, was deemed to be a member of the exchange carrier association pursuant to
Section 69.601(b) of the FCC's regulations (47 C.F.R. Section 69.601(b)); or
(ii) is a person or entity that, on or after such date of enactment, became a
successor or assign of a member described in clause (i)

      INFORMATION SERVICE(S) has the meaning set forth in Section 3(20) of the
Communications Act of 1934, as amended, 47 U.S.C. Section 153(20).

LOCAL WHOLESALE SERVICES means:

      (a) Telephone Exchange Service that Z-Tel provides to other carriers for
resale to their End Users, and other associated services through use of Z-Tel's
OCN, such as basic and adjunct to basic vertical services, and exchange access
functionality, and

                                      -21-
<PAGE>
      (b) Telephone Exchange Service that Z-Tel supports for sale by Sprint to
its End Users, and other associated services through use of Sprint's OCN, such
as basic and adjunct to basic vertical services and exchange access
functionality.

      OCN means operating company number.

      OSS SERVICES or OPERATIONS SUPPORT SYSTEM SERVICES means all
functionalities (as well as the hardware, software and documentation) that is
reasonably necessary, required or useful to directly or indirectly support
delivery of LW Based Services or Z-Tel Information Services to Sprint's End
Users. Included within OSS Services, without limitation, are the following
functionalities: ordering, provisioning, billing and collection, fulfillment,
sales, preparing and handling CDRs, and customer care. For the avoidance of
doubt, "OSS Services" does not include any Telecommunications Service, any
Information Service or any customization of Z-Tel Technology that is developed
as an Ancillary Service.

      REPAIR means the report and resolution of service issues

      SERVICE LEVEL AGREEMENTS or SLAS means specified levels of service that
Z-Tel is responsible to provide in relation to Local Wholesale Services, Z-Node
Services and OSS Services.

      SHORT TERM DEFERRED REVENUE means revenues offset to future periods for
revenue recognition purposes that are included in current liabilities.

      TELECOMMUNICATIONS SERVICES means the offering of telecommunications for a
fee directly to the public, or to such classes of users as to be effectively
available directly to the public, regardless of the facilities used.

TELEPHONE EXCHANGE SERVICE means:

      (a) service within a telephone exchange, or within a connected system of
telephone exchanges within the same exchange area operated to furnish to
subscribers intercommunicating service of the character ordinarily furnished by
a single exchange, and which are covered by the exchange service charge, or

      (b) comparable service provided through a system of switches, transmission
equipment, or other facilities (or combination thereof) by which a subscriber
can originate and terminate a Telecommunications Service.

Telephone Exchange Service involves the combination of loop, switch port and any
other necessary elements required to provide an unbroken signal of 350 + 440 Hz
reflecting that telephone service is currently provided and that the telephone
company is ready to receive dialed digits.

                                      -22-
<PAGE>
      Z-NODE SERVICES means any proprietary Z-Tel Information Service or Z-Tel
Adjunct to Basic Service provided as a vertical feature through the Z-Line
Platform. Available Z-Node Services include Voice Mail, Family Mail Box, Find
Me, On-Line Account Maintenance, Notify Me, and Web Access. For the avoidance of
doubt, Z-Node Services will not include access to Z-Tel's Personal Voice
Assistant service ("PVA(TM) service")

                                      -23-

<PAGE>

ABA #:

Account #:

Account Holder:

Amount Disbursed:

                                  ATTACHMENT B

                                  ESCROW FEES

ACCEPTANCE AND SET-UP FEE:   $1,500
(payable upon funding the escrow)

ANNUAL ADMINISTRATION FEE:   $1,500
(for services for one year or any
part thereof, payable in advance)

INVESTMENT FEES: Included in the annual administration fee, except for the point
two five percent (0.25%) money management fee charged by the money market funds,
which fee will be in addition to the annual administration fee.

OUT-OF-POCKET EXPENSES: Any out-of-pocket expenses, including fees and charges
for legal counsel or other professional advisors, will be charged as incurred.

                                    EXHIBIT B

                          TECHNOLOGY ESCROW AGREEMENT

                                      131

<PAGE>

                                    EXHIBIT C

             FORM OF TEXT FOR INITIAL SEC FILING AND PRESS RELEASE

             Z-TEL AND SPRINT SIGN AGREEMENT FOR WHOLESALE SERVICES

           MEDIA CONTACTS:
         Sarah E. Bialk            Christine Attalla

         Z-Tel Technologies, Inc.                  PR Results (PR(2))(TM)
         813-233-4586                          630.783.1024
         sbialk@z-tel.com                      cattalla@prresults.org

TAMPA, Fla. (February 4, 2003) - Z-Tel Technologies, Inc. (NASDAQ: ZTEL), a
leading provider of local, long distance and enhanced telecommunications
services, today announced it has signed a non-exclusive, wholesale services
agreement with the Sprint Corporation (NYSE: FON, PCS). The agreement gives
Sprint access to Z-Tel's Web-integrated enhanced communications platform and
operational support systems related to providing local residential telephone
service. Specific financial terms of the agreement were not disclosed.

Z-Tel's Web-integrated enhanced services include Internet-accessible voicemail,
multiple-number call forwarding and message notification by email, cell phone or
pager. The agreement offers Sprint a cost-effective avenue to meet consumers'
increasing demand for bundled telecommunications services outside of Sprint's
existing local markets.

Gregg Smith, president and chief executive officer for Z-Tel, commented, "Our
wholesale business model gives companies access to our state-of-the-art enhanced
services and an efficient way to enter the local services market. We're proud to
offer these benefits to Sprint."

Harry Campbell, president of Sprint's Mass Markets Organization, stated, "Z-Tel
offers valuable functionality for Sprint to conduct market tests to explore
providing a coast-to-coast local telephone service offering."

Smith concluded, "With our demonstrated operational expertise and proprietary,
Web-integrated calling and messaging suite, we're in a unique position to
quickly and seamlessly help companies establish or expand their presence in the
local telecommunications services market."

ABOUT Z-TEL

Z-Tel was founded in the wake of the Telecommunications Act of 1996. With the
establishment of the Unbundled Network Element-Platform (UNE-P), competitive
telecommunications companies became able to provide telephone service to
end-users over the incumbent local

telephone providers' network. Z-Tel was formed around UNE-P with the vision of
developing technology that would imbue the telephone with "Intelligent Dial
Tone," wherein telephone service can be personalized to meet consumers' and
businesses' diverse communications needs in an intelligent, intuitive way. Z-Tel
offers residential and business customers in 46 states value-added bundled local
and long distance phone service with proprietary Internet-accessible calling and
messaging features. Z-Tel also makes these services available on a wholesale
basis. For more information about Z-Tel's innovative services or about Z-Tel,
please visit the Company's Web site at www.ztel.com.

                                      132

<PAGE>

ABOUT SPRINT

Sprint is a global communications company serving more than 26 million business
and residential customers in over 70 countries. With approximately 72,000
employees worldwide and more than $26 billion in annual revenues, Sprint is
widely recognized for developing, engineering and deploying state-of-the-art
network technologies, including the United States' first nationwide all-digital,
fiber-optic network and Sprint's award-winning Tier 1 Internet backbone. Sprint
provides local voice and data services in 18 states and operates the largest
100-percent digital, nationwide PCS wireless network in the United States.

This press release contains forward-looking statements. These forward-looking
statements are based on the belief of our management, as well as assumptions
made by and information currently available to our management. You can identify
forward-looking statements by the fact that they do not relate strictly to
historical or current facts. The words "believe," "anticipate," "intend,"
"expect," "estimate," "project" and similar expressions are intended to identify
forward-looking statements. Forward-looking statements describe our expectations
today of what we believe is most likely to occur or may be reasonably achievable
in the future, but they do not predict or assure any future occurrence and may
turn out to be wrong. Forward-looking statements are subject to both known and
unknown risks and uncertainties and can be affected by inaccurate assumptions we
might make. Consequently, no forward-looking statement can be guaranteed. Actual
future results may vary materially. We do not undertake any obligation to
publicly update any forward-looking statements to reflect new information or
future events or occurrences. These statements reflect our current views with
respect to future events and are subject to risks and uncertainties about us,
including risk factors that are described in detail in Z-Tel's 2001 Annual
Report on Form 10-K filed on March 29, 2002; and in Z-Tel's other filings with
the Securities and Exchange Commission.

                                      133
<PAGE>

                                    EXHIBIT D

        Z-TEL BLANKET AGENCY AGREEMENT LETTER FOR LOCAL SERVICE PROVIDERS

         I am an official of Sprint Communications Company L.P. ("SPRINT") and
am authorized to commit my company to the conditions stated in this Agreement:

1.  Sprint will not knowingly submit any inquiries, requests or orders for
         service to Z-Tel without legally adequate authorization and
         verification of the customer to which such inquiries, requests or
         orders are connected.

2.  The agreement between Sprint and the End User provides that the Sprint
         is solely responsible for representing the End User in all requests
         relating to local service. The agreement between Sprint and the End
         User holds the End User responsible to Sprint for all charges incurred
         on the End User's behalf for local service.

3.  Z-Tel may provide ordering and management services to Sprint including
         sending

                                      134
<PAGE>

         Sprint orders for local service using the Sprint OCN through Z-Tel
         systems and interfaces. Z-Tel may also resell UNE-based services to
         Sprint that have been ordered using Z-Tel's OCN. When Z-Tel's OCN is
         used, Sprint is responsible to Z-Tel for all charges that are incurred
         in connection with service requests for Sprint's End Users regardless
         of whether the End User meets payment responsibilities to Sprint. When
         Sprint's OCN is used, Sprint is directly responsible to the ILEC for
         all charges that are incurred in connection with service requests for
         Sprint's End Users.

4.  To the extent required, Sprint grants Z-Tel the authorization to act in
         its behalf concerning the placement of local service orders for Sprint
         End Users with any ILEC including both those submitted using the Z-Tel
         OCN and those using a Sprint OCN. Unless agreed to in writing by both
         parties, the Sprint End Users will deal directly with Sprint on all
         inquiries concerning their Local Service. This may include, but is not
         limited to, billing, repair, directory listings, and number
         portability.

5.  Z-Tel is authorized to release all information regarding the Sprint End
         User's local service to Sprint.

6.  This Agreement will continue in effect unless canceled by prior written
         notice by Z-Tel or Sprint at least thirty (30) calendar days before the
         effective date of cancellation. Cancellation will not release or limit
         any matters occurring before the cancellation of this Blanket Agency
         Agreement.

_________________________________________
Signature of Officer

_________________________________________
Title of Officer

_________________________________________
Company Name

                                      135

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