Document:

<PAGE>   1

                                                                  EXHIBIT 4(d)-2

                              AMENDED AND RESTATED

                           REVOLVING CREDIT AGREEMENT

                                 ($120,000,000)

                                    (364 DAY)

                                      among

                               AVISTA CORPORATION,

                             THE BANKS NAMED HEREIN,

                         TORONTO DOMINION (TEXAS), INC.,

                              BANK OF AMERICA, N.A.

                                       and

                              THE BANK OF NEW YORK

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

                            Dated as of June 26, 2000

                                       1
<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Article      Section                                                                       Page
-------      -------                                                                       ----
<S>          <C>                                                                           <C>
I.  DEFINITIONS

             SECTION 1.01.  Defined Terms                                                    4
             SECTION 1.02.  Terms Generally                                                 21

II.  THE CREDITS

             SECTION 2.01.  Commitments                                                     21
             SECTION 2.02.  Loans                                                           22
             SECTION 2.03.  Notice of Revolving Borrowings                                  24
             SECTION 2.04.  Auction Bid Procedure                                           24
             SECTION 2.05.  Repayment of Loans; Evidence of Debt                            28
             SECTION 2.06.  Letters of Credit                                               28
             SECTION 2.07.  Fees                                                            33
             SECTION 2.08.  Interest on Loans                                               35
             SECTION 2.09.  Default Interest                                                35
             SECTION 2.10.  Alternate Rate of Interest                                      36
             SECTION 2.11.  Termination, Extension and Reduction of Commitments             36
             SECTION 2.12.  Prepayment                                                      37
             SECTION 2.13.  Reserve Requirements; Change in Circumstances                   38
             SECTION 2.14.  Change in Legality                                              39
             SECTION 2.15.  Indemnity                                                       40
             SECTION 2.16.  Pro Rata Treatment                                              41
             SECTION 2.17.  Sharing of Setoffs                                              41
             SECTION 2.18.  Payments                                                        42
             SECTION 2.19.  Taxes                                                           43
             SECTION 2.20.  Termination or Assignment of Commitments Under
                            Certain Circumstances                                           46

III.  REPRESENTATIONS AND WARRANTIES

             SECTION 3.01.  Organization; Powers                                            47
             SECTION 3.02.  Authorization                                                   47
             SECTION 3.03.  Enforceability                                                  48
             SECTION 3.04.  Governmental Approvals                                          48
             SECTION 3.05.  Financial Statements                                            48
             SECTION 3.06.  No Material Adverse Change                                      49
             SECTION 3.07.  Litigation; Compliance with Laws                                49
             SECTION 3.08.  Federal Reserve Regulations                                     49
</TABLE>

<PAGE>   3

<TABLE>
<CAPTION>
Article      Section                                                                       Page
-------      -------                                                                       ----
<S>          <C>                                                                           <C>
             SECTION 3.09.  Investment Company Act; Public Utility Holding Company Act      50
             SECTION 3.10.  Use of Proceeds                                                 50
             SECTION 3.11.  No Material Misstatements                                       50
             SECTION 3.12.  Employee Benefit Plans                                          50
             SECTION 3.13.  Environmental and Safety Matters                                51
             SECTION 3.14.  Significant Subsidiaries                                        51

IV.  CONDITIONS OF LENDING

             SECTION 4.01.  All Borrowings                                                  52
             SECTION 4.02.  First Borrowing                                                 53

V.  AFFIRMATIVE COVENANTS

             SECTION 5.01.  Existence; Businesses and Properties                            55
             SECTION 5.02.  Insurance                                                       56
             SECTION 5.03.  Taxes and Obligations                                           56
             SECTION 5.04.  Financial Statements, Reports, etc                              57
             SECTION 5.05.  Litigation and Other Notices                                    58
             SECTION 5.06.  ERISA                                                           58
             SECTION 5.07.  Maintaining Records; Access to Properties and Inspections       59
             SECTION 5.08.  Use of Proceeds and Letters of Credit                           59
             SECTION 5.09.  Further Assurance                                               59

VI.  NEGATIVE COVENANTS

             SECTION 6.01.  Liens                                                           60
             SECTION 6.02.  Mergers, Consolidations and Acquisitions                        64
             SECTION 6.03.  Disposition of Assets                                           65
             SECTION 6.04.  Consolidated Total Debt to
</TABLE>

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<TABLE>
<CAPTION>
Article      Section                                                                       Page
-------      -------                                                                       ----
<S>          <C>                                                                           <C>
                            Consolidated Total Capitalization Ratio                         65
             SECTION 6.05.  Public Utility Regulatory Borrowing Limits                      65
             SECTION 6.06.  Guarantees                                                      65

VII.  EVENTS OF DEFAULT

VIII. THE AGENT

IX.  MISCELLANEOUS

             SECTION 9.01.  Notices                                                         73
             SECTION 9.02.  Survival of Agreement                                           73
             SECTION 9.03.  Binding Effect                                                  74
             SECTION 9.04.  Successors and Assigns                                          74
             SECTION 9.05.  Expenses; Indemnity                                             78
             SECTION 9.06.  Right of Setoff                                                 80
             SECTION 9.07.  Applicable Law                                                  80
             SECTION 9.08.  Waivers; Amendment                                              80
             SECTION 9.09.  Interest Rate Limitation                                        81
             SECTION 9.10.  Entire Agreement                                                82
             SECTION 9.11.  Waiver of Jury Trial                                            82
             SECTION 9.12.  Severability                                                    82
             SECTION 9.13.  Counterparts                                                    82
             SECTION 9.14.  Headings                                                        83
             SECTION 9.15.  Jurisdiction; Consent to Service of Process                     83
</TABLE>

References
----------

Exhibit A             Form of Note
Exhibit B             Form of Assignment and Acceptance
Exhibit C             Form of Administrative Questionnaire
Exhibit D-1           Form of Opinion of Counsel for the

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<PAGE>   5

                      Borrower
Exhibit D-2           Form of Opinion of Special Counsel for the Borrower
Schedule 2.01         Banks
Schedule 3.14         Significant Subsidiaries
Schedule 4.02(b)      Statutes and Orders of Governmental Authorities

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<PAGE>   6

                            AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
                     dated as of June 26, 2000, among AVISTA CORPORATION, a
                     Washington corporation (herein called the "Borrower"), the
                     banks listed in Schedule 2.01 (the "Banks"), TORONTO
                     DOMINION (TEXAS), INC., as agent for the Banks (in such
                     capacity, the "Agent"), BANK OF AMERICA, N.A. (formerly
                     known as "Bank of America National Trust and Savings
                     Association"), as syndication agent (the "Syndication
                     Agent") and THE BANK OF NEW YORK, as documentation agent
                     (the "Documentation Agent").

              Pursuant to the Pre-Restatement Credit Agreement (as defined
herein), certain banks have extended credit to, and/or issued letters of credit
on behalf of, the Borrower. The Borrower has requested that the Pre-Restatement
Credit Agreement be amended and restated in the form of this Agreement and that
the Banks extend credit to the Borrower in order to enable the Borrower to
borrow on a standby revolving credit basis and obtain letters of credit on and
after the date hereof, at any time prior to the Expiration Date (as defined
herein) in a principal amount not in excess of $108,825,000 at any time
outstanding (subject to a possible increase to $120,000,000, as provided in
Section 2.01(b) below). The proceeds of such borrowings and such letters of
credit are to be used for general corporate purposes. In consideration of the
mutual covenants and agreements contained herein, the parties agree as follows:

ARTICLE I. DEFINITIONS

              SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:

              "ABR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.

              "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.

              "ABR Loan" shall mean any Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.

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<PAGE>   7

              "Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit C.

              "Affiliate" shall mean, when used with respect to a specified
person, another person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the
person specified.

              "Agency Fees" shall have the meaning assigned to such term in
Section 2.07(c).

              "Alternate Base Rate" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to the greater
of (a) the Prime Rate (computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case may be) in effect on such
day and (b) the sum of (i) the Federal Funds Effective Rate in effect for such
day plus (ii) 1/2 of 1%. If for any reason the Agent shall have determined
(which determination shall be conclusive absent manifest error) that it is
unable to ascertain the Federal Funds Effective Rate for any reason, the
Alternate Base Rate shall be determined without regard to clause (b) of the
first sentence of this definition until the circumstances giving rise to such
inability no longer exist.

              "Applicable Percentage" shall mean, with respect to any Bank, the
percentage of the total Commitments represented by such Bank's Commitment. If
the Commitments have terminated or expired, the Applicable Percentage shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.

              "Applicable Rate" shall mean on any date, with respect to any ABR
Loan or Eurodollar Revolving Loan, or with respect to the Commitment Fees, the
Letter of Credit fees or the Utilization Fees payable hereunder, as the case may
be, the applicable rate per annum set forth below under the caption "ABR
Spread," "Eurodollar Spread," "Commitment Fee", "Letter of Credit Participation
Fees" or "Utilization Fees", as the case may be, based upon the Ratings or the
Utilization Level, as the case may be:

              (a) Loan Spreads, Commitment Fee and Letters of Credit
Participation Fees

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<PAGE>   8

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
                                                                                           Letter of
                                                                                             Credit
                                 ABR            Eurodollar         Commitment            Participation
          Ratings               Spread            Spread              Fee                    Fees
------------------------------------------------------------------------------------------------------
<S>                             <C>             <C>                <C>                   <C>
Level 1                         0.00%             .625%              .125%                   .625%

A- or higher by
S&P; and A3 or
higher by
Moody's
------------------------------------------------------------------------------------------------------
Level 2                         0.00%              .75%               .15%                    .75%

BBB+ by S&P;
and Baa1 by
Moody's
------------------------------------------------------------------------------------------------------
Level 3                         0.00%             .875%               .20%                   .875%

BBB by S&P; and
Baa2 by Moody's
------------------------------------------------------------------------------------------------------
Level 4                         0.00%             1.00%               .25%                   1.00%

BBB- by S&P;
and Baa3 by
Moody's
------------------------------------------------------------------------------------------------------
Level 5                          .25%             1.25%              .375%                   1.25%

BB+ by S&P; and
Ba1 by Moody's
------------------------------------------------------------------------------------------------------
Level 6                          .50%             1.50%               .50%                   1.50%

Lower than BB+
by S&P; and
lower than Ba1
by Moody's
------------------------------------------------------------------------------------------------------
</TABLE>

For purposes of the foregoing, (i) if the Ratings in effect on any date fall in
different Levels, the Applicable Rate shall be determined on such date by
reference to the inferior (numerically higher) Level, unless the Ratings differ
by more than one Level, in which case the applicable Level shall be the Level
next below the superior (numerically lower) of the two; (ii) if either Moody's
or S&P shall not have in effect a Rating (other than because such rating agency
shall no longer be in the business of rating corporate debt obligations), then
such rating agency

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<PAGE>   9

will be deemed to have established a Rating in Level 5; and (iii) if any
rating established or deemed to have been established by Moody's or S&P shall be
changed (other than as a result of a change in the rating system of either
Moody's or S&P), such change shall be effective as of the day after the date on
which such change is first announced by the rating agency making such change.
Each change in the Applicable Rate shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next such change. If the rating system of either
Moody's or S&P shall change, or if either such rating agency shall cease to be
in the business of rating corporate debt obligations, the Borrower and the Banks
shall negotiate in good faith to amend the references to specific ratings in
this definition to reflect such changed rating system or the non- availability
of ratings from such rating agency.

                              (b) Utilization Fees

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
             Utilization Level                            Utilization Fee
--------------------------------------------------------------------------------
<S>                                                       <C>
Level 1                                                        .15%

>.33 and less than/equal to .50
--------------------------------------------------------------------------------
Level 2                                                        .30%

>.50 and less than/equal to .75
--------------------------------------------------------------------------------
Level 3                                                        .50%

>.75
--------------------------------------------------------------------------------
</TABLE>

              "Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Bank and an assignee, and accepted by the Agent and
the Borrower, in the form of Exhibit B or such other form as shall be approved
by the Agent.

              "Auction Bid" shall mean an offer by a Bank to

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<PAGE>   10

make an Auction Loan in accordance with Section 2.04.

              "Auction Bid Rate" shall mean, with respect to any Auction Bid,
the Margin for Eurodollar Auction Loans, the Fixed Rate for Fixed Rate Loans or
the Delayed Fixed Rate for Delayed Fixed Rate Loans, as applicable, offered by
the Bank in making such Auction Bid.

              "Auction Bid Request" shall mean a request by the Borrower for
Auction Bids in accordance with Section 2.04.

              "Auction Facility" shall mean the facility described in Section
2.04.

              "Auction Loan" shall mean a Loan made pursuant to Section 2.04.

              "Availability Period" shall mean the period from and including the
Effective Date to but excluding the earlier of the Expiration Date and the date
of the termination of the Commitments.

              "Board" shall mean the Board of Governors of the Federal Reserve
System of the United States.

              "Borrowing" shall mean (a) a group of Revolving Loans of the same
Type, made, converted or continued on the same date and, in the case of
Eurodollar Loans, as to which a single Interest Period is in effect or (b) an
Auction Loan or group of Auction Loans of the same Type made on the same date
and as to which a single Interest Period is in effect.

              "Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of New York) on which banks are
open for business in New York City.

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

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<PAGE>   11

shall be the capitalized amount thereof at such time determined in accordance
with GAAP.

              "Change in Control" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof),
of shares representing more than 30% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Borrower; or (b)
occupation of a majority of the seats (other than vacant seats) on the board of
directors of the Borrower by Persons who were neither (i) nominated by the board
of directors of the Borrower nor (ii) appointed by directors so nominated;
provided, that no event described in clause (a) or clause (b) shall constitute a
"Change in Control" if the senior secured long-term debt rating of the Borrower
shall be at least BBB or higher by S&P and Baa2 or higher by Moody's immediately
after giving effect to the transaction that would otherwise constitute a Change
in Control.

              "Class", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are Revolving
Loans or Auction Loans.

              "Closing Date" shall mean the date of this Agreement.

              "Code" shall mean the Internal Revenue Code of 1986, as the same
may be amended from time to time.

              "Commitment" shall mean, with respect to each Bank, the commitment
of such Bank to make Revolving Loans and to acquire participations in Letters of
Credit hereunder as set forth in Sections 2.01 and 2.06, as the same may be
reduced from time to time pursuant to Section 2.11.

              "Commitment Fee" shall have the meaning assigned to such term in
Section 2.07(a).

              "Consolidated Total Capitalization" on any date means the sum,
without duplication, of the following with respect to the Borrower and its
consolidated subsidiaries: (a) total capitalization as of such date, as
determined in accordance with GAAP, (b) the current portion of liabilities which
as of such date would be classified in whole or part

                                       11
<PAGE>   12

as long-term debt in accordance with GAAP (it being understood that the
noncurrent portion of such liabilities is included in the total capitalization
referred to in clause (a)), (c) all obligations as lessee which, in accordance
with GAAP, are capitalized as liabilities (including the current portion
thereof), and (d) all other liabilities which would be classified as short-term
debt in accordance with GAAP.

              "Consolidated Total Debt" on any date means the sum, without
duplication, of the following with respect to the Borrower and its consolidated
subsidiaries: (a) all liabilities which as of such date would be classified in
whole or in part as long-term debt in accordance with GAAP (including the
current portion thereof), (b) all obligations as lessee which, in accordance
with GAAP, are capitalized as liabilities (including the current portion
thereof), (c) all other liabilities which would be classified as short-term debt
in accordance with GAAP, and (d) all Guarantees of or by the Borrower.

              "Control" shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto.

              "Default" shall mean any event or condition which upon notice,
lapse of time or both would constitute an Event of Default.

              "Delayed Fixed Rate" shall mean, with respect to any Auction Loan
(other than a Eurodollar Auction Loan or a Fixed Rate Loan), the fixed rate of
interest per annum specified by the Bank in making such Auction Loan in its
related Auction Bid.

              "Delayed Fixed Rate Loan" shall mean an Auction Loan bearing
interest at a Delayed Fixed Rate for which an Auction Bid Request is made two
Business Days before the proposed date of borrowing.

              "dollars" or "$" shall mean lawful money of the United States of
America.

                                       12
<PAGE>   13

              "Environmental Law" shall mean any and all applicable present and
future treaties, laws, regulations, enforceable requirements, binding
determinations, orders, decrees, judgments, injunctions, permits, approvals,
authorizations, licenses, permissions, notices or binding agreements issued,
promulgated or entered by any Governmental Authority, relating to the
environment, preservation or reclamation of natural resources, or to the
management, release or threatened release of contaminants or noxious odor,
including the Hazardous Materials Transportation Act, Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, Solid Waste Disposal
Act, as amended by the Resource Conservation and Recovery Act of 1976 and
Hazardous and Solid Waste Amendments of 1984, Federal Water Pollution Control
Act, as amended by the Clean Water Act of 1977, Clean Air Act of 1970, as
amended, Toxic Substances Control Act of 1976, Occupational Safety and Health
Act of 1970, as amended, Emergency Planning and Community Right-to-Know Act of
1986, Safe Drinking Water Act of 1974, as amended, and any similar or
implementing state law, and all amendments or regulations promulgated
thereunder.

              "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time.

              "ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower is a member and
which is treated as a single employer under Section 414 of the Code.

              "Eurodollar", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Eurodollar Rate.

              "Eurodollar Borrowing" shall mean a Borrowing comprised of
Eurodollar Loans.

              "Eurodollar Loan" shall mean any Loan bearing interest at a rate
determined by reference to the Eurodollar Rate in accordance with the provisions
of Article II.

                                       13
<PAGE>   14

              "Eurodollar Rate" shall mean, with respect to any Eurodollar Loan
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/100 of 1%) equal to the product of (i) the arithmetic
average of rates at which dollar deposits approximately equal to the principal
amount of the portion of such Eurodollar Loan to be made by The Toronto-Dominion
Bank, and for a maturity equal to the applicable Interest Period, are offered to
The Toronto-Dominion Bank for Eurodollars at approximately 10:00 a.m., New York
City time, two Business Days prior to the commencement of such Interest Period
and (ii) Statutory Reserves. In the event that such rate is not available at
such time for any reason, then the "Eurodollar Rate" with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Agent in immediately available
funds in the London interbank market at approximately 10:00 a.m., New York City
time, two Business Days prior to the commencement of such Interest Period.

              "Event of Default" shall have the meaning assigned to such term in
Article VII.

              "Expiration Date" shall mean June 25, 2001.

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

              "Fees" shall mean the Commitment Fee and the Agency Fees.

              "Financial Officer" of any corporation shall mean the chief
financial officer or Treasurer of such corporation.

              "First Mortgage" shall mean the Mortgage and Deed of Trust dated
as of June 1, 1939, made by the Borrower in

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<PAGE>   15

favor of Citibank, N.A., as successor Trustee, as the same has been amended,
modified or supplemented to date and as the same may be further amended,
modified or supplemented from time to time hereafter.

              "Fixed Rate" shall mean, with respect to any Auction Loan (other
than a Eurodollar Auction Loan or a Delayed Fixed Rate Loan), the fixed rate of
interest per annum specified by the Bank making such Auction Loan in its related
Auction Bid.

              "Fixed Rate Loan" shall mean an Auction Loan bearing interest at a
Fixed Rate for which an Auction Bid Request is made on the day of the proposed
borrowing.

              "GAAP" shall mean generally accepted accounting principles,
applied on a consistent basis.

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

              "Guarantee" of or by any person shall mean any obligation,
contingent or otherwise, of such person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other person (the "primary
obligor") in any manner, whether directly or indirectly, and including any
obligation of such person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (b) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (c) to maintain working capital, equity capital
or other financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay such Indebtedness; provided, however, that
the term Guarantee shall not include endorsements for collection or deposit, in
either case in the ordinary course of business.

              "Indebtedness" of any person shall mean, without duplication, (a)
all obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,

                                       15
<PAGE>   16

debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such person
issued or assumed as the deferred purchase price of property or services (other
than trade payables incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such person, whether or not the obligations
secured thereby have been assumed, but limited, if such obligations are without
recourse to such person, to the lesser of the principal amount of such
Indebtedness or the fair market value of such property, (g) all Guarantees by
such person of Indebtedness of others, (h) all Capital Lease Obligations of such
person, (i) all obligations of such person in respect of interest rate
protection agreements, foreign currency exchange agreements or other interest or
exchange rate hedging arrangements (the amount of any such obligation to be the
amount that would be payable upon the acceleration, termination or liquidation
thereof) and (j) all obligations of such person as an account party in respect
of letters of credit and bankers' acceptances. The Indebtedness of any person
shall include the Indebtedness of any partnership in which such person is a
general partner.

              "Interest Payment Date" shall mean, with respect to any Loan, the
last day of the Interest Period applicable to the Borrowing of which such Loan
is a part and, in the case of a Eurodollar Borrowing with an Interest Period of
more than three months' duration, each day that would have been an Interest
Payment Date had successive Interest Periods of three months' duration been
applicable to such Borrowing and, in addition, the date of any refinancing or
conversion of such Borrowing with or to a Borrowing of a different Type.

              "Interest Period" shall mean (a) as to any Eurodollar Borrowing,
the period commencing on the date of such Borrowing and ending on the
numerically corresponding day (or, if there is no numerically corresponding day,
on the last day) in the calendar month that is 1, 2, 3 or 6

                                       16
<PAGE>   17

months thereafter, as the Borrower may elect, (b) as to any ABR Borrowing, the
period commencing on the date of such Borrowing and ending on the earliest of
(i) the next succeeding March 31, June 30, September 30 or December 31, (ii) the
Expiration Date, and (iii) the date such Borrowing shall be repaid or prepaid in
accordance with Section 2.12 and (c) with respect to any Fixed Rate Borrowing or
Delayed Fixed Rate Borrowing, the period (which shall not be less than 7 days or
more than 360 days) commencing on the date of such Borrowing and ending on the
date specified in the applicable Auction Bid Request; provided, however, that if
any Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, in the case
of a Eurodollar Borrowing only, such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day. Interest shall accrue from and including the first
day of an Interest Period to but excluding the last day of such Interest Period.

              "Issuing Bank" shall mean The Toronto-Dominion Bank in its
capacity as the issuer of Letters of Credit hereunder, and its successors in
such capacity as provided in Section 2.06(i). The Issuing Bank may, in its
discretion, arrange for one or more Letters of Credit to be issued by Affiliates
of the Issuing Bank, in which case the term "Issuing Bank" shall include any
such Affiliate with respect to Letters of Credit issued by such Affiliate.

              "LC Disbursement" shall mean a payment made by the Issuing Bank
pursuant to a Letter of Credit.

              "LC Exposure" shall mean, at any time, the sum of (a) the
aggregate undrawn amount of all outstanding Letters of Credit at such time plus
(b) the aggregate amount of all LC Disbursements that have not yet been
reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any
Bank at any time shall be its Applicable Percentage of the total LC Exposure at
such time.

              "Letter of Credit" shall mean any letter of credit issued pursuant
to this Agreement.

              "Lien" shall mean, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, encumbrance, charge or security interest in or on
such asset, (b) the interest of a vendor or a lessor under any conditional sale

                                       17
<PAGE>   18

agreement, capital lease or title retention agreement relating to such asset and
(c) in the case of securities, any purchase option, call or similar right of a
third party with respect to such securities.

              "Loans" shall mean loans made by the Banks to the Borrower
pursuant to this Agreement.

              "Loan Documents" shall mean this Agreement and any Notes and any
Letter of Credit applications referred to in Section 2.06(a).

              "Margin" shall mean, with respect to any Auction Loan bearing
interest at a rate based on the Eurodollar Rate, the marginal rate of interest,
if any, to be added to or subtracted from the Eurodollar Rate to determine the
rate of interest applicable to such Loan, as specified by the Bank making such
Loan in its related Auction Bid.

              "Margin Stock" shall have the meaning given such term under
Regulation U.

              "Material Adverse Effect" shall mean an effect on the business,
assets, operations or financial condition of the Borrower and the Subsidiaries
taken as a whole which could reasonably be expected to have a material adverse
effect on the creditworthiness of the Borrower.

              "Moody's" shall mean Moody's Investors Service, Inc.

              "Notes" shall mean any promissory notes of the Borrower,
substantially in the form of Exhibit A, evidencing Loans, as may be delivered
pursuant to Section 2.05.

              "PBGC" shall mean the Pension Benefit Guaranty Corporation
referred to and defined in ERISA.

              "person" shall mean a corporation, association, partnership,
trust, organization, business, individual or government or governmental agency
or political subdivision thereof.

              "Plan" shall mean any pension plan subject to the provisions of
Title IV of ERISA or Section 412 or the Code which is maintained for employees
of the Borrower or any

                                       18
<PAGE>   19

ERISA Affiliate.

              "Pre-Restatement Credit Agreement" shall mean the Revolving Credit
Agreement (3 Year) among the Borrower, the banks named therein, Toronto Dominion
(Texas), Inc., Bank of America National Trust and Savings Association and The
Bank of New York, dated as of June 30, 1998, and as in effect prior to its
amendment and restatement hereby.

              "Prime Rate" shall mean the rate of interest per annum adopted
from time to time by The Toronto-Dominion Bank at its principal office in New
York City as its prime rate. For purposes of this Agreement, any change in the
Alternate Base Rate due to a change in the Prime Rate shall be effective on the
date such change in the Prime Rate is adopted.

              "Ratings" shall refer to the ratings of Moody's and S&P applicable
to the Borrower's senior unsecured long-term debt obligations.

              "Register" shall have the meaning given to such term in Section
9.04(d).

              "Regulation D" shall mean Regulation D of the Board as from time
to time in effect and all official rulings and interpretations thereunder or
thereof and shall include any successor or other regulation or official
interpretation of the Board relating to reserve requirements applicable to
member banks of the Federal Reserve System.

              "Regulation U" shall mean Regulation U of the Board as from time
to time in effect and all official rulings and interpretations thereunder or
thereof.

              "Regulation X" shall mean Regulation X of the Board as from time
to time in effect and all official rulings and interpretations thereunder or
thereof.

              "Related Parties" shall mean, with respect to any specified
Person, such Person's Affiliates and the respective directors, officers,
employees, agents and advisors of such Person and such Person's Affiliates.

              "Reportable Event" shall mean any reportable event

                                       19
<PAGE>   20

as defined in Section 4043(b) of ERISA or the regulations issued thereunder with
respect to a Plan (other than a Plan maintained by an ERISA Affiliate which is
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Code).

              "Required Banks" shall mean, at any time, Banks having Revolving
Credit Exposures representing at least 66-2/3% of the aggregate Revolving
Exposures or, if there shall be no Revolving Credit Exposure, Banks having
Commitments representing at least 66-2/3% of the aggregate Commitments. For
purposes of declaring the Loans to be due and payable pursuant to Article VII
and of demanding the deposit of cash collateral pursuant to Section 2.06(i), and
for all purposes after the Loans become due and payable pursuant to Article VII
or the Commitments expire or terminate, the outstanding Auction Loans of the
Banks shall be included in their respective Revolving Credit Exposure in
determining the Required Banks.

              "Responsible Officer" of any corporation shall mean any executive
officer or Financial Officer of such corporation and any other officer or
similar official thereof responsible for the administration of the obligations
of such corporation in respect of this Agreement.

              "Revolving Credit Exposure" shall mean, with respect to any Bank
at any time, the sum of the outstanding principal amount of such Bank's
Revolving Loans and its LC Exposure at such time.

              "Revolving Loan" shall mean a Loan made pursuant to Section 2.03.

              "S&P" shall mean Standard & Poor's Ratings Services.

              "Significant Subsidiary" shall mean a Subsidiary meeting any one
of the following conditions: (a) the investments in and advances to such
Subsidiary by the Borrower and the other Subsidiaries, if any, as at the end of
the Borrower's latest fiscal quarter exceeded 10% of the total assets of the
Borrower and its Subsidiaries at such date, computed and consolidated in
accordance with GAAP; or (b) the Borrower's and the other Subsidiaries'
proportionate share of the total assets (after intercompany eliminations) of
such Subsidiary as at the end of the Borrower's latest

                                       20
<PAGE>   21

fiscal quarter exceeded 10% of the total assets of the Borrower and its
Subsidiaries at such date, computed and consolidated in accordance with GAAP; or
(c) the equity in the income from continuing operations before income taxes,
extraordinary items and cumulative effect of a change in accounting principle of
such Subsidiary for the period of four consecutive fiscal quarters ending at the
end of the Borrower's latest fiscal quarter exceeded 10% of such income of the
Borrower and its Subsidiaries for such period, computed and consolidated in
accordance with GAAP; or (d) such Subsidiary is the parent of one or more
Subsidiaries and, together with such Subsidiaries would, if considered in the
aggregate, constitute a Significant Subsidiary.

              "Statutory Reserves" shall mean a fraction (expressed as a
decimal) the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including, without limitation, any marginal, special, emergency or supplemental
reserves) with respect to Euro dollar funding (including with respect to
Eurocurrency Liabilities as defined in Regulation D) in an amount approximately
equal to the respective Eurodollar Loan and with a term approximately equal to
the Interest Period for such Eurodollar Loan expressed as a decimal established
by the Board or by any other United States banking authority to which the Agent
is subject. Such reserve percentages shall include, without limitation, those
imposed under Regula tion D. Statutory Reserves shall be adjusted automatically
on and as of the effective date of any change in any reserve percentage.

              "Structuring Fee" shall have the meaning assigned to such term in
Section 2.07(c).

              "subsidiary" shall mean, for any person (the "Parent"), any
corporation, partnership or other entity of which securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions of such
corporation, partnership or other entity (irrespective of whether or not at the
time securities or other ownership interests of any other class or classes of
such corporation, partnership or other entity shall have or

                                       21
<PAGE>   22

might have voting power by reason of the happening of any contingency) are at
the time directly or indirectly owned or controlled by the Parent or one or more
of its subsidiaries or by the Parent and one or more of its subsidiaries.

              "Subsidiary" shall mean a subsidiary of the Borrower.

              A "Subsidiary Event" shall mean the following; provided, however,
that a Subsidiary Event shall not be deemed to have occurred if the Banks have
previously consented thereto:

              (a) any Significant Subsidiary shall fail to observe or perform
       any covenant, condition or agreement contained in Section 5.01(a) as if
       such section applied to such Significant Subsidiary, with all references
       therein to the Borrower being deemed references to such Significant
       Subsidiary;

              (b) any Significant Subsidiary shall fail to observe or perform
       any covenant, condition or agreement in Sections 5.01(b), 5.02, 5.03 or
       5.07 as if such sections applied to such Significant Subsidiary, with all
       references therein to the Borrower being deemed references to such
       Significant Subsidiary, and such default shall continue unremedied for a
       period of 30 days after notice thereof from the Agent or any Bank to the
       Borrower;

              (c) any Significant Subsidiary shall:

                     (i) merge into or consolidate with any other person, or
              permit any other person to merge into or consolidate with it, or
              purchase, lease or otherwise acquire (in one transaction or a
              series of transactions) all or substantially all of the assets of
              any other person (whether directly by purchase, lease or other
              acquisition of all or substantially all of the assets of such
              person or indirectly by purchase or other acquisition of all or
              substantially all of the capital stock of such other person) other
              than acquisitions in the ordinary course of such Significant
              Subsidiary's business, except that if, at the time thereof and
              immediately after giving effect thereto no Event

                                       22
<PAGE>   23

              of Default or Default shall have occurred and be continuing, then
              (A) such Significant Subsidiary may (i) merge with or into, or
              consolidate with, any Subsidiary or (ii) merge with or into, or
              consolidate with, the Borrower in a transaction in which the
              Borrower is the surviving corporation, (B) such Significant
              Subsidiary may purchase, lease or otherwise acquire from any
              Subsidiary all or substantially all of its assets and may purchase
              or otherwise acquire all or substantially all of the capital stock
              of any person who immediately thereafter is a Subsidiary, (C) such
              Significant Subsidiary may merge with or into, or consolidate
              with, any other person so long as the assets of such person at the
              time of such consolidation or merger, do not exceed 10% of the
              total assets of the Borrower and its Subsidiaries, after giving
              effect to such merger or consolidation, computed and consolidated
              in accordance with GAAP consistently applied, and (D) such
              Significant Subsidiary may purchase, lease or otherwise acquire
              any or all of the assets of any other person (and may purchase or
              otherwise acquire the capital stock of any other person) so long
              as the assets being purchased, leased or acquired (or the
              Significant Subsidiary's proportionate share of the assets of the
              person whose capital stock is being acquired) do not exceed 10% of
              the total assets of the Borrower and its Subsidiaries, after
              giving effect to such acquisition, computed and consolidated in
              accordance with GAAP consistently applied, or

                     (ii) sell, lease, transfer, assign or other wise dispose of
              (in one transaction or in a series of transactions), in any fiscal
              year, assets (whether now owned or hereafter acquired) which,
              together with the amount of all sales, leases, transfers,
              assignments or dispositions by the Borrower permitted under
              Section 6.03 (other than sales, leases, transfers, assignments or
              other dispositions permitted under clauses (i) through (iv) of
              such Section), are in excess of 10% of the assets of the Borrower
              and its Subsidiaries as of the end of the most recent fiscal year,
              computed

                                       23
<PAGE>   24

              and consolidated in accordance with GAAP consistently applied,
              except (A) a Significant Subsidiary may sell, lease, transfer,
              assign or otherwise dispose of, in any fiscal year, assets in the
              ordinary course of business which, together with the amount of all
              sales, leases, transfers, assignments or dispositions in the
              ordinary course permitted under Section 6.03(i), do not exceed 5%
              of the assets of the Borrower and its Subsidiaries as of the end
              of the most recent fiscal year, computed and consolidated in
              accordance with GAAP consistently applied, (B) to the extent
              permitted in clause (c)(i) above and (C) any Significant
              Subsidiary may sell, lease, transfer, assign or otherwise dispose
              of, or create, incur, assume or permit to exist Liens on,
              receivables and related properties or interests therein;

provided, however, that, notwithstanding anything in this clause (c) to the
contrary, a Subsidiary Event shall not be deemed to have occurred and shall not
constitute an Event of Default under paragraph (k) of Article VII if, after
giving effect to the consummation of any transaction contemplated by clause
(c)(i) or (c)(ii) hereof, such Significant Subsidiary shall have or shall be
deemed to have a ratio of total long-term Indebtedness to total stockholders'
equity equal to or less than 1.5 to 1.0.

              "Transactions" shall have the meaning assigned to such term in
Section 3.02.

              "Type", when used in respect of any Loan or Borrowing, shall refer
to the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. For purposes hereof, "Rate" shall mean,
in the case of a Revolving Loan or Borrowing, the Eurodollar Rate and the
Alternate Base Rate or, in the case of an Auction Loan or Borrowing, the
Eurodollar Rate, Fixed Rate or Delayed Fixed Rate.

              "Utilization Fee" shall have the meaning assigned to such term in
Section 2.07.

              "Utilization Level" shall mean the ratio of the outstanding
principal amount of Loans and the LC Exposure to

                                       24
<PAGE>   25

the total Commitments.

              SECTION 1.02. Terms Generally. The definitions in Section 1.01
shall apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; provided,
however, that, for purposes of determining compliance with any covenant set
forth in Article VI, such terms shall be construed in accordance with GAAP as in
effect on the date of this Agreement applied on a basis consistent with the
application used in preparing the Borrower's audited financial statements
referred to in Section 3.05.

ARTICLE II. THE CREDITS

              SECTION 2.01. (a) Commitments. Subject to the terms and conditions
and relying upon the representations and warranties herein set forth, each Bank
agrees, severally and not jointly, to make Revolving Loans to the Borrower, at
any time and from time to time on or after the date of this Agreement, and until
the earlier of the Expiration Date and the termination of the Commitment of such
Bank in accordance with the terms hereof, in an aggregate principal amount at
any time outstanding that will not result in (i) the Revolving Credit Exposure
of any Bank exceeding the Commitment set forth opposite its name in Schedule
2.01 hereto, as the same may be reduced from time to time pursuant to Section
2.11 or (ii) the sum of the total Revolving Credit Exposure plus the aggregate
principal amount of outstanding Auction Loans exceeding the total Commitments.

              Within the limits set forth in the preceding sentence, the
Borrower may borrow, pay or prepay and

                                       25
<PAGE>   26

reborrow Revolving Loans on or after the date of this Agreement and prior to the
Expiration Date, subject to the terms, conditions and limitations set forth
herein.

              (b) On not more than two occasions the Borrower may by written
notice to the Administrative Agent cause New Banks (as defined below) to assume
Commitments by an aggregate amount not in excess of $11,175,000 in the aggregate
(the "New Commitments"). Each such notice shall specify (i) the date (each a
"Transition Date") on which the Borrower proposes that New Commitments shall
become effective, which shall be not less than ten Business Days
after the date on which such notice is delivered to the Administrative Agent and
(ii) the identity of each person that has agreed to assume any portion of such
New Commitments (each a "New Bank") and the amount of such New Commitments
allocated to such New Bank. Subject only to there not existing any Default or
Event of Default on such Transition Date before or after giving effect to such
New Commitments, such New Commitments shall become effective as of such
Transition Date and, if any Revolving Loans are outstanding on such Transition
Date, each Bank shall assign to the New Banks, and each of the New Banks shall
purchase from the Banks, at the principal amount thereof, such interests in the
Revolving Loans outstanding on such Transition Date as shall be necessary in
order that, after giving effect to all such assignments and purchases, such
Revolving Loans will be held by Banks and New Banks ratably in accordance with
their Commitments after giving effect to the addition of such New Commitments to
the Commitments. The Administrative Agent shall notify the Banks promptly upon
receipt of the Borrower's notice thereof of each Transition Date and in respect
thereof the New Commitments, the New Banks and, in the case of each notice to
any Bank, the respective interests in such Bank's Revolving Loans subject to the
assignments contemplated by the immediately preceding sentence. In the event
that any Bank shall incur any breakage cost as a result of making any such
assignment, or that any New Bank shall incur any reverse breakage cost as a
result of taking any such assignment, the Borrower shall indemnify it for such
cost, calculated as contemplated by Section 2.15 in the case of breakage costs
and calculated based upon the difference between the Eurodollar Rate applicable
to each assigned Revolving Loan and the cost to the New Bank of funding its
assigned interests in the case

                                       26
<PAGE>   27

of reverse breakage costs. It is expressly understood that no Bank shall have
any obligation to agree to an increase in the amount of the Commitment pursuant
to this Section.

              SECTION 2.02. Loans. (a) Each Revolving Loan shall be made as part
of a Borrowing consisting of Revolving Loans made by the Banks ratably in
accordance with their Commitments. Each Auction Loan shall be made in accordance
with the procedures set forth in Section 2.04. The failure of any Bank to make
any Loan required to be made hereunder shall not in itself relieve any other
Bank of its obligation to lend hereunder (it being understood, however, that no
Bank shall be responsible for the failure of any other Bank to make any Loan
required to be made by such other Bank). The Loans comprising each Borrowing
shall be in an aggregate principal amount which is an integral multiple of
$1,000,000.

              (b) Subject to Section 2.10, (i) each Revolving Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans, as the Borrower may request
pursuant to Section 2.03, and (ii) each Auction Borrowing shall be comprised
entirely of Eurodollar Loans, Fixed Rate Loans or Delayed Fixed Rate Loans as
the Borrower may request in accordance with Section 2.04. Each Bank may at its
option fulfill its Commitment with respect to any Eurodollar Loan by causing any
domestic or foreign branch or Affiliate of such Bank to make such Loan; provided
that any exercise of such option shall not affect the obligation of the Borrower
to repay such Loan in accordance with the terms of this Agreement or any
applicable Note. Borrowings of more than one Type or Class may be outstanding at
the same time; provided, however, that the Borrower shall not be entitled to
request any Borrowing which, if made, would result in an aggregate of more than
five separate Eurodollar Loans of any Bank being outstanding hereunder at any
one time. For purposes of the foregoing, Loans having different Interest
Periods, regardless of whether they commence on the same date, shall be
considered separate Loans.

              (c) Subject to paragraph (e) below, each Bank shall make a
Revolving Loan in the amount of its pro rata portion, as determined under
Section 2.16, or, if an Auction Loan, in the relevant amount as determined under
Section 2.04, of each Borrowing hereunder on the proposed date

                                       27
<PAGE>   28

thereof by wire transfer of immediately available funds to the Agent in Houston,
Texas, not later than 2:00 p.m., New York City time, and the Agent shall by 3:00
p.m., New York City time, make available to the Borrower in immediately
available funds the amounts so received (i) by wire transfer for credit to the
account of the Borrower with Bank of America, N.A., Account Number 12332-29152;
ABA # 12100358, or (ii) as otherwise specified by the Borrower in its notice of
Borrowing or, if a Borrowing shall not occur on such date because any condition
precedent herein specified shall not have been met, return the amounts so
received to the respective Banks. Unless the Agent shall have received notice
from a Bank prior to the date of any Borrowing that such Bank will not make
available to the Agent such Bank's portion of such Borrowing, the Agent may
assume that such Bank has made such portion available to the Agent on the date
of such Borrowing in accordance with this paragraph (c) and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have made
such portion available to the Agent, such Bank and the Borrower severally agree
to repay 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 Borrower until the date such amount is repaid to the Agent at (i) in the
case of the Borrower the interest rate applicable at the time to the Loans
comprising such Borrowing and (ii) in the case of such Bank, the Federal Funds
Effective Rate. If such Bank shall repay to the Agent such corresponding amount,
such amount shall constitute such Bank's Loan as part of such Borrowing for
purposes of this Agreement.

              (d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Expiration Date.

              (e) The Borrower may refinance all or any part of any Borrowing
with a Borrowing of the same or a different Type or Class, subject to the
conditions and limitations set forth in this Agreement. Any Borrowing or part
thereof so refinanced shall be deemed to be repaid or prepaid in accordance with
Section 2.05 or 2.12, as applicable, with the proceeds of a new

                                       28
<PAGE>   29

Borrowing, and the proceeds of the new Borrowing, to the extent they do not
exceed the principal amount of the Borrowing being refinanced, shall not be paid
by the Banks to the Agent or by the Agent to the Borrower pursuant to paragraph
(c) above.

              SECTION 2.03. Notice of Revolving Borrowings. To request a
Revolving Borrowing, the Borrower shall give the Agent written or telecopy
notice (or telephone notice promptly confirmed in writing or by telecopy) (a) in
the case of a Eurodollar Borrowing, not later than 10:00 a.m., New York City
time, three Business Days before a proposed borrowing and (b) in the case of an
ABR Borrowing, not later than 12:00 (noon), New York City time, the day of a
proposed borrowing. Such notice shall be irrevocable and shall in each case
refer to this Agreement and specify (i) whether the Borrowing then being
requested is to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of
such Borrowing (which shall be a Business Day) and the amount thereof; and (iii)
if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with
respect thereto. If no election as to the Type of Borrowing is specified in any
such notice, then the requested Borrowing shall be an ABR Borrowing. If no
Interest Period with respect to any Eurodollar Borrowing is specified in any
such notice, then the Borrower shall be deemed to have selected an Interest
Period of one month's duration. If the Borrower shall not have given notice in
accordance with this Section 2.03 of its election to refinance a Borrowing prior
to the end of the Interest Period in effect for such Borrowing, then the
Borrower shall (unless such Borrowing is repaid at the end of such Interest
Period) be deemed to have given notice of an election to refinance such
Borrowing with an ABR Borrowing. The Agent shall promptly advise the Banks of
any notice given pursuant to this Section 2.03 and of each Bank's portion of the
requested Borrowing.

              SECTION 2.04. Auction Bid Procedure. (a) Subject to the terms and
conditions set forth herein, from time to time during the Availability Period
the Borrower may request Auction Bids and may (but shall not have any obligation
to) accept Auction Bids and borrow Auction Loans; provided that the sum of the
total Revolving Credit Exposure plus the aggregate principal amount of
outstanding Auction Loans at any time shall not exceed the total Commitments.

                                       29
<PAGE>   30

To request Auction Bids, the Borrower shall notify the Agent of such request by
telephone, in the case of a Eurodollar Borrowing, not later than 1:00 p.m., New
York City time, four Business Days before the date of the proposed Borrowing, in
the case of a Fixed Rate Borrowing, not later than 1:00 p.m., New York City
time, one Business Day before the date of the proposed Borrowing, or, in the
case of a Delayed Fixed Rate Borrowing, not later than 2:00 p.m., New York City
time, two Business Days before the date for the proposed Borrowing; provided
that the Borrower may submit up to (but not more than) (i) 1 Eurodollar Auction
Bid Request and (ii) 1 Fixed Rate Auction Bid Request or 1 Delayed Fixed Rate
Auction Bid Request on the same day. Each such telephonic Auction Bid Request
shall be confirmed promptly by hand delivery or telecopy to the Agent of a
written Auction Bid Request in a form approved by the Agent and signed by the
Borrower. Each such telephonic and written Auction Bid Request shall specify the
following information in compliance with Section 2.02:

              (i) the aggregate amount of the requested Borrowing;

       (ii) the date of such Borrowing, which shall be a Business Day;

       (iii) whether such Borrowing is to be a Eurodollar Borrowing, a Fixed
       Rate Borrowing, or a Delayed Fixed Rate Borrowing;

       (iv) the Interest Period (or Interest Periods) to be applicable to such
       Borrowing, which shall be a period contemplated by the definition of the
       term "Interest Period"; and

              (v) the location and number of the Borrower's account to which
       funds are to be disbursed, which shall comply with the requirements of
       Section 2.02.

              (b) Following receipt of an Auction Bid Request in accordance with
this Section, the Agent shall notify the Banks of the details thereof by
telecopy, inviting the Banks to submit Auction Bids in the case of a Eurodollar
Auction Bid Request, no later than 2:00 p.m., New York City time, four Business
Days before the proposed date

                                       30
<PAGE>   31

of the Borrowing, in the case of a Fixed Rate Auction Bid Request, no later than
2:00 p.m., one Business Day before the proposed date of the Borrowing, and, in
the case of a Delayed Fixed Rate Bid Request, not later than 3:00 p.m., New York
City time, two Business Days before the proposed date of the Borrowing.

              (c) Each Bank may (but shall not have any obligation to) make one
or more Auction Bids to the Borrower in response to an Auction Bid Request. Each
Auction Bid by a Bank must be in a form approved by the Agent and must be
received by the Agent by telecopy, in the case of a Eurodollar Auction
Borrowing, not later than 12:00 (noon), New York City time, three Business Days
before the proposed date of such Auction Borrowing, in the case of a Fixed Rate
Borrowing, not later than 10:30 a.m., New York City time, on the proposed date
of such Auction Borrowing, and, in the case of a Delayed Fixed Rate Bid, not
later than 12:00 (noon), New York City time, one Business Day before the
proposed date of such Auction Borrowing. Auction Bids that do not conform
substantially to the form approved by the Agent may be rejected by the Agent,
and the Agent shall notify the applicable Bank as promptly as practicable. Each
Auction Bid shall specify (i) the principal amount (which shall be an integral
multiple of $1,000,000 and which may equal the entire principal amount of the
Auction Borrowing requested by the Borrower) of the Auction Loan or Loans that
the Bank is willing to make, (ii) the Auction Bid Rate or Rates at which the
Bank is prepared to make such Loan or Loans (expressed as a percentage rate per
annum in the form of a decimal to no more than four decimal places) and (iii)
the Interest Period applicable to each such Loan and the last day thereof in
accordance with the Auction Bid Request.

              (d) The Agent shall promptly notify the Borrower by telecopy of
the Auction Bid Rate and the principal amount specified in each Auction Bid and
the identity of the Bank that shall have made such Auction Bid.

              (e) Subject only to the provisions of this paragraph, the Borrower
may accept or reject any Auction Bid. The Borrower shall notify the Agent by
telephone, confirmed by telecopy in a form approved by the Agent, whether and to
what extent it has decided to accept or

                                       31
<PAGE>   32

reject each Auction Bid, in the case of a Eurodollar Auction Borrowing, not
later than 2:00 p.m., New York City time, three Business Days before the date of
the proposed Auction Borrowing, in the case of a Fixed Rate Borrowing, not later
than 11:30 a.m., New York City time, on the proposed date of the Auction
Borrowing, and, in the case of a Delayed Fixed Rate Borrowing, not later than
1:00 p.m., New York City time, one Business day before the date of the proposed
Auction Borrowing; provided that (i) the failure of the Borrower to give such
notice shall be deemed to be a rejection of each Auction Bid, (ii) the Borrower
shall not accept an Auction Bid made at a particular Auction Bid Rate if the
Borrower rejects an Auction Bid made at a lower Auction Bid Rate, (iii) the
aggregate amount of the Auction Bids accepted by the Borrower shall not exceed
the aggregate amount of the requested Auction Borrowing specified in the related
Auction Bid Request, (iv) to the extent necessary to comply with clause (iii)
above, the Borrower may accept Auction Bids at the same Auction Bid Rate in
part, which acceptance, in the case of multiple Auction Bids at such Auction Bid
Rate, shall be made pro rata in accordance with the amount of each such Auction
Bid, and (v) except pursuant to clause (iv) above, no Auction Bid shall be
accepted for an Auction Loan unless such Auction Loan is in an integral multiple
of $1,000,000. A notice given by the Borrower pursuant to this paragraph shall
be irrevocable.

              (f) The Agent shall notify each bidding Bank by telephone and
telecopy whether or not its Auction Bid has been accepted (and, if so, the
amount and Auction Bid Rate so accepted) in the case of Eurodollar Auction
Loans, by 3:00 p.m., New York City time, three Business Days before the
borrowing date, in the case of Fixed Rate Loans, by 12:00 (noon), New York City
time, on the borrowing date, and, in the case of Delayed Fixed Rate Loans, by
3:00 p.m., New York City time, one Business Day before the Borrowing Date. Each
successful bidder will thereupon become bound, subject to the terms and
conditions hereof, to make the Auction Loan in respect of which its Auction Bid
has been accepted.

              (g) If the Agent shall elect to submit an Auction Bid in its
capacity as a Bank, it shall submit such Auction Bid directly to the Borrower at
least one quarter of an hour earlier than the time by which the other Banks are
required

                                       32
<PAGE>   33

to submit their Auction Bids to the Agent pursuant to paragraph (b) of this
Section.

              SECTION 2.05. Repayment of Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay each Bank the then unpaid
principal amount of each Loan of such Bank on the last day of the Interest
Period applicable to such Loan and on the Expiration Date. Each Loan shall bear
interest on the outstanding principal balance thereof as set forth in Section
2.08.

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

              (c) The Agent shall maintain accounts in which it shall record (i)
the amount and date of each Loan made hereunder, the Class and Type thereof and
the Interest Period applicable thereto, (ii) the amount of any principal,
interest or fees due and payable or to become due and payable from the Borrower
to each Bank hereunder and (iii) the amount of any principal, interest or fees
received by the Agent hereunder for the account of the Banks and each Bank's
share thereof.

              (d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of any Bank or the Agent to maintain such accounts or any error therein
shall not in any manner affect the obligation of the Borrower to repay the Loans
in accordance with the terms of this Agreement.

              (e) Any Bank may request that Loans of any Class made by it be
evidenced by a Note. In such event, the Borrower shall prepare, execute and
deliver to such Bank a Note payable to the order of such Bank (or, if requested
by such Bank, to such Bank and its registered assigns). Thereafter, the Loans
evidenced by such Note and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more

                                       33
<PAGE>   34

Notes in such form payable to the order of the payee named therein (or, if such
Note is a registered Note, to such payee and its registered assigns).

              SECTION 2.06. Letters of Credit. (a) General. Subject to the terms
and conditions set forth herein, the Borrower may request the issuance of
Letters of Credit for its own account, in a form reasonably acceptable to the
Agent and the Issuing Bank, at any time and from time to time during the
Availability Period. In the event of any inconsistency between the terms and
conditions of this Agreement and the terms and conditions of any form of letter
of credit application or other agreement submitted by the Borrower to, or
entered into by the Borrower with, the Issuing Bank relating to any Letter of
Credit, the terms and conditions of this Agreement shall control.

              (b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended, renewed or extended,
and specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day), the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) of this Section), the amount of such
Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit. If requested by the Issuing Bank, the Borrower also shall submit a
letter of credit application on the Issuing Bank's standard form in connection
with any request for a Letter of Credit. A Letter of Credit shall be issued,
amended, renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed $25,000,000 and (ii) the sum of
the total Revolving Credit Exposure plus

                                       34
<PAGE>   35

the aggregate principal amount of outstanding Auction Loans shall not exceed the
total Commitments.

              (c) Expiration Date. Each Letter of Credit shall expire not later
than the close of business on the date that is five Business Days prior to the
Expiration Date.

              (d) Participations. By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Banks, the Issuing Bank
hereby grants to each Bank, and each Bank hereby acquires from the Issuing Bank,
a participation in such Letter of Credit equal to such Bank's Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Bank hereby
absolutely and unconditionally agrees to pay to the Agent, for the account of
the Issuing Bank, such Bank's Applicable Percentage of each LC Disbursement made
by the Issuing Bank and not reimbursed by the Borrower on the date due as
provided in paragraph (e) of this Section, or of any reimbursement payment
required to be refunded to the Borrower for any reason to the extent received by
such Bank. Each Bank acknowledges and agrees that its obligation to acquire
participations pursuant to this paragraph in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or extension of any Letter of
Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.

              (e) Reimbursement. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such
LC Disbursement by paying to the Agent an amount equal to such LC Disbursement
not later than 12:00 (noon), New York City time, on (i) the Business Day that
the Borrower receives notice of such LC Disbursement, if such notice is received
prior to 10:00 a.m., New York City time, on the day of receipt, or (ii) the
Business Day immediately following the day that the Borrower receives such
notice, if such notice is not received prior to such time on the day of receipt;
provided that ,if such LC Disbursement is not less than $1,000,000, the Borrower
may, subject to the conditions to borrowing set forth herein, request in
accordance with Section 2.03 that such payment be financed with an ABR Revolving
Borrowing in an equivalent amount and, to the extent so financed, the Borrower's
obligation to make such payment shall be discharged and replaced by the
resulting ABR Revolving Borrowing. If the Borrower fails to make such payment
when due, the Agent shall notify each Bank of the applicable LC Disbursement,
the payment then due from the Borrower in respect thereof and such Bank's
Applicable Percentage thereof. Promptly following receipt of such notice, each
Bank shall pay to the Agent its Applicable Percentage of the

                                       35
<PAGE>   36

payment then due from the Borrower, in the same manner as provided in Section
2.02 with respect to Loans made by such Bank (and Section 2.02 shall apply,
mutatis mutandis, to the payment obligations of the Banks), and the Agent shall
promptly pay to the Issuing Bank the amounts so received by it from the Banks.
Promptly following receipt by the Agent of any payment from the Borrower
pursuant to this paragraph, the Agent shall distribute such payment to the
Issuing Bank or, to the extent that Banks have made payments pursuant to this
paragraph to reimburse the Issuing Bank, then to such Banks and the Issuing Bank
as their interests may appear. Any payment made by a Bank pursuant to this
paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the
funding of ABR Revolving Loans as contemplated above) shall not constitute a
Loan and shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.

              (f) Obligations Absolute. The Borrower's obligation to reimburse
LC Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower's obligations hereunder. Neither
the Agent, the Banks nor the Issuing Bank, nor any of their Related Parties,
shall have any liability or responsibility by reason of or in connection with
the issuance or transfer of any Letter of Credit or any payment or failure to
make any payment thereunder (irrespective of any of the circumstances referred
to in the preceding sentence), or any error, omission, interruption, loss or
delay in transmission or delivery of any draft, notice or other communication
under or relating to any Letter of Credit (including any document required to
make a drawing thereunder), any error in interpretation of technical terms or
any consequence arising from causes beyond the control of the Issuing Bank;
provided that the foregoing shall not be construed to excuse the Issuing Bank
from liability to the Borrower to the extent of any direct damages (as opposed
to consequential damages, claims in respect of which are hereby waived by the
Borrower to the extent permitted by applicable law) suffered by the Borrower
that are caused by the Issuing Bank's gross negligence or wilful misconduct. The
parties hereto expressly agree that, in the absence of gross negligence or
wilful misconduct on the part of the Issuing Bank (as finally determined by a
court of competent jurisdiction), the Issuing Bank shall be deemed to have
exercised care in each such determination. In furtherance of

                                       36
<PAGE>   37

the foregoing and without limiting the generality thereof, the parties agree
that, with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the Issuing Bank
may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

              (g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Agent and the Borrower by telephone (confirmed by telecopy) of such
demand for payment and whether the Issuing Bank has made or will make an LC
Disbursement thereunder; provided that any failure to give or delay in giving
such notice shall not relieve the Borrower of its obligation to reimburse the
Issuing Bank and the Banks with respect to any such LC Disbursement.

              (h) Interim Interest. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans;
provided that, if the Borrower fails to reimburse such LC Disbursement when due
pursuant to paragraph (e) of this Section, then Section 2.09 shall apply.
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Bank, except that interest accrued on and after the date of payment by
any Bank pursuant to paragraph (e) of this Section to reimburse the Issuing Bank
shall be for the account of such Bank to the extent of such payment.

              (i) Cash Collateralization. If any Event of Default shall occur
and be continuing, on the Business Day that the Borrower receives notice from
the Agent, at the request of the Required Banks, demanding the deposit of cash
collateral pursuant to this paragraph, the Borrower shall deposit in an account
with the Agent, in the name of the Agent and for the benefit of the Banks, an
amount in cash equal to the LC Exposure as of such date plus any accrued and
unpaid interest thereon; provided that the obligation to deposit such cash
collateral shall become effective immediately, and such deposit shall become
immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default with respect to the Borrower described in
clause (g) or (h) of Article VII. Such deposit shall be held by the Agent as
collateral for the payment and performance of the obligations of the Borrower
under this Agreement. The Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account. Other than any

                                       37
<PAGE>   38

interest earned on the investment of such deposits, which investments shall be
made at the option and sole discretion of the Agent and at the Borrower's risk
and expense, such deposits shall not bear interest. Interest or profits, if any,
on such investments shall accumulate in such account. Moneys in such account
shall be applied by the Agent to reimburse the Issuing Bank for LC Disbursements
for which it has not been reimbursed and, to the extent not so applied, shall be
held for the satisfaction of the reimbursement obligations of the Borrower for
the LC Exposure at such time or be applied to satisfy other obligations of the
Borrower under this Agreement. If the Borrower is required to provide an amount
of cash collateral hereunder as a result of the occurrence of an Event of
Default, such amount (to the extent not applied as aforesaid) shall be returned
to the Borrower within three Business Days after all Events of Default have been
cured or waived.

              SECTION 2.07. Fees. (a) The Borrower agrees to pay to each Bank,
through the Agent, on the first Business Day of January, April, July and
October, in each year, and on the date on which the Commitment of such Bank
shall be terminated as provided herein, a commitment fee (a "Commitment Fee") on
the average daily unused amount of the Commitment of such Bank during the
preceding quarter (or shorter period commencing with the date hereof or ending
with the Expiration Date or the date on which the Commitment of such Bank shall
be terminated); provided, that, for purposes of determining the Commitment Fee,
the undrawn portion of the Commitments shall not be deemed to be reduced by the
amount of any borrowing under the Auction Facility. The Commitment Fees shall
accrue on each day at a rate per annum equal to the Applicable Rate in effect on
such day. All Commitment Fees shall be computed on the basis of the actual
number of days elapsed in a year of 365 or 366 days, as appropriate. The
Commitment Fee due to each Bank shall commence to accrue on the date of this
Agreement and shall cease to accrue on the date on which the Commitment of such
Bank shall be terminated as provided herein.

              (b) The Borrower agrees to pay (i) to the Agent for the account of
each Bank a participation fee with respect to its participations in Letters of
Credit, which shall accrue at the Applicable Rate on the average daily amount of
such Bank's LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Bank's
Commitment terminates and the date on which such Bank ceases to have any LC
Exposure, and (ii) to the Issuing Bank a fronting fee for Letters of Credit,
which shall accrue at the rate per annum of .125% on the average daily amount of
the LC Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the

                                       38
<PAGE>   39

period from and including the Effective Date to but excluding the later of the
date of termination of the Commitments and the date on which there ceases to be
any LC Exposure. Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year shall
be payable on the first Business Day following such last day, commencing on the
first such date to occur after the Effective Date; provided that all such fees
shall be payable on the date on which the Commitments terminate and any such
fees accruing after the date on which the Commitments terminate shall be payable
on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph
shall be payable within 10 days after demand. All participation fees and
fronting fees shall be computed on the basis of a year of 365 or 366 days, as
appropriate and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).

              (c) The Borrower agrees to pay to the Agent, for its own account,
the fees separately agreed between the Agent and the Borrower (the "Agency Fees"
and the "Structuring Fee").

              (d) The Borrower agrees to pay the Agent, for its own account,
$100 for each Auction Bid Request the Borrower makes, payable the day on which
the Auction Bid Request is made.

              (e) For any day on which the outstanding principal amount of Loans
and the LC Exposure shall be greater than 33% of the total Commitments (or,
following the Expiration Date, 33% of the total Commitments on the Expiration
Date), the Borrower shall pay to the Administrative Agent for the account of
each Bank a utilization fee (a "Utilization Fee") at a rate per annum equal to
the Applicable Rate in effect for such day on such Bank's Applicable Percentage
of the aggregate amount of the outstanding Loans and the LC Exposure on such
day. The Utilization Fees, if any, in respect of any fiscal quarter shall be
payable in arrears on each March 31, June 30, September 30 and December 31, on
the date on which the Commitments terminate and on any later date on which the
Loans are repaid in full or on which the LC Exposure is terminated; provided,
however, that if the Utilization Fee should be payable on a day other than a
Business Day, such date of payment shall be extended to the next succeeding
Business Day. All Utilization Fees shall be computed on the basis of a year of
365 or 366 days, as appropriate, and shall be payable for the actual number of
days elapsed

                                       39
<PAGE>   40

(including the first day but excluding the last day).

              (f) All Fees shall be paid on the dates due, in immediately
available funds, to the Agent (or to the Issuing Bank, in the case of fees
payable to it) for distribution, if and as appropriate, among the Banks. Once
paid, none of the Fees shall be refundable under any circumstances.

              SECTION 2.08. Interest on Loans. (a) Subject to the provisions of
Section 2.09, the Loans comprising each ABR Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 365
or 366 days, as the case may be) at a rate per annum equal to the Alternate Base
Rate plus the Applicable Rate.

              (b) Subject to the provisions of Section 2.09, the Loans
comprising each Eurodollar Borrowing shall bear interest (computed on the basis
of the actual number of days elapsed over a year of 360 days) (i) in the case of
a Eurodollar Revolving Loan at a rate per annum equal to the Eurodollar Rate for
the Interest Period in effect for such Borrowing plus the Applicable Rate or
(ii) in the case of a Eurodollar Auction Loan, at the Eurodollar Rate for the
Interest Period in effect for such Borrowing plus the Margin applicable to such
Loan.

              (c) Each Fixed Rate Loan shall bear interest at the Fixed Rate
applicable to such Loan. Each Delayed Fixed Rate Loan shall bear interest at the
Delayed Fixed Rate applicable to such Loan.

              (d) Interest on each Loan shall be payable on the Interest Payment
Dates applicable to such Loan except as otherwise provided in this Agreement.
The applicable Alternate Base Rate or Eurodollar Rate for each Interest Period
or day within an Interest Period, as the case may be, shall be determined by the
Agent, and such determination shall be conclusive absent manifest error.

              SECTION 2.09. Default Interest. If the Borrower shall default in
the payment of the principal of or interest on any Loan or any other amount
becoming due hereunder, by acceleration or otherwise, the Borrower shall on
demand from time to time pay interest, to the extent permitted by law, on such
defaulted amount up to (but not including) the date

                                       40
<PAGE>   41

of actual payment (after as well as before judgment) at a rate per annum
(computed on the basis of the actual number of days elapsed over a year of 360
days) equal to the Alternate Base Rate plus the Applicable Rate plus 2%.

              SECTION 2.10. Alternate Rate of Interest. In the event, and on
each occasion, that on the day two Business Days prior to the commencement of
any Interest Period for a Eurodollar Borrowing the Agent shall have in good
faith determined that dollar deposits in the principal amounts of the Loans
comprising such Borrowing are not generally available in the London interbank
market, or that the rates at which such dollar deposits are being offered will
not adequately and fairly reflect the cost to the majority in interest of the
Banks of making or maintaining their Eurodollar Loans during such Interest
Period, or that reasonable means do not exist for ascertaining the Eurodollar
Rate, the Agent shall, as soon as practicable thereafter, give written or
telecopy notice of such determination to the Borrower and the Banks. In the
event of any such determination, (i) any request by the Borrower for a
Eurodollar Borrowing pursuant to Section 2.03 shall, until the Agent shall have
advised the Borrower and the Banks that the circumstances giving rise to such
notice no longer exist, be deemed to be a request for an ABR Borrowing and (ii)
any request by the Borrower for a Eurodollar Auction Borrowing shall be
ineffective; provided that (A) if the circumstances giving rise to such notice
do not affect all the Banks, then requests by Borrower for Eurodollar Auction
Borrowings may be made to Banks that are not affected thereby and (B) if the
circumstances giving rise to such notice affect only one Type of Borrowings,
then the other Type of Borrowings shall be permitted. Each determination by the
Agent hereunder shall be conclusive absent manifest error.

              SECTION 2.11. Termination, Reduction and Extension of Commitments.
(a) The Commitments shall be automatically terminated on the Expiration Date.

              (b) Upon at least three Business Days' prior irrevocable written
or telecopy notice to the Agent, the Borrower may at any time in whole
permanently terminate, or from time to time in part permanently reduce, the
unused portion of the Commitments; provided, however, that (i) each

                                       41
<PAGE>   42

partial reduction of the Commitments shall be in an integral multiple of
$1,000,000 and (ii) the Borrower shall not terminate or reduce the Commitments
if, after giving effect to any concurrent prepayment of the Loans in accordance
with Section 2.12, the sum of the Revolving Credit Exposure plus the aggregate
principal amount of outstanding Auction Loans would exceed the total
Commitments.

              (c) Each reduction in the Commitments hereunder shall be made
ratably among the Banks in accordance with their respective applicable
Commitments. The Borrower shall pay to the Agent for the account of the Banks,
on the date of each termination or reduction, the Commitment Fees on the amount
of the Commitments so terminated or reduced accrued through the date of such
termination or reduction.

              (d) The Borrower may request an extension of this Agreement upon
60 days' prior written notice to the Agent; provided, that, such extension will
be at the sole option of the Banks and will require the written agreement of
each Bank in order to become effective.

              SECTION 2.12. Prepayment. (a) The Borrower shall have the right at
any time and from time to time to prepay any Borrowing, in whole or in part,
upon at least three Business Days' prior written or telecopy notice (or
telephone notice promptly confirmed by written or telecopy notice) to the Agent;
provided, however, that each partial prepayment shall be in an amount which is
an integral multiple of $1,000,000, and that the Borrower shall not have the
right to prepay any Auction Loan without the prior consent of the Bank thereof.

              (b) On the date of any termination or reduction of the Commitments
pursuant to Section 2.11, the Borrower shall pay or prepay so much of the
Borrowings as shall be necessary in order that the aggregate principal amount of
the Revolving Credit Exposure plus the aggregate principal amount of Auction
Loans outstanding will not exceed the aggregate Commitments after giving effect
to such termination or reduction.

             (c) Each notice of prepayment shall specify the prepayment date and
the principal amount of each Borrowing (or portion thereof) to be prepaid, shall
be irrevocable and shall commit the Borrower to prepay such Borrowing by the

                                       42
<PAGE>   43

amount stated therein on the date stated therein. All prepayments under this
Section 2.12 shall be subject to Section 2.15 but otherwise without premium or
penalty. All prepayments under this Section 2.12 shall be accompanied by accrued
interest on the principal amount being prepaid to the date of payment.

              SECTION 2.13. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein, if after the date of this Agreement
there is adopted any new law, rule or regulation or any change in applicable law
or regulation or in the interpretation or administration thereof by any
governmental authority charged with the interpretation or administration thereof
(whether or not having the force of law) which shall impose, modify or deem
applicable any reserve, special deposit or similar requirement against assets
of, deposits with or for the account of or credit extended by such Bank (except
any such reserve requirement which is reflected in the Eurodollar Rate) or shall
impose on such Bank or the London interbank market any other condition affecting
this Agreement or Eurodollar Loans made by such Bank, and the result of any of
the foregoing shall be to increase the cost to such Bank of making or
maintaining any Eurodollar Loan or to reduce the amount of any sum received or
receivable by such Bank hereunder or under any Notes (whether of principal,
interest or otherwise) in respect of Eurodollar Loans by an amount deemed by
such Bank to be material, then the Borrower will pay to such Bank upon demand
such additional amount or amounts as will compensate such Bank for such
additional costs incurred or reduction suffered.

              (b) If any Bank shall have determined that the applicability of
any law, rule, regulation, agreement or guideline adopted after the date hereof
regarding capital adequacy, or any change in any of the foregoing or the
adoption after the date hereof of any change in any law, rule, regulation,
agreement or guideline existing on the date hereof or in the interpretation or
administration of any of the foregoing by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or any lending office of such Bank) or any
Bank's holding company with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such

                                       43
<PAGE>   44

author ity, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Bank's capital or on the capital of such
Bank's holding company, if any, as a consequence of this Agreement or the Loans
made by such Bank pursuant hereto to a level below that which such Bank or such
Bank's holding company could have achieved but for such applicability, adoption,
change or compliance (taking into consideration such Bank's policies and the
policies of such Bank's holding company with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from time to time the Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank or such Bank's holding company for any such reduction suffered.

              (c) A certificate of each Bank setting forth in reasonable detail
such amount or amounts as shall be necessary to compensate such Bank or its
holding company as specified in paragraph (a) or (b) above, as the case may be,
and the manner in which such Bank has determined the same, shall be delivered to
the Borrower and shall be conclusive absent manifest error. The Borrower shall
pay each Bank the amount shown as due on any such certificate delivered by it
within 10 days after its receipt of the same.

              (d) Failure on the part of any Bank to demand compensation for any
increased costs or reduction in amounts received or receivable or reduction in
return on capital with respect to any period shall not constitute a waiver of
such Bank's right to demand compensation with respect to such period or any
other period. The protection of this Section shall be available to each Bank
regardless of any possible contention of the invalidity or inapplicability of
the law, rule, regulation, guideline or other change or condition which shall
have occurred or been imposed.

              SECTION 2.14. Change in Legality. (a) Notwithstanding any other
provision herein, if any change in, or adoption of, any law or regulation or in
the interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Bank to
make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrower and to the Agent, such Bank may:

                                       44
<PAGE>   45

              (i) declare that Eurodollar Loans will not thereafter be made by
       such Bank hereunder, whereupon any request by the Borrower for a
       Eurodollar Borrowing shall, as to such Bank only, be deemed a request for
       an ABR Loan unless such declaration shall be subsequently withdrawn; and

       (ii) require that all outstanding Eurodollar Loans made by it be
       converted to ABR Loans, in which event all such Eurodollar Loans shall be
       automatically converted to ABR Loans as of the effective date of such
       notice as provided in paragraph (b) below.

In the event any Bank shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Bank or the
converted Eurodollar Loans of such Bank shall instead be applied to repay the
ABR Loans made by such Bank in lieu of, or resulting from the conversion of,
such Eurodollar Loans.

              (b) For purposes of this Section 2.14, a notice to the Borrower by
any Bank shall be effective as to each Eurodollar Loan, if lawful, on the last
day of the Interest Period currently applicable to such Eurodollar Loan.

              SECTION 2.15. Indemnity. The Borrower shall indemnify each Bank
against any loss or expense which such Bank may sustain or incur as a
consequence of (a) any failure by the Borrower to fulfill on the date of any
Eurodollar Borrowing hereunder the applicable conditions set forth in Article
IV, (b) any failure by the Borrower to borrow or to refinance any Eurodollar
Loan hereunder after irrevocable notice of such borrowing or refinancing has
been given pursuant to Sections 2.03 and 2.04, (c) any payment or prepayment of
a Eurodollar Loan required by any other provision of this Agreement or otherwise
made or deemed made on a date other than the last day of the Interest Period
applicable thereto or (d) any default in payment or prepay ment of the principal
amount of any Eurodollar Loan or any part thereof or interest accrued thereon,
as and when due and payable (at the due date thereof, whether by scheduled
maturity, acceleration, irrevocable notice of prepayment or otherwise)
including, in each such case, any

                                       45
<PAGE>   46

loss or reasonable expense sustained or incurred or to be sustained or incurred
in liquidating or employing deposits from third parties acquired to effect or
maintain such Loan or any part thereof as a Eurodollar Loan. Such loss or
reasonable expense shall include an amount equal to the excess, if any, as
reasonably determined by such Bank, of (i) its cost of obtaining the funds for
the Eurodollar Loan being paid, prepaid, converted or not borrowed (assumed to
be the Eurodollar Rate applicable thereto) for the period from the date of such
payment, prepayment, conversion or failure to borrow to the last day of the
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Eurodollar Loan which would have commenced on the date
of such failure) over (ii) the amount of interest (as reasonably determined by
such Bank) that would be realized by such Bank in reemploying the funds so paid,
prepaid or not borrowed for such period or Interest Period, as the case may be.
A certificate of any Bank setting forth any amount or amounts which such Bank is
entitled to receive pursuant to this Section, and the manner in which such Bank
has determined the same, shall be delivered to the Borrower and shall be
conclusive absent manifest error.

              SECTION 2.16. Pro Rata Treatment. Except as required under
Sections 2.04 and 2.14, each Borrowing, each payment or prepayment of principal
of any Borrowing, each payment of interest on the Loans, each payment of the
Commitment Fees, each reduction of the Commitments and each refinancing of any
Borrowing with a Borrowing of any Type shall be allocated pro rata among the
Banks in accordance with their respective applicable Commitments (or, if such
Commitments shall have expired or been terminated, in accordance with the
respective principal amounts of their outstanding Loans). Each Bank agrees that
in computing such Bank's portion of any Borrowing to be made hereunder, the
Agent may, in its discretion, round each Bank's percentage of such Borrowing,
computed in accordance with Section 2.01, to the next higher or lower whole
dollar amount.

              SECTION 2.17. Sharing of Setoffs. Each Bank agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against the Borrower, or pursuant to a secured claim under Section 506 of Title
11 of the United States Code or other security or interest

                                       46
<PAGE>   47

arising from, or in lieu of, such secured claim, received by such Bank under any
applicable bankruptcy, insolvency or other similar law or otherwise, or by any
other means, obtain payment (voluntary or involuntary) in respect of any
Revolving Loan or Revolving Loans or participations in LC Disbursements as a
result of which the unpaid principal portion of its Revolving Loans or
participations in LC Disbursements shall be proportionately less than the unpaid
principal portion of the Revolving Loans or participations in LC Disbursements
of any other Bank, it shall be deemed simultaneously to have purchased from such
other Bank at face value, and shall promptly pay to such other Bank the purchase
price for, a participation in the Revolving Loans or participations in LC
Disbursements of such other Bank, so that the aggregate unpaid principal amount
of the Revolving Loans and participations in Revolving Loans and in LC
Disbursements held by each Bank shall be in the same proportion to the aggregate
unpaid principal amount of all Revolving Loans and participations in LC
Disbursements then outstanding as the principal amount of its Revolving Loans
and participations in LC Disbursements prior to such exercise of banker's lien,
setoff or counterclaim or other event was to the principal amount of all
Revolving Loans and participations in LC Disbursements outstanding prior to such
exercise of banker's lien, setoff or counter-claim or other event; provided,
however, that, if any such purchase or purchases or adjustments shall be made
pursuant to this Section and the payment giving rise thereto shall thereafter be
recovered, such purchase or purchases or adjustments shall be rescinded to the
extent of such recovery and the purchase price or prices or adjustment restored
without interest. The Borrower expressly consents to the foregoing arrangements
and agrees that any Bank holding a participation in a Revolving Loan or in an LC
Disbursement deemed to have been so purchased may exercise any and all rights of
banker's lien, setoff or counterclaim with respect to any and all moneys owing
by the Borrower to such Bank by reason thereof as fully as if such Bank had made
a Loan directly to the Borrower in the amount of such participation.

              SECTION 2.18. Payments. (a) The Borrower shall make each payment
(including principal of or interest on any Borrowing or reimbursements of LC
Disbursements or any Fees or other amounts) hereunder and under any other Loan

                                       47
<PAGE>   48

Document not later than 12:00 (noon), New York City time, on the date when due
in dollars to the Agent at its offices at 909 Fanning, Suite 1700, Houston,
Texas, in immediately
available funds.

              (b) Whenever any payment (including principal of or interest on
any Borrowing or reimbursements of LC Disbursements or any Fees or other
amounts) hereunder or under any other Loan Document shall become due, or
otherwise would occur, on a day that is not a Business Day, such payment may be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest or Fees, if applicable.

              SECTION 2.19. Taxes. (a) Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 2.18, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on the net income of the Agent, any Bank or the Issuing
Bank (or any transferee or assignee thereof, including a participation holder
(any such entity being called a "Transferee")) and franchise taxes imposed on
the Agent, any Bank or the Issuing Bank (or Transferee) by the United States or
any jurisdiction under the laws of which the Agent, any such Bank or the Issuing
Bank (or such Transferee) or the applicable lending office, is organized or any
political subdivision thereof (all such nonexcluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder to the Banks or the Issuing Bank (or
any Transferee) or the Agent, (i) the sum payable shall be increased by the
amount necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.19) such
Bank or the Issuing Bank (or such Transferee) or the Agent (as the case may be)
shall receive an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxing authority or
other Governmental Authority in accordance with applicable law; provided,
however, that no Transferee of any Bank shall be

                                       48
<PAGE>   49

entitled to receive any greater payment under this paragraph (a) than such Bank
would have been entitled to receive with respect to the rights assigned,
participated or other wise transferred unless such assignment, participation or
transfer shall have been made at a time when the circumstances giving rise to
such greater payment did not exist.

               (b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "Other Taxes").

               (c) The Borrower will indemnify each Bank (or Transferee), the
Issuing Bank (or Transferee) and the Agent for the full amount of Taxes and
Other Taxes paid by such Bank (or such Transferee), the Issuing Bank (or such
Transferee) or the Agent, as the case may be, and any liability (including
penalties, interest and reasonable expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted by the relevant taxing authority or other Governmental Authority. Such
indemnification shall be made within 30 days after the date any Bank or the
Issuing Bank (or Transferee) or the Agent, as the case may be, makes written
demand therefor. If a Bank or the Issuing Bank (or Transferee) or the Agent
shall become aware that it is entitled to receive a refund in respect of Taxes
or Other Taxes as to which it has been indemnified by the Borrower pursuant to
this Section 2.19, it shall promptly notify the Borrower of the availability of
such refund and shall, within 30 days after receipt of a request by the
Borrower, apply for such refund at the Borrower's expense. If any Bank or the
Issuing Bank (or Transferee) or the Agent receives a refund in respect of any
Taxes or Other Taxes as to which it has been indemnified by the Borrower
pursuant to this Section 2.19, it shall promptly notify the Borrower of such
refund and shall repay such refund to the Borrower (to the extent of amounts
that have been paid by the Borrower under this Section 2.19 with respect to such
refund) within 30 days (or promptly upon receipt, if the Borrower has requested
application for such refund pursuant hereto), net

                                       49
<PAGE>   50

of all reasonable out-of-pocket expenses of such Bank and without interest;
provided that the Borrower, upon the request of such Bank or the Issuing Bank
(or such Transferee) or the Agent, agrees to return such refund (plus penalties,
interest or other charges) to such Bank or the Issuing Bank (or such Transferee)
or the Agent in the event such Bank or the Issuing Bank (or such Transferee) or
the Agent is required to repay such refund. Nothing contained in this paragraph
(c) shall require any Bank or the Issuing Bank (or Transferee) or the Agent to
make available any of its tax returns (or any other information relating to its
taxes which it deems to be confidential); provided that Borrower, at its
expense, shall have the right to receive an opinion from a firm of independent
public accountants of recognized national standing acceptable to the Borrower
that the amount due hereunder is correctly calculated.

               (d) Within 30 days after the date of any payment of Taxes or
Other Taxes withheld by the Borrower in respect of any payment to any Bank or
the Issuing Bank (or Transferee) or the Agent, the Borrower will furnish to the
Agent, at its address referred to in Section 9.01, the original or a certified
copy of a receipt evidencing payment thereof.

               (e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.19
shall survive the payment in full of the principal of and interest on all Loans
made hereunder.

               (f) On or prior to the execution of this Agreement and on or
before the transfer to a Transferee, the Agent shall notify the Borrower of each
Bank's or the Issuing Bank's (or Transferee's) address. On or prior to the
Banks' or the Issuing Bank's (or Transferee's) first Interest Payment Date, and
from time to time as required by law, each Bank or the Issuing Bank (or
Transferee) that is organized under the laws of a jurisdiction outside the
United States shall, if legally able to do so, deliver to the Borrower and the
Agent such certificates, documents or other evidence, as required by the Code or
Treasury Regulations issued pursuant thereto, including Internal Revenue Service
Form 1001 or Form 4224 and any other certificate or statement of exemption
required by Treasury

                                       50
<PAGE>   51

Regulation Section 1.1441-1, 1.1441-4 or 1.1441-6(c) or any subsequent version
thereof or successors thereto, properly completed and duly executed by such Bank
or such Issuing Bank (or Transferee) establishing that such payment is (i) not
subject to United States Federal withholding tax under the Code because such
payment is effectively connected with the conduct by such Bank or such Issuing
Bank (or Transferee) of a trade or business in the United States or (ii) totally
exempt from United States Federal withholding tax, or subject to a reduced rate
of such tax under a provision of an applicable tax treaty. Unless the Borrower
and the Agent have received forms or other documents satisfactory to them
indicating that such payments hereunder or under any Notes are not subject to
United States Federal withholding tax or are subject to such tax at a rate
reduced by an applicable tax treaty, the Borrower shall withhold taxes from such
payments at the applicable statutory rate.

               (g) The Borrower shall not be required to pay any additional
amounts to any Bank or the Issuing Bank (or Transferee) in respect of United
States Federal withholding tax pursuant to paragraph (a) above if the obligation
to pay such additional amounts would not have arisen but for a failure by such
Bank or such Issuing Bank (or Transferee) to comply with the provisions of
paragraph (f) above; provided, however, that the Borrower shall be required to
pay those amounts to any Bank or the Issuing Bank (or Transferee) that it was
required to pay hereunder prior to the failure of such Bank or such Issuing Bank
(or Transferee) to comply with the provisions of such paragraph (f).

               SECTION 2.20. Termination or Assignment of Commitments Under
Certain Circumstances. (a) Any Bank or the Issuing Bank (or Transferee) claiming
any additional amounts payable pursuant to Section 2.13 or Section 2.19 or
exercising its rights under Section 2.14 shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any certificate or
document requested by the Borrower or to change the jurisdiction of its
applicable lending office if the making of such a filing or change would avoid
the need for or reduce the amount of any such additional amounts which may
thereafter accrue or avoid the circumstances giving rise to such exercise and
would not, in the sole determination of such Bank or such Issuing Bank, be
otherwise disadvantageous to such Bank or such

                                       51
<PAGE>   52

Issuing Bank (or Transferee).

               (b) In the event that any Bank shall have delivered a notice or
certificate pursuant to Section 2.13 or 2.14, or the Borrower shall be required
to make additional payments under Section 2.19 to any Bank or the Issuing Bank
(or Transferee) or to the Agent with respect to any Bank or the Issuing Bank (or
Transferee), the Borrower shall have the right, at its own expense, upon notice
to such Bank or the Issuing Bank (or Transferee) and the Agent (and, if a
Commitment is being assigned, the Issuing Bank), (a) to terminate the Commitment
of such Bank or such Issuing Bank (or Transferee) or (b) to require such Bank or
the Issuing Bank (or Transferee) to transfer and assign without recourse (in
accordance with and subject to the restrictions contained in Section 9.04) all
its interests, rights and obligations under this Agreement (other than any
outstanding Auction Loans) to another financial institution which shall assume
such obligations; provided that (i) no such termination or assignment shall
conflict with any law, rule or regulation or order of any Governmental Authority
and (ii) the Borrower or the assignee, as the case may be, shall pay to the
affected Bank or the Issuing Bank (or Transferee) in immediately available funds
on the date of such termination or assignment the principal of and interest
accrued to the date of payment on the Loans made by it hereunder and all other
amounts accrued for its account or owed to it hereunder and, in the case of a
termination or assignment by the Issuing Bank, shall cause all Letters of Credit
to be surrendered for cancelation on or prior to the date of such termination or
assignment.

ARTICLE III. REPRESENTATIONS AND WARRANTIES

               The Borrower represents and warrants to each of the Banks that:

               SECTION 3.01. Organization; Powers. Each of the Borrower and the
Significant Subsidiaries (a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, (b)
has all requisite power and authority to own its property and assets and to
carry on its business as now conducted and as proposed to be conducted, (c) is

                                       52
<PAGE>   53

qualified to do business in every jurisdiction where such qualification is
required, except where the failure so to qualify would not result in a Material
Adverse Effect, and (d) in the case of the Borrower, has the corporate power and
authority to execute, deliver and perform its obligations under each of the Loan
Documents and each other agreement or instrument contemplated thereby to which
it is or will be a party and to borrow hereunder.

               SECTION 3.02. Authorization. The execution, delivery and
performance by the Borrower of each of the Loan Documents and the borrowings
hereunder (collectively, the "Transactions") (a) have been duly authorized by
all requisite corporate and, if required, stockholder action and (b) will not
(i) violate (A) any provision of law, statute, rule or regulation the violation
of which could reasonably be expected to impair the validity and enforceability
of this Agreement or any other Loan Document or materially impair the rights of
or benefits available to the Banks under the Loan Documents, or of the
certificate or articles of incorporation or other constitutive documents or
by-laws of the Borrower or any Significant Subsidiary, (B) any order of any
Governmental Authority the violation of which could reasonably be expected to
impair the validity or enforce ability of this Agreement or any other Loan
Document, or materially impair the rights of or benefits available to the Banks
under the Loan Documents, or (C) any provision of any indenture or other
material agreement or instrument evidencing or relating to borrowed money to
which the Borrower or any Significant Subsidiary is a party or by which any of
them or any of their property is or may be bound in a manner which could
reasonably be expected to impair the validity and enforceability of this
Agreement or any other Loan Document or materially impair the rights of or
benefits available to the Banks under the Loan Documents, (ii) be in conflict
with, result in a breach of or constitute (alone or with notice or lapse of time
or both) a default under any such indenture, agreement or other instru ment in a
manner which could reasonably be expected to impair the validity and
enforceability of this Agreement or any other Loan Document or materially impair
the rights of or benefits available to the Banks under the Loan Documents or
(iii) result in the creation or imposition under any such indenture, agreement
or other instrument of any Lien upon or with respect to any property or assets
now owned or

                                       53
<PAGE>   54

hereafter acquired by the Borrower.

               SECTION 3.03. Enforceability. This Agreement has been duly
executed and delivered by the Borrower and constitutes, and each other Loan
Document when executed and delivered by the Borrower will constitute, a legal,
valid and binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms.

               SECTION 3.04. Governmental Approvals. No action, consent or
approval of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except
such as have been made or obtained and are in full force and effect.

               SECTION 3.05. Financial Statements. The Borrower has heretofore
furnished to the Banks its consolidated balance sheets and statements of income
and statements of cash flow as of and for the fiscal year ended December 31,
1999, audited by and accompanied by the opinion of Deloitte & Touche,
independent public accountants. Such financial statements present fairly the
financial condition and results of operations of the Borrower and its
consolidated subsidiaries as of such dates and for such periods. Such balance
sheets and the notes thereto, together with the Borrower's Annual Report on Form
10-K for the fiscal year ended December 31, 1999, reflect all liabilities,
direct or contingent, of the Borrower and its consolidated Subsidiaries as of
the dates thereof which are material on a consolidated basis. Such financial
statements were prepared in accordance with GAAP applied (except as noted
therein) on a consistent basis.

               SECTION 3.06. No Material Adverse Change. Except as disclosed in
the Borrower's Annual Report on Form 10-K for the fiscal year ended December 31,
1999, in the Borrower's Form 10-Q for the fiscal quarter ended March 31, 2000
and in any document filed prior to the date of this Agreement pursuant to
Sections 13(a), 14 or 15(d) of the Securities Exchange Act of 1934, there has
been no change in the business, assets, operations or financial condition of the
Borrower and the Subsidiaries, taken as a whole, since December 31, 1999, which
could reasonably be expected to have a material adverse effect on the
creditworthiness of the Borrower.

                                       54
<PAGE>   55

               SECTION 3.07. Litigation; Compliance with Laws. (a) Except as set
forth in the Annual Report of the Borrower on Form 10-K for the year ended
December 31, 1999, in the Borrower's Form 10-Q for the fiscal quarter ended
March 31, 2000 or in any document filed prior to the date of this Agreement
pursuant to Sections 13(a), 14 or 15(d) of the Securities Exchange Act of 1934,
there are not any actions, suits or proceedings at law or in equity or by or
before any Governmental Authority now pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Subsidiary or any
business, property or rights of any such person (i) which involve any Loan Docu
ment or the Transactions or (ii) which could reasonably be anticipated,
individually or in the aggregate, to result in a Material Adverse Effect.

               (b) Neither the Borrower nor any of the Subsidiaries is in
violation of any law, rule or regulation, or in default with respect to any
judgment, writ, injunction or decree of any Governmental Authority, where such
violation or default would be reasonably likely to result in a Material Adverse
Effect.

               SECTION 3.08. Federal Reserve Regulations. (a) Neither the
Borrower nor any of the Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.

               (b) No part of the proceeds of any Loan or Letter of Credit will
be used, whether directly or indirectly, and whether immediately, incidentally
or ultimately, (i) to purchase or carry Margin Stock or to extend credit to
others for the purpose of purchasing or carrying Margin Stock or to refund
indebtedness originally incurred for such purpose, or (ii) for any purpose which
entails a violation of, or which is inconsistent with, the provisions of the
Regulations of the Board, including Regulation U or X.

               SECTION 3.09. Investment Company Act; Public Utility Holding
Company Act. The Borrower is not (a) an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of 1940 or (b) subject
to regulation as a "holding company" under the Public Utility

                                       55
<PAGE>   56

Holding Company Act of 1935.

               SECTION 3.10. Use of Proceeds and Letters of Credit. The Borrower
will use the proceeds of the Loans and the Letters of Credit only for the
purposes specified in the preamble to this Agreement.

               SECTION 3.11. No Material Misstatements. No information, report,
financial statement, exhibit or schedule furnished by or on behalf of the
Borrower to the Agent, the Issuing Bank or any Bank in connection with the
negotiation of any Loan Document or included therein or delivered pursuant
thereto contained, contains or will contain any material misstatement of fact
or, when considered together with all reports theretofore filed with the
Securities and Exchange Commission, omitted, omits or will omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were, are or will be made, not misleading.

               SECTION 3.12. Employee Benefit Plans. Each of the Borrower and
its ERISA Affiliates is in compliance in all material respects with the
applicable provisions of ERISA and the regulations and published interpretations
thereunder. No Reportable Event has occurred as to which the Borrower or any
ERISA Affiliate was required to file a report with the PBGC, and the present
value of all benefit liabilities under each Plan (based on those assumptions
used to fund such Plan) did not, as of the last annual valuation date applicable
thereto, exceed by more than $10,000,000 the value of the assets of such Plan.

               SECTION 3.13. Environmental and Safety Matters. Each of the
Borrower and each Subsidiary has complied with all Federal, state, local and
other statutes, ordinances, orders, judgments, rulings and regulations relating
to environmental pollution or to environmental or nuclear regulation or control
or to employee health or safety, except where noncompliance would not be
reasonably likely to result in a Material Adverse Effect. Neither the Borrower
nor any Subsidiary has received notice of any failure so to comply, except where
noncompliance would not be reasonably likely to result in a Material Adverse
Effect. The Borrower's and the Subsidiaries' plants do not manage any hazardous
wastes, hazardous substances, hazardous materials,

                                       56
<PAGE>   57

toxic substances, toxic pollutants or substances similarly denominated, as those
terms or similar terms are used in the Resource Conservation and Recovery Act,
the Comprehensive Environmental Response Compensation and Liability Act, the
Hazardous Materials Transportation Act, the Toxic Substance Control Act, the
Clean Air Act, the Clean Water Act or any other applicable law relating to
environmental pollution or employee health and safety, or any nuclear fuel or
other radioactive materials, in violation of any law or any regulations
promulgated pursuant thereto, where such violation would be reasonably likely to
result in a Material Adverse Effect. The Borrower is aware of no events,
conditions or circumstances involving environmental pollution or contamination
or employee health or safety that could reasonably be expected to result in a
Material Adverse Effect. The representations and warranties set forth in this
Section 3.13 are, however, subject to any matters, circumstances or events set
forth in the Borrower's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, in the Borrower's Form 10-Q for the fiscal quarter ended
March 31, 2000 and in any document filed prior to the date of this Agreement
pursuant to Sections 13(a), 14 or 15(d) of the Securities Exchange Act of 1934;
provided, however, that the inclusion of such matters, circumstances or events
as exceptions (or any other exceptions contained in the representations and
warranties which refer to the Borrower's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, the Borrower's Form 10-Q for the fiscal
quarter ended March 31, 2000 or in any document filed prior to the date of this
Agreement pursuant to Sections 13(a), 14 or 15(d) of the Securities Exchange Act
of 1934) shall not be construed to mean that the Borrower has concluded that any
such matter, circumstance or effect is likely to result in a Material Adverse
Effect.

               SECTION 3.14. Significant Subsidiaries. Schedule 3.14 sets forth
as of the date hereof a list of all Significant Subsidiaries of the Borrower and
the percentage ownership interest of the Borrower therein.

ARTICLE IV. CONDITIONS OF LENDING

               The obligations of the Banks to make Loans and of the Issuing
Bank to issue, amend, renew, or extend Letters

                                       57
<PAGE>   58

of Credit, hereunder are subject to the satisfaction of the following
conditions:

               SECTION 4.01. All Borrowings. On the date of each Borrowing or
issuance, renewal, extension or amending of a Letter of Credit, including each
Borrowing in which Loans are refinanced with new Loans as contemplated by
Section 2.02(e):

               (a) The Agent shall have received a notice of such Borrowing as
        required by Section 2.03.

               (b) The representations and warranties set forth in Article III
        hereof (except, in the case of a refinancing of Loans or the issuance,
        amendment, renewal or extension of a Letter of Credit or the refinancing
        of a LC Disbursement that does not increase the sum of the Revolving
        Credit Exposure, LC Disbursements and the Auction Loans of any Bank
        outstanding, the representations set forth in Sections 3.06 and 3.07)
        shall be true and correct in all material respects on and as of the date
        of such Borrowing or the date of issuance, amendment, renewal or
        extension of such Letter of Credit with the same effect as though made
        on and as of such date, except to the extent such representations and
        warranties expressly relate to an earlier date.

               (c) The Borrower shall be in compliance with all the terms and
        provisions set forth herein and in each other Loan Document on its part
        to be observed or performed, and at the time of and immediately after
        such Borrowing or the date of issuance, amendment, renewal or extension
        of such Letter of Credit no Event of Default or Default shall have
        occurred and be continuing.

Each Borrowing and issuance, amendment, renewal or extension of such Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date of such Borrowing as to the matters specified in paragraphs
(b) and (c) of this Section 4.01.

               SECTION 4.02. First Borrowing. On the date of this Agreement:

                                       58
<PAGE>   59

               (a) The Agent shall have received favorable written opinions of
        (i) Paine, Hamblen, Coffin, Brooke & Miller, counsel for the Borrower,
        and (ii) Thelen, Reid & Priest, special counsel to the Borrower, each
        dated the date of this Agreement and addressed to the Banks, to the
        effect set forth in Exhibits D-1 and D-2 hereto, and the Borrower hereby
        instructs such counsel to deliver such opinions to the Agent.

               (b) The Agent shall have received evidence satisfactory to it and
        set forth on Schedule 4.02(b) that the Borrower shall have obtained all
        consents and approvals of, and shall have made all filings and
        registrations with, any Governmental Authority required in order to
        consummate the Transactions, in each case without the imposition of any
        condition which, in the judgment of the Banks, could adversely affect
        their rights or interests hereunder.

               (c) All legal matters incident to this Agreement and the
        borrowings hereunder shall be satisfactory to the Banks and their
        counsel and to Cravath, Swaine & Moore, counsel for the Agent.

               (d) The Agent shall have received (i) a copy of the certificate
        or articles of incorporation, including all amendments thereto, of the
        Borrower, certified as of a recent date by the Secretary of State of the
        state of its organization, and a certificate as to the good standing of
        the Borrower as of a recent date, from such Secretary of State; (ii) a
        certificate of the Secretary or Assistant Secretary of the Borrower
        dated the Closing Date and certifying (A) that attached thereto is a
        true and complete copy of the by-laws of the Borrower as in effect on
        the Closing Date and at all times since a date prior to the date of the
        resolutions described in clause (B) below, (B) that attached thereto is
        a true and complete copy of resolutions duly adopted by the board of
        directors of the Borrower authorizing the execution, delivery and
        performance of the Loan Documents and the borrowings hereunder, and that
        such resolutions have not been modified, rescinded or amended and are in
        full force and effect, (C) that the certificate or articles of
        incorporation of the

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<PAGE>   60

        Borrower have not been amended since the date of the last amendment
        thereto shown on the certificate of good standing furnished pursuant to
        clause (i) above, and (D) as to the incumbency and specimen signature of
        each officer executing any Loan Document or any other document delivered
        in connection herewith on behalf of the Borrower; (iii) a certificate of
        another officer as to the incumbency and specimen signature of the
        Secretary or Assistant Secretary executing the certificate pursuant to
        (ii) above; and (iv) such other documents as the Banks or their counsel
        or Cravath, Swaine & Moore, counsel for the Agent, may reasonably
        request.

               (e) The Agent shall have received a certificate, dated the
        Closing Date and signed by a Financial Officer of the Borrower,
        confirming compliance with the conditions precedent set forth in
        paragraphs (b) and (c) of Section 4.01.

               (f) The Agent shall have received all Fees and other amounts due
        and payable on or prior to the date of this Agreement, including all
        Fees accrued to the date hereof under the Pre-Restatement Credit
        Agreement, this Agreement or the fee schedule set forth in the
        invitation schedule and fee schedule dated May 12, 2000.

ARTICLE V. AFFIRMATIVE COVENANTS

               The Borrower covenants and agrees with each Bank and with the
Issuing Bank that so long as this Agreement shall remain in effect or the
principal of or interest on any Loan, any Fees or any other expenses, any LC
Disbursement or amounts payable under any Loan Document shall be unpaid or any
Letter of Credit remains outstanding, unless the Required Banks shall otherwise
consent in writing, the Borrower will:

               SECTION 5.01. Existence; Businesses and Proper ties. (a) Do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence, except as otherwise expressly permitted under
Section 6.02.

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<PAGE>   61

               (b) Do or cause to be done all things necessary to obtain,
preserve, renew, extend and keep in full force and effect the rights, licenses,
permits, franchises, authorizations, patents, copyrights, trademarks and trade
names utilized in the conduct of the Borrower's business except where the
failure so to obtain, preserve, renew, extend or maintain any of the foregoing
would not result in a Material Adverse Effect; maintain and operate such
business in substantially the manner in which it is presently conducted and
operated, except as otherwise expressly permitted under this Agreement; comply
in all material respects with all applicable laws, rules, regulations and orders
of any Governmental Authority, whether now in effect or hereafter enacted if
failure to comply with such requirements would result in a Material Adverse
Effect; and at all times maintain and preserve all property material to the
conduct of such business and keep such property in good repair, working order
and condition and from time to time make, or cause to be made, all needful and
proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith may be
properly conducted at all times; provided, however, that the Borrower may cause
the discontinuance of the operation or a reduction in the capacity of any of its
facilities, or any element or unit thereof including, without limitation, real
and personal properties, facilities, machinery and equipment, (i) if, in the
judgment of the Borrower, it is no longer advisable to operate the same, or to
operate the same at its former capacity, and such discontinuance or reduction
would not result in a Material Adverse Effect, or (ii) if the Borrower intends
to sell and dispose of its interest in the same in accordance with the terms of
this Agreement and within a reasonable time shall endeavor to effectuate the
same.

               SECTION 5.02. Insurance. (a) Maintain insurance, to such extent
and against such risks, as is customary with companies in the same or similar
businesses and owning similar properties in the same general area in which the
Borrower operates and (b) maintain such other insurance as may be required by
law. All insurance required by this Section 5.02 shall be maintained with
financially sound and reputable insurers or through self-insurance; provided,
however, that the portion of such insurance constituting

                                       61
<PAGE>   62

self-insurance shall be comparable to that usually maintained by companies
engaged in the same or similar businesses and owning similar properties in the
same general area in which the Borrower operates and the reserves maintained
with respect to such self-insured amounts are deemed adequate by the officer or
officers of the Borrower responsible for insurance matters.

               SECTION 5.03. Taxes and Obligations. Pay and discharge promptly
when due all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits or in respect of its property, before the same
shall become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might give rise to a Lien
upon such properties or any part thereof; provided, however, that such payment
and discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and the Borrower shall, to
the extent required by GAAP, have set aside on its books adequate reserves with
respect thereto.

               SECTION 5.04. Financial Statements, Reports, etc. Furnish to the
Agent and each Bank:

               (a) within 105 days after the end of each fiscal year, its
        consolidated and consolidating balance sheets and related statements of
        income and statements of cash flow, showing the financial condition of
        the Borrower and its consolidated Subsidiaries as of the close of such
        fiscal year and the results of its operations and the operations of such
        Subsidiaries during such year, all audited by Deloitte & Touche or other
        independent public accountants of recognized national standing
        acceptable to the Required Banks and accompanied by an opinion of such
        accountants (which shall not be qualified in any material respect) to
        the effect that such consolidated financial statements fairly present
        the financial condition and results of operations of the Borrower on a
        consolidated basis (except as noted therein) in accordance with GAAP
        consistently applied;

               (b) within 50 days after the end of each of the first three
        fiscal quarters of each fiscal year, its

                                       62
<PAGE>   63

        consolidated and, to the extent otherwise available, consolidating
        balance sheets and related statements of income and statements of cash
        flow, showing the financial condition of the Borrower and its
        consolidated subsidiaries as of the close of such fiscal quarter and the
        results of its operations and the operations of such subsidiaries during
        such fiscal quarter and the then elapsed portion of the fiscal year, all
        certified by one of its Financial Officers as fairly presenting the
        financial condition and results of operations of the Borrower on a
        consolidated basis in accordance with GAAP consistently applied, subject
        to normal year-end audit adjustments;

               (c) concurrently with any delivery of financial statements under
        (a) or (b) above, a certificate of the relevant accounting firm opining
        on or certifying such statements or Financial Officer (which
        certificate, when furnished by an accounting firm, may be limited to
        accounting matters and disclaim responsibility for legal
        interpretations) certifying that to the knowledge of the accounting firm
        or the Financial Officer, as the case may be, no Event of Default or
        Default has occurred or, if such an Event of Default or Default has
        occurred, specifying the nature and extent thereof and any corrective
        action taken or proposed to be taken with respect thereto;

               (d) promptly after the same become publicly available, copies of
        all periodic and other reports, proxy statements and other materials
        filed by it with the Securities and Exchange Commission, or any
        governmental authority succeeding to any of or all the functions of said
        Commission, or with any national securities exchange, or distributed to
        its share holders, as the case may be; and

               (e) promptly, from time to time, such other information regarding
        the operations, business affairs and financial condition of the Borrower
        or any Significant Subsidiary, or compliance with the terms of any Loan
        Document, as the Agent or any Bank may reasonably request.

               SECTION 5.05. Litigation and Other Notices.

                                       63
<PAGE>   64

Furnish to the Agent and each Bank prompt written notice of the following:

               (a) any Event of Default or Default, specifying the nature and
        extent thereof and the corrective action (if any) proposed to be taken
        with respect thereto;

               (b) the filing or commencement of, or any written threat or
        notice of intention of any person to file or commence, any action, suit
        or proceeding, whether at law or in equity or by or before any
        Governmental Authority, against the Borrower or any Subsidiary thereof
        which could reasonably be anticipated to result in a Material Adverse
        Effect; and

               (c) any development that has resulted in, or could reasonably be
        anticipated to result in, a Material Adverse Effect.

               SECTION 5.06. ERISA. (a) Comply in all material respects with the
applicable provisions of ERISA and (b) furnish to the Agent and each Bank (i) as
soon as possible, and in any event within 30 days after any Responsible Officer
of the Borrower or any ERISA Affiliate either knows or has reason to know that
any Reportable Event has occurred that alone or together with any other
Reportable Event could reasonably be expected to result in liability of the
Borrower to the PBGC in an aggregate amount exceeding $10,000,000, a statement
of a Financial Officer setting forth details as to such Reportable Event and the
action proposed to be taken with respect thereto, together with a copy of the
notice, if any, of such Reportable Event given to the PBGC, (ii) promptly after
receipt thereof, a copy of any notice the Borrower or any ERISA Affiliate may
receive from the PBGC relating to the intention of the PBGC to terminate any
Plan or Plans (other than a Plan maintained by an ERISA Affiliate which is
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Code) or to appoint a trustee to administer any Plan or Plans and
(iii) within 10 days after the due date for filing with the PBGC pursuant to
Section 412(n) of the Code of a notice of failure to make a required installment
or other payment with respect to a Plan, a statement of a Financial Officer
setting forth details as to such failure and the action proposed to be taken
with respect thereto, together

                                       64
<PAGE>   65

with a copy of such notice given to the PBGC.

               SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Maintain all financial records in accordance with GAAP and permit
any representatives designated by any Bank to visit and inspect the financial
records and the properties of the Borrower at reasonable times and as often as
requested and to make extracts from and copies of such financial records, and
permit any representatives designated by any Bank to discuss the affairs,
finances and condition of the Borrower with the chief financial officer of the
Borrower, or other person designated by the chief financial officer, and
independent accountants therefor.

               SECTION 5.08. Use of Proceeds and Letters of Credit. Use the
proceeds of the Loans and the Letters of Credit only for the purposes set forth
in the preamble to this Agreement.

               SECTION 5.09. Further Assurance. Pledge all the capital stock
(including any warrants, options or other rights entitling the Borrower to
purchase or acquire such capital stock) of Avista Capital, Inc. to the Agent for
the benefit of the Banks by August 15, 2000. Such pledge shall be made pursuant
to a pledge agreement in a form reasonably satisfactory to the Agent. Such
pledge shall not restrict, limit or encumber the Borrower's ability to conduct
any business activities of Avista Capital, Inc. or any of its affiliates
(subject to any restrictions on Avista Capital, Inc. under this Agreement as a
result of it being a Significant Subsidiary), including, but not limited to, its
decisions related to disposition of assets in whole or in part, mergers,
acquisitions, inter-company loans, dividends or other commitments.

ARTICLE VI. NEGATIVE COVENANTS

               The Borrower covenants and agrees with each Bank that, so long as
this Agreement shall remain in effect or the principal of or interest on any
Loan shall be unpaid, any LC Disbursement, any Fees or any other expenses or
amounts payable under any Loan Document shall be unpaid or any Letter of Credit
remains outstanding, unless the Required Banks shall otherwise consent in
writing, the Borrower will not:

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<PAGE>   66

               SECTION 6.01. Liens. Create, incur, assume or permit to exist any
Lien on any property or assets (including stock or other securities of any
person, including any Subsidiary) now owned or hereafter acquired by it or on
any income or revenues or rights in respect of any thereof, except:

               (a) Liens on property or assets of the Borrower created by the
        documents, instruments or agreements existing on the date hereof and
        which are listed as exhibits to the Borrower's Annual Report on Form
        10-K for the fiscal year ended December 31, 1999, to the extent that
        such Liens secure only obligations arising under such existing
        documents, agreements or instruments;

               (b) any Lien existing on any property or asset prior to the
        acquisition thereof by the Borrower; provided that (i) such Lien is not
        created in contemplation of or in connection with such acquisition and
        (ii) such Lien does not apply to any other property or assets of the
        Borrower;

               (c) the Lien of the First Mortgage;

               (d) Liens permitted under the First Mortgage (whether or not such
        permitted Liens cover properties or assets subject to the Lien of the
        First Mortgage) and any other Liens to which the Lien of the First
        Mortgage is expressly made subject;

               (e) the Lien of any collateral trust mortgage or similar
        instrument which would be intended to eventually replace (in one
        transaction or a series of transactions) the First Mortgage (as amended,
        modified or supplemented from time to time, "Collateral Trust Mortgage")
        on properties or assets of the Borrower to secure bonds, notes and other
        obligations of the Borrower; provided that, so long as the First
        Mortgage shall constitute a Lien on properties or assets of the
        Borrower, the bonds, notes or other obligations issued under the
        Collateral Trust Mortgage (i) shall also be secured by an equal
        principal amount of bonds issued under the First Mortgage or (ii) shall
        be issued against property additions not subject to the Lien of

                                       66
<PAGE>   67

        the First Mortgage;

               (f) Liens permitted under the Collateral Trust Mortgage (whether
        or not such permitted Liens cover properties or assets subject to the
        Lien of the Collateral Trust Mortgage) and any other Liens to which the
        Lien of the Collateral Trust Mortgage is subject;

               (g) Liens for taxes, assessments or governmental charges not yet
        due or which are being contested in compliance with Section 5.03;

               (h) carriers', warehousemen's, mechanic's, materialmen's,
        repairmen's or other like Liens arising in the ordinary course of
        business and securing obligations that are not due or which are being
        contested in compliance with Section 5.03;

               (i) pledges and deposits made in the ordinary course of business
        in compliance with workmen's compen sation, unemployment insurance and
        other social secur ity laws or regulations;

               (j) Liens incurred or created in connection with or to secure the
        performance of bids, tenders, trade contracts (other than for
        Indebtedness), leases, statutory obligations, surety and appeal bonds,
        performance bonds and other obligations of a like nature incurred in the
        ordinary course of business;

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

               (l) Liens (i) which secure obligations not assumed by the
        Borrower, (ii) on account of which the Borrower has not and does not
        expect to pay interest directly or indirectly and (iii) which exist upon
        real estate or rights in or relating to real estate in respect of which
        the Borrower has a right-of-way or other easement

                                       67
<PAGE>   68

        for purposes of substations or transmission or distribution facilities;

               (m) rights reserved to or vested in any federal, state or local
        governmental body or agency by the terms of any right, power, franchise,
        grant, license, contract or permit, or by any provision of law, to
        recapture or to purchase, or designate a purchase of or order the sale
        of, any property of the Borrower or to terminate any such right, power,
        franchise, grant, license, contract or permit before the expiration
        thereof;

               (n) Liens of judgments covered by insurance, or upon appeal and
        covered by bond, or to the extent not so covered not exceeding at one
        time $10,000,000 in aggregate amount;

               (o) any Liens, moneys sufficient for the discharge of which shall
        have been deposited in trust with the trustee or mortgagee under the
        instrument evidencing such Lien, with irrevocable authority of such
        trustee or mortgagee to apply such moneys to the discharge of such Lien
        to the extent required for such purpose;

               (p) rights reserved to or vested in any federal, state or local
        governmental body or agency or other public authority to control or
        regulate the business or property of the Borrower;

               (q) any obligations or duties, affecting the property of the
        Borrower to any federal, state or local governmental body or agency or
        other public authority with respect to any authorization, permit,
        consent or license of such body, agency or authority, given in
        connection with the purchase, construction, equipping, testing and
        operation of the Borrower's utility property;

               (r) with respect to any property which the Borrower may hereafter
        acquire, any exceptions or reservations therefrom existing at the time
        of such acquisition or any terms, conditions, agreements, covenants,
        exceptions and reservations expressed or provided in the deeds of other
        instruments,

                                       68
<PAGE>   69

        respectively, under and by virtue of which the Borrower shall hereafter
        acquire the same, none of which materially impairs the use of such
        property for the purposes for which it is acquired by the Borrower;

               (s) leases and subleases entered into in the ordinary course of
        business;

               (t) banker's Liens and other Liens in the nature of a right of
        setoff;

               (u) Liens resulting from any transaction permitted under Section
        6.03(v);

               (v) renewals, replacements, amendments, modifications,
        supplements, refinancings or extensions of Liens set forth above to the
        extent that the principal amount of Indebtedness secured by such Lien
        immediately prior thereto is not increased and such Lien is not extended
        to other property (it being understood that such limitation does not
        apply to the Liens described in subsection (c), (e) or (u) above);

               (w) security deposits or amounts paid into trust funds for the
        reclamation of mining properties;

               (x) restrictions on transfer or use of properties and assets,
        first rights of refusal, and rights to acquire properties and assets
        granted to others;

               (y) non-consensual equitable Liens on the Borrower's
        tenant-in-common or other interest in joint projects;

               (z) Liens on the Borrower's tenant-in-common or other interest in
        joint projects incurred by the project sponsor without the express
        consent of the Borrower to such incurrence;

               (aa) cash collateral contemplated under Section 2.06(i) and the
        pledge of Avista Capital, Inc. stock contemplated under Section 5.09 of
        this Agreement and under Section 5.09 of the $140,000,000 Amended and
        Restated Credit Agreement dated as of June 26, 2000 among the Borrower,
        the banks named therein and

                                       69
<PAGE>   70

        Toronto-Dominion (Texas), Inc., as agent; and

               (ab) Liens not expressly permitted in clauses (a) through (aa) of
        this Section 6.01 to secure Indebtedness of the Borrower, provided that
        the aggregate outstanding principal amount of the Indebtedness so
        secured does not at any one time exceed 5% of the total assets of the
        Borrower and its Subsidiaries, computed and consolidated in accordance
        with GAAP consistently applied.

               SECTION 6.02. Mergers, Consolidations and Acquisitions. Merge
into or consolidate with any other person, or permit any other person to merge
into or consolidate with it, or purchase, lease or otherwise acquire (in one
transaction or a series of transactions) all or substantially all of the assets
of any other person (whether directly by purchase, lease or other acquisition of
all or substantially all of the assets of such person or indirectly by purchase
or other acquisition of all or substantially all of the capital stock of such
other person) other than acquisitions in the ordinary course of the Borrower's
business, except that if (A) at the time thereof and immediately after giving
effect thereto no Event of Default or Default shall have occurred and be
continuing and (B) in the case of any merger or consolidation involving the
Borrower in which the Borrower is not the surviving corporation, the surviving
corporation shall assume in writing the obligations of the Borrower under this
Agreement and any other Loan Documents, then (a) the Borrower may merge or
consolidate with any Subsidiary in a transaction in which the Borrower is the
surviving corporation, (b) the Borrower may purchase, lease or otherwise acquire
from any Subsidiary all or substantially all of its assets and may purchase or
otherwise acquire all or substantially all of the capital stock of any person
who immediately thereafter is a Subsidiary, (c) the Borrower may merge with or
into, or consolidate with, any other person so long as (i) in the case where the
business of such other person, or an Affiliate of such other person, entirely or
primarily consists of an electric or gas utility business, the senior secured
long-term debt rating of the Borrower shall be at least BBB or higher by S&P and
Baa2 or higher by Moody's immediately after such merger or consolidation, or in
the case of a merger or consolidation in which the Borrower is

                                       70
<PAGE>   71

not the surviving entity, the senior secured long-term debt rating of the
surviving entity or an Affiliate thereof shall be at least BBB+ or higher by S&P
and Baa1 or higher by Moody's immediately after such merger or consolidation, or
(ii) in the case where such other person's business does not entirely or
primarily consist of an electric or gas utility business, the assets of such
person at the time of such consolidation or merger do not exceed 10% of the
total assets of the Borrower and its Subsidiaries after giving effect to such
merger or consolidation, computed and consolidated in accordance with GAAP
consistently applied, and (d) the Borrower may purchase, lease or otherwise
acquire any or all of the assets of any other person (and may purchase or
otherwise acquire the capital stock of any other person) so long as (i) the
assets being purchased, leased or acquired (or the assets of the person whose
capital stock is being acquired) entirely or primarily consist of electric or
gas utility assets or (ii) in the case where the assets being purchased, leased
or acquired (or the assets of the person whose capital stock is being acquired)
do not entirely or primarily consist of electric or gas utility assets, the
assets being acquired (or the Borrower's proportionate share of the assets of
the person whose capital stock is being acquired) do not exceed 10% of the total
assets of the Borrower and its Subsidiaries, after giving effect to such
acquisition, computed and consolidated in accordance with GAAP consistently
applied.

               SECTION 6.03. Disposition of Assets. Sell, lease, transfer,
assign or otherwise dispose of (in one transaction or in a series of
transactions), in any fiscal year, assets (whether now owned or hereafter
acquired) which, together with the amount of all sales, leases, transfers,
assignments or other dispositions permitted under clause (c)(ii) of the
definition of Subsidiary Event in Article I (other than sales, leases,
transfers, assignments or other dispositions permitted under clauses (c)(ii) (A)
through (C) in such definition), exceed 10% of the assets of the Borrower and
its Subsidiaries as of the end of the most recent fiscal year, computed and
consolidated in accordance with GAAP consistently applied, except (i) the
Borrower may, in any fiscal year, sell, lease, transfer, assign or otherwise
dispose of assets in the ordinary course of business which, together with the
amount of all sales, leases, transfers, assignments or other dispositions in the

                                       71
<PAGE>   72

ordinary course permitted under clause (c)(ii)(A) of the definition of
Subsidiary Event in Article I, do not exceed 5% of the assets of the Borrower
and its Subsidiaries as of the end of the most recent fiscal year, computed and
consolidated in accordance with GAAP consistently applied, (ii) to the extent
permitted under Section 5.03, 6.01 or Section 6.02, (iii) the Borrower may sell,
lease, transfer, assign or otherwise dispose of its interest in the Washington
Public Power Supply System Nuclear Project No. 3 in accordance with the
settlement agreement among the Borrower, the Washington Public Power Supply
System and Bonneville Power Administration, as the same may be amended, modified
or supplemented from time to time, (iv) the Borrower may sell, lease, transfer,
assign or otherwise dispose of its interests in the Colstrip and Centralia
Projects and related assets and (v) the Borrower may sell, lease, transfer,
assign or otherwise dispose (including by way of capital contribution) of, or
create, incur, assume or permit to exist Liens on, receivables and related
properties or interests therein.

               SECTION 6.04. Consolidated Total Debt to Consolidated Total
Capitalization Ratio. Permit the ratio of Consolidated Total Debt to
Consolidated Total Capitalization to be, at the end of any fiscal quarter,
greater than 0.60 to 1.00 for the preceding twelve-month period, and to remain
greater than 0.60 to 1.00 for a period of 30 days.

               SECTION 6.05. Public Utility Regulatory Borrowing Limits. Incur
actual borrowings or commitments or issued and outstanding debt of the Borrower
in excess of the amount authorized (i) by statute without necessity of public
utility commission approval and/or (ii) by orders of public utility commissions,
as in effect from time to time.

               SECTION 6.06. Guarantees. Incur Guarantees of or by the Borrower
with respect to Avista Energy, Inc. in excess of $50,000,000 in the aggregate or
Guarantees of or by the Borrower with respect to Avista Energy, Inc. with a
duration of one year or longer.

ARTICLE VII. EVENTS OF DEFAULT

        In case of the happening (and during the

                                       72
<PAGE>   73

continuance) of any of the following events ("Events of Default"):

               (a) any representation or warranty made or deemed made in or in
        connection with any Loan Document or the borrowings hereunder, or any
        representation, warranty, statement or information contained in any
        report, certificate, financial statement or other instrument furnished
        in connection with or pursuant to any Loan Document, shall prove to have
        been false or misleading in any material respect when so made, deemed
        made or furnished;

               (b) default shall be made in the payment of any principal of any
        Loan or any reimbursement obligation in respect of any LC Disbursement
        when and as the same shall become due and payable, whether at the due
        date thereof or at a date fixed for prepayment thereof or by
        acceleration thereof or otherwise;

               (c) default shall be made in the payment of any interest on any
        Loan or any Fee or any other amount (other than an amount referred to in
        (b) above) due under any Loan Document, when and as the same shall
        become due and payable, and such default shall continue unremedied for a
        period of five Business Days;

               (d) default shall be made in the due observance or performance by
        the Borrower of any covenant, condition or agreement contained in
        Section 5.01(a) or 5.05 or in Article VI;

               (e) default shall be made in the due observance or performance by
        the Borrower of any covenant, condition or agreement contained in any
        Loan Document (other than those specified in (b), (c) or (d) above) and
        such default shall continue unremedied for a period of 30 days after
        notice thereof from the Agent or any Bank to the Borrower;

               (f) the Borrower or any Significant Subsidiary shall (i) fail to
        pay any principal or interest, regardless of amount, due in respect of
        any Indebtedness when the aggregate unpaid principal amount is in excess
        of $25,000,000, when and as the same shall

                                       73
<PAGE>   74

        become due and payable (after expiration of any applicable grace
        period), or (ii) fail to observe or perform any other term, covenant,
        condition or agreement (after expiration of any applicable grace period)
        contained in any agreement or instrument evidencing or governing any
        such Indebtedness if the effect of any failure referred to in this
        clause (ii) is to cause, or to permit the holder or holders of such
        Indebtedness or a trustee on its or their behalf (with or without the
        giving of notice, the lapse of time or both) to cause, such Indebtedness
        to become due prior to its stated maturity;

               (g) an involuntary proceeding shall be commenced or an
        involuntary petition shall be filed in a court of competent jurisdiction
        seeking (i) relief in respect of the Borrower or any Significant
        Subsidiary, or of a substantial part of the property or assets of the
        Borrower or a Significant Subsidiary, under Title 11 of the United
        States Code, as now constituted or hereafter amended, or any other
        Federal or state bankruptcy, insolvency, receivership or similar law,
        (ii) the appointment of a receiver, trustee, custodian, sequestrator,
        conservator or similar official for the Borrower or any Significant
        Subsidiary or for a substantial part of the property or assets of the
        Borrower or a Significant Subsidiary or (iii) the winding-up or
        liquidation of the Borrower or any Significant Subsidiary; and such
        proceeding or petition shall continue undismissed, or an order or decree
        approving or ordering any of the foregoing shall be entered and continue
        unstayed and in effect, for a period of 60 or more days;

               (h) the Borrower or any Significant Subsidiary shall (i)
        voluntarily commence any proceeding or file any petition seeking relief
        under Title 11 of the United States Code, as now constituted or
        hereafter amended, or any other Federal or state bankruptcy, insolvency,
        receivership or similar law, (ii) consent to the institution of, or fail
        to contest in a timely and appropriate manner, any proceeding or the
        filing of any petition described in (g) above, (iii) apply for or
        consent to the appointment of a receiver, trustee, custodian,
        sequestrator, conservator or similar

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<PAGE>   75

        official for the Borrower or any Significant Subsidiary or for a
        substantial part of the property or assets of the Borrower or any
        Significant Subsidiary, (iv) file an answer admitting the material
        allegations of a petition filed against it in any such proceeding, (v)
        make a general assignment for the benefit of creditors, (vi) become
        unable, admit in writing its inability or fail generally to pay its
        debts as they become due or (vii) take any action for the purpose of
        effecting any of the foregoing;

               (i) a final judgment or judgments shall be rendered against the
        Borrower, any Significant Subsidiary or any combination thereof for the
        payment of money with respect to which an aggregate amount in excess of
        $25,000,000 is not covered by insurance and the same shall remain
        undischarged for a period of 30 consecutive days during which execution
        shall not be effectively stayed, or any action shall be legally taken by
        a judgment creditor to levy upon assets or properties of the Borrower or
        any Significant Subsidiary to enforce any such judgment;

               (j) a Reportable Event or Reportable Events, or a failure to make
        a required installment or other payment (within the meaning of Section
        412(n)(l) of the Code), shall have occurred with respect to any Plan or
        Plans that reasonably could be expected to result in liability of the
        Borrower to the PBGC or to a Plan in an aggregate amount exceeding
        $25,000,000 and, within 30 days after the reporting of any such
        Reportable Event to the Agent or after the receipt by the Agent of the
        statement required pursuant to Section 5.06, the Agent shall have
        notified the Borrower in writing that (i) the Required Banks have made a
        determination that, on the basis of such Reportable Event or Reportable
        Events or the failure to make a required payment, there are reasonable
        grounds (A) for the termination of such Plan or Plans by the PBGC, (B)
        for the appointment by the appropriate United States District Court of a
        trustee to administer such Plan or Plans or (C) for the imposition of a
        lien in favor of a Plan and (ii) as a result thereof an Event of Default
        exists hereunder; or a trustee shall be appointed by a United States
        District Court to administer any such Plan or Plans; or

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<PAGE>   76

        the PBGC shall institute proceedings to terminate any Plan or Plans;

               (k) there shall occur a Subsidiary Event; or

               (l) a Change in Control shall occur;

then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Agent, at the request of the Required Banks,
shall, by notice to the Borrower, take either or both of the following actions,
at the same or different times: (i) terminate forthwith the Commitments and (ii)
declare the Loans then outstanding to be forthwith due and payable in whole or
in part, whereupon (A) the Commitments will automatically be terminated and (B)
the principal of the Loans so declared to be due and payable, together with
accrued interest thereon and any unpaid accrued Fees and all other liabilities
of the Borrower accrued hereunder and under any other Loan Document, shall
become forthwith due and payable, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding; and in any event with respect to the Borrower
described in para graph (g) or (h) above, the Commitments shall automatically
terminate and the principal of the Loans then outstanding, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of the
Borrower accrued hereunder and under any other Loan Document, shall
automatically become due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding.

ARTICLE VIII. THE AGENT

               In order to expedite the various transactions contemplated by
this Agreement, Toronto Dominion (Texas), Inc. is hereby appointed to act as
Agent on behalf of the Banks and the Issuing Bank. Each of the Banks and the
Issuing Bank hereby irrevocably authorizes and directs the

                                       76
<PAGE>   77

Agent to take such action on behalf of such Bank under the terms and provisions
of this Agreement, and to exercise such powers hereunder as are specifically
delegated to or required of the Agent by the terms and provisions hereof,
together with such powers as are reasonably incidental thereto. The Agent is
hereby expressly authorized on behalf of the Banks and the Issuing Bank, without
hereby limiting any implied authority, (a) to receive on behalf of each of the
Banks any payment of principal of or interest on the Loans outstanding
hereunder, LC Reimbursements and all other amounts accrued hereunder paid to the
Agent, and to distribute to each Bank its proper share of all payments so
received as soon as practicable; (b) to give notice promptly on behalf of each
of the Banks to the Borrower of any event of default specified in this Agreement
of which the Agent has actual knowledge acquired in connection with its agency
hereunder; and (c) to distribute promptly to each Bank copies of all notices,
agreements and other material as provided for in this Agreement as received by
such Agent.

               Neither the Agent nor any of its directors, officers, employees
or agents shall be liable to any Bank as such for any action taken or omitted by
any of them hereunder except for its or his own gross negligence or wilful
misconduct, or be responsible for any statement, warranty or representation
herein or the contents of any document delivered in connection herewith or be
required to ascertain or to make any inquiry concerning the performance or
observance by the Borrower of any of the terms, conditions, covenants or
agreements of this Agreement. The Agent shall not be responsible to the Banks
and the Issuing Bank for the due execution, genuineness, validity,
enforceability or effectiveness of this Agreement or any other instrument to
which reference is made herein. The Agent shall in all cases be fully protected
in acting, or refraining from acting, in accordance with written instructions
signed by the Required Banks, and, except as otherwise specifically provided
herein, such instructions and any action taken or failure to act pursuant
thereto shall be binding on all the Banks. The Agent shall, in the absence of
knowledge to the contrary, be entitled to rely on any paper or document believed
by it in good faith to be genuine and correct and to have been signed or sent by
the proper person or persons. Neither the Agent nor any of its directors,
officers, employees or agents shall have any

                                       77
<PAGE>   78

responsibility to the Borrower on account of the failure or delay in performance
or breach by any Bank or the Issuing Bank of any of its obligations hereunder or
to any Bank or the Issuing Bank on account of the failure of or delay in
performance or breach by any other Bank or the Borrower of any of their
respective obligations hereunder or in connection herewith. The Agent may
execute any and all duties hereunder by or through agents or employees and shall
be entitled to advice of legal counsel selected by it with respect to all
matters arising hereunder and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such counsel.

               The Agent and its affiliates may accept deposits from, lend money
to and generally engage in any kind of business with the Borrower or other
affiliate thereof as if it were not the Agent.

               Each Bank recognizes that applicable laws, rules, regulations or
guidelines of governmental authorities may require the Agent to determine
whether the transactions contemplated hereby should be classified as "highly
lever aged" or assigned any similar or successor classification, and that such
determination may be binding upon the other Banks. Each Bank understands that
any such determination shall be made solely by the Agent based upon such factors
(which may include, without limitation, the Agent's internal policies and
prevailing market practices) as the Agent shall deem relevant and agrees that
the Agent shall have no liability for the consequences of any such
determination.

               Each Bank agrees (i) to reimburse the Agent in the amount of such
Bank's pro rata share (based on its Commitment hereunder) of any expenses
incurred for the benefit of the Banks by the Agent, including reasonable counsel
fees and compensation of agents and employees paid for services rendered on
behalf of the Banks, not reimbursed by the Borrower and (ii) to indemnify and
hold harmless the Agent and any of its directors, officers, employees or agents,
on demand, in the amount of its pro rata share, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against it in its capacity as the Agent or
any of them in any way

                                       78
<PAGE>   79

relating to or arising out of this Agreement or any action taken or omitted by
it or any of them under this Agreement, to the extent not reimbursed by the
Borrower; provided, however, that no Bank shall be liable to the Agent for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the gross
negligence or wilful misconduct of the Agent or any of its directors, officers,
employees or agents.

               Each Bank acknowledges that it has, independently and without
reliance upon the Agent or any other Bank and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other Bank based on
such documents and information as it shall deem appropriate at the time,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any related agreement or any document furnished hereunder.

               The Agent may execute any of its duties under this Agreement by
or through agents or attorneys selected by them using reasonable care and shall
be entitled to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence or misconduct of
any agents or attorneys selected and authorized to act by it with reasonable
care unless the damage complained of directly results from an act or failure to
act on part of the Agent which constitutes gross negligence or wilful
misconduct. Delegation to an attorney or agent shall not release the Agent from
its obligation to perform or cause to be performed the delegated duty.

               The Documentation Agent and the Syndication Agent shall not have
any rights, powers, obligations, liabilities, responsibilities or duties under
this Agreement other than those applicable to all Banks as such. Without
limiting the foregoing, none of the Banks identified as "Documentation Agent" or
"Syndication Agent" shall have or be deemed to have any fiduciary relationship
with any Bank. Each Bank acknowledges that it has not relied, and will not rely,
on any of the Banks so identified in deciding to enter into this Agreement or in
taking or not taking action hereunder.

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<PAGE>   80

ARTICLE IX. MISCELLANEOUS

               SECTION 9.01. Notices. Notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed or sent by telecopy, graphic scanning or other tele
graphic communications equipment of the sending party, as follows:

               (a) if to the Borrower, to it at East 1411 Mission Avenue
        (99202), P.O. Box 3727, Spokane, Washington 99220, Attention of the
        Senior Vice President and Chief Financial Officer (Telecopy No.
        509-482-4879);

               (b) if to the Agent, to it at 909 Fannin, Suite 1700, Houston,
        Texas 77010, Attention of Kimberly Burleson (Telecopy No. 713-951-9921);

               (c) if to the Issuing Bank, to it at 909 Fannin, Suite 1700,
        Houston, Texas 77010, Attention of Kimberly Burleson (Telecopy No.
        713-951- 0021); and

               (d) if to a Bank, to it at its address (or telecopy number) set
        forth in Schedule 2.01 or in the Assignment and Acceptance pursuant to
        which such Bank shall have become a party hereto.

All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or other telegraphic communications equipment of the sender, or on the
date five Business Days after dispatch by certified or registered mail if
mailed, in each case delivered, sent or mailed (properly addressed) to such
party as provided in this Section 9.01 or in accordance with the latest
unrevoked direction from such party given in accordance with this Section 9.01.

               SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties, including, without limitation, any indemnities
and

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<PAGE>   81

reimbursement obligations, made by the Borrower herein and in the certificates
or other instruments prepared or delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the Banks and shall survive the making by the Banks of the Loans
and issuance of any Letters of Credit, and the execution and delivery to the
Banks of any Notes evidencing such Loans, regardless of any investigation made
by the Banks, or on their behalf, or by the Issuing Bank and shall continue in
full force and effect as long as the principal of or any accrued interest on any
Loan or any Fee or any other amount payable under this Agreement or any other
Loan Document is outstanding and unpaid or any Letter of Credit is outstanding
and so long as the Commitments have not been terminated.

               SECTION 9.03. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Borrower and the Agent and
when the Agent shall have received copies hereof which, when taken together,
bear the signatures of each Bank and the Issuing Bank, and thereafter shall be
binding upon and inure to the benefit of the Borrower, the Agent, the Issuing
Bank and each Bank and their respective successors and assigns, except that the
Borrower shall not have the right to assign its rights hereunder or any interest
herein without the prior consent of all the Banks and the Issuing Bank.

               SECTION 9.04. Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and permitted assigns of such party; and all
covenants, promises and agreements by or on behalf of the Borrower, the Agent,
the Issuing Bank or the Banks that are contained in this Agreement shall bind
and inure to the benefit of their respective successors and permitted assigns.

               (b) Each Bank (including the Agent when acting as a Bank) may
assign to one or more assignees all or a portion of its interests, rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Revolving Credit Commitment and the same portion of the
applicable Loan or Loans at the time owing to it other than any Auction Loans,
which may, but need not, be

                                       81
<PAGE>   82

assigned); provided, however, that (i) except in the case of an assignment to a
Bank or an Affiliate of such Bank, the Borrower and the Agent (and, in the case
of an assignment of all or a portion of a Commitment or any Bank's obligation in
respect of its LC Exposure, the Issuing Bank) must give their prior written
consent to such assignment (which consent shall not be unreasonably withheld),
(ii) that no assignee of any Bank shall be entitled to receive any greater
payment or protection under Sections 2.13, 2.14(a), 2.15 or 2.19 than such Bank
would have been entitled to receive with respect to the rights assigned or
otherwise transferred unless such assignment or transfer shall have been made at
a time when the circumstances giving rise to such greater payment did not exist,
(iii) each such assignment shall be of a constant, and not a varying, percentage
of all the assigning Bank's rights and obligations under this Agreement, except
that this clause (iii) shall not apply to rights in respect of outstanding
Auction Loans, (iv) the amount of the Commitment of the assigning Bank subject
to each such assignment (determined as of the date the Assignment and Acceptance
with respect to such assignment is delivered to the Agent) shall not be less
than $5,000,000 (or, if less, the total amount of their Commitments), (v) the
parties to each such assignment shall execute and deliver to the Agent an
Assignment and Acceptance and a processing and recordation fee of $5,000 and
(vi) the assignee, if it shall not be a Bank, shall deliver to the Agent an
Administrative Questionnaire. Upon acceptance and recording pursuant to
paragraph (e) of this Section 9.04, from and after the effective date specified
in each Assignment and Acceptance, which effective date shall be at least five
Business Days after the execution thereof, (A) the assignee thereunder shall be
a party hereto and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Bank under this Agreement
and (B) the assigning Bank thereunder shall, to the extent of the interest
assigned by such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of an assigning Bank's rights and obligations under
this Agreement, such Bank shall cease to be a party hereto but shall continue to
be entitled to the benefits of Sections 2.13, 2.15, 2.19 and 9.05, as well as to
any Fees accrued for its account and not yet paid).

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<PAGE>   83

               (c) By executing and delivering an Assignment and Acceptance, the
assigning Bank thereunder and the assignee thereunder shall be deemed to confirm
to and agree with each other and the other parties hereto as follows: (i) such
assigning Bank warrants that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim and that its
Commitment, and the outstanding balances of its Loans, in each case without
giving effect to assignments thereof which have not become effective, are as set
forth in such Assignment and Accep tance; (ii) except as set forth in (i) above,
such assigning Bank makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto, or the financial condition of the Borrower or any Subsidiary or the
performance or observance by the Borrower or any Subsidiary of any of its
obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into such Assignment and
Acceptance; (iv) such assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 5.04 and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (v) such assignee will independently and
without reliance upon the Agent, such assigning Bank or any other Bank and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (vi) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee agrees that
it will perform in accordance with their terms all the obligations which by the
terms of this Agreement are required to be performed by it as a Bank.

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<PAGE>   84

               (d) The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it including the recordation of the names and addresses
of the Banks, and the Commitment of, and principal amount of the Loans and LC
Disbursements owing to, each Bank pursuant to the terms hereof from time to time
(the "Register"). The Agent, the Issuing Bank and the Banks may treat each
person whose name is recorded in the Register pursuant to the terms hereof as a
Bank hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower, the Issuing Bank and any Bank, at any
reasonable time and from time to time upon reasonable prior notice.

               (e) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Bank and an assignee, an Administrative
Questionnaire completed in respect of the assignee (unless the assignee shall
already be a Bank hereunder), the processing and recordation fee referred to in
paragraph (b) above and, if required, the written consent of the Borrower and
the Agent to such assignment, the Agent shall (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Banks. Upon the request of the assignee,
the Borrower, at its own expense, shall execute and deliver to the Agent, a new
Note or Notes to the order of such assignee in a principal amount equal to the
applicable Commitment assumed by it pursuant to such Assignment and Acceptance
and, if the assigning Bank has retained a Commitment, upon the request of the
assigning bank, the Borrower shall execute and deliver a new Note to the order
of such assigning Bank in a principal amount equal to the applicable Commitment
retained by it. Canceled Notes shall be returned to the Borrower.

               (f) Each Bank may without the consent of the Borrower, the
Issuing Bank or the Agent sell participations to one or more banks or other
entities in all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it and any
Notes held by it); provided, however, that (i) such Bank's obligations under
this Agreement shall remain unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the participating banks or other entities shall be entitled to the benefit
of the cost

                                       84
<PAGE>   85

protection provisions contained in Sections 2.13, 2.15 and 2.19 to the same
extent as if they were Banks (provided, that the amount of such benefit shall be
limited to the amount in respect of the interest sold to which the seller of
such participation would have been entitled had it not sold such interest) and
(iv) the Borrower, the Agent, the Issuing Bank and the other Banks shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement, and such Bank shall retain
the sole right to enforce the obligations of the Borrower relating to the Loans
and to approve any amendment, modification or waiver of any provision of this
Agreement (other than amendments, modifications or waivers decreasing any fees
payable hereunder or the amount of principal of or the rate at which interest is
payable on the Loans, extending any scheduled principal payment date or date
fixed for the payment of interest on the Loans or changing or extending the
Commitments).

               (g) Any Bank or participant may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 9.04, disclose to the assignee or participant or proposed assignee
or participant any information relating to the Borrower furnished to such Bank
by or on behalf of the Borrower; provided that, prior to any such disclosure of
information designated by the Borrower as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information.

               (h) Notwithstanding anything to the contrary contained herein,
any Bank (a "Granting Bank") may grant to a special purpose funding vehicle (an
"SPC") the option to fund all or any part of any Loan that such Granting Bank
would otherwise be obligated to fund pursuant to this Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPC to fund any Loan,
and (ii) if an SPC elects not to exercise such option or otherwise fails to fund
all or any part of such Loan, the Granting Bank shall be obligated to fund such
Loan pursuant to the terms hereof. The funding of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Bank to the same extent, and as

                                       85
<PAGE>   86

if, such Loan were funded by such Granting Bank. Each party hereto hereby agrees
that no SPC shall be liable for any indemnity or payment under this Agreement
for which a Bank would otherwise be liable for so long as, and to the extent,
the Granting Bank provides such indemnity or makes such payment. Notwithstanding
anything to the contrary contained in this Agreement, any SPC may disclose on a
confidential basis any non-public information relating to its funding of Loans
to any rating agency, commercial paper dealer or provider of any surety or
guarantee to such SPC. This paragraph may not be amended without the prior
written consent of each Granting Bank, all or any part of whose Loan is being
funded by an SPC at the time of such amendment.

               (i) Any Bank may at any time assign for security purposes all or
any portion of its rights under this Agreement and any Notes issued to it to a
Federal Reserve Bank; provided that no such assignment shall release a Bank from
any of its obligations hereunder.

               (j) Subject to Section 6.02, the Borrower shall not assign or
delegate any of its rights or duties hereunder.

               SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay
(i) all reasonable out-of-pocket expenses incurred by the Agent in connection
with the preparation of this Agreement and the other Loan Documents or in
connection with any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions hereby contemplated shall be
consummated) or incurred by the Agent or any Bank in connection with the
enforcement or protection of their rights in connection with this Agreement and
the other Loan Documents or in connection with the Loans made or the Notes
issued hereunder, including the fees, charges and disbursements of Cravath,
Swaine & Moore, counsel for the Agent, and, in connection with any such
amendment, modification or waiver or any such enforcement or protection, the
fees, charges and disbursements of any other internal or external counsel for
the Agent, the Issuing Bank or any Bank and (ii) all reasonable out-of-pocket
expenses incurred by the Issuing Bank in connection with the issuance,
amendment, renewal or extension of any Letter of Credit or any demand for
payment thereunder. The Borrower further agrees that it shall indemnify the
Banks from and hold them harmless

                                       86
<PAGE>   87

against any documentary taxes, assessments or charges made by any Governmental
Authority by reason of the execution and delivery of this Agreement or any of
the other Loan Documents.

               (b) The Borrower agrees to indemnify the Agent, the Issuing Bank
and each Bank and each of their respective directors, officers, employees and
agents (each such person being called an "Indemnitee") against, and to hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including reasonable counsel fees, charges and disbursements,
incurred by or asserted against any Indemnitee arising out of, in any way
connected with, or as a result of (i) the execution or delivery of this
Agreement or any other Loan Document or any agreement or instrument contemplated
thereby, the performance by the parties thereto of their respective obligations
thereunder or the consummation of the Transactions and the other transactions
contemplated thereby, (ii) the use of the proceeds of the Loans and of the
Letters of Credit (including any refusal by the Issuing Bank to honor a demand
for payment under a Letter of Credit if the documents presented in connection
with such demand do not strictly comply with the terms of such Letter of Credit)
or (iii) any claim, litigation, investigation or proceeding relating to any of
the foregoing, whether or not any Indemnitee is a party thereto; provided that
such indemnity shall not, as to any Indemnitee, be available to the extent that
such losses, claims, damages, liabilities or related expenses are determined by
a court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or wilful misconduct of such Indemnitee.

               (c) The provisions of this Section 9.05 shall remain operative
and in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Agent, the Issuing Bank or any Bank. All amounts due
under this Section 9.05 shall be payable on written demand therefor.

               SECTION 9.06. Right of Setoff. If an Event of

                                       87
<PAGE>   88

Default shall have occurred and be continuing and the Loans shall have been
accelerated as set forth in Article VII, each Bank 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 Bank
(or bank Controlling such Bank) to or for the credit or the account of the
Borrower against any of and all the obligations of the Borrower now or hereafter
existing under this Agreement and other Loan Documents held by such Bank. The
rights of each Bank under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Bank may have. Any Bank
shall provide the Borrower with written notice promptly after exercising its
rights under this Section.

               SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.

               SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the
Agent, the Issuing Bank or any Bank in exercising any power or right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the Agent,
the Issuing Bank and the Banks hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies which they would
otherwise have. No waiver of any provision of this Agreement or any other Loan
Document or consent to any departure by the Borrower therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) below,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.

               (b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to

                                       88
<PAGE>   89

an agreement or agreements in writing entered into by the Borrower and the
Required Banks; provided, however, that no such agreement shall (i) decrease the
principal amount of, or extend the maturity of or any scheduled principal
payment date or date for the payment of any interest on any Loan or LC
Disbursement, or waive or excuse any such payment or any part thereof, or
decrease the rate of interest on any Loan, without the prior written consent of
each Bank affected thereby, (ii) change or extend the Commitment or decrease the
Commitment Fees of any Bank without the prior written consent of such Bank, or
(iii) amend or modify the provisions of Section 2.16, the provisions of this
Section or the definition of "Required Banks", without the prior written consent
of each Bank; provided further that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Agent or the Issuing Bank hereunder
without the prior written consent of the Agent or the Issuing Bank, as the case
may be. Each Bank and each holder of a Note shall be bound by any waiver,
amendment or modification authorized by this Section regardless of whether its
Note shall have been marked to make reference thereto, and any consent by any
Bank or holder of a Note pursuant to this Section shall bind any person
subsequently acquiring a Note from it, whether or not such Note shall have been
so marked.

               SECTION 9.09. Interest Rate Limitation. Notwithstanding anything
herein or in any Notes to the contrary, if at any time the applicable interest
rate, together with all fees and charges which are treated as interest under
applicable law (collectively the "Charges"), as provided for herein or in any
other document executed in connection herewith, or otherwise contracted for,
charged, received, taken or reserved by any Bank, shall exceed the maximum
lawful rate (the "Maximum Rate") which may be contracted for, charged, taken,
received or reserved by such Bank in accordance with applicable law, the rate of
interest payable under any Note held by such Bank, together with all Charges
payable to such Bank, shall be limited to the Maximum Rate.

               SECTION 9.10. Entire Agreement. This Agreement and the other Loan
Documents constitute the entire contract between the parties relative to the
subject matter hereof. Any previous agreement among the parties with respect to
the

                                       89
<PAGE>   90

subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents, expressed
or implied, is intended to confer upon any party other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.

               SECTION 9.11. Waiver of Jury Trial. Each party hereto hereby
waives, to the fullest extent permitted by applicable law, any right it may have
to a trial by jury in respect of any litigation directly or indirectly arising
out of, under or in connection with this Agreement or any of the other Loan
Documents. Each party hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise, that such
other party would not, in the event of litigation, seek to enforce the foregoing
waiver and (b) acknowledges that it and the other parties hereto have been
induced to enter into this Agreement and the other Loan Documents, as
applicable, by, among other things, the mutual waivers and certifications in
this Section 9.11.

               SECTION 9.12. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

               SECTION 9.13. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract, and shall become
effec tive as provided in Section 9.03.

               SECTION 9.14. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and are not to affect the construction of, or to

                                       90
<PAGE>   91

be taken into consideration in interpreting, this Agreement.

               SECTION 9.15. Jurisdiction; Consent to Service of Process. (a)
The Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Agent, Issuing Bank or any other Bank may otherwise have to bring any action or
proceeding relating to this Agreement or the other Loan Documents against the
Borrower or its properties in the courts of any jurisdiction.

               (b) The Borrower hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this agreement or the other Loan
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.

               (c) Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

                                       91
<PAGE>   92

               WITNESS the due execution hereof as of the date first above
written.

                                        AVISTA CORPORATION,

                                        by
                                           /s/ Ronald R. Peterson
                                           ------------------------------------
                                           Name: Ronald R. Peterson
                                           Title: Vice President and
                                           Treasurer

                                        TORONTO DOMINION (TEXAS),
                                        INC., as Agent,

                                        by
                                           /s/ Jeffery R. Lents
                                           ------------------------------------
                                           Name: Jeffery R. Lents
                                           Title: Vice President

                                       92
<PAGE>   93

                                        THE BANK OF NEW YORK, as
                                        Documentation Agent,

                                        by
                                           /s/ Steven Kalachman
                                           ------------------------------------
                                           Name: Steven Kalachman
                                           Title: Vice President

                                        BANK OF AMERICA, N.A., as
                                        Syndication Agent,

                                        by
                                           /s/ Gary M. Tsuyuki
                                           ------------------------------------
                                           Name: Gary M. Tsuyuki
                                           Title: Managing Director

                                        TORONTO DOMINION (TEXAS), INC.,

                                        by
                                           /s/ Jeffery R. Lents
                                           ------------------------------------
                                           Name: Jeffery R. Lents
                                           Title: Vice President

                                        THE TORONTO-DOMINION BANK, as
                                        Issuing Bank

                                        by
                                           /s/ Jeffery R. Lents
                                           ------------------------------------
                                           Name: Jeffery R. Lents
                                           Title: Mgr. Cr. Admin.

                                        THE BANK OF NEW YORK,

                                        by
                                           /s/ Steven Kalachman
                                           ------------------------------------
                                           Name: Steven Kalachman
                                           Title: Vice President

                                       93
<PAGE>   94

                                        BANK OF AMERICA, N.A.,

                                        by
                                           /s/ Gary M. Tsuyuki
                                           ------------------------------------
                                           Name: Gary M. Tsuyuki
                                           Title: Managing Director

                                        FIRST SECURITY BANK, N.A.,

                                        by
                                           /s/ Brian W. Cook
                                           ------------------------------------
                                           Name: Brian W. Cook
                                           Title:

                                        FLEET NATIONAL BANK,

                                        by
                                           /s/Suresh V. Chivukula
                                           ------------------------------------
                                           Name: Suresh V. Chivukula
                                           Title: Senior Vice President

                                        MORGAN GUARANTY TRUST COMPANY
                                        OF NEW YORK,

                                        by
                                           /s/ Robert Bottamedi
                                           ------------------------------------
                                           Name: Robert Bottamedi
                                           Title: Vice President

                                        U.S. BANK, NATIONAL ASSOCIATION,

                                        by
                                           /s/ Wilfred C. Jack
                                           ------------------------------------
                                           Name: Wilfred C. Jack
                                           Title: Vice President

                                       94
<PAGE>   95

                                        WELLS FARGO BANK, N.A.,

                                        by
                                           /s/ Tom Beil
                                           ------------------------------------
                                           Name: Tom Beil
                                           Title: Vice President

                                       95

<PAGE>   96

                                                                       EXHIBIT A

                                    [FORM OF]

                                      NOTE

$__________________                                                June 26, 2000
New York, New York

          FOR VALUE RECEIVED, the undersigned, AVISTA CORPORATION, a Washington
corporation (the "Borrower"), hereby promises to pay to the order of
_______________________ (the "Bank"), at the office of Toronto Dominion (Texas),
Inc., (the "Agent"), at 909 Fanning, Suite 1700, Houston, Texas 77010, (i) on
the last day of each Interest Period, as defined in the $120,000,000 Amended and
Restated Revolving Credit Agreement dated as of June 26, 2000 (the "Credit
Agreement"), among the Borrower, the Banks named therein and the Agent, the
aggregate unpaid principal amount of all Loans (as defined in the Credit
Agreement) made to the Borrower by the Bank pursuant to the Credit Agreement to
which such Interest Period applies and (ii) on the Expiration Date (as defined
in the Credit Agreement) the aggregate unpaid principal amount of all Loans made
to the Borrower by the Bank pursuant to the Credit Agreement, in lawful money of
the United States of America in immediately available funds, and to pay interest
from the date hereof on the principal amount hereof from time to time
outstanding, in like funds, at said office, at the rate or rates per annum and
payable on the dates provided in the Credit Agreement.

          The Borrower promises to pay interest, on demand, on any overdue
principal and, to the extent permitted by law, overdue interest from their due
dates at the rate or rates provided in the Credit Agreement.

          The Borrower hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The nonexercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.

          All borrowings evidenced by this Note and all payments and prepayments
of the principal hereof and interest hereon and the respective dates and
maturity dates thereof shall be endorsed by

                                       96
<PAGE>   97

the holder hereof on the schedule attached hereto and made a part hereof or on a
continuation thereof which shall be attached hereto and made a part hereof, or
otherwise recorded by such holder in its internal records; provided, however,
that the failure of the holder hereof to make such a notation or any error in
such a notation shall not affect the obligations of the Borrower under this
Note.

          This Note is one of the Notes referred to in the Credit Agreement,
which, among other things, contains provisions for the acceleration of the
maturity hereof upon the happening of certain events, for optional and mandatory
prepayment of the principal hereof prior to the maturity hereof and for the
amendment or waiver of certain provisions of the Credit Agreement, all upon the
terms and conditions therein specified. This Note shall be construed in
accordance with and governed by the laws of the State of New York and any
applicable laws of the United States of America.

                                       AVISTA CORPORATION

                                        by
                                           -------------------------------------
                                           Name:
                                           Title:

                                       97
<PAGE>   98

                               Loans and Payments

<TABLE>
<CAPTION>
                                                            Unpaid      Name of
             Amount                       Payments         Principal    Person
              and        Maturity    -------------------   Balance of   Making
Date     Type/Class of     Date      Principal Interest      Note      Notation
             Loan
--------------------------------------------------------------------------------
<S>     <C>              <C>         <C>       <C>         <C>         <C>
</TABLE>

                                       98
<PAGE>   99

                                                                       EXHIBIT B

                                    [FORM OF]

                            ASSIGNMENT AND ACCEPTANCE

          Reference is made to the $120,000,000 Amended and Restated Credit
Agreement dated as of June 26, 2000 (as in effect from time to time, the "Credit
Agreement"), among Avista Corporation, a Washington corporation (the
"Borrower"), the banks listed on Schedule 2.01 thereto (the "Banks") and Toronto
Dominion (Texas), Inc., as agent for the Banks (in such capacity, the "Agent").
Terms defined in the Credit Agreement are used herein with the same meanings.

          1. The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes, without recourse, from
the Assignor, effective as of the Effective Date set forth on the reverse
hereof, the interests set forth on the reverse hereof (the "Assigned Interest")
in the Assignor's rights and obligations under the Credit Agreement, including,
without limitation, the interests set forth on the reverse hereof in the
Commitment of the Assignor on the Effective Date and Revolving Loans [and
Auction Loans] owing to the Assignor which are outstanding on the Effective
Date, together with unpaid interest accrued on the assigned Revolving Loans [and
Auction Loans] to the Effective Date, together with the participations in
Letters of Credit and LC Disbursements held by the Assignor on the Effective
Date, and the amount, if any, set forth on the reverse hereof of the Fees
accrued to the Effective Date for the account of the Assignor. Each of the
Assignor and the Assignee hereby makes and agrees to be bound by all the
representations, warranties and agreements set forth in Section 9.04(c) of the
Credit Agreement, a copy of which has been received by each such party. From and
after the Effective Date (i) the Assignee shall be a party to and be bound by
the provisions of the Credit Agreement and, to the extent of the interests
assigned by this Assignment and Acceptance, have the rights and obligations of a
Bank thereunder and under the Loan Documents and (ii) the Assignor shall, to the
extent of the interests assigned by this Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Credit Agreement.

          2.  This Assignment and Acceptance is being

                                       99
<PAGE>   100

delivered to the Agent together with (i) if the Assignee is organized under the
laws of a jurisdiction outside the United States, the forms specified in Section
2.19(f) of the Credit Agreement, duly completed and executed by such Assignee,
(ii) if the Assignee is not already a Bank under the Credit Agreement, an
Administrative Questionnaire in the form of Exhibit C to the Credit Agreement
and (iii) a processing and recordation fee of $5,000.

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

Date of Assignment:

Legal Name of Assignor:

Legal Name of Assignee:

Assignee's Address for Notices:

Effective Date of Assignment
(may not be fewer than 5 Business
Days after the Date of Assignment):

                                      100
<PAGE>   101

<TABLE>
<CAPTION>
                                                            Percentage
                                                            Assigned of
                                                            Facility and
                                                            Commitment
                                                            Thereunder (set
                                                            forth, to at
                                                            least 8 decimals,
                            Principal Amount                as a percentage
                            Assigned (and                   of the Facility
                            identifying                     and the aggregate
                            information as to               Commitments of
                            individual                      all Banks
Facility                    Auction Loans)                  thereunder)
--------                    --------------                  -----------
<S>                         <C>                             <C>
Commitment                        $                                   %
Assigned:

Revolving Loans:                  $                                   %

[Auction Loans:                   $                                   %]
Fees Assigned (if                 $                                   %
any):
</TABLE>

The terms set forth above and on
the reverse side hereof are
hereby agreed to:                                 Accepted:

___________________, as Assignor                  TORONTO DOMINION (TEXAS),
                                                  INC., as Agent

By:____________________________                   By:___________________________
   Name:                                             Name:
   Title:                                            Title:

___________________, as                              Title:
Assignee

By:____________________________
   Name:

                                      101
<PAGE>   102

AVISTA CORPORATION

By:____________________________
Name:
Title:

                                      102
<PAGE>   103

                                                                       EXHIBIT C

                          Administrative Questionnaire

                                      103
<PAGE>   104

                                                                     EXHIBIT D-1

                       Opinion of Counsel for the Borrower

                                      104
<PAGE>   105

                                                                     EXHIBIT D-2

                   Opinion of Special Counsel to the Borrower

                                      105
<PAGE>   106

                                  SCHEDULE 2.01

                                      Banks

<TABLE>
<CAPTION>
Bank                                                 Commitment
----                                                 ----------
<S>                                              <C>
Toronto Dominion (Texas), Inc.                   $18,450,000.00
909 Fanning
Suite 1700
Houston, TX 77010
Attention: Ms. Kimberly Burleson

Telecopy:  (713) 951-9921

   With copies to:

   Toronto Dominion Bank U.S.A. Division
   31 West 52nd Street
   New York, NY 10019-6101

   Attention:  Mr. Peter Cody
   Telecopy:  (212) 262-1929

Bank of America, N.A.                            $18,450,000.00
555 California Street
41st Floor
San Francisco, CA 94104

Attention: Gary Tsuyuki
Telecopy: (415) 622-0632
</TABLE>

                                      106
<PAGE>   107

<TABLE>
<CAPTION>
Bank                                                 Commitment
----                                                 ----------
<S>                                              <C>
The Bank of New York                             $18,450,000.00
One Wall Street
New York, NY 10286

Attention:  Ms. Trisha E. Hardy
Telecopy:   (212) 635-7923

First Security Bank, N.A.                        $11,925,000.00
119 North 9th Street (83702)
Boise, ID 83730

Attention: Mr. Brian Cook
Telecopy: (509) 353-2472

Fleet National Bank                              $11,525,000.00
100 Federal Street
Boston, MA 02110

Attention: Leroy Gayle
Telecopy: (617) 434-3652

Morgan Guaranty Trust Company of New York        $11,525,000.00
60 Wall Street
New York, NY 10261

Attention:  Mr. Robert Bottamedi
Telecopy: (212) 640-5010
</TABLE>

                                      107
<PAGE>   108

<TABLE>
<S>                                              <C>
U.S. Bank                                          $9,250,000.00
1420 Fifth Avenue
11th Floor
WWH276
Seattle, WA 98101

Attention:  Mr. Wilfred C. Jack
Telecopy:   (206) 344-3654

Wells Fargo Bank, National Association             $9,250,000.00
524 W. Riverside Avenue
8th Floor
Spokane, WA 99210

Attention:  Mr. Tom Beil
Telecopy:   (509) 455-5762

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

                                                 $108,825,000.00
</TABLE>

                                      108
<PAGE>   109

                                  SCHEDULE 3.14

                            Significant Subsidiaries

<TABLE>
<CAPTION>
   Name                       Percent Ownership
   ----                       -----------------
<S>                           <C>
Avista Capital, Inc.               100%
</TABLE>

                                      109
<PAGE>   110

                                SCHEDULE 4.02(b)

                 Statutes and Orders of Governmental Authorities

1. Statute of Washington authorizing borrowings of one year or less without
approval and/or Order(s) of the Washington Utilities and Transportation
Commission.

2. Statute of Oregon authorizing borrowings of one year or less without approval
and/or Order(s) of the Oregon Public Utility Commission.

3. Statute of Idaho authorizing borrowings of one year or less without approval
and/or Order(s) of the Idaho Public Utilities Commission.

4. Statute of California authorizing borrowings of one year or less without
approval and/or Order(s) of the California Public Utilities Commission.

                                      110
<PAGE>   111
                 AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT

                                 ($140,000,000)

                                    (364 DAY)

                                      among

                               AVISTA CORPORATION,

                             THE BANKS NAMED HEREIN,

                         TORONTO DOMINION (TEXAS), INC.,

                              BANK OF AMERICA, N.A.

                                       and

                              THE BANK OF NEW YORK

                            Dated as of June 26, 2000

<PAGE>   112
<TABLE>
Article           Section                                                                                Page
-------           -------                                                                                ----
<S>                                                                                                     <C>
I.  DEFINITIONS

                  SECTION 1.01.  Defined Terms.............................................................6
                  SECTION 1.02.  Terms Generally..........................................................24

II.  THE CREDITS

                  SECTION 2.01.  Commitments..............................................................25
                  SECTION 2.02.  Loans....................................................................26
                  SECTION 2.03.  Notice of Revolving Borrowings...........................................28
                  SECTION 2.04.  Auction Bid Procedure....................................................29
                  SECTION 2.05.  Repayment of Loans; Evidence of Debt.....................................32
                  SECTION 2.06.  Fees.....................................................................33
                  SECTION 2.07.  Interest on Loans........................................................35
                  SECTION 2.08.  Default Interest.........................................................35
                  SECTION 2.09.  Alternate Rate of Interest...............................................35
                  SECTION 2.10.  Termination, Reduction and Extension of Commitments......................36
                  SECTION 2.11.  Prepayment...............................................................37
                  SECTION 2.12.  Reserve Requirements; Change in Circumstances............................38
                  SECTION 2.13.  Change in Legality.......................................................39
                  SECTION 2.14.  Indemnity................................................................40
                  SECTION 2.15.  Pro Rata Treatment.......................................................41
                  SECTION 2.16.  Sharing of Setoffs.......................................................41
                  SECTION 2.17.  Payments.................................................................42
                  SECTION 2.18.  Taxes....................................................................43
                  SECTION 2.19.  Termination or Assignment of Commitments Under Certain Circumstances.....46

III.  REPRESENTATIONS AND WARRANTIES

                  SECTION 3.01.  Organization; Powers.....................................................47
                  SECTION 3.02.  Authorization............................................................47
                  SECTION 3.03.  Enforceability...........................................................48
                  SECTION 3.04.  Governmental Approvals...................................................48
                  SECTION 3.05.  Financial Statements.....................................................48
                  SECTION 3.06.  No Material Adverse Change...............................................49
                  SECTION 3.07.  Litigation; Compliance with Laws.........................................49
                  SECTION 3.08.  Federal Reserve Regulations..............................................49
                  SECTION 3.09.  Investment Company Act; Public Utility Holding Company Act...............50

</TABLE>

                                       2
<PAGE>   113
<TABLE>
<CAPTION>
Article           Section                                                                                Page
-------           -------                                                                                ----
<S>                                                                                                     <C>
                  SECTION 3.10.  Use of Proceeds..........................................................50
                  SECTION 3.11.  No Material Misstatements................................................50
                  SECTION 3.12.  Employee Benefit Plans...................................................50
                  SECTION 3.13.  Environmental and Safety Matters.........................................51
                  SECTION 3.14.  Significant Subsidiaries.................................................52

IV.  CONDITIONS OF LENDING

                  SECTION 4.01.  All Borrowings...........................................................52
                  SECTION 4.02.  First Borrowing..........................................................53

V.  AFFIRMATIVE COVENANTS

                  SECTION 5.01.  Existence; Businesses and Properties.....................................54
                  SECTION 5.02.  Insurance................................................................55
                  SECTION 5.03.  Taxes and Obligations....................................................56
                  SECTION 5.04.  Financial Statements, Reports, etc.......................................56
                  SECTION 5.05.  Litigation and Other Notices.............................................58
                  SECTION 5.06.  ERISA....................................................................58
                  SECTION 5.07.  Maintaining Records; Access to Properties and Inspections................59
                  SECTION 5.08.  Use of Proceeds..........................................................59
                  SECTION 5.09.  Further Assurance........................................................59

VI.  NEGATIVE COVENANTS

                  SECTION 6.01.  Liens....................................................................60
                  SECTION 6.02.  Mergers, Consolidations and Acquisitions.................................64
                  SECTION 6.03.  Disposition of Assets....................................................65
                  SECTION 6.04.  Consolidated Total Debt to Consolidated Total Capitalization Ratio.......66
                  SECTION 6.05.  Public Utility Regulatory Borrowing Limits...............................66
</TABLE>

                                       3
<PAGE>   114
<TABLE>
<CAPTION>
Article           Section                                                                                Page
-------           -------                                                                                ----
<S>                                                                                                     <C>
                  SECTION 6.06.  Guarantees...............................................................66

VII.  EVENTS OF DEFAULT...................................................................................66

VIII. THE AGENT...........................................................................................70

IX.  MISCELLANEOUS

                  SECTION 9.01.  Notices..................................................................74
                  SECTION 9.02.  Survival of Agreement....................................................74
                  SECTION 9.03.  Binding Effect...........................................................75
                  SECTION 9.04.  Successors and Assigns...................................................75
                  SECTION 9.05.  Expenses; Indemnity......................................................80
                  SECTION 9.06.  Right of Setoff..........................................................81
                  SECTION 9.07.  Applicable Law...........................................................81
                  SECTION 9.08.  Waivers; Amendment.......................................................82
                  SECTION 9.09.  Interest Rate Limitation.................................................83
                  SECTION 9.10.  Entire Agreement.........................................................83
                  SECTION 9.11.  Waiver of Jury Trial.....................................................83
                  SECTION 9.12.  Severability.............................................................84
                  SECTION 9.13.  Counterparts.............................................................84
                  SECTION 9.14.  Headings.................................................................84
                  SECTION 9.15.  Jurisdiction; Consent to Service of Process..............................84
</TABLE>

References
Exhibit A         Form of Note
Exhibit B         Form of Assignment and Acceptance
Exhibit C         Form of Administrative Questionnaire
Exhibit D-1       Form of Opinion of Counsel for the
                  Borrower
Exhibit D-2       Form of Opinion of Special Counsel for
                  the Borrower

                                       4

<PAGE>   115

Schedule 2.01     Banks
Schedule 3.14     Significant Subsidiaries
Schedule 4.02(b)  Statutes and Orders of Governmental
                  Authorities

                                       5
<PAGE>   116
                                    AMENDED AND RESTATED REVOLVING CREDIT
                           AGREEMENT dated as of June 26, 2000, among AVISTA
                           CORPORATION, a Washington corporation (herein called
                           the "Borrower"), the banks listed in Schedule 2.01
                           (the "Banks"), TORONTO DOMINION (TEXAS), INC., as
                           agent for the Banks (in such capacity, the "Agent"),
                           BANK OF AMERICA, N.A. (formerly known as "Bank of
                           America National Trust and Savings Association"), as
                           syndication agent (the "Syndication Agent") and THE
                           BANK OF NEW YORK, as documentation agent (the
                           "Documentation Agent").

                  Pursuant to the Pre-Restatement Credit Agreement (as defined
herein), certain banks have extended credit to the Borrower. The Borrower has
requested that the Pre- Restatement Credit Agreement be amended and restated in
the form of this Agreement and that the Banks extend credit to the Borrower in
order to enable the Borrower to borrow on a standby revolving credit basis on
and after the date hereof, at any time prior to the Expiration Date (as defined
herein) in a principal amount not in excess of $121,175,000 at any time
outstanding (subject to a possible increase to $140,000,000, as provided in
Section 2.01(b) below). The proceeds of such borrowings are to be used for
general corporate purposes. In consideration of the mutual covenants and
agreements contained herein, the parties agree as follows:

ARTICLE I.  DEFINITIONS

                  SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:

                  "ABR", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.

                  "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.

                  "ABR Loan" shall mean any Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.

                  "Administrative Questionnaire" shall mean an

                                       6
<PAGE>   117

Administrative Questionnaire in the form of Exhibit C.

                  "Affiliate" shall mean, when used with respect to a specified
person, another person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the
person specified.

                  "Agency Fees" shall have the meaning assigned to such term in
Section 2.06(b).

                  "Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to the
greater of (a) the Prime Rate (computed on the basis of the actual number of
days elapsed over a year of 365 or 366 days, as the case may be) in effect on
such day and (b) the sum of (i) the Federal Funds Effective Rate in effect for
such day plus (ii) 1/2 of 1%. If for any reason the Agent shall have determined
(which determination shall be conclusive absent manifest error) that it is
unable to ascertain the Federal Funds Effective Rate for any reason, the
Alternate Base Rate shall be determined without regard to clause (b) of the
first sentence of this definition until the circumstances giving rise to such
inability no longer exist.

                  "Applicable Percentage" shall mean, with respect to any Bank,
the percentage of the total Commitments represented by such Bank's Commitment.
If the Commitments have terminated or expired, the Applicable Percentage shall
be determined based upon the Commitments most recently in effect, giving effect
to any assignments.

                  "Applicable Rate" shall mean on any date, with respect to any
ABR Loan or Eurodollar Revolving Loan, or with respect to the Commitment Fees or
Utilization Fees payable hereunder, as the case may be, the applicable rate per
annum set forth below under the caption "ABR Spread," "Eurodollar Spread",
"Commitment Fee" or "Utilization Fee", as the case may be, based upon the
Ratings or the Utilization Level, as the case may be:

                                       7
<PAGE>   118

                  (a)  Loan Spreads and Commitment Fee

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
           Ratings          ABR Spread               Eurodollar                Commitment
                                                      Spread                     Fee
-----------------------------------------------------------------------------------------
<S>                         <C>                      <C>                       <C>
Level 1                       0.00%                    .625%                    .10%

A- or higher by
S&P; and A3 or
higher by Moody's
-----------------------------------------------------------------------------------------

Level 2                       0.00%                    .75%                     .125%

BBB+ by S&P; and
Baa1 by Moody's
-----------------------------------------------------------------------------------------

Level 3                       0.00%                    .875%                    .15%

BBB by S&P; and
Baa2 by Moody's
-----------------------------------------------------------------------------------------

Level 4                       0.00%                    1.00%                    .20%

BBB- by S&P; and
Baa3 by Moody's
-----------------------------------------------------------------------------------------

Level 5                       .25%                     1.25%                    .25%

BB+ by S&P; and
Ba1 by Moody's
-----------------------------------------------------------------------------------------

Level 6                       .50%                     1.50%                    .50%

Lower than BB+ by
S&P; and lower
than Ba1 by
Moody's
-----------------------------------------------------------------------------------------
</TABLE>

For purposes of the foregoing, (i) if the Ratings in effect on any date fall in
different Levels, the Applicable Rate shall be determined on such date by
reference to the inferior (numerically higher) Level, unless the Ratings differ
by more than one Level, in which case the applicable Level shall be the Level
next below the superior (numerically lower) of the two; (ii) if either Moody's
or S&P shall not have in effect a Rating (other than because such rating agency
shall no longer be in the business of rating corporate debt obligations), then
such rating agency will be deemed to have established a Rating in Level 5; and

                                       8
<PAGE>   119

(iii) if any rating established or deemed to have been established by Moody's or
S&P shall be changed (other than as a result of a change in the rating system of
either Moody's or S&P), such change shall be effective as of the day after the
date on which such change is first announced by the rating agency making such
change. Each change in the Applicable Rate shall apply during the period
commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next such change. If the rating
system of either Moody's or S&P shall change, or if either such rating agency
shall cease to be in the business of rating corporate debt obligations, the
Borrower and the Banks shall negotiate in good faith to amend the references to
specific ratings in this definition to reflect such changed rating system or the
non- availability of ratings from such rating agency.

                  (b) Utilization Fees

<TABLE>
<CAPTION>
-------------------------------------------------------------------
           Utilization Level                       Utilization Fee
-------------------------------------------------------------------
<S>                                                <C>
Level 1                                                 .15%

>.33 and less than/equal to .50
-------------------------------------------------------------------

Level 2                                                 .30%

>.50 and less than/equal to .75
-------------------------------------------------------------------

Level 3                                                 .50%

>.75
-------------------------------------------------------------------
</TABLE>

                  "Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Bank and an assignee, and accepted by the Agent and
the Borrower, in the form of Exhibit B or such other form as shall be approved
by the Agent.

                  "Auction Bid" shall mean an offer by a Bank to make an Auction
Loan in accordance with Section 2.04.

                                       9
<PAGE>   120
                  "Auction Bid Rate" shall mean, with respect to any Auction
Bid, the Margin for Eurodollar Auction Loans, the Fixed Rate for Fixed Rate
Loans or the Delayed Fixed Rate for Delayed Fixed Rate Loans, as applicable,
offered by the Bank in making such Auction Bid.

                  "Auction Bid Request" shall mean a request by the Borrower for
Auction Bids in accordance with Section 2.04.

                  "Auction Facility" shall mean the facility described in
Section 2.04.

                  "Auction Loan" shall mean a Loan made pursuant to Section
2.04.

                  "Availability Period" shall mean the period from and including
the Effective Date to but excluding the earlier of the Expiration Date and the
date of the termination of the Commitments.

                  "Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.

                  "Borrowing" shall mean (a) a group of Revolving Loans of the
same Type, made, converted or continued on the same date and, in the case of
Eurodollar Loans, as to which a single Interest Period is in effect or (b) an
Auction Loan or group of Auction Loans of the same Type made on the same date
and as to which a single Interest Period is in effect.

                  "Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of New York) on which banks are
open for business in New York City.

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

                                       10
<PAGE>   121

                  "Change in Control" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof),
of shares representing more than 30% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Borrower; or (b)
occupation of a majority of the seats (other than vacant seats) on the board of
directors of the Borrower by Persons who were neither (i) nominated by the board
of directors of the Borrower nor (ii) appointed by directors so nominated;
provided, that no event described in clause (a) or clause (b) shall constitute a
"Change in Control" if the senior secured long-term debt rating of the Borrower
shall be at least BBB or higher by S&P and Baa2 or higher by Moody's immediately
after giving effect to the transaction that would otherwise constitute a Change
in Control.

          "Class", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans
or Auction Loans.

          "Closing Date" shall mean the date of this Agreement.

          "Code" shall mean the Internal Revenue Code of 1986, as the same may
be amended from time to time.

          "Commitment" shall mean, with respect to each Bank, the commitment of
such Bank to make Revolving Loans hereunder as set forth in Section 2.01, as the
same may be reduced from time to time pursuant to Section 2.10.

          "Commitment Fee" shall have the meaning assigned to such term in
Section 2.06(a).

          "Consolidated Total Capitalization" on any date means the sum, without
duplication, of the following with respect to the Borrower and its consolidated
subsidiaries: (a) total capitalization as of such date, as determined in
accordance with GAAP, (b) the current portion of liabilities which as of such
date would be classified in whole or part as long-term debt in accordance with
GAAP (it being understood that the noncurrent portion of such liabilities is
included in the total capitalization referred to in

                                       11
<PAGE>   122

clause (a)), (c) all obligations as lessee which, in accordance with GAAP, are
capitalized as liabilities (including the current portion thereof), and (d) all
other liabilities which would be classified as short-term debt in accordance
with GAAP.

          "Consolidated Total Debt" on any date means the sum, without
duplication, of the following with respect to the Borrower and its consolidated
subsidiaries: (a) all liabilities which as of such date would be classified in
whole or in part as long-term debt in accordance with GAAP (including the
current portion thereof), (b) all obligations as lessee which, in accordance
with GAAP, are capitalized as liabilities (including the current portion
thereof), and (c) all other liabilities which would be classified as short-term
debt in accordance with GAAP, and (d) all Guarantees of or by the Borrower.

          "Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto.

          "Default" shall mean any event or condition which upon notice, lapse
of time or both would constitute an Event of Default.

          "Delayed Fixed Rate" shall mean, with respect to any Auction Loan
(other than a Eurodollar Auction Loan or a Fixed Rate Loan), the fixed rate of
interest per annum specified by the Bank in making such Auction Loan in its
related Auction Bid.

          "Delayed Fixed Rate Loan" shall mean an Auction Loan bearing interest
at a Delayed Fixed Rate for which an Auction Bid Request is made two Business
Days before the proposed date of borrowing.

          "dollars" or "$" shall mean lawful money of the United States of
America.

          "Environmental Law" shall mean any and all applicable present and
future treaties, laws, regulations,

                                       12
<PAGE>   123

enforceable requirements, binding determinations, orders, decrees, judgments,
injunctions, permits, approvals, authorizations, licenses, permissions, notices
or binding agreements issued, promulgated or entered by any Governmental
Authority, relating to the environment, preservation or reclamation of natural
resources, or to the management, release or threatened release of contaminants
or noxious odor, including the Hazardous Materials Transportation Act,
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
and Hazardous and Solid Waste Amendments of 1984, Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1977, Clean Air Act of 1970,
as amended, Toxic Substances Control Act of 1976, Occupational Safety and Health
Act of 1970, as amended, Emergency Planning and Community Right-to-Know Act of
1986, Safe Drinking Water Act of 1974, as amended, and any similar or
implementing state law, and all amendments or regulations promulgated
thereunder.

          "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time.

          "ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is a member of a group of which the Borrower is a member and
which is treated as a single employer under Section 414 of the Code.

          "Eurodollar", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Eurodollar Rate.

          "Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.

          "Eurodollar Loan" shall mean any Loan bearing interest at a rate
determined by reference to the Eurodollar Rate in accordance with the provisions
of Article II.

          "Eurodollar Rate" shall mean, with respect to any Eurodollar Loan for
any Interest Period, an interest rate

                                       13
<PAGE>   124

per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the
product of (i) the arithmetic average of rates at which dollar deposits
approximately equal to the principal amount of the portion of such Eurodollar
Loan to be made by The Toronto-Dominion Bank, and for a maturity equal to the
applicable Interest Period, are offered to The Toronto-Dominion Bank for
Eurodollars at approximately 10:00 a.m., New York City time, two Business Days
prior to the commencement of such Interest Period and (ii) Statutory Reserves.
In the event that such rate is not available at such time for any reason, then
the "Eurodollar Rate" with respect to such Eurodollar Borrowing for such
Interest Period shall be the rate at which dollar deposits of $5,000,000 and for
a maturity comparable to such Interest Period are offered by the principal
London office of the Agent in immediately available funds in the London
interbank market at approximately 10:00 a.m., New York City time, two Business
Days prior to the commencement of such Interest Period.

          "Event of Default" shall have the meaning assigned to such term in
Article VII.

          "Expiration Date" shall mean June 25, 2001.

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

          "Fees" shall mean the Commitment Fee and the Agency Fees.

          "Financial Officer" of any corporation shall mean the chief financial
officer or Treasurer of such corporation.

          "First Mortgage" shall mean the Mortgage and Deed of Trust dated as of
June 1, 1939, made by the Borrower in favor of Citibank, N.A., as successor
Trustee, as the same

                                       14
<PAGE>   125

has been amended, modified or supplemented to date and as the same may be
further amended, modified or supplemented from time to time hereafter.

          "Fixed Rate" shall mean, with respect to any Auction Loan (other than
a Eurodollar Auction Loan or a Delayed Fixed Rate Loan), the fixed rate of
interest per annum specified by the Bank making such Auction Loan in its related
Auction Bid.

          "Fixed Rate Loan" shall mean an Auction Loan bearing interest at a
Fixed Rate for which an Auction Bid Request is made on the day of the proposed
borrowing.

          "GAAP" shall mean generally accepted accounting principles, applied on
a consistent basis.

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

          "Guarantee" of or by any person shall mean any obligation, contingent
or otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase property, securities or services for the purpose
of assuring the owner of such Indebtedness of the payment of such Indebtedness
or (c) to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness; provided, however, that the term Guarantee
shall not include endorsements for collection or deposit, in either case in the
ordinary course of business.

          "Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all

                                       15
<PAGE>   126

obligations of such person upon which interest charges are customarily paid, (d)
all obligations of such person under conditional sale or other title retention
agreements relating to property or assets purchased by such person, (e) all
obligations of such person issued or assumed as the deferred purchase price of
property or services (other than trade payables incurred in the ordinary course
of business), (f) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such person, whether or
not the obligations secured thereby have been assumed, but limited, if such
obligations are without recourse to such person, to the lesser of the principal
amount of such Indebtedness or the fair market value of such property, (g) all
Guarantees by such person of Indebtedness of others, (h) all Capital Lease
Obligations of such person, (i) all obligations of such person in respect of
interest rate protection agreements, foreign currency exchange agreements or
other interest or exchange rate hedging arrangements (the amount of any such
obligation to be the amount that would be payable upon the acceleration,
termination or liquidation thereof) and (j) all obligations of such person as an
account party in respect of letters of credit and bankers' acceptances. The
Indebtedness of any person shall include the Indebtedness of any partnership in
which such person is a general partner.

          "Interest Payment Date" shall mean, with respect to any Loan, the last
day of the Interest Period applicable to the Borrowing of which such Loan is a
part and, in the case of a Eurodollar Borrowing with an Interest Period of more
than three months' duration, each day that would have been an Interest Payment
Date had successive Interest Periods of three months' duration been applicable
to such Borrowing and, in addition, the date of any refinancing or conversion of
such Borrowing with or to a Borrowing of a different Type.

          "Interest Period" shall mean (a) as to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the
Borrower may elect, (b) as to any

                                       16
<PAGE>   127

ABR Borrowing, the period commencing on the date of such Borrowing and ending on
the earliest of (i) the next succeeding March 31, June 30, September 30 or
December 31, (ii) the Expiration Date, and (iii) the date such Borrowing shall
be repaid or prepaid in accordance with Section 2.11 and (c) with respect to any
Fixed Rate Borrowing or Delayed Fixed Rate Borrowing, the period (which shall
not be less than 7 days or more than 360 days) commencing on the date of such
Borrowing and ending on the date specified in the applicable Auction Bid
Request; provided, however, that if any Interest Period would end on a day other
than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such
next succeeding Business Day would fall in the next calendar month, in which
case such Interest Period shall end on the next preceding Business Day. Interest
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.

          "Lien" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset and
(c) in the case of securities, any purchase option, call or similar right of a
third party with respect to such securities.

          "Loans" shall mean loans made by the Banks to the Borrower pursuant to
this Agreement.

          "Loan Documents" shall mean this Agreement and any Notes.

          "Margin" shall mean, with respect to any Auction Loan bearing interest
at a rate based on the Eurodollar Rate, the marginal rate of interest, if any,
to be added to or subtracted from the Eurodollar Rate to determine the rate of
interest applicable to such Loan, as specified by the Bank making such Loan in
its related Auction Bid.

          "Margin Stock" shall have the meaning given such term under Regulation
U.

                                       17
<PAGE>   128

          "Material Adverse Effect" shall mean an effect on the business,
assets, operations or financial condition of the Borrower and the Subsidiaries
taken as a whole which could reasonably be expected to have a material adverse
effect on the creditworthiness of the Borrower.

          "Moody's" shall mean Moody's Investors Service, Inc.

          "Notes" shall mean any promissory notes of the Borrower, substantially
in the form of Exhibit A, evidencing Loans, as may be delivered pursuant to
Section 2.05.

          "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA.

          "person" shall mean a corporation, association, partnership, trust,
organization, business, individual or government or governmental agency or
political subdivision thereof.

          "Plan" shall mean any pension plan subject to the provisions of Title
IV of ERISA or Section 412 or the Code which is maintained for employees of the
Borrower or any ERISA Affiliate.

          "Pre-Restatement Credit Agreement" shall mean the Amended and Restated
Revolving Credit Agreement (364 day) among the Borrower, the banks named
therein, Toronto Dominion (Texas), Inc., Bank of America National Trust and
Savings Association and The Bank of New York, dated as of June 29, 1999, and as
in effect prior to its amendment and restatement hereby.

          "Prime Rate" shall mean the rate of interest per annum adopted from
time to time by The Toronto-Dominion Bank at its principal office in New York
City as its prime rate. For purposes of this Agreement, any change in the
Alternate Base Rate due to a change in the Prime Rate shall be effective on the
date such change in the Prime Rate is adopted.

          "Ratings" shall refer to the ratings of Moody's and S&P applicable to
the Borrower's senior unsecured long-term debt obligations.

                                       18
<PAGE>   129

          "Register" shall have the meaning given to such term in Section
9.04(d).

          "Regulation D" shall mean Regulation D of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof and shall include any successor or other regulation or official
interpretation of the Board relating to reserve requirements applicable to
member banks of the Federal Reserve System.

          "Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.

          "Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.

          "Related Parties" shall mean, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.

          "Reportable Event" shall mean any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate which is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Code).

          "Required Banks" shall mean, at any time, Banks having Revolving
Credit Exposures representing at least 66-2/3% of the aggregate Revolving
Exposures or, if there shall be no Revolving Credit Exposure, Banks having
Commitments representing at least 66-2/3% of the aggregate Commitments. For
purposes of declaring the Loans to be due and payable pursuant to Article VII,
and for all purposes after the Loans become due and payable pursuant to Article
VII or the Commitments expire or terminate, the outstanding Auction Loans of the
Banks shall be included in their respective Revolving Credit Exposure in
determining the Required Banks.

          "Responsible Officer" of any corporation shall mean any executive
officer or Financial Officer of such

                                       19
<PAGE>   130

corporation and any other officer or similar official thereof responsible for
the administration of the obligations of such corporation in respect of this
Agreement.

          "Revolving Credit Exposure" shall mean, with respect to any Bank at
any time, the sum of the outstanding principal amount of such Bank's Revolving
Loans at such time.

          "Revolving Loan" shall mean a Loan made pursuant to Section 2.03.

          "S&P" shall mean Standard & Poor's Ratings Services.

          "Significant Subsidiary" shall mean a Subsidiary meeting any one of
the following conditions: (a) the investments in and advances to such Subsidiary
by the Borrower and the other Subsidiaries, if any, as at the end of the
Borrower's latest fiscal quarter exceeded 10% of the total assets of the
Borrower and its Subsidiaries at such date, computed and consolidated in
accordance with GAAP; or (b) the Borrower's and the other Subsidiaries'
proportionate share of the total assets (after intercompany eliminations) of
such Subsidiary as at the end of the Borrower's latest fiscal quarter exceeded
10% of the total assets of the Borrower and its Subsidiaries at such date,
computed and consolidated in accordance with GAAP; or (c) the equity in the
income from continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principle of such Subsidiary for the
period of four consecutive fiscal quarters ending at the end of the Borrower's
latest fiscal quarter exceeded 10% of such income of the Borrower and its
Subsidiaries for such period, computed and consolidated in accordance with GAAP;
or (d) such Subsidiary is the parent of one or more Subsidiaries and, together
with such Subsidiaries would, if considered in the aggregate, constitute a
Significant Subsidiary.

          "Statutory Reserves" shall mean a fraction (expressed as a decimal)
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages

                                       20
<PAGE>   131

(including, without limitation, any marginal, special, emergency or supplemental
reserves) with respect to Eurodollar funding (including with respect to
Eurocurrency Liabilities as defined in Regulation D) in an amount approximately
equal to the respective Eurodollar Loan and with a term approximately equal to
the Interest Period for such Eurodollar Loan expressed as a decimal established
by the Board or by any other United States banking authority to which the Agent
is subject. Such reserve percentages shall include, without limitation, those
imposed under Regulation D. Statutory Reserves shall be adjusted automatically
on and as of the effective date of any change in any reserve percentage.

          "Structuring Fee" shall have the meaning assigned to such term in
Section 2.06(b).

          "subsidiary" shall mean, for any person (the "Parent"), any
corporation, partnership or other entity of which securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions of such
corporation, partnership or other entity (irrespective of whether or not at the
time securities or other ownership interests of any other class or classes of
such corporation, partnership or other entity shall have or might have voting
power by reason of the happening of any contingency) are at the time directly or
indirectly owned or controlled by the Parent or one or more of its subsidiaries
or by the Parent and one or more of its subsidiaries.

          "Subsidiary" shall mean a subsidiary of the Borrower.

          A "Subsidiary Event" shall mean the following; provided, however, that
a Subsidiary Event shall not be deemed to have occurred if the Banks have
previously consented thereto:

          (a) any Significant Subsidiary shall fail to observe or perform any
     covenant, condition or agreement contained in Section 5.01(a) as if such
     section applied to such Significant Subsidiary, with all references therein
     to the Borrower being deemed references to such Significant Subsidiary;

                                       21
<PAGE>   132

          (b) any Significant Subsidiary shall fail to observe or perform any
     covenant, condition or agreement in Sections 5.01(b), 5.02, 5.03 or 5.07 as
     if such sections applied to such Significant Subsidiary, with all
     references therein to the Borrower being deemed references to such
     Significant Subsidiary, and such default shall continue unremedied for a
     period of 30 days after notice thereof from the Agent or any Bank to the
     Borrower;

          (c) any Significant Subsidiary shall:

               (i) merge into or consolidate with any other person, or permit
          any other person to merge into or consolidate with it, or purchase,
          lease or otherwise acquire (in one transaction or a series of
          transactions) all or substantially all of the assets of any other
          person (whether directly by purchase, lease or other acquisition of
          all or substantially all of the assets of such person or indirectly by
          purchase or other acquisition of all or substantially all of the
          capital stock of such other person) other than acquisitions in the
          ordinary course of such Significant Subsidiary's business, except that
          if, at the time thereof and immediately after giving effect thereto no
          Event of Default or Default shall have occurred and be continuing,
          then (A) such Significant Subsidiary may (i) merge with or into, or
          consolidate with, any Subsidiary or (ii) merge with or into, or
          consolidate with, the Borrower in a transaction in which the Borrower
          is the surviving corporation, (B) such Significant Subsidiary may
          purchase, lease or otherwise acquire from any Subsidiary all or
          substantially all of its assets and may purchase or otherwise acquire
          all or substantially all of the capital stock of any person who
          immediately thereafter is a Subsidiary, (C) such Significant
          Subsidiary may merge with or into, or consolidate with, any other
          person so long as the assets of such person at the time of such
          consolidation or merger, do not exceed 10% of the total assets of the
          Borrower and its Subsidiaries, after giving effect to such merger or

                                       22
<PAGE>   133

          consolidation, computed and consolidated in accordance with GAAP
          consistently applied, and (D) such Significant Subsidiary may
          purchase, lease or otherwise acquire any or all of the assets of any
          other person (and may purchase or otherwise acquire the capital stock
          of any other person) so long as the assets being purchased, leased or
          acquired (or the Significant Subsidiary's proportionate share of the
          assets of the person whose capital stock is being acquired) do not
          exceed 10% of the total assets of the Borrower and its Subsidiaries,
          after giving effect to such acquisition, computed and consolidated in
          accordance with GAAP consistently applied, or

               (ii) sell, lease, transfer, assign or otherwise dispose of (in
          one transaction or in a series of transactions), in any fiscal year,
          assets (whether now owned or hereafter acquired) which, together with
          the amount of all sales, leases, transfers, assignments or
          dispositions by the Borrower permitted under Section 6.03 (other than
          sales, leases, transfers, assignments or other dispositions permitted
          under clauses (i) through (iv) of such Section), are in excess of 10%
          of the assets of the Borrower and its Subsidiaries as of the end of
          the most recent fiscal year, computed and consolidated in accordance
          with GAAP consistently applied, except (A) a Significant Subsidiary
          may sell, lease, transfer, assign or otherwise dispose of, in any
          fiscal year, assets in the ordinary course of business which, together
          with the amount of all sales, leases, transfers, assignments or
          dispositions in the ordinary course permitted under Section 6.03(i),
          do not exceed 5% of the assets of the Borrower and its Subsidiaries as
          of the end of the most recent fiscal year, computed and consolidated
          in accordance with GAAP consistently applied, (B) to the extent
          permitted in clause (c)(i) above and (C) any Significant Subsidiary
          may sell, lease, transfer, assign or otherwise dispose of, or create,
          incur, assume or permit to exist Liens on, receivables and related
          properties or interests therein;

                                       23
<PAGE>   134

provided, however, that, notwithstanding anything in this clause (c) to the
contrary, a Subsidiary Event shall not be deemed to have occurred and shall not
constitute an Event of Default under paragraph (k) of Article VII if, after
giving effect to the consummation of any transaction contemplated by clause
(c)(i) or (c)(ii) hereof, such Significant Subsidiary shall have or shall be
deemed to have a ratio of total long-term Indebtedness to total stockholders'
equity equal to or less than 1.5 to 1.0.

          "Transactions" shall have the meaning assigned to such term in Section
3.02.

          "Type", when used in respect of any Loan or Borrowing, shall refer to
the Rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined. For purposes hereof, "Rate" shall mean, in the
case of a Revolving Loan or Borrowing, the Eurodollar Rate and the Alternate
Base Rate or, in the case of an Auction Loan or Borrowing, the Eurodollar Rate,
Fixed Rate or Delayed Fixed Rate.

          "Utilization Fee" shall have the meaning assigned to such term in
Section 2.06.

          "Utilization Level" shall mean the ratio of the outstanding principal
amount of Loans to the total Commitments.

          SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; provided,
however, that, for purposes of determining compliance with any covenant set
forth in

                                       24
<PAGE>   135

Article VI, such terms shall be construed in accordance with GAAP as in
effect on the date of this Agreement applied on a basis consistent with the
application used in preparing the Borrower's audited financial statements
referred to in Section 3.05.

ARTICLE II.  THE CREDITS

          SECTION 2.01. (a) Commitments. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Bank
agrees, severally and not jointly, to make Revolving Loans to the Borrower, at
any time and from time to time on or after the date of this Agreement, and until
the earlier of the Expiration Date and the termination of the Commitment of such
Bank in accordance with the terms hereof, in an aggregate principal amount at
any time outstanding that will not result in (i) the Revolving Credit Exposure
of any Bank exceeding the Commitment set forth opposite its name in Schedule
2.01 hereto, as the same may be reduced from time to time pursuant to Section
2.10 or (ii) the sum of the total Revolving Credit Exposure plus the aggregate
principal amount of outstanding Auction Loans exceeding the total Commitments.

          Within the limits set forth in the preceding sentence, the Borrower
may borrow, pay or prepay and reborrow Revolving Loans on or after the date of
this Agreement and prior to the Expiration Date, subject to the terms,
conditions and limitations set forth herein.

          (b) On not more than two occasions the Borrower may by written notice
to the Administrative Agent cause New Banks (as defined below) to assume
Commitments by an aggregate amount not in excess of $18,825,000 in the aggregate
(the "New Commitments"). Each such notice shall specify (i) the date (each a
"Transition Date") on which the Borrower proposes that New Commitments shall
become effective, which shall be not less than ten Business Days
after the date on which such notice is delivered to the Administrative Agent and
(ii) the identity of each person that has agreed to assume any portion of such
New Commitments (each a "New Bank") and the amount of such New Commitments
allocated to such New Bank. Subject only to

                                       25
<PAGE>   136

there not existing any Default or Event of Default on such Transition Date
before or after giving effect to such New Commitments, such New Commitments
shall become effective as of such Transition Date and, if any Revolving Loans
are outstanding on such Transition Date, each Bank shall assign to the New
Banks, and each of the New Banks shall purchase from the Banks, at the principal
amount thereof, such interests in the Revolving Loans outstanding on such
Transition Date as shall be necessary in order that, after giving effect to all
such assignments and purchases, such Revolving Loans will be held by Banks and
New Banks ratably in accordance with their Commitments after giving effect to
the addition of such New Commitments to the Commitments. The Administrative
Agent shall notify the Banks promptly upon receipt of the Borrower's notice
thereof of each Transition Date and in respect thereof the New Commitments, the
New Banks and, in the case of each notice to any Bank, the respective interests
in such Bank's Revolving Loans subject to the assignments contemplated by the
immediately preceding sentence. In the event that any Bank shall incur any
breakage cost as a result of making any such assignment, or that any New Bank
shall incur any reverse breakage cost as a result of taking any such assignment,
the Borrower shall indemnify it for such cost, calculated as contemplated by
Section 2.14 in the case of breakage costs and calculated based upon the
difference between the Eurodollar Rate applicable to each assigned Revolving
Loan and the cost to the New Bank of funding its assigned interests in the case
of reverse breakage costs. It is expressly understood that no Bank shall have
any obligation to agree to an increase in the amount of the Commitment pursuant
to this Section.

          SECTION 2.02. Loans. (a) Each Revolving Loan shall be made as part of
a Borrowing consisting of Revolving Loans made by the Banks ratably in
accordance with their Commitments. Each Auction Loan shall be made in accordance
with the procedures set forth in Section 2.04. The failure of any Bank to make
any Loan required to be made hereunder shall not in itself relieve any other
Bank of its obligation to lend hereunder (it being understood, however, that no
Bank shall be responsible for the failure of any other Bank to make any Loan
required to be made by such other Bank). The Loans comprising each Borrowing
shall be in an aggregate principal amount which is an integral multiple of
$1,000,000.

                                       26
<PAGE>   137

          (b) Subject to Section 2.09, (i) each Revolving Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans, as the Borrower may request
pursuant to Section 2.03, and (ii) each Auction Borrowing shall be comprised
entirely of Eurodollar Loans, Fixed Rate Loans or Delayed Fixed Rate Loans as
the Borrower may request in accordance with Section 2.04. Each Bank may at its
option fulfill its Commitment with respect to any Eurodollar Loan by causing any
domestic or foreign branch or Affiliate of such Bank to make such Loan; provided
that any exercise of such option shall not affect the obligation of the Borrower
to repay such Loan in accordance with the terms of this Agreement or any
applicable Note. Borrowings of more than one Type or Class may be outstanding at
the same time; provided, however, that the Borrower shall not be entitled to
request any Borrowing which, if made, would result in an aggregate of more than
five separate Eurodollar Loans of any Bank being outstanding hereunder at any
one time. For purposes of the foregoing, Loans having different Interest
Periods, regardless of whether they commence on the same date, shall be
considered separate Loans.

          (c) Subject to paragraph (e) below, each Bank shall make a Revolving
Loan in the amount of its pro rata portion, as determined under Section 2.15,
or, if an Auction Loan, in the relevant amount as determined under Section 2.04,
of each Borrowing hereunder on the proposed date thereof by wire transfer of
immediately available funds to the Agent in Houston, Texas, not later than 2:00
p.m., New York City time, and the Agent shall by 3:00 p.m., New York City time,
make available to the Borrower in immediately available funds the amounts so
received (i) by wire transfer for credit to the account of the Borrower with
Bank of America, N.A., Account Number 12332-29152; ABA # 12100358, or (ii) as
otherwise specified by the Borrower in its notice of Borrowing or, if a
Borrowing shall not occur on such date because any condition precedent herein
specified shall not have been met, return the amounts so received to the
respective Banks. Unless the Agent shall have received notice from a Bank prior
to the date of any Borrowing that such Bank will not make available to the Agent
such Bank's portion of such Borrowing, the Agent may assume that such Bank has
made such portion available to the Agent on the date of such Borrowing in
accordance with this paragraph (c)

                                       27
<PAGE>   138

and the Agent may, in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent that such
Bank shall not have made such portion available to the Agent, such Bank and the
Borrower severally agree to repay 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 Borrower until the date such amount is
repaid to the Agent at (i) in the case of the Borrower the interest rate
applicable at the time to the Loans comprising such Borrowing and (ii) in the
case of such Bank, the Federal Funds Effective Rate. If such Bank shall repay to
the Agent such corresponding amount, such amount shall constitute such Bank's
Loan as part of such Borrowing for purposes of this Agreement.

          (d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Expiration Date.

          (e) The Borrower may refinance all or any part of any Borrowing with a
Borrowing of the same or a different Type or Class, subject to the conditions
and limitations set forth in this Agreement. Any Borrowing or part thereof so
refinanced shall be deemed to be repaid or prepaid in accordance with Section
2.05 or 2.11, as applicable, with the proceeds of a new Borrowing, and the
proceeds of the new Borrowing, to the extent they do not exceed the principal
amount of the Borrowing being refinanced, shall not be paid by the Banks to the
Agent or by the Agent to the Borrower pursuant to paragraph (c) above.

          SECTION 2.03. Notice of Revolving Borrowings. To request a Revolving
Borrowing, the Borrower shall give the Agent written or telecopy notice (or
telephone notice promptly confirmed in writing or by telecopy) (a) in the case
of a Eurodollar Borrowing, not later than 10:00 a.m., New York City time, three
Business Days before a proposed borrowing and (b) in the case of an ABR
Borrowing, not later than 12:00 (noon), New York City time, the day of a
proposed borrowing. Such notice shall be irrevocable and shall in each case
refer to this Agreement and specify (i) whether the Borrowing then being
requested is to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of
such

                                       28
<PAGE>   139

Borrowing (which shall be a Business Day) and the amount thereof; and (iii)
if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with
respect thereto. If no election as to the Type of Borrowing is specified in any
such notice, then the requested Borrowing shall be an ABR Borrowing. If no
Interest Period with respect to any Eurodollar Borrowing is specified in any
such notice, then the Borrower shall be deemed to have selected an Interest
Period of one month's duration. If the Borrower shall not have given notice in
accordance with this Section 2.03 of its election to refinance a Borrowing prior
to the end of the Interest Period in effect for such Borrowing, then the
Borrower shall (unless such Borrowing is repaid at the end of such Interest
Period) be deemed to have given notice of an election to refinance such
Borrowing with an ABR Borrowing. The Agent shall promptly advise the Banks of
any notice given pursuant to this Section 2.03 and of each Bank's portion of the
requested Borrowing.

          SECTION 2.04. Auction Bid Procedure. (a) Subject to the terms and
conditions set forth herein, from time to time during the Availability Period
the Borrower may request Auction Bids and may (but shall not have any obligation
to) accept Auction Bids and borrow Auction Loans; provided that the sum of the
total Revolving Credit Exposure plus the aggregate principal amount of
outstanding Auction Loans at any time shall not exceed the total Commitments. To
request Auction Bids, the Borrower shall notify the Agent of such request by
telephone, in the case of a Eurodollar Borrowing, not later than 1:00 p.m., New
York City time, four Business Days before the date of the proposed Borrowing, in
the case of a Fixed Rate Borrowing, not later than 1:00 p.m., New York City
time, one Business Day before the date of the proposed Borrowing, or, in the
case of a Delayed Fixed Rate Borrowing, not later than 2:00 p.m., New York City
time, two Business Days before the date for the proposed Borrowing; provided
that the Borrower may submit up to (but not more than) (i) 1 Eurodollar Auction
Bid Request and (ii) 1 Fixed Rate Auction Bid Request or 1 Delayed Fixed Rate
Auction Bid Request on the same day. Each such telephonic Auction Bid Request
shall be confirmed promptly by hand delivery or telecopy to the Agent of a
written Auction Bid Request in a form approved by the Agent and signed by the
Borrower. Each such telephonic and written

                                       29
<PAGE>   140

Auction Bid Request shall specify the following information in compliance with
Section 2.02:

          (i) the aggregate amount of the requested Borrowing;

          (ii) the date of such Borrowing, which shall be a Business Day;

          (iii) whether such Borrowing is to be a Eurodollar Borrowing, a Fixed
     Rate Borrowing, or a Delayed Fixed Rate Borrowing;

          (iv) the Interest Period (or Interest Periods) to be applicable to
     such Borrowing, which shall be a period contemplated by the definition of
     the term "Interest Period"; and

          (v) the location and number of the Borrower's account to which funds
     are to be disbursed, which shall comply with the requirements of Section
     2.02.

          (b) Following receipt of an Auction Bid Request in accordance with
this Section, the Agent shall notify the Banks of the details thereof by
telecopy, inviting the Banks to submit Auction Bids in the case of a Eurodollar
Auction Bid Request, no later than 2:00 p.m., New York City time, four Business
Days before the proposed date of the Borrowing, in the case of a Fixed Rate
Auction Bid Request, no later than 2:00 p.m., one Business Day before the
proposed date of the Borrowing, and, in the case of a Delayed Fixed Rate Bid
Request, not later than 3:00 p.m., New York City time, two Business Days before
the proposed date of the Borrowing.

          (c) Each Bank may (but shall not have any obligation to) make one or
more Auction Bids to the Borrower in response to an Auction Bid Request. Each
Auction Bid by a Bank must be in a form approved by the Agent and must be
received by the Agent by telecopy, in the case of a Eurodollar Auction
Borrowing, not later than 12:00 (noon), New York City time, three Business Days
before the proposed date of such Auction Borrowing, in the

                                       30
<PAGE>   141

case of a Fixed Rate Borrowing, not later than 10:30 a.m., New York City time,
on the proposed date of such Auction Borrowing, and, in the case of a Delayed
Fixed Rate Bid, not later than 12:00 (noon), New York City time, one Business
Day before the proposed date of such Auction Borrowing. Auction Bids that do not
conform substantially to the form approved by the Agent may be rejected by the
Agent, and the Agent shall notify the applicable Bank as promptly as
practicable. Each Auction Bid shall specify (i) the principal amount (which
shall be an integral multiple of $1,000,000 and which may equal the entire
principal amount of the Auction Borrowing requested by the Borrower) of the
Auction Loan or Loans that the Bank is willing to make, (ii) the Auction Bid
Rate or Rates at which the Bank is prepared to make such Loan or Loans
(expressed as a percentage rate per annum in the form of a decimal to no more
than four decimal places) and (iii) the Interest Period applicable to each such
Loan and the last day thereof in accordance with the Auction Bid Request.

          (d) The Agent shall promptly notify the Borrower by telecopy of the
Auction Bid Rate and the principal amount specified in each Auction Bid and the
identity of the Bank that shall have made such Auction Bid.

          (e) Subject only to the provisions of this paragraph, the Borrower may
accept or reject any Auction Bid. The Borrower shall notify the Agent by
telephone, confirmed by telecopy in a form approved by the Agent, whether and to
what extent it has decided to accept or reject each Auction Bid, in the case of
a Eurodollar Auction Borrowing, not later than 2:00 p.m., New York City time,
three Business Days before the date of the proposed Auction Borrowing, in the
case of a Fixed Rate Borrowing, not later than 11:30 a.m., New York City time,
on the proposed date of the Auction Borrowing, and, in the case of a Delayed
Fixed Rate Borrowing, not later than 1:00 p.m., New York City time, one Business
day before the date of the proposed Auction Borrowing; provided that (i) the
failure of the Borrower to give such notice shall be deemed to be a rejection of
each Auction Bid, (ii) the Borrower shall not accept an Auction Bid made at a
particular Auction Bid Rate if the Borrower rejects an Auction Bid made at a
lower Auction Bid Rate, (iii) the aggregate amount of the Auction Bids accepted
by the Borrower shall not exceed the aggregate amount of the requested Auction
Borrowing specified in the related Auction Bid Request, (iv) to the extent
necessary to

                                       31
<PAGE>   142

comply with clause (iii) above, the Borrower may accept Auction Bids at the same
Auction Bid Rate in part, which acceptance, in the case of multiple Auction Bids
at such Auction Bid Rate, shall be made pro rata in accordance with the amount
of each such Auction Bid, and (v) except pursuant to clause (iv) above, no
Auction Bid shall be accepted for an Auction Loan unless such Auction Loan is in
an integral multiple of $1,000,000. A notice given by the Borrower pursuant to
this paragraph shall be irrevocable.

          (f) The Agent shall notify each bidding Bank by telephone and telecopy
whether or not its Auction Bid has been accepted (and, if so, the amount and
Auction Bid Rate so accepted) in the case of Eurodollar Auction Loans, by 3:00
p.m., New York City time, three Business Days before the borrowing date, in the
case of Fixed Rate Loans, by 12:00 (noon), New York City time, on the borrowing
date, and, in the case of Delayed Fixed Rate Loans, by 3:00 p.m., New York City
time, one Business Day before the Borrowing Date. Each successful bidder will
thereupon become bound, subject to the terms and conditions hereof, to make the
Auction Loan in respect of which its Auction Bid has been accepted.

          (g) If the Agent shall elect to submit an Auction Bid in its capacity
as a Bank, it shall submit such Auction Bid directly to the Borrower at least
one quarter of an hour earlier than the time by which the other Banks are
required to submit their Auction Bids to the Agent pursuant to paragraph (b) of
this Section.

          SECTION 2.05. Repayment of Loans; Evidence of Debt. (a) The Borrower
hereby unconditionally promises to pay each Bank the then unpaid principal
amount of each Loan of such Bank on the last day of the Interest Period
applicable to such Loan and on the Expiration Date. Each Loan shall bear
interest on the outstanding principal balance thereof as set forth in Section
2.07.

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

                                       32
<PAGE>   143

          (c) The Agent shall maintain accounts in which it shall record (i) the
amount and date of each Loan made hereunder, the Class and Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal, interest
or fees due and payable or to become due and payable from the Borrower to each
Bank hereunder and (iii) the amount of any principal, interest or fees received
by the Agent hereunder for the account of the Banks and each Bank's share
thereof.

          (d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of
any Bank or the Agent to maintain such accounts or any error therein shall not
in any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.

          (e) Any Bank may request that Loans of any Class made by it be
evidenced by a Note. In such event, the Borrower shall prepare, execute and
deliver to such Bank a Note payable to the order of such Bank (or, if requested
by such Bank, to such Bank and its registered assigns). Thereafter, the Loans
evidenced by such Note and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more Notes in such
form payable to the order of the payee named therein (or, if such Note is a
registered Note, to such payee and its registered assigns).

          SECTION 2.06. Fees. (a) The Borrower agrees to pay to each Bank,
through the Agent, on the first Business Day of January, April, July and
October, in each year, and on the date on which the Commitment of such Bank
shall be terminated as provided herein, a commitment fee (a "Commitment Fee") on
the average daily unused amount of the Commitment of such Bank during the
preceding quarter (or shorter period commencing with the date hereof or ending
with the Expiration Date or the date on which the Commitment of such Bank shall
be terminated); provided, that, for purposes of determining the Commitment Fee,
the undrawn portion of the Commitments shall not be deemed to be reduced by the
amount of any borrowing under the Auction Facility.

                                       33
<PAGE>   144

The Commitment Fees shall accrue on each day at a rate per annum equal to the
Applicable Rate in effect on such day. All Commitment Fees shall be computed on
the basis of the actual number of days elapsed in a year of 365 or 366 days, as
appropriate. The Commitment Fee due to each Bank shall commence to accrue on the
date of this Agreement and shall cease to accrue on the date on which the
Commitment of such Bank shall be terminated as provided herein.

          (b) The Borrower agrees to pay to the Agent, for its own account, the
fees separately agreed between the Agent and the Borrower, at the times agreed
to (the "Agency Fees" and the "Structuring Fee").

          (c) For any day on which the outstanding principal amount of Loans
shall be greater than 33% of the total Commitments (or, following the Expiration
Date, 33% of the total Commitments on the Expiration Date), the Borrower shall
pay to the Administrative Agent for the account of each Bank a utilization fee
(a "Utilization Fee") at a rate per annum equal to the Applicable Rate in effect
for such day on such Bank's Applicable Percentage of the aggregate amount of the
outstanding Loans on such day. The Utilization Fees, if any, in respect of any
fiscal quarter shall be payable in arrears on each March 31, June 30, September
30 and December 31, on the date on which the Commitments terminate and on any
later date on which the Loans are repaid in full; provided, however, that if the
Utilization Fee should be payable on a day other than a Business Day, such date
of payment shall be extended to the next succeeding Business Day. All
Utilization Fees shall be computed on the basis of a year of 365 or 366 days, as
appropriate, and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).

          (d) The Borrower agrees to pay the Agent, for its own account, $100
for each Auction Bid Request the Borrower makes, payable the day on which the
Auction Bid Request is made.

          (e) All Fees shall be paid on the dates due, in immediately available
funds, to the Agent for distribution, if and as appropriate, among the Banks.
Once paid, none of the Fees shall be refundable under any circumstances.

                                       34
<PAGE>   145

          SECTION 2.07. Interest on Loans. (a) Subject to the provisions of
Section 2.08, the Loans comprising each ABR Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 365
or 366 days, as the case may be) at a rate per annum equal to the Alternate Base
Rate plus the Applicable Rate.

          (b) Subject to the provisions of Section 2.08, the Loans comprising
each Eurodollar Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) (i) in the case of a
Eurodollar Revolving Loan at a rate per annum equal to the Eurodollar Rate for
the Interest Period in effect for such Borrowing plus the Applicable Rate or
(ii) in the case of a Eurodollar Auction Loan, at the Eurodollar Rate for the
Interest Period in effect for such Borrowing plus the Margin applicable to such
Loan.

          (c) Each Fixed Rate Loan shall bear interest at the Fixed Rate
applicable to such Loan. Each Delayed Fixed Rate Loan shall bear interest at the
Delayed Fixed Rate applicable to such Loan.

          (d) Interest on each Loan shall be payable on the Interest Payment
Dates applicable to such Loan except as otherwise provided in this Agreement.
The applicable Alternate Base Rate or Eurodollar Rate for each Interest Period
or day within an Interest Period, as the case may be, shall be determined by the
Agent, and such determination shall be conclusive absent manifest error.

          SECTION 2.08. Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder, by acceleration or otherwise, the Borrower shall on demand from
time to time pay interest, to the extent permitted by law, on such defaulted
amount up to (but not including) the date of actual payment (after as well as
before judgment) at a rate per annum (computed on the basis of the actual number
of days elapsed over a year of 360 days) equal to the Alternate Base Rate plus
the Applicable Rate plus 2%.

          SECTION 2.09. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business

                                       35
<PAGE>   146

Days prior to the commencement of any Interest Period for a Eurodollar Borrowing
the Agent shall have in good faith determined that dollar deposits in the
principal amounts of the Loans comprising such Borrowing are not generally
available in the London interbank market, or that the rates at which such dollar
deposits are being offered will not adequately and fairly reflect the cost to
the majority in interest of the Banks of making or maintaining their Eurodollar
Loans during such Interest Period, or that reasonable means do not exist for
ascertaining the Eurodollar Rate, the Agent shall, as soon as practicable
thereafter, give written or telecopy notice of such determination to the
Borrower and the Banks. In the event of any such determination, (i) any request
by the Borrower for a Eurodollar Borrowing pursuant to Section 2.03 shall, until
the Agent shall have advised the Borrower and the Banks that the circumstances
giving rise to such notice no longer exist, be deemed to be a request for an ABR
Borrowing and (ii) any request by the Borrower for a Eurodollar Auction
Borrowing shall be ineffective; provided that (A) if the circumstances giving
rise to such notice do not affect all the Banks, then requests by Borrower for
Eurodollar Auction Borrowings may be made to Banks that are not affected thereby
and (B) if the circumstances giving rise to such notice affect only one Type of
Borrowings, then the other Type of Borrowings shall be permitted. Each
determination by the Agent hereunder shall be conclusive absent manifest error.

          SECTION 2.10. Termination, Reduction and Extension of Commitments. (a)
The Commitments shall be automatically terminated on the Expiration Date.

          (b) Upon at least three Business Days' prior irrevocable written or
telecopy notice to the Agent, the Borrower may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the unused portion
of the Commitments; provided, however, that (i) each partial reduction of the
Commitments shall be in an integral multiple of $1,000,000 and (ii) the Borrower
shall not terminate or reduce the Commitments if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 2.11, the sum of
the Revolving Credit Exposure plus the aggregate principal amount of outstanding
Auction Loans would exceed the total Commitments.

                                       36
<PAGE>   147

          (c) Each reduction in the Commitments hereunder shall be made ratably
among the Banks in accordance with their respective applicable Commitments. The
Borrower shall pay to the Agent for the account of the Banks, on the date of
each termination or reduction, the Commitment Fees on the amount of the
Commitments so terminated or reduced accrued through the date of such
termination or reduction.

          (d) The Borrower may request an extension of this Agreement upon 60
days' prior written notice to the Agent; provided, that, such extension will be
at the sole option of the Banks and will require the written agreement of each
Bank in order to become effective.

          SECTION 2.11. Prepayment. (a) The Borrower shall have the right at any
time and from time to time to prepay any Borrowing, in whole or in part, upon at
least three Business Days' prior written or telecopy notice (or telephone notice
promptly confirmed by written or telecopy notice) to the Agent; provided,
however, that each partial prepayment shall be in an amount which is an integral
multiple of $1,000,000, and that the Borrower shall not have the right to prepay
any Auction Loan without the prior consent of the Bank thereof.

          (b) On the date of any termination or reduction of the Commitments
pursuant to Section 2.10, the Borrower shall pay or prepay so much of the
Borrowings as shall be necessary in order that the aggregate principal amount of
the Revolving Credit Exposure plus the aggregate principal amount of Auction
Loans outstanding will not exceed the aggregate Commitments after giving effect
to such termination or reduction.

          (c) Each notice of prepayment shall specify the prepayment date and
the principal amount of each Borrowing (or portion thereof) to be prepaid, shall
be irrevocable and shall commit the Borrower to prepay such Borrowing by the
amount stated therein on the date stated therein. All prepayments under this
Section 2.11 shall be subject to Section 2.14 but otherwise without premium or
penalty. All prepayments under this Section 2.11 shall be accompanied by accrued
interest on the principal amount being prepaid to the date of payment.

                                       37
<PAGE>   148

          SECTION 2.12. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein, if after the date of this Agreement
there is adopted any new law, rule or regulation or any change in applicable law
or regulation or in the interpretation or administration thereof by any
governmental authority charged with the interpretation or administration thereof
(whether or not having the force of law) which shall impose, modify or deem
applicable any reserve, special deposit or similar requirement against assets
of, deposits with or for the account of or credit extended by such Bank (except
any such reserve requirement which is reflected in the Eurodollar Rate) or shall
impose on such Bank or the London interbank market any other condition affecting
this Agreement or Eurodollar Loans made by such Bank, and the result of any of
the foregoing shall be to increase the cost to such Bank of making or
maintaining any Eurodollar Loan or to reduce the amount of any sum received or
receivable by such Bank hereunder or under any Notes(whether of principal,
interest or otherwise) in respect of Eurodollar Loans by an amount deemed by
such Bank to be material, then the Borrower will pay to such Bank upon demand
such additional amount or amounts as will compensate such Bank for such
additional costs incurred or reduction suffered.

          (b) If any Bank shall have determined that the applicability of any
law, rule, regulation, agreement or guideline adopted after the date hereof
regarding capital adequacy, or any change in any of the foregoing or the
adoption after the date hereof of any change in any law, rule, regulation,
agreement or guideline existing on the date hereof or in the interpretation or
administration of any of the foregoing by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or any lending office of such Bank) or any
Bank's holding company with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Bank's capital or on the capital of such Bank's holding company, if any,
as a consequence of this Agreement or the Loans made by such Bank pursuant
hereto to a level below that which such Bank or such Bank's holding company
could

                                       38
<PAGE>   149

have achieved but for such applicability, adoption, change or compliance (taking
into consideration such Bank's policies and the policies of such Bank's holding
company with respect to capital adequacy) by an amount deemed by such Bank to be
material, then from time to time the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank or such Bank's holding
company for any such reduction suffered.

          (c) A certificate of each Bank setting forth in reasonable detail such
amount or amounts as shall be necessary to compensate such Bank or its holding
company as specified in paragraph (a) or (b) above, as the case may be, and the
manner in which such Bank has determined the same, shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
each Bank the amount shown as due on any such certificate delivered by it within
10 days after its receipt of the same.

          (d) Failure on the part of any Bank to demand compensation for any
increased costs or reduction in amounts received or receivable or reduction in
return on capital with respect to any period shall not constitute a waiver of
such Bank's right to demand compensation with respect to such period or any
other period. The protection of this Section shall be available to each Bank
regardless of any possible contention of the invalidity or inapplicability of
the law, rule, regulation, guideline or other change or condition which shall
have occurred or been imposed.

          SECTION 2.13. Change in Legality. (a) Notwithstanding any other
provision herein, if any change in, or adoption of, any law or regulation or in
the interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Bank to
make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrower and to the Agent, such Bank may:

          (i) declare that Eurodollar Loans will not thereafter be made by such
     Bank hereunder, whereupon any request by the Borrower for a Eurodollar
     Borrowing shall, as to such Bank only, be deemed a request for an ABR Loan
     unless such declaration shall be subsequently

                                       39
<PAGE>   150

     withdrawn; and

          (ii) require that all outstanding Eurodollar Loans made by it be
     converted to ABR Loans, in which event all such Eurodollar Loans shall be
     automatically converted to ABR Loans as of the effective date of such
     notice as provided in paragraph (b) below.

In the event any Bank shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Bank or the
converted Eurodollar Loans of such Bank shall instead be applied to repay the
ABR Loans made by such Bank in lieu of, or resulting from the conversion of,
such Eurodollar Loans.

          (b) For purposes of this Section 2.13, a notice to the Borrower by any
Bank shall be effective as to each Eurodollar Loan, if lawful, on the last day
of the Interest Period currently applicable to such Eurodollar Loan.

          SECTION 2.14. Indemnity. The Borrower shall indemnify each Bank
against any loss or expense which such Bank may sustain or incur as a
consequence of (a) any failure by the Borrower to fulfill on the date of any
Eurodollar Borrowing hereunder the applicable conditions set forth in Article
IV, (b) any failure by the Borrower to borrow or to refinance any Eurodollar
Loan hereunder after irrevocable notice of such borrowing or refinancing has
been given pursuant to Sections 2.03 and 2.04, (c) any payment or prepayment of
a Eurodollar Loan required by any other provision of this Agreement or otherwise
made or deemed made on a date other than the last day of the Interest Period
applicable thereto or (d) any default in payment or prepay ment of the principal
amount of any Eurodollar Loan or any part thereof or interest accrued thereon,
as and when due and payable (at the due date thereof, whether by scheduled
maturity, acceleration, irrevocable notice of prepayment or otherwise)
including, in each such case, any loss or reasonable expense sustained or
incurred or to be sustained or incurred in liquidating or employing deposits
from third parties acquired to effect or maintain such Loan or any part thereof
as a Eurodollar Loan. Such loss or reasonable expense shall include an amount
equal to the excess, if any, as reasonably determined by such Bank, of

                                       40
<PAGE>   151

(i) its cost of obtaining the funds for the Eurodollar Loan being paid, prepaid,
converted or not borrowed (assumed to be the Eurodollar Rate applicable thereto)
for the period from the date of such payment, prepayment, conversion or failure
to borrow to the last day of the Interest Period for such Loan (or, in the case
of a failure to borrow, the Interest Period for such Eurodollar Loan which would
have commenced on the date of such failure) over (ii) the amount of interest (as
reasonably determined by such Bank) that would be realized by such Bank in
reemploying the funds so paid, prepaid or not borrowed for such period or
Interest Period, as the case may be. A certificate of any Bank setting forth any
amount or amounts which such Bank is entitled to receive pursuant to this
Section, and the manner in which such Bank has determined the same, shall be
delivered to the Borrower and shall be conclusive absent manifest error.

          SECTION 2.15. Pro Rata Treatment. Except as required under Sections
2.04 and 2.13, each Borrowing, each payment or prepayment of principal of any
Borrowing, each payment of interest on the Loans, each payment of the Commitment
Fees, each reduction of the Commitments and each refinancing of any Borrowing
with a Borrowing of any Type shall be allocated pro rata among the Banks in
accordance with their respective applicable Commitments (or, if such Commitments
shall have expired or been terminated, in accordance with the respective
principal amounts of their outstanding Loans). Each Bank agrees that in
computing such Bank's portion of any Borrowing to be made hereunder, the Agent
may, in its discretion, round each Bank's percentage of such Borrowing, computed
in accordance with Section 2.01, to the next higher or lower whole dollar
amount.

          SECTION 2.16. Sharing of Setoffs. Each Bank agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrower, or pursuant to a secured claim under Section 506 of Title 11 of
the United States Code or other security or interest arising from, or in lieu
of, such secured claim, received by such Bank under any applicable bankruptcy,
insolvency or other similar law or otherwise, or by any other means, obtain
payment (voluntary or involuntary) in respect of any Revolving Loan or Revolving
Loans as a result of which the unpaid principal portion of its Revolving Loans
shall be

                                       41
<PAGE>   152

proportionately less than the unpaid principal portion of the Revolving Loans of
any other Bank, it shall be deemed simultaneously to have purchased from such
other Bank at face value, and shall promptly pay to such other Bank the purchase
price for, a participation in the Revolving Loans of such other Bank, so that
the aggregate unpaid principal amount of the Revolving Loans and participations
in Revolving Loans held by each Bank shall be in the same proportion to the
aggregate unpaid principal amount of all Revolving Loans then outstanding as the
principal amount of its Revolving Loans prior to such exercise of banker's lien,
setoff or counterclaim or other event was to the principal amount of all
Revolving Loans outstanding prior to such exercise of banker's lien, setoff or
counter-claim or other event; provided, however, that, if any such purchase or
purchases or adjustments shall be made pursuant to this Section and the payment
giving rise thereto shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and the purchase
price or prices or adjustment restored without interest. The Borrower expressly
consents to the foregoing arrangements and agrees that any Bank holding a
participation in a Revolving Loan deemed to have been so purchased may exercise
any and all rights of banker's lien, setoff or counterclaim with respect to any
and all moneys owing by the Borrower to such Bank by reason thereof as fully as
if such Bank had made a Loan directly to the Borrower in the amount of such
participation.

          SECTION 2.17. Payments. (a) The Borrower shall make each payment
(including principal of or interest on any Borrowing or any Fees or other
amounts) hereunder and under any other Loan Document not later than 12:00
(noon), New York City time, on the date when due in dollars to the Agent at its
offices at 909 Fanning, Suite 1700, Houston, Texas, in immediately available
funds.

          (b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
interest or Fees, if applicable.

                                       42
<PAGE>   153

          SECTION 2.18. Taxes. (a) Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 2.17, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed on the net income of the Agent or any Bank (or any
transferee or assignee thereof, including a participation holder (any such
entity being called a "Transferee")) and franchise taxes imposed on the Agent or
any Bank (or Transferee) by the United States or any jurisdiction under the laws
of which the Agent or any such Bank (or such Transferee) or the applicable
lending office, is organized or any political subdivision thereof (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to the Banks (or any Transferee) or the Agent, (i) the sum payable
shall be increased by the amount necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.18) such Bank (or such Transferee) or the Agent (as the case may
be) shall receive an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxing authority or
other Governmental Authority in accordance with applicable law; provided,
however, that no Transferee of any Bank shall be entitled to receive any greater
payment under this paragraph (a) than such Bank would have been entitled to
receive with respect to the rights assigned, participated or other wise
transferred unless such assignment, participation or transfer shall have been
made at a time when the circumstances giving rise to such greater payment did
not exist.

          (b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "Other Taxes").

                                       43
<PAGE>   154
          (c) The Borrower will indemnify each Bank (or Transferee) and the
Agent for the full amount of Taxes and Other Taxes paid by such Bank (or such
Transferee)or the Agent, as the case may be, and any liability (including
penalties, interest and reasonable expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted by the relevant taxing authority or other Governmental Authority. Such
indemnification shall be made within 30 days after the date any Bank (or
Transferee) or the Agent, as the case may be, makes written demand therefor. If
a Bank (or Transferee) or the Agent shall become aware that it is entitled to
receive a refund in respect of Taxes or Other Taxes as to which it has been
indemnified by the Borrower pursuant to this Section 2.18, it shall promptly
notify the Borrower of the availability of such refund and shall, within 30 days
after receipt of a request by the Borrower, apply for such refund at the
Borrower's expense. If any Bank (or Transferee) or the Agent receives a refund
in respect of any Taxes or Other Taxes as to which it has been indemnified by
the Borrower pursuant to this Section 2.18, it shall promptly notify the
Borrower of such refund and shall repay such refund to the Borrower (to the
extent of amounts that have been paid by the Borrower under this Section 2.18
with respect to such refund) within 30 days (or promptly upon receipt, if the
Borrower has requested application for such refund pursuant hereto), net of all
reasonable out-of-pocket expenses of such Bank and without interest; provided
that the Borrower, upon the request of such Bank (or such Transferee) or the
Agent, agrees to return such refund (plus penalties, interest or other charges)
to such Bank (or such Transferee) or the Agent in the event such Bank (or such
Transferee) or the Agent is required to repay such refund. Nothing contained in
this paragraph (c) shall require any Bank (or Transferee) or the Agent to make
available any of its tax returns (or any other information relating to its taxes
which it deems to be confidential); provided that Borrower, at its expense,
shall have the right to receive an opinion from a firm of independent public
accountants of recognized national standing acceptable to the Borrower that the
amount due hereunder is correctly calculated.

          (d) Within 30 days after the date of any payment of Taxes or Other
Taxes withheld by the Borrower in respect

                                       44
<PAGE>   155

of any payment to any Bank (or Transferee) or the Agent, the Borrower will
furnish to the Agent, at its address referred to in Section 9.01, the original
or a certified copy of a receipt evidencing payment thereof.

          (e) Without prejudice to the survival of any other agreement contained
herein, the agreements and obligations contained in this Section 2.18 shall
survive the payment in full of the principal of and interest on all Loans made
hereunder.

          (f) On or prior to the execution of this Agreement and on or before
the transfer to a Transferee, the Agent shall notify the Borrower of each Bank's
(or Transferee's) address. On or prior to the Bank's (or Transferee's) first
Interest Payment Date, and from time to time as required by law, each Bank (or
Transferee) that is organized under the laws of a jurisdiction outside the
United States shall, if legally able to do so, deliver to the Borrower and the
Agent such certificates, documents or other evidence, as required by the Code or
Treasury Regulations issued pursuant thereto, including Internal Revenue Service
Form 1001 or Form 4224 and any other certificate or statement of exemption
required by Treasury Regulation Section 1.1441-1, 1.1441-4 or 1.1441-6(c) or any
subsequent version thereof or successors thereto, properly completed and duly
executed by such Bank (or Transferee) establishing that such payment is (i) not
subject to United States Federal withholding tax under the Code because such
payment is effectively connected with the conduct by such Bank (or Transferee)
of a trade or business in the United States or (ii) totally exempt from United
States Federal withholding tax, or subject to a reduced rate of such tax under a
provision of an applicable tax treaty. Unless the Borrower and the Agent have
received forms or other documents satisfactory to them indicating that such
payments hereunder or under any Notes are not subject to United States Federal
withholding tax or are subject to such tax at a rate reduced by an applicable
tax treaty, the Borrower shall withhold taxes from such payments at the
applicable statutory rate.

          (g) The Borrower shall not be required to pay any additional amounts
to any Bank (or Transferee) in respect of United States Federal withholding tax
pursuant to

                                       45
<PAGE>   156

paragraph (a) above if the obligation to pay such additional amounts would not
have arisen but for a failure by such Bank (or Transferee) to comply with the
provisions of paragraph (f) above; provided, however, that the Borrower shall be
required to pay those amounts to any Bank (or Transferee) that it was required
to pay hereunder prior to the failure of such Bank (or Transferee) to comply
with the provisions of such paragraph (f).

          SECTION 2.19. Termination or Assignment of Commitments Under Certain
Circumstances. (a) Any Bank (or Transferee) claiming any additional amounts
payable pursuant to Section 2.12 or Section 2.18 or exercising its rights under
Section 2.13 shall use reasonable efforts (consistent with legal and regulatory
restrictions) to file any certificate or document requested by the Borrower or
to change the jurisdiction of its applicable lending office if the making of
such a filing or change would avoid the need for or reduce the amount of any
such additional amounts which may thereafter accrue or avoid the circumstances
giving rise to such exercise and would not, in the sole determination of such
Bank, be otherwise disadvantageous to such Bank (or Transferee).

          (b) In the event that any Bank shall have delivered a notice or
certificate pursuant to Section 2.12 or 2.13, or the Borrower shall be required
to make additional payments under Section 2.18 to any Bank (or Transferee) or to
the Agent with respect to any Bank (or Transferee), the Borrower shall have the
right, at its own expense, upon notice to such Bank (or Transferee) and the
Agent (a) to terminate the Commitment of such Bank (or Transferee) or (b) to
require such Bank (or Transferee) to transfer and assign without recourse (in
accordance with and subject to the restrictions contained in Section 9.04) all
its interests, rights and obligations under this Agreement (other than any
outstanding Auction Loans) to another financial institution which shall assume
such obligations; provided that (i) no such termination or assignment shall
conflict with any law, rule or regulation or order of any Governmental Authority
and (ii) the Borrower or the assignee, as the case may be, shall pay to the
affected Bank (or Transferee) in immediately available funds on the date of such
termination or assignment the principal of and interest accrued to the date of
payment on the Loans made by

                                       46
<PAGE>   157

it hereunder and all other amounts accrued for its account or owed to it
hereunder.

ARTICLE III.  REPRESENTATIONS AND WARRANTIES

          The Borrower represents and warrants to each of the Banks that:

          SECTION 3.01. Organization; Powers. Each of the Borrower and the
Significant Subsidiaries (a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, (b)
has all requisite power and authority to own its property and assets and to
carry on its business as now conducted and as proposed to be conducted, (c) is
qualified to do business in every jurisdiction where such qualification is
required, except where the failure so to qualify would not result in a Material
Adverse Effect, and (d) in the case of the Borrower, has the corporate power and
authority to execute, deliver and perform its obligations under each of the Loan
Documents and each other agreement or instrument contemplated thereby to which
it is or will be a party and to borrow hereunder.

          SECTION 3.02. Authorization. The execution, delivery and performance
by the Borrower of each of the Loan Documents and the borrowings hereunder
(collectively, the "Transactions") (a) have been duly authorized by all
requisite corporate and, if required, stockholder action and (b) will not (i)
violate (A) any provision of law, statute, rule or regulation the violation of
which could reasonably be expected to impair the validity and enforceability of
this Agreement or any other Loan Document or materially impair the rights of or
benefits available to the Banks under the Loan Documents, or of the certificate
or articles of incorporation or other constitutive documents or by-laws of the
Borrower or any Significant Subsidiary, (B) any order of any Governmental
Authority the violation of which could reasonably be expected to impair the
validity or enforce ability of this Agreement or any other Loan Document, or
materially impair the rights of or benefits available to the Banks under the
Loan Documents, or (C) any provision of any indenture or other material
agreement or instrument evidencing or relating to borrowed money to which the

                                       47
<PAGE>   158

Borrower or any Significant Subsidiary is a party or by which any of them or any
of their property is or may be bound in a manner which could reasonably be
expected to impair the validity and enforceability of this Agreement or any
other Loan Document or materially impair the rights of or benefits available to
the Banks under the Loan Documents, (ii) be in conflict with, result in a breach
of or constitute (alone or with notice or lapse of time or both) a default under
any such indenture, agreement or other instru ment in a manner which could
reasonably be expected to impair the validity and enforceability of this
Agreement or any other Loan Document or materially impair the rights of or
benefits available to the Banks under the Loan Documents or (iii) result in the
creation or imposition under any such indenture, agreement or other instrument
of any Lien upon or with respect to any property or assets now owned or
hereafter acquired by the Borrower.

          SECTION 3.03. Enforceability. This Agreement has been duly executed
and delivered by the Borrower and constitutes, and each other Loan Document when
executed and delivered by the Borrower will constitute, a legal, valid and
binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms.

          SECTION 3.04. Governmental Approvals. No action, consent or approval
of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except
such as have been made or obtained and are in full force and effect.

          SECTION 3.05. Financial Statements. The Borrower has heretofore
furnished to the Banks its consolidated balance sheets and statements of income
and statements of cash flow as of and for the fiscal year ended December 31,
1999, audited by and accompanied by the opinion of Deloitte & Touche,
independent public accountants. Such financial statements present fairly the
financial condition and results of operations of the Borrower and its
consolidated subsidiaries as of such dates and for such periods. Such balance
sheets and the notes thereto, together with the Borrower's Annual Report on Form
10-K for the fiscal year ended December 31, 1999, reflect all liabilities,
direct or contingent, of the Borrower and its consolidated Subsidiaries as of
the dates thereof which are material on a

                                       48
<PAGE>   159

consolidated basis. Such financial statements were prepared in accordance with
GAAP applied (except as noted therein) on a consistent basis.

          SECTION 3.06. No Material Adverse Change. Except as disclosed in the
Borrower's Annual Report on Form 10-K for the fiscal year ended December 31,
1999, in the Borrower's Form 10-Q for the fiscal quarter ended March 31, 2000
and in any document filed prior to the date of this Agreement pursuant to
Sections 13(a), 14 or 15(d) of the Securities Exchange Act of 1934, there has
been no change in the business, assets, operations or financial condition of the
Borrower and the Subsidiaries, taken as a whole, since December 31, 1999, which
could reasonably be expected to have a material adverse effect on the
creditworthiness of the Borrower.

          SECTION 3.07. Litigation; Compliance with Laws. (a) Except as set
forth in the Annual Report of the Borrower on Form 10-K for the year ended
December 31, 1999, in the Borrower's Form 10-Q for the fiscal quarter ended
March 31, 2000 or in any document filed prior to the date of this Agreement
pursuant to Sections 13(a), 14 or 15(d) of the Securities Exchange Act of 1934,
there are not any actions, suits or proceedings at law or in equity or by or
before any Governmental Authority now pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Subsidiary or any
business, property or rights of any such person (i) which involve any Loan Docu
ment or the Transactions or (ii) which could reasonably be anticipated,
individually or in the aggregate, to result in a Material Adverse Effect.

          (b) Neither the Borrower nor any of the Subsidiaries is in violation
of any law, rule or regulation, or in default with respect to any judgment,
writ, injunction or decree of any Governmental Authority, where such violation
or default would be reasonably likely to result in a Material Adverse Effect.

          SECTION 3.08. Federal Reserve Regulations. (a) Neither the Borrower
nor any of the Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying Margin Stock.

                                       49
<PAGE>   160

          (b) No part of the proceeds of any Loan will be used, whether directly
or indirectly, and whether immediately, incidentally or ultimately, (i) to
purchase or carry Margin Stock or to extend credit to others for the purpose of
purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is inconsistent with, the provisions of the Regulations of the Board,
including Regulation U or X.

          SECTION 3.09. Investment Company Act; Public Utility Holding Company
Act. The Borrower is not (a) an "investment company" as defined in, or subject
to regulation under, the Investment Company Act of 1940 or (b) subject to
regulation as a "holding company" under the Public Utility Holding Company Act
of 1935.

          SECTION 3.10. Use of Proceeds. The Borrower will use the proceeds of
the Loans only for the purposes specified in the preamble to this Agreement.

          SECTION 3.11. No Material Misstatements. No information, report,
financial statement, exhibit or schedule furnished by or on behalf of the
Borrower to the Agent or any Bank in connection with the negotiation of any Loan
Document or included therein or delivered pursuant thereto contained, contains
or will contain any material misstatement of fact or, when considered together
with all reports theretofore filed with the Securities and Exchange Commission,
omitted, omits or will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were, are
or will be made, not misleading.

          SECTION 3.12. Employee Benefit Plans. Each of the Borrower and its
ERISA Affiliates is in compliance in all material respects with the applicable
provisions of ERISA and the regulations and published interpretations
thereunder. No Reportable Event has occurred as to which the Borrower or any
ERISA Affiliate was required to file a report with the PBGC, and the present
value of all benefit liabilities under each Plan (based on those assumptions
used to fund such Plan) did not, as of the last annual valuation date applicable
thereto, exceed by more than $10,000,000 the

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<PAGE>   161

value of the assets of such Plan.

          SECTION 3.13. Environmental and Safety Matters. Each of the Borrower
and each Subsidiary has complied with all Federal, state, local and other
statutes, ordinances, orders, judgments, rulings and regulations relating to
environmental pollution or to environmental or nuclear regulation or control or
to employee health or safety, except where noncompliance would not be reasonably
likely to result in a Material Adverse Effect. Neither the Borrower nor any
Subsidiary has received notice of any failure so to comply, except where
noncompliance would not be reasonably likely to result in a Material Adverse
Effect. The Borrower's and the Subsidiaries' plants do not manage any hazardous
wastes, hazardous substances, hazardous materials, toxic substances, toxic
pollutants or substances similarly denominated, as those terms or similar terms
are used in the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response Compensation and Liability Act, the Hazardous Materials
Transportation Act, the Toxic Substance Control Act, the Clean Air Act, the
Clean Water Act or any other applicable law relating to environmental pollution
or employee health and safety, or any nuclear fuel or other radioactive
materials, in violation of any law or any regulations promulgated pursuant
thereto, where such violation would be reasonably likely to result in a Material
Adverse Effect. The Borrower is aware of no events, conditions or circumstances
involving environmental pollution or contamination or employee health or safety
that could reasonably be expected to result in a Material Adverse Effect. The
representations and warranties set forth in this Section 3.13 are, however,
subject to any matters, circumstances or events set forth in the Borrower's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999, in the
Borrower's Form 10-Q for the fiscal quarter ended March 31, 2000 and in any
document filed prior to the date of this Agreement pursuant to Sections 13(a),
14 or 15(d) of the Securities Exchange Act of 1934; provided, however, that the
inclusion of such matters, circumstances or events as exceptions (or any other
exceptions contained in the representations and warranties which refer to the
Borrower's Annual Report on Form 10-K for the fiscal year ended December 31,
1999, in the Borrower's Form 10-Q for the fiscal quarter ended March 31, 2000 or
in any document filed prior to the date of this Agreement pursuant to

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<PAGE>   162

Sections 13(a), 14 or 15(d) of the Securities Exchange Act of 1934 shall not be
construed to mean that the Borrower has concluded that any such matter,
circumstance or effect is likely to result in a Material Adverse Effect.

          SECTION 3.14. Significant Subsidiaries. Schedule 3.14 sets forth as of
the date hereof a list of all Significant Subsidiaries of the Borrower and the
percentage ownership interest of the Borrower therein.

ARTICLE IV.  CONDITIONS OF LENDING

          The obligations of the Banks to make Loans hereunder are subject to
the satisfaction of the following conditions:

          SECTION 4.01. All Borrowings. On the date of each Borrowing, including
each Borrowing in which Loans are refinanced with new Loans as contemplated by
Section 2.02(e):

          (a) The Agent shall have received a notice of such Borrowing as
     required by Section 2.03.

          (b) The representations and warranties set forth in Article III hereof
     (except, in the case of a refinancing of Loans that does not increase the
     sum of the Revolving Credit Exposure and the Auction Loans of any Bank
     outstanding, the representations set forth in Sections 3.06 and 3.07) shall
     be true and correct in all material respects on and as of the date of such
     Borrowing with the same effect as though made on and as of such date,
     except to the extent such representations and warranties expressly relate
     to an earlier date.

          (c) The Borrower shall be in compliance with all the terms and
     provisions set forth herein and in each other Loan Document on its part to
     be observed or performed, and at the time of and immediately after such
     Borrowing no Event of Default or Default shall have occurred and be
     continuing.

Each Borrowing shall be deemed to constitute a representation and warranty by
the Borrower on the date of

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<PAGE>   163

such Borrowing as to the matters specified in paragraphs (b) and (c) of this
Section 4.01.

          SECTION 4.02. First Borrowing. On the date of this Agreement:

          (a) The Agent shall have received favorable written opinions of (i)
     Paine, Hamblen, Coffin, Brooke & Miller, counsel for the Borrower, and (ii)
     Thelen, Reid & Priest, special counsel to the Borrower, each dated the date
     of this Agreement and addressed to the Banks, to the effect set forth in
     Exhibits D-1 and D-2 hereto, and the Borrower hereby instructs such counsel
     to deliver such opinions to the Agent.

          (b) The Agent shall have received evidence satisfactory to it and set
     forth on Schedule 4.02(b) that the Borrower shall have obtained all
     consents and approvals of, and shall have made all filings and
     registrations with, any Governmental Authority required in order to
     consummate the Transactions, in each case without the imposition of any
     condition which, in the judgment of the Banks, could adversely affect their
     rights or interests hereunder.

          (c) All legal matters incident to this Agreement and the borrowings
     hereunder shall be satisfactory to the Banks and their counsel and to
     Cravath, Swaine & Moore, counsel for the Agent.

          (d) The Agent shall have received (i) a copy of the certificate or
     articles of incorporation, including all amendments thereto, of the
     Borrower, certified as of a recent date by the Secretary of State of the
     state of its organization, and a certificate as to the good standing of the
     Borrower as of a recent date, from such Secretary of State; (ii) a
     certificate of the Secretary or Assistant Secretary of the Borrower dated
     the Closing Date and certifying (A) that attached thereto is a true and
     complete copy of the by-laws of the Borrower as in effect on the Closing
     Date and at all times since a date prior to the date of the resolutions
     described in clause (B) below, (B) that attached thereto is a true and
     complete copy of resolutions duly adopted by the board of directors of the
     Borrower

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<PAGE>   164

     authorizing the execution, delivery and performance of the Loan Documents
     and the borrowings hereunder, and that such resolutions have not been
     modified, rescinded or amended and are in full force and effect, (C) that
     the certificate or articles of incorporation of the Borrower have not been
     amended since the date of the last amendment thereto shown on the
     certificate of good standing furnished pursuant to clause (i) above, and
     (D) as to the incumbency and specimen signature of each officer executing
     any Loan Document or any other document delivered in connection herewith on
     behalf of the Borrower; (iii) a certificate of another officer as to the
     incumbency and specimen signature of the Secretary or Assistant Secretary
     executing the certificate pursuant to (ii) above; and (iv) such other
     documents as the Banks or their counsel or Cravath, Swaine & Moore, counsel
     for the Agent, may reasonably request.

          (e) The Agent shall have received a certificate, dated the Closing
     Date and signed by a Financial Officer of the Borrower, confirming
     compliance with the conditions precedent set forth in paragraphs (b) and
     (c) of Section 4.01.

          (f) The Agent shall have received all Fees and other amounts due and
     payable on or prior to the date of this Agreement, including all Fees
     accrued to the date hereof under the Pre-Restatement Credit Agreement, this
     Agreement or the fee schedule set forth in the invitation schedule and fee
     schedule dated May 12, 2000.

ARTICLE V.  AFFIRMATIVE COVENANTS

          The Borrower covenants and agrees with each Bank that so long as this
Agreement shall remain in effect or the principal of or interest on any Loan,
any Fees or any other expenses or any amounts payable under any Loan Document
shall be unpaid, unless the Required Banks shall otherwise consent in writing,
the Borrower will:

          SECTION 5.01. Existence; Businesses and Proper ties. (a) Do or cause
to be done all things

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<PAGE>   165

necessary to preserve, renew and keep in full force and effect its legal
existence, except as otherwise expressly permitted under Section 6.02.

     (b) Do or cause to be done all things necessary to obtain, preserve, renew,
extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
utilized in the conduct of the Borrower's business except where the failure so
to obtain, preserve, renew, extend or maintain any of the foregoing would not
result in a Material Adverse Effect; maintain and operate such business in
substantially the manner in which it is presently conducted and operated, except
as otherwise expressly permitted under this Agreement; comply in all material
respects with all applicable laws, rules, regulations and orders of any
Governmental Authority, whether now in effect or hereafter enacted if failure to
comply with such requirements would result in a Material Adverse Effect; and at
all times maintain and preserve all property material to the conduct of such
business and keep such property in good repair, working order and condition and
from time to time make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary in order
that the business carried on in connection therewith may be properly conducted
at all times; provided, however, that the Borrower may cause the discontinuance
of the operation or a reduction in the capacity of any of its facilities, or any
element or unit thereof including, without limitation, real and personal
properties, facilities, machinery and equipment, (i) if, in the judgment of the
Borrower, it is no longer advisable to operate the same, or to operate the same
at its former capacity, and such discontinuance or reduction would not result in
a Material Adverse Effect, or (ii) if the Borrower intends to sell and dispose
of its interest in the same in accordance with the terms of this Agreement and
within a reasonable time shall endeavor to effectuate the same.

          SECTION 5.02. Insurance. (a) Maintain insurance, to such extent and
against such risks, as is customary with companies in the same or similar
businesses and owning similar properties in the same general area in which the
Borrower operates and (b) maintain such other insurance as may be required by
law. All insurance required by this

                                       55
<PAGE>   166

Section 5.02 shall be maintained with financially sound and reputable insurers
or through self-insurance; provided, however, that the portion of such insurance
constituting self-insurance shall be comparable to that usually maintained by
companies engaged in the same or similar businesses and owning similar
properties in the same general area in which the Borrower operates and the
reserves maintained with respect to such self-insured amounts are deemed
adequate by the officer or officers of the Borrower responsible for insurance
matters.

          SECTION 5.03. Taxes and Obligations. Pay and discharge promptly when
due all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or in respect of its property, before the same shall
become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might give rise to a Lien
upon such properties or any part thereof; provided, however, that such payment
and discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and the Borrower shall, to
the extent required by GAAP, have set aside on its books adequate reserves with
respect thereto.

          SECTION 5.04. Financial Statements, Reports, etc. Furnish to the Agent
and each Bank:

          (a) within 105 days after the end of each fiscal year, its
     consolidated and consolidating balance sheets and related statements of
     income and statements of cash flow, showing the financial condition of the
     Borrower and its consolidated Subsidiaries as of the close of such fiscal
     year and the results of its operations and the operations of such
     Subsidiaries during such year, all audited by Deloitte & Touche or other
     independent public accountants of recognized national standing acceptable
     to the Required Banks and accompanied by an opinion of such accountants
     (which shall not be qualified in any material respect) to the effect that
     such consolidated financial statements fairly present the financial
     condition and results of operations of the Borrower on a consolidated basis
     (except as noted therein) in accordance with GAAP consistently applied;

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<PAGE>   167

          (b) within 50 days after the end of each of the first three fiscal
     quarters of each fiscal year, its consolidated and, to the extent otherwise
     available, consolidating balance sheets and related statements of income
     and statements of cash flow, showing the financial condition of the
     Borrower and its consolidated subsidiaries as of the close of such fiscal
     quarter and the results of its operations and the operations of such
     subsidiaries during such fiscal quarter and the then elapsed portion of the
     fiscal year, all certified by one of its Financial Officers as fairly
     presenting the financial condition and results of operations of the
     Borrower on a consolidated basis in accordance with GAAP consistently
     applied, subject to normal year-end audit adjustments;

          (c) concurrently with any delivery of financial statements under (a)
     or (b) above, a certificate of the relevant accounting firm opining on or
     certifying such statements or Financial Officer (which certificate, when
     furnished by an accounting firm, may be limited to accounting matters and
     disclaim responsibility for legal interpretations) certifying that to the
     knowledge of the accounting firm or the Financial Officer, as the case may
     be, no Event of Default or Default has occurred or, if such an Event of
     Default or Default has occurred, specifying the nature and extent thereof
     and any corrective action taken or proposed to be taken with respect
     thereto;

          (d) promptly after the same become publicly available, copies of all
     periodic and other reports, proxy statements and other materials filed by
     it with the Securities and Exchange Commission, or any governmental
     authority succeeding to any of or all the functions of said Commission, or
     with any national securities exchange, or distributed to its share holders,
     as the case may be; and

          (e) promptly, from time to time, such other information regarding the
     operations, business affairs and financial condition of the Borrower or any
     Significant Subsidiary, or compliance with the terms of any Loan Document,
     as the Agent or any Bank may

                                       57

<PAGE>   168

     reasonably request.

          SECTION 5.05. Litigation and Other Notices. Furnish to the Agent and
each Bank prompt written notice of the following:

          (a) any Event of Default or Default, specifying the nature and extent
     thereof and the corrective action (if any) proposed to be taken with
     respect thereto;

          (b) the filing or commencement of, or any written threat or notice of
     intention of any person to file or commence, any action, suit or
     proceeding, whether at law or in equity or by or before any Governmental
     Authority, against the Borrower or any Subsidiary thereof which could
     reasonably be anticipated to result in a Material Adverse Effect; and

          (c) any development that has resulted in, or could reasonably be
     anticipated to result in, a Material Adverse Effect.

          SECTION 5.06. ERISA. (a) Comply in all material respects with the
applicable provisions of ERISA and (b) furnish to the Agent and each Bank (i) as
soon as possible, and in any event within 30 days after any Responsible Officer
of the Borrower or any ERISA Affiliate either knows or has reason to know that
any Reportable Event has occurred that alone or together with any other
Reportable Event could reasonably be expected to result in liability of the
Borrower to the PBGC in an aggregate amount exceeding $10,000,000, a statement
of a Financial Officer setting forth details as to such Reportable Event and the
action proposed to be taken with respect thereto, together with a copy of the
notice, if any, of such Reportable Event given to the PBGC, (ii) promptly after
receipt thereof, a copy of any notice the Borrower or any ERISA Affiliate may
receive from the PBGC relating to the intention of the PBGC to terminate any
Plan or Plans (other than a Plan maintained by an ERISA Affiliate which is
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Code) or to appoint a trustee to administer any Plan or Plans and
(iii) within 10 days after the due date for filing with the PBGC pursuant to
Section 412(n) of the Code of a notice of failure to make a required installment
or other

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<PAGE>   169

payment with respect to a Plan, a statement of a Financial Officer
setting forth details as to such failure and the action proposed to be taken
with respect thereto, together with a copy of such notice given to the PBGC.

          SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Maintain all financial records in accordance with GAAP and permit
any representatives designated by any Bank to visit and inspect the financial
records and the properties of the Borrower at reasonable times and as often as
requested and to make extracts from and copies of such financial records, and
permit any representatives designated by any Bank to discuss the affairs,
finances and condition of the Borrower with the chief financial officer of the
Borrower, or other person designated by the chief financial officer, and
independent accountants therefor.

          SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans only for
the purposes set forth in the preamble to this Agreement.

          SECTION 5.09. Further Assurance. Pledge all the capital stock
(including any warrants, options or other rights entitling the Borrower to
purchase or acquire such capital stock) of Avista Capital, Inc. to the Agent for
the benefit of the Banks by August 15, 2000. Such pledge shall be made pursuant
to a pledge agreement in a form reasonably satisfactory to the Agent. Such
pledge shall not restrict, limit or encumber the Borrower's ability to conduct
any business activities of Avista Capital, Inc. or any of its affiliates
(subject to any restrictions on Avista Capital, Inc. under this Agreement as a
result of it being a Significant Subsidiary), including, but not limited to, its
decisions related to disposition of assets in whole or in part, mergers,
acquisitions, inter-company loans, dividends or other commitments.

ARTICLE VI.  NEGATIVE COVENANTS

          The Borrower covenants and agrees with each Bank that, so long as this
Agreement shall remain in effect or the principal of or interest on any Loan,
any Fees or any other expenses or amounts payable under any Loan Document shall
be unpaid, unless the Required Banks shall otherwise consent in

                                       59
<PAGE>   170
writing, the Borrower will not:

          SECTION 6.01. Liens. Create, incur, assume or permit to exist any Lien
on any property or assets (including stock or other securities of any person,
including any Subsidiary) now owned or hereafter acquired by it or on any income
or revenues or rights in respect of any thereof, except:

          (a) Liens on property or assets of the Borrower created by the
     documents, instruments or agreements existing on the date hereof and which
     are listed as exhibits to the Borrower's Annual Report on Form 10-K for the
     fiscal year ended December 31, 1999, to the extent that such Liens secure
     only obligations arising under such existing documents, agreements or
     instruments;

          (b) any Lien existing on any property or asset prior to the
     acquisition thereof by the Borrower; provided that (i) such Lien is not
     created in contemplation of or in connection with such acquisition and (ii)
     such Lien does not apply to any other property or assets of the Borrower;

          (c) the Lien of the First Mortgage;

          (d) Liens permitted under the First Mortgage (whether or not such
     permitted Liens cover properties or assets subject to the Lien of the First
     Mortgage) and any other Liens to which the Lien of the First Mortgage is
     expressly made subject;

          (e) the Lien of any collateral trust mortgage or similar instrument
     which would be intended to eventually replace (in one transaction or a
     series of transactions) the First Mortgage (as amended, modified or
     supplemented from time to time, "Collateral Trust Mortgage") on properties
     or assets of the Borrower to secure bonds, notes and other obligations of
     the Borrower; provided that, so long as the First Mortgage shall constitute
     a Lien on properties or assets of the Borrower, the bonds, notes or other
     obligations issued under the Collateral Trust Mortgage (i) shall also be
     secured by an equal principal amount of bonds issued

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<PAGE>   171

     under the First Mortgage or (ii) shall be issued against property additions
     not subject to the Lien of the First Mortgage;

          (f) Liens permitted under the Collateral Trust Mortgage (whether or
     not such permitted Liens cover properties or assets subject to the Lien of
     the Collateral Trust Mortgage) and any other Liens to which the Lien of the
     Collateral Trust Mortgage is subject;

          (g) Liens for taxes, assessments or governmental charges not yet due
     or which are being contested in compliance with Section 5.03;

          (h) carriers', warehousemen's, mechanic's, materialmen's, repairmen's
     or other like Liens arising in the ordinary course of business and securing
     obligations that are not due or which are being contested in compliance
     with Section 5.03;

          (i) pledges and deposits made in the ordinary course of business in
     compliance with workmen's compensation, unemployment insurance and other
     social security laws or regulations;

          (j) Liens incurred or created in connection with or to secure the
     performance of bids, tenders, trade contracts (other than for
     Indebtedness), leases, statutory obligations, surety and appeal bonds,
     performance bonds and other obligations of a like nature incurred in the
     ordinary course of business;

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

          (l) Liens (i) which secure obligations not assumed by the Borrower,
     (ii) on account of which the Borrower has not and does not expect to pay
     interest directly or indirectly and (iii) which exist upon real estate or

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<PAGE>   172

     rights in or relating to real estate in respect of which the Borrower has a
     right-of-way or other easement for purposes of substations or transmission
     or distribution facilities;

          (m) rights reserved to or vested in any federal, state or local
     governmental body or agency by the terms of any right, power, franchise,
     grant, license, contract or permit, or by any provision of law, to
     recapture or to purchase, or designate a purchase of or order the sale of,
     any property of the Borrower or to terminate any such right, power,
     franchise, grant, license, contract or permit before the expiration
     thereof;

          (n) Liens of judgments covered by insurance, or upon appeal and
     covered by bond, or to the extent not so covered not exceeding at one time
     $10,000,000 in aggregate amount;

          (o) any Liens, moneys sufficient for the discharge of which shall have
     been deposited in trust with the trustee or mortgagee under the instrument
     evidencing such Lien, with irrevocable authority of such trustee or
     mortgagee to apply such moneys to the discharge of such Lien to the extent
     required for such purpose;

          (p) rights reserved to or vested in any federal, state or local
     governmental body or agency or other public authority to control or
     regulate the business or property of the Borrower;

          (q) any obligations or duties, affecting the property of the Borrower
     to any federal, state or local governmental body or agency or other public
     authority with respect to any authorization, permit, consent or license of
     such body, agency or authority, given in connection with the purchase,
     construction, equipping, testing and operation of the Borrower's utility
     property;

          (r) with respect to any property which the Borrower may hereafter
     acquire, any exceptions or reservations therefrom existing at the time of
     such acquisition or any terms, conditions, agreements,

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<PAGE>   173

     covenants, exceptions and reservations expressed or provided in the deeds
     of other instruments, respectively, under and by virtue of which the
     Borrower shall hereafter acquire the same, none of which materially impairs
     the use of such property for the purposes for which it is acquired by the
     Borrower;

          (s) leases and subleases entered into in the ordinary course of
     business;

          (t) banker's Liens and other Liens in the nature of a right of setoff;

          (u) Liens resulting from any transaction permitted
     under Section 6.03(v);

          (v) renewals, replacements, amendments, modifications, supplements,
     refinancings or extensions of Liens set forth above to the extent that the
     principal amount of Indebtedness secured by such Lien immediately prior
     thereto is not increased and such Lien is not extended to other property
     (it being understood that such limitation does not apply to the Liens
     described in subsection (c), (e) or (u) above);

          (w) security deposits or amounts paid into trust funds for the
     reclamation of mining properties;

          (x) restrictions on transfer or use of properties and assets, first
     rights of refusal, and rights to acquire properties and assets granted to
     others;

          (y) non-consensual equitable Liens on the Borrower's tenant-in-common
     or other interest in joint projects;

          (z) Liens on the Borrower's tenant-in-common or other interest in
     joint projects incurred by the project sponsor without the express consent
     of the Borrower to such incurrence;

          (aa) cash collateral contemplated under Section 2.06(i) and the pledge
     of Avista Capital, Inc. stock contemplated under Section 5.09 of this
     Agreement and under Section 5.09 of the $120,000,000 Amended and

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<PAGE>   174

     Restated Credit Agreement dated as of June 26, 2000 among the Borrower, the
     banks named therein and Toronto-Dominion (Texas), Inc., as agent; and

          (ab) Liens not expressly permitted in clauses (a) through (aa) of this
     Section 6.01 to secure Indebtedness of the Borrower, provided that the
     aggregate outstanding principal amount of the Indebtedness so secured does
     not at any one time exceed 5% of the total assets of the Borrower and its
     Subsidiaries, computed and consolidated in accordance with GAAP
     consistently applied.

          SECTION 6.02. Mergers, Consolidations and Acquisitions. Merge into or
consolidate with any other person, or permit any other person to merge into or
consolidate with it, or purchase, lease or otherwise acquire (in one transaction
or a series of transactions) all or substantially all of the assets of any other
person (whether directly by purchase, lease or other acquisition of all or
substantially all of the assets of such person or indirectly by purchase or
other acquisition of all or substantially all of the capital stock of such other
person) other than acquisitions in the ordinary course of the Borrower's
business, except that if (A) at the time thereof and immediately after giving
effect thereto no Event of Default or Default shall have occurred and be
continuing and (B) in the case of any merger or consolidation involving the
Borrower in which the Borrower is not the surviving corporation, the surviving
corporation shall assume in writing the obligations of the Borrower under this
Agreement and any other Loan Documents, then (a) the Borrower may merge or
consolidate with any Subsidiary in a transaction in which the Borrower is the
surviving corporation, (b) the Borrower may purchase, lease or otherwise acquire
from any Subsidiary all or substantially all of its assets and may purchase or
otherwise acquire all or substantially all of the capital stock of any person
who immediately thereafter is a Subsidiary,(c) the Borrower may merge with or
into, or consolidate with, any other person so long as (i) in the case where the
business of such other person, or an Affiliate of such other person, entirely or
primarily consists of an electric or gas utility business, the senior secured
long-term debt rating of the Borrower shall be at least BBB or higher by S&P and
Baa2 or higher by Moody's

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<PAGE>   175

immediately after such merger or consolidation, or in the case of a merger or
consolidation in which the Borrower is not the surviving entity, the senior
secured long-term debt rating of the surviving entity or an Affiliate thereof
shall be at least BBB+ or higher by S&P and Baa1 or higher by Moody's
immediately after such merger or consolidation, or (ii) in the case where such
other person's business does not entirely or primarily consist of an electric or
gas utility business, the assets of such person at the time of such
consolidation or merger do not exceed 10% of the total assets of the Borrower
and its Subsidiaries after giving effect to such merger or consolidation,
computed and consolidated in accordance with GAAP consistently applied, and (d)
the Borrower may purchase, lease or otherwise acquire any or all of the assets
of any other person (and may purchase or otherwise acquire the capital stock of
any other person) so long as (i) the assets being purchased, leased or acquired
(or the assets of the person whose capital stock is being acquired) entirely or
primarily consist of electric or gas utility assets or (ii) in the case where
the assets being purchased, leased or acquired (or the assets of the person
whose capital stock is being acquired) do not entirely or primarily consist of
electric or gas utility assets, the assets being acquired (or the Borrower's
proportionate share of the assets of the person whose capital stock is being
acquired) do not exceed 10% of the total assets of the Borrower and its
Subsidiaries, after giving effect to such acquisition, computed and consolidated
in accordance with GAAP consistently applied.

          SECTION 6.03. Disposition of Assets. Sell, lease, transfer, assign or
otherwise dispose of (in one transaction or in a series of transactions), in any
fiscal year, assets (whether now owned or hereafter acquired) which, together
with the amount of all sales, leases, transfers, assignments or other
dispositions permitted under clause (c)(ii) of the definition of Subsidiary
Event in Article I (other than sales, leases, transfers, assignments or other
dispositions permitted under clauses (c)(ii) (A) through (C) in such
definition), exceed 10% of the assets of the Borrower and its Subsidiaries as of
the end of the most recent fiscal year, computed and consolidated in accordance
with GAAP consistently applied, except (i) the Borrower may, in any fiscal year,
sell, lease, transfer, assign or otherwise dispose of assets in the ordinary
course of

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business which, together with the amount of all sales, leases, transfers,
assignments or other dispositions in the ordinary course permitted under clause
(c)(ii)(A) of the definition of Subsidiary Event in Article I, do not exceed 5%
of the assets of the Borrower and its Subsidiaries as of the end of the most
recent fiscal year, computed and consolidated in accordance with GAAP
consistently applied, (ii) to the extent permitted under Section 5.03, 6.01 or
Section 6.02, (iii) the Borrower may sell, lease, transfer, assign or otherwise
dispose of its interest in the Washington Public Power Supply System Nuclear
Project No. 3 in accordance with the settlement agreement among the Borrower,
the Washington Public Power Supply System and Bonneville Power Administration,
as the same may be amended, modified or supplemented from time to time, (iv) the
Borrower may sell, lease, transfer, assign or otherwise dispose of its interests
in the Colstrip and Centralia Projects and related assets and (v) the Borrower
may sell, lease, transfer, assign or otherwise dispose (including by way of
capital contribution) of, or create, incur, assume or permit to exist Liens on,
receivables and related properties or interests therein.

          SECTION 6.04. Consolidated Total Debt to Consolidated Total
Capitalization Ratio. Permit the ratio of Consolidated Total Debt to
Consolidated Total Capitalization to be, at the end of any fiscal quarter,
greater than 0.60 to 1.00 for the preceding twelve-month period, and to remain
greater than 0.60 to 1.00 for a period of 30 days.

          SECTION 6.05. Public Utility Regulatory Borrowing Limits. Incur actual
borrowings or commitments or issued and outstanding debt of the Borrower in
excess of the amount authorized (i) by statute without necessity of public
utility commission approval and/or (ii) by orders of public utility commissions,
as in effect from time to time.

          SECTION 6.06. Guarantees. Incur Guarantees of or by the Borrower with
respect to Avista Energy, Inc. in excess of $50,000,000 in the aggregate or
Guarantees of or by the Borrower with respect to Avista Energy, Inc. with a
duration of one year or longer.

ARTICLE VII.  EVENTS OF DEFAULT

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          In case of the happening (and during the continuance) of any of the
following events ("Events of Default"):

          (a) any representation or warranty made or deemed made in or in
     connection with any Loan Document or the borrowings hereunder, or any
     representation, warranty, statement or information contained in any report,
     certificate, financial statement or other instrument furnished in
     connection with or pursuant to any Loan Document, shall prove to have been
     false or misleading in any material respect when so made, deemed made or
     furnished;

          (b) default shall be made in the payment of any principal of any Loan
     when and as the same shall become due and payable, whether at the due date
     thereof or at a date fixed for prepayment thereof or by acceleration
     thereof or otherwise;

          (c) default shall be made in the payment of any interest on any Loan
     or any Fee or any other amount (other than an amount referred to in (b)
     above) due under any Loan Document, when and as the same shall become due
     and payable, and such default shall continue unremedied for a period of
     five Business Days;

          (d) default shall be made in the due observance or performance by the
     Borrower of any covenant, condition or agreement contained in Section
     5.01(a) or 5.05 or in Article VI;

          (e) default shall be made in the due observance or performance by the
     Borrower of any covenant, condition or agreement contained in any Loan
     Document (other than those specified in (b), (c) or (d) above) and such
     default shall continue unremedied for a period of 30 days after notice
     thereof from the Agent or any Bank to the Borrower;

          (f) the Borrower or any Significant Subsidiary shall (i) fail to pay
     any principal or interest, regardless of amount, due in respect of any
     Indebtedness when the aggregate unpaid principal amount

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<PAGE>   178

     is in excess of $25,000,000, when and as the same shall become due and
     payable (after expiration of any applicable grace period), or (ii) fail to
     observe or perform any other term, covenant, condition or agreement (after
     expiration of any applicable grace period) contained in any agreement or
     instrument evidencing or governing any such Indebtedness if the effect of
     any failure referred to in this clause (ii) is to cause, or to permit the
     holder or holders of such Indebtedness or a trustee on its or their behalf
     (with or without the giving of notice, the lapse of time or both) to cause,
     such Indebtedness to become due prior to its stated maturity;

          (g) an involuntary proceeding shall be commenced or an involuntary
     petition shall be filed in a court of competent jurisdiction seeking (i)
     relief in respect of the Borrower or any Significant Subsidiary, or of a
     substantial part of the property or assets of the Borrower or a Significant
     Subsidiary, under Title 11 of the United States Code, as now constituted or
     hereafter amended, or any other Federal or state bankruptcy, insolvency,
     receivership or similar law, (ii) the appointment of a receiver, trustee,
     custodian, sequestrator, conservator or similar official for the Borrower
     or any Significant Subsidiary or for a substantial part of the property or
     assets of the Borrower or a Significant Subsidiary or (iii) the winding-up
     or liquidation of the Borrower or any Significant Subsidiary; and such
     proceeding or petition shall continue undismissed, or an order or decree
     approving or ordering any of the foregoing shall be entered and continue
     unstayed and in effect, for a period of 60 or more days;

          (h) the Borrower or any Significant Subsidiary shall (i) voluntarily
     commence any proceeding or file any petition seeking relief under Title 11
     of the United States Code, as now constituted or hereafter amended, or any
     other Federal or state bankruptcy, insolvency, receivership or similar law,
     (ii) consent to the institution of, or fail to contest in a timely and
     appropriate manner, any proceeding or the filing of any petition described
     in (g) above, (iii) apply for or consent to the appointment of a receiver,
     trustee,

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<PAGE>   179

     custodian, sequestrator, conservator or similar official for the Borrower
     or any Significant Subsidiary or for a substantial part of the property or
     assets of the Borrower or any Significant Subsidiary, (iv) file an answer
     admitting the material allegations of a petition filed against it in any
     such proceeding, (v) make a general assignment for the benefit of
     creditors, (vi) become unable, admit in writing its inability or fail
     generally to pay its debts as they become due or (vii) take any action for
     the purpose of effecting any of the foregoing;

          (i) a final judgment or judgments shall be rendered against the
     Borrower, any Significant Subsidiary or any combination thereof for the
     payment of money with respect to which an aggregate amount in excess of
     $25,000,000 is not covered by insurance and the same shall remain
     undischarged for a period of 30 consecutive days during which execution
     shall not be effectively stayed, or any action shall be legally taken by a
     judgment creditor to levy upon assets or properties of the Borrower or any
     Significant Subsidiary to enforce any such judgment;

          (j) a Reportable Event or Reportable Events, or a failure to make a
     required installment or other payment (within the meaning of Section
     412(n)(l) of the Code), shall have occurred with respect to any Plan or
     Plans that reasonably could be expected to result in liability of the
     Borrower to the PBGC or to a Plan in an aggregate amount exceeding
     $25,000,000 and, within 30 days after the reporting of any such Reportable
     Event to the Agent or after the receipt by the Agent of the statement
     required pursuant to Section 5.06, the Agent shall have notified the
     Borrower in writing that (i) the Required Banks have made a determination
     that, on the basis of such Reportable Event or Reportable Events or the
     failure to make a required payment, there are reasonable grounds (A) for
     the termination of such Plan or Plans by the PBGC, (B) for the appointment
     by the appropriate United States District Court of a trustee to administer
     such Plan or Plans or (C) for the imposition of a lien in favor of a Plan
     and (ii) as a result thereof an Event of Default exists hereunder; or a
     trustee shall be appointed by a United States

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<PAGE>   180

     District Court to administer any such Plan or Plans; or the PBGC shall
     institute proceedings to terminate any Plan or Plans;

          (k) there shall occur a Subsidiary Event; or

          (l) a Change in Control shall occur;

then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Agent, at the request of the Required Banks,
shall, by notice to the Borrower, take either or both of the following actions,
at the same or different times: (i) terminate forthwith the Commitments and (ii)
declare the Loans then outstanding to be forthwith due and payable in whole or
in part, whereupon (A) the Commitments will automatically be terminated and (B)
the principal of the Loans so declared to be due and payable, together with
accrued interest thereon and any unpaid accrued Fees and all other liabilities
of the Borrower accrued hereunder and under any other Loan Document, shall
become forthwith due and payable, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding; and in any event with respect to the Borrower
described in paragraph (g) or (h) above, the Commitments shall automatically
terminate and the principal of the Loans then outstanding, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of the
Borrower accrued hereunder and under any other Loan Document, shall
automatically become due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding.

ARTICLE VIII. THE AGENT

          In order to expedite the various transactions contemplated by this
Agreement, Toronto Dominion (Texas), Inc. is hereby appointed to act as Agent on
behalf of the Banks. Each of the Banks hereby irrevocably authorizes and

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directs the Agent to take such action on behalf of such Bank under the terms and
provisions of this Agreement, and to exercise such powers hereunder as are
specifically delegated to or required of the Agent by the terms and provisions
hereof, together with such powers as are reasonably incidental thereto. The
Agent is hereby expressly authorized on behalf of the Banks, without hereby
limiting any implied authority, (a) to receive on behalf of each of the Banks
any payment of principal of or interest on the Loans outstanding hereunder and
all other amounts accrued hereunder paid to the Agent, and to distribute to each
Bank its proper share of all payments so received as soon as practicable; (b) to
give notice promptly on behalf of each of the Banks to the Borrower of any event
of default specified in this Agreement of which the Agent has actual knowledge
acquired in connection with its agency hereunder; and (c) to distribute promptly
to each Bank copies of all notices, agreements and other material as provided
for in this Agreement as received by such Agent.

          Neither the Agent nor any of its directors, officers, employees or
agents shall be liable to any Bank as such for any action taken or omitted by
any of them hereunder except for its or his own gross negligence or wilful
misconduct, or be responsible for any statement, warranty or representation
herein or the contents of any document delivered in connection herewith or be
required to ascertain or to make any inquiry concerning the performance or
observance by the Borrower of any of the terms, conditions, covenants or
agreements of this Agreement. The Agent shall not be responsible to the Banks
for the due execution, genuineness, validity, enforceability or effectiveness of
this Agreement or any other instrument to which reference is made herein. The
Agent shall in all cases be fully protected in acting, or refraining from
acting, in accordance with written instructions signed by the Required Banks,
and, except as otherwise specifically provided herein, such instructions and any
action taken or failure to act pursuant thereto shall be binding on all the
Banks. The Agent shall, in the absence of knowledge to the contrary, be entitled
to rely on any paper or document believed by it in good faith to be genuine and
correct and to have been signed or sent by the proper person or persons. Neither
the Agent nor any of its directors, officers, employees or agents shall have any
responsibility to the

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Borrower on account of the failure or delay in performance or breach by any Bank
of any of its obligations hereunder or to any Bank on account of the failure of
or delay in performance or breach by any other Bank or the Borrower of any of
their respective obligations hereunder or in connection herewith. The Agent may
execute any and all duties hereunder by or through agents or employees and shall
be entitled to advice of legal counsel selected by it with respect to all
matters arising hereunder and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such counsel.

          The Agent and its affiliates may accept deposits from, lend money to
and generally engage in any kind of business with the Borrower or other
affiliate thereof as if it were not the Agent.

          Each Bank recognizes that applicable laws, rules, regulations or
guidelines of governmental authorities may require the Agent to determine
whether the transactions contemplated hereby should be classified as "highly
lever aged" or assigned any similar or successor classification, and that such
determination may be binding upon the other Banks. Each Bank understands that
any such determination shall be made solely by the Agent based upon such factors
(which may include, without limitation, the Agent's internal policies and
prevailing market practices) as the Agent shall deem relevant and agrees that
the Agent shall have no liability for the consequences of any such
determination.

          Each Bank agrees (i) to reimburse the Agent in the amount of such
Bank's pro rata share (based on its Commitment hereunder) of any expenses
incurred for the benefit of the Banks by the Agent, including reasonable counsel
fees and compensation of agents and employees paid for services rendered on
behalf of the Banks, not reimbursed by the Borrower and (ii) to indemnify and
hold harmless the Agent and any of its directors, officers, employees or agents,
on demand, in the amount of its pro rata share, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against it in its capacity as the Agent or
any of them in any way relating to or arising out of this Agreement or any
action

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taken or omitted by it or any of them under this Agreement, to the extent not
reimbursed by the Borrower; provided, however, that no Bank shall be liable to
the Agent for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the gross negligence or wilful misconduct of the Agent or any of its
directors, officers, employees or agents.

          Each Bank acknowledges that it has, independently and without reliance
upon the Agent or any other Bank and based on such documents and information as
it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Bank also acknowledges that it will, independently and
without reliance upon the Agent or any other Bank based on such documents and
information as it shall deem appropriate at the time, continue to make its own
decisions in taking or not taking action under or based upon this Agreement, any
related agreement or any document furnished hereunder.

          The Agent may execute any of its duties under this Agreement by or
through agents or attorneys selected by them using reasonable care and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys selected and authorized to act by it with reasonable care
unless the damage complained of directly results from an act or failure to act
on part of the Agent which constitutes gross negligence or wilful misconduct.
Delegation to an attorney or agent shall not release the Agent from its
obligation to perform or cause to be performed the delegated duty.

          The Documentation Agent and the Syndication Agent shall not have any
rights, powers, obligations, liabilities, responsibilities or duties under this
Agreement other than those applicable to all Banks as such. Without limiting the
foregoing, none of the Banks identified as "Documentation Agent" or "Syndication
Agent" shall have or be deemed to have any fiduciary relationship with any Bank.
Each Bank acknowledges that it has not relied, and will not rely, on any of the
Banks so identified in deciding to enter into this Agreement or in taking or not
taking action hereunder.

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ARTICLE IX.  MISCELLANEOUS

          SECTION 9.01. Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed or sent by telecopy, graphic scanning or other telegraphic
communications equipment of the sending party, as follows:

          (a) if to the Borrower, to it at East 1411 Mission Avenue (99202),
     P.O. Box 3727, Spokane, Washington 99220, Attention of the Senior Vice
     President and Chief Financial Officer (Telecopy No. 509-482-4879);

          (b) if to the Agent, to it at 909 Fannin, Suite 1700, Houston, Texas
     77010, Attention of Kimberly Burleson (Telecopy No. 713-951-9921); and

          (c) if to a Bank, to it at its address (or telecopy number) set forth
     in Schedule 2.01 or in the Assignment and Acceptance pursuant to which such
     Bank shall have become a party hereto.

All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or other telegraphic communications equipment of the sender, or on the
date five Business Days after dispatch by certified or registered mail if
mailed, in each case delivered, sent or mailed (properly addressed) to such
party as provided in this Section 9.01 or in accordance with the latest
unrevoked direction from such party given in accordance with this Section 9.01.

          SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties, including, without limitation, any indemnities
and reimbursement obligations, made by the Borrower herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Banks and shall survive the making by the

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Banks of the Loans, and the execution and delivery to the Banks of any Notes
evidencing such Loans, regardless of any investigation made by the Banks, or on
their behalf, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any Fee or any other amount
payable under this Agreement or any other Loan Document is outstanding and
unpaid and so long as the Commitments have not been terminated.

          SECTION 9.03. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower and the Agent and when the
Agent shall have received copies hereof which, when taken together, bear the
signatures of each Bank, and thereafter shall be binding upon and inure to the
benefit of the Borrower, the Agent and each Bank and their respective successors
and assigns, except that the Borrower shall not have the right to assign its
rights hereunder or any interest herein without the prior consent of all the
Banks.

          SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and permitted assigns of such party; and all covenants,
promises and agreements by or on behalf of the Borrower, the Agent or the Banks
that are contained in this Agreement shall bind and inure to the benefit of
their respective successors and permitted assigns.

          (b) Each Bank (including the Agent when acting as a Bank) may assign
to one or more assignees all or a portion of its interests, rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Revolving Credit Commitment and the same portion of the
applicable Loan or Loans at the time owing to it other than any Auction Loans,
which may, but need not, be assigned); provided, however, that (i) except in the
case of an assignment to a Bank or an Affiliate of such Bank, the Borrower and
the Agent must give their prior written consent to such assignment (which
consent shall not be unreasonably withheld), (ii) that no assignee of any Bank
shall be entitled to receive any greater payment or protection under Sections
2.12, 2.13(a), 2.14 or 2.18 than such Bank would have been entitled to receive
with respect to the rights assigned or otherwise transferred unless such
assignment or

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transfer shall have been made at a time when the circumstances giving rise to
such greater payment did not exist, (iii) each such assignment shall be of a
constant, and not a varying, percentage of all the assigning Bank's rights and
obligations under this Agreement, except that this clause (iii) shall not apply
to rights in respect of outstanding Auction Loans, (iv) the amount of the
Commitment of the assigning Bank subject to each such assignment (determined as
of the date the Assignment and Acceptance with respect to such assignment is
delivered to the Agent) shall not be less than $5,000,000 (or, if less, the
total amount of their Commitments), (v) the parties to each such assignment
shall execute and deliver to the Agent an Assignment and Acceptance and a
processing and recordation fee of $5,000 and (vi) the assignee, if it shall not
be a Bank, shall deliver to the Agent an Administrative Questionnaire. Upon
acceptance and recording pursuant to paragraph (e) of this Section 9.04, from
and after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five Business Days after the execution thereof,
(A) the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Bank under this Agreement and (B) the assigning Bank thereunder
shall, to the extent of the interest assigned by such Assignment and Acceptance,
be released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Bank's rights and obligations under this Agreement, such Bank shall cease to be
a party hereto but shall continue to be entitled to the benefits of Sections
2.12, 2.14, 2.18 and 9.05, as well as to any Fees accrued for its account and
not yet paid).

          (c) By executing and delivering an Assignment and Acceptance, the
assigning Bank thereunder and the assignee thereunder shall be deemed to confirm
to and agree with each other and the other parties hereto as follows: (i) such
assigning Bank warrants that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim and that its
Commitment, and the outstanding balances of its Loans, in each case without
giving effect to assignments thereof which have not become effective, are as set
forth in such Assignment and Acceptance; (ii) except as set forth in (i) above,
such

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<PAGE>   187
assigning Bank makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto, or the financial condition of the Borrower or any Subsidiary or the
performance or observance by the Borrower or any Subsidiary of any of its
obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into such Assignment and
Acceptance; (iv) such assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 5.04 and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (v) such assignee will independently and
without reliance upon the Agent, such assigning Bank or any other Bank and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (vi) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee agrees that
it will perform in accordance with their terms all the obligations which by the
terms of this Agreement are required to be performed by it as a Bank.

          (d) The Agent shall maintain a copy of each Assignment and Acceptance
delivered to it including the recordation of the names and addresses of the
Banks, and the Commitment of, and principal amount of the Loans owing to,
each Bank pursuant to the terms hereof from time to time (the "Register"). The
Agent and the Banks may treat each person whose name is recorded in the Register
pursuant to the terms hereof as a Bank hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower and
any Bank, at any reasonable time and from time to time upon reasonable prior
notice.

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          (e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Bank and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Bank hereunder), the processing and recordation fee referred to in paragraph (b)
above and, if required, the written consent of the Borrower and the Agent to
such assignment, the Agent shall (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Banks. Upon the request of the assignee, the Borrower, at
its own expense, shall execute and deliver to the Agent, a new Note or Notes to
the order of such assignee in a principal amount equal to the applicable
Commitment assumed by it pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained a Commitment, upon the request of the assigning
bank, the Borrower shall execute and deliver a new Note to the order of such
assigning Bank in a principal amount equal to the applicable Commitment retained
by it. Canceled Notes shall be returned to the Borrower.

          (f) Each Bank may without the consent of the Borrower or the Agent
sell participations to one or more banks or other entities in all or a portion
of its rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans owing to it and any Notes held by it); provided,
however, that (i) such Bank's obligations under this Agreement shall remain
unchanged, (ii) such Bank shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the participating banks or
other entities shall be entitled to the benefit of the cost protection
provisions contained in Sections 2.12, 2.14 and 2.18 to the same extent as if
they were Banks (provided, that the amount of such benefit shall be limited to
the amount in respect of the interest sold to which the seller of such
participation would have been entitled had it not sold such interest) and (iv)
the Borrower, the Agent and the other Banks shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement, and such Bank shall retain the sole right to enforce the
obligations of the Borrower relating to the Loans and to approve any amendment,
modification or waiver of any provision of this Agreement (other than
amendments, modifications or waivers decreasing any fees payable

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hereunder or the amount of principal of or the rate at which interest is payable
on the Loans, extending any scheduled principal payment date or date fixed for
the payment of interest on the Loans or changing or extending the Commitments).

          (g) Any Bank or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Bank by
or on behalf of the Borrower; provided that, prior to any such disclosure of
information designated by the Borrower as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information.

          (h) Notwithstanding anything to the contrary contained herein, any
Bank (a "Granting Bank") may grant to a special purpose funding vehicle (an
"SPC") the option to fund all or any part of any Loan that such Granting Bank
would otherwise be obligated to fund pursuant to this Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPC to fund any Loan,
and (ii) if an SPC elects not to exercise such option or otherwise fails to fund
all or any part of such Loan, the Granting Bank shall be obligated to fund such
Loan pursuant to the terms hereof. The funding of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Bank to the same extent, and as if,
such Loan were funded by such Granting Bank. Each party hereto hereby agrees
that no SPC shall be liable for any indemnity or payment under this Agreement
for which a Bank would otherwise be liable for so long as, and to the extent,
the Granting Bank provides such indemnity or makes such payment. Notwithstanding
anything to the contrary contained in this Agreement, any SPC may disclose on a
confidential basis any non-public information relating to its funding of Loans
to any rating agency, commercial paper dealer or provider of any surety or
guarantee to such SPC. This paragraph may not be amended without the prior
written consent of each Granting Bank, all or any part of whose Loan is being
funded by an SPC at the time of such amendment.

                                       79
<PAGE>   190

          (i) Any Bank may at any time assign for security purposes all or any
portion of its rights under this Agreement and any Notes issued to it to a
Federal Reserve Bank; provided that no such assignment shall release a Bank from
any of its obligations hereunder.

          (j) Subject to Section 6.02, the Borrower shall not assign or delegate
any of its rights or duties hereunder.

          SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay all
reasonable out-of-pocket expenses incurred by the Agent in connection with the
preparation of this Agreement and the other Loan Documents or in connection with
any amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions hereby contemplated shall be consummated) or
incurred by the Agent or any Bank in connection with the enforcement or
protection of their rights in connection with this Agreement and the other Loan
Documents or in connection with the Loans made or the Notes issued hereunder,
including the fees, charges and disbursements of Cravath, Swaine & Moore,
counsel for the Agent, and, in connection with any such amendment, modification
or waiver or any such enforcement or protection, the fees, charges and
disbursements of any other internal or external counsel for the Agent or any
Bank. The Borrower further agrees that it shall indemnify the Banks from and
hold them harmless against any documentary taxes, assessments or charges made by
any Governmental Authority by reason of the execution and delivery of this
Agreement or any of the other Loan Documents.

          (b) The Borrower agrees to indemnify the Agent and each Bank and each
of their respective directors, officers, employees and agents (each such person
being called an "Indemnitee") against, and to hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
including reasonable counsel fees, charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as
a result of (i) the execution or delivery of this Agreement or any other Loan
Document or any agreement or instrument contemplated thereby, the

                                       80
<PAGE>   191

performance by the parties thereto of their respective obligations thereunder or
the consummation of the Transactions and the other transactions contemplated
thereby, (ii) the use of the proceeds of the Loans or (iii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are deter mined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or wilful misconduct of such Indemnitee.

          (c) The provisions of this Section 9.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Agent or any Bank. All amounts due under this
Section 9.05 shall be payable on written demand therefor.

          SECTION 9.06. Right of Setoff. If an Event of Default shall have
occurred and be continuing and the Loans shall have been accelerated as set
forth in Article VII, each Bank 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 Bank (or bank
Controlling such Bank) to or for the credit or the account of the Borrower
against any of and all the obligations of the Borrower now or hereafter existing
under this Agreement and other Loan Documents held by such Bank. The rights of
each Bank under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Bank may have. Any Bank shall
provide the Borrower with written notice promptly after exercising its rights
under this Section.

          SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.

                                       81
<PAGE>   192

          SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the Agent
or any Bank in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Agent and the Banks hereunder and
under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies which they would otherwise have. No waiver of any provision
of this Agreement or any other Loan Document or consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on the Borrower in any case shall entitle the Borrower to any
other or further notice or demand in similar or other circumstances.

          (b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Banks; provided, however, that no
such agreement shall (i) decrease the principal amount of, or extend the
maturity of or any scheduled principal payment date or date for the payment of
any interest on any Loan, or waive or excuse any such payment or any part
thereof, or decrease the rate of interest on any Loan, without the prior written
consent of each Bank affected thereby, (ii) change or extend the Commitment or
decrease the Commitment Fees of any Bank without the prior written consent of
such Bank, or (iii) amend or modify the provisions of Section 2.15, the
provisions of this Section or the definition of "Required Banks", without the
prior written consent of each Bank; provided further that no such agreement
shall amend, modify or otherwise affect the rights or duties of the Agent
hereunder without the prior written consent of the Agent. Each Bank and each
holder of a Note shall be bound by any waiver, amendment or modification
authorized by this Section regardless of whether its Note shall have been marked
to make reference thereto, and any consent by any Bank or holder of a Note
pursuant to this Section shall bind any

                                       82
<PAGE>   193

person subsequently acquiring a Note from it, whether or not such Note shall
have been so marked.

          SECTION 9.09. Interest Rate Limitation. Notwithstanding anything
herein or in any Notes to the contrary, if at any time the applicable interest
rate, together with all fees and charges which are treated as interest under
applicable law (collectively the "Charges"), as provided for herein or in any
other document executed in connection herewith, or otherwise contracted for,
charged, received, taken or reserved by any Bank, shall exceed the maximum
lawful rate (the "Maximum Rate") which may be contracted for, charged, taken,
received or reserved by such Bank in accordance with applicable law, the rate of
interest payable under any Note held by such Bank, together with all Charges
payable to such Bank, shall be limited to the Maximum Rate.

          SECTION 9.10. Entire Agreement. This Agreement and the other Loan
Documents constitute the entire contract between the parties relative to the
subject matter hereof. Any previous agreement among the parties with respect to
the subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents, expressed
or implied, is intended to confer upon any party other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.

          SECTION 9.11. Waiver of Jury Trial. Each party hereto hereby waives,
to the fullest extent permitted by applicable law, any right it may have to a
trial by jury in respect of any litigation directly or indirectly arising out
of, under or in connection with this Agreement or any of the other Loan
Documents. Each party hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise, that such
other party would not, in the event of litigation, seek to enforce the foregoing
waiver and (b) acknowledges that it and the other parties hereto have been
induced to enter into this Agreement and the other Loan Documents, as
applicable, by, among other things, the mutual waivers and certifications in
this Section 9.11.

                                       83
<PAGE>   194

          SECTION 9.12. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

          SECTION 9.13. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract, and shall become effec
tive as provided in Section 9.03.

          SECTION 9.14. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.

          SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) The
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the Agent
or any Bank may otherwise have to bring any action or proceeding relating to
this Agreement or the other Loan Documents against the Borrower or its
properties in the courts of any

                                       84
<PAGE>   195

jurisdiction.

          (b) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

          (c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

          WITNESS the due execution hereof as of the date first above written.

                                   AVISTA CORPORATION,

                                   by  /s/ Ronald R. Peterson
                                     --------------------------------
                                     Name:  Ronald R. Peterson
                                     Title: Vice President and
                                            Treasurer

                                   TORONTO DOMINION (TEXAS),
                                   INC., as Agent,

                                   by   /s/ Jeffery R. Lents
                                     --------------------------------
                                     Name:  Jeffery R. Lents
                                     Title: Vice President

                                   THE BANK OF NEW YORK, as
                                   Documentation Agent,

                                       85
<PAGE>   196

                                   by  /s/ Steven Kalachman
                                     --------------------------------
                                     Name:  Steven Kalachman
                                     Title: Vice President

                                   BANK OF AMERICA, N.A, as
                                   Syndication Agent,

                                   by  /s/ Gary M. Tsuyuki
                                     --------------------------------
                                     Name:  Gary M. Tsuyuki
                                     Title: Managing Director

                                   TORONTO DOMINION (TEXAS), INC.,

                                   by  /s/ Jeffery R. Lents
                                     --------------------------------
                                     Name:  Jeffery R. Lents
                                     Title: Vice President

                                   THE BANK OF NEW YORK,

                                   by  /s/ Steven Kalachman
                                     --------------------------------
                                     Name:  Steven Kalachman
                                     Title: Vice President

                                   BANK OF AMERICA, N.A.,

                                   by /s/ Gary M. Tsuyuki
                                     --------------------------------
                                     Name:  Gary M. Tsuyuki
                                     Title: Managing Director

                                   FIRST SECURITY BANK, N.A.,

                                   by  /s/ Brian W. Cook
                                     --------------------------------
                                     Name:  Brian W. Cook
                                     Title:

                                       86
<PAGE>   197

                                   FLEET NATIONAL BANK,

                                   by /s/ Suresh V. Chivukula
                                     --------------------------------
                                     Name:  Suresh V. Chivukula
                                     Title: Senior Vice
                                            President

                                   MORGAN GUARANTY TRUST COMPANY
                                   OF NEW YORK,

                                   by  /s/ Robert Bottamedi
                                     --------------------------------
                                     Name:  Robert Bottamedi
                                     Title: Vice President

                                   U.S. BANK, NATIONAL ASSOCIATION,

                                   by  /s/ Wilfred C. Jack
                                     --------------------------------
                                     Name:  Wilfred C. Jack
                                     Title: Vice President

                                   WELLS FARGO BANK, N.A.,

                                   by  /s/ Tom Beil
                                     --------------------------------
                                     Name:  Tom Beil
                                     Title: Vice President

                                       87
<PAGE>   198

                                                                       EXHIBIT A

                                    [FORM OF]

                                      NOTE

$__________________                                               June 26, 2000
New York, New York

          FOR VALUE RECEIVED, the undersigned, AVISTA CORPORATION, a Washington
corporation (the "Borrower"), hereby promises to pay to the order of
_______________________ (the "Bank"), at the office of Toronto Dominion (Texas),
Inc., (the "Agent"), at 909 Fanning, Suite 1700, Houston, Texas 77010, (i) on
the last day of each Interest Period, as defined in the $140,000,000 Amended and
Restated Revolving Credit Agreement dated as of June 26, 2000 (the "Credit
Agreement"), among the Borrower, the Banks named therein and the Agent, the
aggregate unpaid principal amount of all Loans (as defined in the Credit
Agreement) made to the Borrower by the Bank pursuant to the Credit Agreement to
which such Interest Period applies and (ii) on the Expiration Date (as defined
in the Credit Agreement) the aggregate unpaid principal amount of all Loans made
to the Borrower by the Bank pursuant to the Credit Agreement, in lawful money of
the United States of America in immediately available funds, and to pay interest
from the date hereof on the principal amount hereof from time to time
outstanding, in like funds, at said office, at the rate or rates per annum and
payable on the dates provided in the Credit Agreement.

          The Borrower promises to pay interest, on demand, on any overdue
principal and, to the extent permitted by law, overdue interest from their due
dates at the rate or rates provided in the Credit Agreement.

          The Borrower hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The nonexercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.

                                       88
<PAGE>   199

          All borrowings evidenced by this Note and all payments and prepayments
of the principal hereof and interest hereon and the respective dates and
maturity dates thereof shall be endorsed by the holder hereof on the schedule
attached hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof, or otherwise recorded by such holder
in its internal records; provided, however, that the failure of the holder
hereof to make such a notation or any error in such a notation shall not affect
the obligations of the Borrower under this Note.

          This Note is one of the Notes referred to in the Credit Agreement,
which, among other things, contains provisions for the acceleration of the
maturity hereof upon the happening of certain events, for optional and mandatory
prepayment of the principal hereof prior to the maturity hereof and for the
amendment or waiver of certain provisions of the Credit Agreement, all upon the
terms and conditions therein specified. This Note shall be construed in
accordance with and governed by the laws of the State of New York and any
applicable laws of the United States of America.

                                   AVISTA CORPORATION

                                   by
                                      ----------------------------
                                      Name:
                                      Title:

                                       89
<PAGE>   200

                               Loans and Payments

<TABLE>
<CAPTION>
              Amount                                           Unpaid      Name of
               and                          Payments          Principal     Person
            Type/Class     Maturity    -------------------   Balance of     Making
 Date         of Loan        Date       Principal Interest       Note      Notation
-----       -----------    --------    -------------------   ----------   ---------
<S>         <C>            <C>         <C>                   <C>          <C>

</TABLE>

                                       90
<PAGE>   201

                                                                       EXHIBIT B

                                    [FORM OF]

                            ASSIGNMENT AND ACCEPTANCE

          Reference is made to the $140,000,000 Amended and Restated Credit
Agreement dated as of June 26, 2000 (as in effect from time to time, the "Credit
Agreement"), among Avista Corporation, a Washington corporation (the
"Borrower"), the banks listed on Schedule 2.01 thereto (the "Banks") and Toronto
Dominion (Texas), Inc., as agent for the Banks (in such capacity, the "Agent").
Terms defined in the Credit Agreement are used herein with the same meanings.

          1. The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes, without recourse, from
the Assignor, effective as of the Effective Date set forth on the reverse
hereof, the interests set forth on the reverse hereof (the "Assigned Interest")
in the Assignor's rights and obligations under the Credit Agreement, including,
without limitation, the interests set forth on the reverse hereof in the
Commitment of the Assignor on the Effective Date and Revolving Loans [and
Auction Loans] owing to the Assignor which are outstanding on the Effective
Date, together with unpaid interest accrued on the assigned Revolving Loans [and
Auction Loans] to the Effective Date, and the amount, if any, set forth on the
reverse hereof of the Fees accrued to the Effective Date for the account of the
Assignor. Each of the Assignor and the Assignee hereby makes and agrees to be
bound by all the representations, warranties and agreements set forth in Section
9.04(c) of the Credit Agreement, a copy of which has been received by each such
party. From and after the Effective Date (i) the Assignee shall be a party to
and be bound by the provisions of the Credit Agreement and, to the extent of the
interests assigned by this Assignment and Acceptance, have the rights and
obligations of a Bank thereunder and under the Loan Documents and (ii) the
Assignor shall, to the extent of the interests assigned by this Assignment and
Acceptance, relinquish its rights and be released from its obligations under the
Credit Agreement.

          2. This Assignment and Acceptance is being delivered to the Agent
together with (i) if the Assignee is

                                       91
<PAGE>   202

organized under the laws of a jurisdiction outside the United States, the forms
specified in Section 2.18(f) of the Credit Agreement, duly completed and
executed by such Assignee, (ii) if the Assignee is not already a Bank under the
Credit Agreement, an Administrative Questionnaire in the form of Exhibit C to
the Credit Agreement and (iii) a processing and recordation fee of $5,000.

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

Date of Assignment:

Legal Name of Assignor:

Legal Name of Assignee:

Assignee's Address for Notices:

Effective Date of Assignment
(may not be fewer than 5 Business
Days after the Date of Assignment):

                                       92
<PAGE>   203

<TABLE>
<CAPTION>
                                                            Percentage
                                                            Assigned of
                                                            Facility and
                                                            Commitment
                                                            Thereunder (set
                                                            forth, to at
                                                            least 8 decimals,
                              Principal Amount              as a percentage
                              Assigned (and                 of the Facility
                              identifying                   and the aggregate
                              information as                Commitments of
                              to individual                 all Banks
Facility                      Auction Loans)                thereunder)
----------------              -----------------             ------------------
<S>                           <C>                           <C>
Commitment Assigned:                $                               %
Revolving Loans:                    $                               %
Auction Loans:                      $                               %
Fees Assigned (if any):             $                               %
</TABLE>

The terms set forth above and on
the reverse side hereof are
hereby agreed to:                                 Accepted:

_________________________, as Assignor            TORONTO DOMINION (TEXAS),
                                                  INC., as Agent

By:____________________________                   By:_________________________
   Name:                                             Name:
   Title:                                            Title:

________________________, as Assignee                Title:

By:____________________________
   Name:

                                       93
<PAGE>   204

AVISTA CORPORATION

By:_________________________
   Name:
   Title:

                                       94
<PAGE>   205

                                                                       EXHIBIT C

                          Administrative Questionnaire

                                       95
<PAGE>   206

                                                                     EXHIBIT D-1

                       Opinion of Counsel for the Borrower

                                       96
<PAGE>   207

                                                                     EXHIBIT D-2

                   Opinion of Special Counsel to the Borrower

                                       97
<PAGE>   208

                                                                   SCHEDULE 2.01

                                      Banks

<TABLE>
<CAPTION>
Bank                                                     Commitment
----                                                     ----------
<S>                                                     <C>
Toronto Dominion (Texas), Inc.                          $21,550,000.00
909 Fanning
Suite 1700
Houston, TX 77010
Attention: Ms. Kimberly Burleson

Telecopy:  (713) 951-9921

   With copies to:

   Toronto-Dominion Bank U.S.A. Division
   31 West 52nd Street
   New York, NY 10019-6101

   Attention:  Mr. Peter Cody
   Telecopy:  (212) 262-1929

Bank of America, N.A.                                  $21,550,000.00
555 California Street
41st Floor
San Francisco, CA 94104

Attention:  Gary Tsuyuki
Telecopy:  (415) 622-0632

The Bank of New York                                   $21,550,000.00
One Wall Street
New York, NY 10286

Attention:  Ms. Trisha E. Hardy
Telecopy:  (212) 635-7923

First Security Bank, N.A.                              $8,075,000.00
119 North 9th Street
Boise, ID 83730

Attention:  Mr. Brian Cook
Telecopy:  (509) 353-2472

Fleet National Bank                                    $13,475,000.00
100 Federal Street
Boston, MA 02110
</TABLE>

                                       98
<PAGE>   209

<TABLE>
<S>                                                    <C>
Attention: Leroy Gayle
Telecopy: (617) 434-3652

Morgan Guaranty Trust Company of New York              $13,475,000.00
60 Wall Street
New York, NY 10261

Attention:  Mr. Robert Bottamedi
Telecopy:  (212) 640-5010

U.S. Bank                                              $10,750,000.00
1420 Fifth Avenue
11th Floor
WWH276
Seattle, WA 98101

Attention:  Mr. Wilfred Jack
Telecopy:  (206) 344-3654

Wells Fargo Bank, National Association                 $10,750,000.00
524 W. Riverside Avenue
Suite 800
8th Floor
Spokane, WA 99210

Attention:  Mr. Tom Beil
Telecopy:  (509) 455-5762

                                                       ---------------
                                                       $121,175,000.00
</TABLE>

                                       99
<PAGE>   210
                                                                   SCHEDULE 3.14

                            Significant Subsidiaries

<TABLE>
<CAPTION>
   Name                       Percent Ownership
   ----                       -----------------
<S>                           <C>
Avista Capital, Inc.               100%
</TABLE>

                                      100
<PAGE>   211

                                SCHEDULE 4.02(b)

       Statutes and Orders of Governmental Authorities

1. Statute of Washington authorizing borrowings of one year or less without
approval and/or Order(s) of the Washington Utilities and Transportation
Commission.

2. Statute of Oregon authorizing borrowings of one year or less without approval
and/or Order(s) of the Oregon Public Utility Commission.

3. Statute of Idaho authorizing borrowings of one year or less without approval
and/or Order(s) of the Idaho Public Utilities Commission.

4. Statute of California authorizing borrowings of one year or less without
approval and/or Order(s) of the California Public Utilities Commission.

                                      101<PAGE>   1
                                                                   EXHIBIT 10.19

                                CREDIT AGREEMENT

        THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 21,
2000, is entered into by and among:

               (1) LSI LOGIC CORPORATION, a Delaware corporation ("LSI");

               (2) LSI LOGIC JAPAN SEMICONDUCTOR, INC., a Japanese corporation
        ("LLJS");

               (3) Each of the financial institutions from time to time listed
        in Schedule I hereto, as amended from time to time (such financial
        institutions to be referred to herein collectively as "Lenders"); and

               (4) ABN AMRO BANK N.V., as agent for Lenders (in such capacity,
        "Agent").

                                    RECITALS

        A. LSI and LLJS (collectively, "Borrowers") and ABN AMRO Bank N.V., as a
Lender and as Agent, are parties to that certain Credit Agreement, dated as of
August 5, 1998 (the "Original Credit Agreement"), pursuant to which Lenders have
provided certain credit facilities to each of Borrowers severally, but not
jointly, upon the terms and subject to the conditions set forth therein.

        B. The Original Credit Agreement was amended and restated at the time
additional parties became Lenders by that certain Amended and Restated Credit
Agreement, dated as of September 22, 1998, by and among Borrowers, Lenders and
Agent, which has been further amended by Amendment No. 1 to Credit Agreement,
dated as of March 4, 1999, Amendment No. 2 to Credit Agreement, dated as of
November 12, 1999, and Amendment No. 3 to Credit Agreement, dated as of February
15, 2000 (collectively, the "Existing Credit Agreement").

        C. Borrowers have requested that the Existing Credit Agreement be
amended in certain respects to be consistent with the terms of a "synthetic"
lease of equipment by LSI in which certain parties that are Lenders hereunder
will be acquiring participation interests in the rental and certain other
payments to be made by LSI as lessee, and Borrowers, Lenders and Agent have
agreed to amend the Existing Credit Agreement upon the terms and subject to the
conditions set forth herein. For convenience of reference, the parties hereto
wish to restate the Existing Credit Agreement as so amended in its entirety.

                                    AGREEMENT

        NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree that the Existing
Credit Agreement shall be amended and restated as of the date hereof to read in
its entirety as follows:

<PAGE>   2

SECTION I. INTERPRETATION.

        1.01. Definitions. Unless otherwise indicated in this Agreement or any
other Credit Document, each term set forth below, when used in this Agreement or
any other Credit Document, shall have the respective meaning given to that term
below or in the provision of this Agreement or other document, instrument or
agreement referenced below.

               "ABN AMRO" shall mean ABN AMRO Bank N.V.

               "Acquisition" shall mean any transaction or series of related
        transactions for the purpose of or resulting in (a) the acquisition,
        directly or indirectly, of all or substantially all of the assets of a
        Person or of any business or division of a Person, (b) the acquisition,
        directly or indirectly, of all or substantially all of the capital
        stock, obligations or other securities of or interest in a Person, or
        (c) a merger or consolidation or any other combination by either
        Borrower or any of its Subsidiaries with another Person.

               "Affiliate" shall mean any Person which, directly or indirectly,
        controls, is controlled by or is under common control with another
        Person. For purposes of the foregoing, "control" with respect to any
        Person shall mean the possession, directly or indirectly, of the power
        (a) to vote twenty-five percent (25%) or more of the securities having
        ordinary voting power for the election of directors of such Person, or
        (b) to direct or cause the direction of the management and policies of
        such Person, whether through the ownership of voting securities or by
        contract or otherwise.

               "Agent" shall have the meaning given to that term in clause (4)
        of the introductory paragraph hereof.

               "Agent's Fee Letter" shall mean the letter agreement dated as of
        July 17, 1998 between LSI and Agent.

               "Agent's Syndication Letter" shall mean the letter agreement
        dated as of August 5, 1998 between LSI and Agent.

               "Agreement" shall mean this Amended and Restated Credit
        Agreement.

               "Applicable Lending Office" shall mean:

                      (a) With respect to any U.S. Lender and any U.S.
               Borrowing, (i) in the case of any Base Rate Loan, such Lender's
               Domestic Lending Office, and (ii) in the case of any LIBOR Loan,
               such Lender's Euro-Dollar Lending Office; and

                      (b) With respect to any Japanese Lender and the Japanese
               Borrowing, such Lender's Japanese Lending Office.

               "Applicable Margin" shall mean, with respect to any Borrowing at
        any time, the per annum margin which is determined pursuant to the
        Pricing Grid and added to the Base Rate, LIBO Rate or TIBO Rate, as the
        case may be, for such Borrowing; provided,

                                       2
<PAGE>   3

        however, that each Applicable Margin determined pursuant to the Pricing
        Grid shall be increased by two percent (2.00%) per annum on the date an
        Event of Default occurs and shall continue at such increased rate unless
        and until such Event of Default is cured or waived in accordance with
        this Agreement. The Applicable Margins shall be determined as provided
        in the Pricing Grid and may change for each Pricing Period.

               "Assignee Lender" shall have the meaning given to that term in
        Subparagraph 8.05(c).

               "Assignment" shall have the meaning given to that term in
        Subparagraph 8.05(c).

               "Assignment Agreement" shall have the meaning given to that term
        in Subparagraph 8.05(c).

               "Assignment Effective Date" shall have, with respect to each
        Assignment Agreement, the meaning set forth therein.

               "Assignor Lender" shall have the meaning given to that term in
        Subparagraph 8.05(c).

               "Bankruptcy Code" shall mean Title 11 of the United States Code
        entitled "Bankruptcy."

               "Base Rate" shall mean, on any day, the greater of (a) the Prime
        Rate in effect on such date and (b) the Federal Funds Rate for such day
        plus one-half percent (0.50%).

               "Base Rate Loan" shall mean, at any time, a U.S. Loan which then
        bears interest at a rate specified in clause (i) of Subparagraph
        2.01(d).

               "Borrowers" shall have the meaning given to that term in Recital
A.

               "Borrowing" shall mean a U.S. Borrowing or the Japanese
Borrowing.

               "Business Day" shall mean any day on which commercial banks are
        not authorized or required to close in San Francisco, California,
        Chicago, Illinois, or New York, New York and (a) if such Business Day is
        related to a LIBOR Loan, dealings in Dollar deposits are carried out in
        the London interbank market and commercial banks are open for business
        in London or (b) if such Business Day is related to the Japanese
        Borrowing, dealings in Yen deposits are carried out in the Tokyo
        interbank market and commercial banks are open for business in Tokyo.

               "Capital Adequacy Requirement" shall have the meaning given to
        that term in Subparagraph 2.10(d).

               "Capitalized Interest" shall mean interest that is incurred or
        accrued in any period and added to the cost of the asset in connection
        with which such interest is incurred.

                                       3
<PAGE>   4

               "Capital Lease" shall mean, for any Person, any lease of property
        (whether real, personal or mixed) which, in accordance with GAAP, would,
        at the time a determination is made, be required to be recorded as a
        capital lease in respect of which such Person is liable as lessee.

               "Change of Control" shall mean

                      (a) With respect to LSI, (i) the acquisition after the
               date hereof by any person or group of persons (within the meaning
               of Section 13 or 14 of the Securities Exchange Act of 1934 (as
               amended, the "Exchange Act")) of (A) beneficial ownership (within
               the meaning of Rule 13d-3 promulgated by the SEC under the
               Exchange Act) of thirty percent (30%) or more of the outstanding
               equity securities of LSI entitled to vote for members of the
               Board of Directors of LSI, or (B) all or substantially all of the
               assets of LSI; or (ii) during any period of twelve (12)
               consecutive calendar months, individuals who are directors of LSI
               on the first day of such period ("Initial Directors") and any
               directors of LSI who are specifically approved by two-thirds of
               the Initial Directors and previously-approved Directors shall
               cease to constitute a majority of the Board of Directors of LSI
               before the end of such period; or

                      (b) With respect to LLJS, LSI shall cease to own directly
               or indirectly one hundred percent (100%) of the equity securities
               of LLJS, except for any nominal amount of director stock
               necessary to do business in Japan.

               "Change of Law" shall have the meaning given to that term in
        Subparagraph 2.10(b).

               "Closing Date" shall mean the U.S. Closing Date or the Japanese
        Closing Date.

               "Commitment Fees" shall mean, collectively, the U.S. Revolving
        Commitment Fees and the U.S. 364 Day Commitment Fees.

               "Commitments" shall mean, collectively, the U.S. Revolving
        Commitments, the U.S. 364 Day Commitments and the Japanese Commitments.

               "Compliance Certificate" shall have the meaning given to that
        term in clause (iii) of Subparagraph 5.01(a).

               "Consolidated CMLTD" shall mean, as of any date of determination,
        the portion of long-term indebtedness coming due in the current quarter
        and the next succeeding three-quarter period as determined in accordance
        with GAAP.

               "Consolidated Current Liabilities" shall mean, as of any date of
        determination, the sum of current liabilities of LSI and its
        Subsidiaries on a consolidated basis, as determined in accordance with
        GAAP, plus (without duplication) Guaranty Obligations with respect to
        that portion of the underlying obligations which come due within one
        year of such date of determination.

                                       4
<PAGE>   5

               "Consolidated EBITDA" shall mean, for any period, Consolidated
        Net Income plus Consolidated Interest Expense plus income tax expense
        plus depreciation expense and amortization expense, which were deducted
        in determining Consolidated Net Income, of LSI and its Subsidiaries on a
        consolidated basis, as determined in accordance with GAAP.

               "Consolidated Interest Expense" shall mean, for any period,
        interest expense (including interest expense attributable to Capital
        Leases) of LSI and its Subsidiaries on a consolidated basis, as
        determined in accordance with GAAP.

               "Consolidated Net Income" shall mean, for any period, the net
        income of LSI and its Subsidiaries on a consolidated basis for such
        period taken as a single accounting period, as determined in accordance
        with GAAP.

               "Consolidated Quick Assets" shall mean, as of any date of
        determination, the sum of all unencumbered and unrestricted (except
        those encumbered or restricted in favor of Agent or Lenders as security
        for the Obligations) cash, cash equivalents and net accounts receivable
        classified as current assets according to GAAP, of LSI and its
        Subsidiaries on a consolidated basis, as determined in accordance with
        GAAP.

               "Consolidated Tangible Net Worth" shall mean, as of any date of
        determination, Consolidated Total Assets minus Consolidated Total
        Liabilities, minus (a) all assets which would be classified in a
        separate account as intangible assets in accordance with GAAP, including
        goodwill, organizational expense, research and development expense,
        capitalized software, patent applications, patents, trademarks, trade
        names, brands, copyrights, trade secrets, customer lists, licenses,
        franchises and covenants not to compete, (b) all unamortized debt
        discount and expense and (c) all treasury stock; provided, however, that
        to the extent otherwise included in the amount set forth in the
        foregoing clause (a) of this definition, there shall be excluded from
        such amount the sum of (i) all engineering costs incurred in connection
        with the development of major production capabilities at new
        manufacturing facilities or refurbishment of an existing facility or
        with respect to introducing a new manufacturing process to existing or
        new manufacturing facilities and which are classified as a fixed asset
        and capitalized on the consolidated balance sheet of LSI in accordance
        with GAAP and (ii) amounts representing the capitalized portion of the
        acquisition and development costs of software necessary for the
        operation of the business of LSI and its Subsidiaries, as shown on the
        consolidated balance sheet of LSI.

               "Consolidated Total Assets" shall mean, as of any date of
        determination, the total assets of LSI and its Subsidiaries on a
        consolidated basis, as determined in accordance with GAAP.

               "Consolidated Total Debt" shall mean, as of any date of
        determination, all Indebtedness of LSI and its Subsidiaries on a
        consolidated basis, as determined in accordance with GAAP.

                                       5
<PAGE>   6

               "Consolidated Total Liabilities" shall mean, as of any date of
        determination, the total liabilities of LSI and its Subsidiaries on a
        consolidated basis, as determined in accordance with GAAP.

               "Contractual Obligation" of any Person shall mean, any indenture,
        note, lease, loan agreement, security, deed of trust, mortgage, security
        agreement, guaranty, instrument, contract, agreement or other form of
        contractual obligation or undertaking to which such Person is a party or
        by which such Person or any of its property is bound.

               "Credit Documents" shall mean and include this Agreement, the
        Notes, the LSI Guaranty, the Lender Rate Contracts, the Agent's Fee
        Letter and the Agent's Syndication Letter; all other documents,
        instruments and agreements delivered to Agent or any Lender pursuant to
        Section III; and all other documents, instruments and agreements
        delivered to Agent or any Lender in connection with this Agreement on or
        after the date of this Agreement.

               "Credit Event" shall mean the making of any Loan; the conversion
        of any U.S. Loan into a LIBOR Loan; the selection of a new Interest
        Period for a LIBOR Loan; or the selection of a new Interest Period
        exceeding one (1) month for the Japanese Borrowing.

               "Default" shall mean an Event of Default or any event or
        circumstance not yet constituting an Event of Default which, with the
        giving of any notice or the lapse of any period of time or both, would
        become an Event of Default.

               "Defaulting Lender" shall mean a Lender which has failed to fund
        its portion of any Borrowing which it is required to fund under this
        Agreement and has continued in such failure for three (3) Business Days
        after written notice from Agent.

               "Dollar Equivalent" shall mean, as to any amount denominated in
        Yen as of any date of determination, the equivalent amount in Dollars as
        determined by Agent on the basis of the Telegraphic Transfer Mid Rate
        quoted by Bank of Tokyo Mitsubishi at or about 10:00 a.m. (Tokyo time)
        on such date.

               "Dollars" and "$" shall mean the lawful currency of the United
        States of America and, in relation to any payment under this Agreement,
        same day or immediately available funds.

               "Domestic Lending Office" shall mean, with respect to any U.S.
        Lender and any U.S. Borrowing, (a) initially, its office designated as
        such in Part B of Schedule I (or, in the case of any U.S. Lender which
        becomes a U.S. Lender by an assignment pursuant to Subparagraph 8.05(c),
        its office designated as such in the applicable Assignment Agreement)
        and (b) subsequently, such other office or offices as such U.S. Lender
        may designate to Agent as the office at which such Lender's Base Rate
        Loans will thereafter be maintained and for the account of which all
        payments of principal of, and interest on, such Lender's Base Rate Loans
        will thereafter be made.

               "Eligible Assignee" shall mean a commercial bank having a
        combined capital and surplus of at least $100,000,000, or another
        financial institution which is a qualified

                                       6
<PAGE>   7

        institutional buyer as defined in Rule 144A under the Securities Act of
        1933, as amended, that is acting through a branch or agency or an office
        located in (a) the United States, in the case of a potential Assignee
        Lender that is to become a U.S. Lender or (b) Japan, in the case of a
        potential Assignee Lender that is to become a Japanese Lender.

               "Environmental Laws" shall mean all federal, state or local laws,
        statutes, common law duties, rules, regulations, ordinances and codes,
        together with all administrative orders, directives, requests, licenses,
        authorizations and permits of, and agreements with (including consent
        decrees), any Governmental Authorities, in each case relating to or
        imposing liability or standards of conduct concerning public health,
        safety and environmental protection matters, including the Comprehensive
        Environmental Response, Compensation and Liability Act of 1980, the
        Clean Air Act, the Federal Water Pollution Control Act of 1972, the
        Solid Waste Disposal Act, the Federal Resource Conservation and Recovery
        Act, the Toxic Substances Control Act, the Emergency Planning and
        Community Right-to-Know Act, the California Hazardous Waste Control Law,
        the California Solid Waste Management, Resource Recovery and Recycling
        Act, the California Water Code and the California Health and Safety
        Code.

               "Equity Capital" shall mean, as of any date of determination,
        Consolidated Total Assets minus Consolidated Total Liabilities
        (exclusive of the cumulative translation adjustment account as reported
        in the consolidated balance sheet of LSI and its Subsidiaries as of such
        date).

               "ERISA" shall mean the Employee Retirement Income Security Act of
        1974.

               "ERISA Affiliate" shall mean any trade or business (whether or
        not incorporated) which is under common control with LSI within the
        meaning of Section 4001(a)(14) of ERISA and Sections 414(b), (c) and (m)
        of the IRC.

               "ERISA Event" shall mean (a) a Reportable Event with respect to a
        Pension Plan; (b) a withdrawal by LSI or any ERISA Affiliate from a
        Pension Plan subject to Section 4063 of ERISA during a plan year in
        which it was a substantial employer (as defined in Section 4001(a)(2) of
        ERISA) or a cessation of operations which is treated as such a
        withdrawal under Section 4062(e) of ERISA; (c) the filing of a notice of
        intent to terminate, the treatment of a plan amendment as a termination
        under Section 4041 or 4041A of ERISA or the commencement of proceedings
        by the PBGC to terminate a Pension Plan subject to Title IV of ERISA;
        (d) a failure by LSI or any ERISA Affiliate to make required
        contributions to a Pension Plan or other Plan subject to Section 412 of
        the IRC; (e) an event or condition which might reasonably be expected to
        constitute grounds under Section 4042 of ERISA for the termination of,
        or the appointment of a trustee to administer, any Pension Plan; (f) the
        imposition of any liability under Title IV of ERISA, other than PBGC
        premiums due but not delinquent under Section 4007 of ERISA, upon LSI or
        any ERISA Affiliate; or (g) an application for a funding waiver or an
        extension of any amortization period pursuant to Section 412 of the IRC
        with respect to any Pension Plan.

                                       7
<PAGE>   8

               "Euro-Dollar Lending Office" shall mean, with respect to any U.S.
        Lender and any U.S. Borrowing, (a) initially, such Lender's office
        designated as such in Part B of Schedule I (or, in the case of any U.S.
        Lender which becomes a U.S. Lender by an assignment pursuant to
        Subparagraph 8.05(c), its office designated as such in the applicable
        Assignment Agreement) and (b) subsequently, such other office or offices
        as such Lender may designate to Agent as the office at which such
        Lender's LIBOR Loans will thereafter be maintained and for the account
        of which all payments of principal of, and interest on, such Lender's
        LIBOR Loans will thereafter be made.

               "Event of Default" shall have the meaning given to that term in
        Paragraph 6.01.

               "Existing Credit Agreement" shall have the meaning given to that
        term in Recital B.

               "Federal Funds Rate" shall mean, for any day, the rate per annum
        set forth in the weekly statistical release designated as H.15 (519), or
        any successor publication, published by the FRB (including any such
        successor publication, "H.15 (519)") for such day opposite the caption
        "Federal Funds (Effective)". If on any relevant day, such rate is not
        yet published in H.15 (519), the rate for such day shall be the rate set
        forth in the daily statistical release designated as the Composite 3:30
        p.m. Quotations for U.S. Government Securities, or any successor
        publication, published by the Federal Reserve Bank of New York
        (including any such successor publication, the "Composite 3:30 p.m.
        Quotations") for such day under the caption "Federal Funds Effective
        Rate". If on any relevant day, such rate is not yet published in either
        H.15 (519) or the Composite 3:30 p.m. Quotations, the rate for such day
        shall be the arithmetic means, as determined by Agent, of the rates
        quoted to Agent for such day by three (3) federal funds brokers of
        recognized standing selected by Agent for overnight federal funds
        transactions.

               "Financial Statements" shall mean, with respect to any accounting
        period for any Person, statements of income, shareholders' equity and
        cash flows of such Person for such period, and a balance sheet of such
        Person as of the end of such period, setting forth in each case in
        comparative form figures for the corresponding period in the preceding
        fiscal year if such period is less than a full fiscal year or, if such
        period is a full fiscal year, corresponding figures from the preceding
        annual audit, all prepared in reasonable detail and in accordance with
        GAAP.

               "Foreign Plan" shall mean any employee benefit plan maintained by
        LSI, LLJS or any of their Subsidiaries which is mandated or governed by
        any Governmental Rule of any Governmental Authority other than the
        United States.

               "FRB" shall mean the Board of Governors of the Federal Reserve
        System, and any Governmental Authority succeeding to any of its
        principal functions.

               "GAAP" shall mean generally accepted accounting principles set
        forth from time to time in the opinions and pronouncements of the
        Accounting Principles Board and the American Institute of Certified
        Public Accountants and statements and pronouncements of the Financial
        Accounting Standards Board (or agencies with similar functions of

                                       8
<PAGE>   9

        comparable stature and authority within the U.S. accounting profession),
        which are applicable to the circumstances as of the date of
        determination.

               "Governmental Authority" shall mean any domestic or foreign
        national, state or local government, any political subdivision thereof,
        any department, agency, authority or bureau of any of the foregoing, or
        any other entity exercising executive, legislative, judicial, regulatory
        or administrative functions of or pertaining to government, including,
        without limitation, the Federal Deposit Insurance Corporation, the FRB,
        the Comptroller of the Currency, any central bank or any comparable
        authority.

               "Governmental Charges" shall mean, with respect to any Person,
        all levies, assessments, fees, claims or other charges imposed by any
        Governmental Authority upon such Person or any of its property or
        otherwise payable by such Person.

               "Governmental Rule" shall mean any law, rule, regulation,
        ordinance, order, code interpretation, judgment, decree, directive,
        guidelines, policy or similar form of decision of any Governmental
        Authority.

               "Guaranty Obligation" shall mean, as applied to any Person, any
        direct or indirect liability, contingent or otherwise, of that Person:

                      (a) With respect to any Indebtedness, lease (other than an
               operating lease), dividend, or other obligation (the "primary
               obligations") of another Person (the "primary obligor"),
               including any obligation of that Person (i) to purchase,
               repurchase or otherwise acquire such primary obligations or any
               property constituting direct or indirect security therefor, or
               (ii) to advance or provide funds (A) for the payment or discharge
               of any such primary obligation, or (B) to maintain working
               capital or equity capital of the primary obligor or otherwise to
               maintain the net worth or solvency or any balance sheet item,
               level of income or financial condition of the primary obligor, or
               (iii) to purchase property, securities or services primarily for
               the purpose of assuring the owner of any such primary obligation
               of the ability of the primary obligor to make payment of such
               primary obligation, or (iv) otherwise to assure or hold harmless
               the holder of any such primary obligation against loss in respect
               thereof;

                      (b) (i) With respect to letters of credit, acceptances,
               bank guaranties, surety bonds or similar instruments issued for
               the account of that Person or as to which that Person is
               otherwise liable for reimbursement of drawings, or (ii) as a
               partner or joint venturer in any partnership or joint venture;

                      (c) With respect to "synthetic" leases; or

                      (d) Net obligations with respect to Rate Contracts, other
               than Rate Contracts entered into in connection with a bona fide
               hedging operation that provides offsetting benefits to such
               Person.

               "Hazardous Substances" shall mean any toxic or hazardous
        substances, materials, wastes, contaminants or pollutants, including
        asbestos, PCBs, petroleum products and

                                       9
<PAGE>   10

        byproducts, and any substances defined or listed as "hazardous
        substances," "hazardous materials," "hazardous wastes" or "toxic
        substances" (or similarly identified), regulated under or forming the
        basis for liability under any applicable Environmental Law.

               "Indebtedness" shall mean, for any Person, without duplication:

                      (a) All indebtedness or other obligations of such Person
               for borrowed money;

                      (b) All obligations of such Person for the deferred
               purchase price of property or services (including obligations
               under credit facilities which secure or finance such purchase
               price and obligations under "synthetic" leases), other than trade
               payables incurred by such Person in the ordinary course of its
               business on ordinary terms;

                      (c) All obligations evidenced by notes, bonds, debentures
               or similar instruments, including obligations so evidenced
               incurred in connection with the acquisition of property, assets
               or businesses;

                      (d) All indebtedness created or arising under any
               conditional sale or other title retention agreement with respect
               to property acquired by such Person (even though the rights and
               remedies of the seller or lender under such agreement in the
               event of default are limited to repossession or sale of such
               property);

                      (e) All obligations under Capital Leases;

                      (f) All Guaranty Obligations other than Guaranty
               Obligations described in clauses (a)(iii) and (a)(iv) of the
               definition of "Guaranty Obligation" where the primary obligor is
               a Subsidiary; and

                      (g) All indebtedness of another Person secured by any Lien
               upon or in property owned by the Person for whom Indebtedness is
               being determined, whether or not such Person has assumed or
               become liable for the payment of such indebtedness of such other
               Person; provided, that if such indebtedness is not assumed and
               recourse is limited solely to such property, the Indebtedness
               incurred hereunder shall be valued at the lesser of the principal
               amount of the obligation so secured or the fair market value of
               the property subject to such Lien.

               "Initial Closing Date" shall mean the earlier of the U.S. Closing
        Date and the Japanese Closing Date. (If the U.S. Closing Date and the
        Japanese Closing Date are the same date, the Initial Closing Date and
        the Second Closing Date shall be the same date.)

               "Interest Period" shall mean:

                      (a) With respect to any LIBOR Loan, the time period
               selected by LSI pursuant to Subparagraph 2.01(c) or Subparagraph
               2.01(e) which commences on the first day of such U.S. Borrowing
               or the effective date of any conversion and ends on the last day
               of such time period, and thereafter, each subsequent time

                                       10
<PAGE>   11

               period selected by LSI pursuant to Subparagraph 2.01(f) which
               commences on the last day of the immediately preceding time
               period and ends on the last day of that time period; and

                      (b) With respect to the Japanese Borrowing, the time
               period selected by LLJS pursuant to Subparagraph 2.02(b) which
               commences on the first day of the Japanese Borrowing and ends on
               the last day of such time period, and thereafter, each subsequent
               time period selected by LLJS pursuant to Subparagraph 2.02(d)
               which commences on the last day of the immediately preceding time
               period and ends on the last day of that time period.

               "IRC" shall mean the Internal Revenue Code of 1986.

               "IRS" shall mean the Internal Revenue Service, or any successor
        thereto.

               "Japanese Borrowing" shall mean the borrowing by LLJS consisting
        of Japanese Loans made by the Japanese Lenders on the Japanese Closing
        Date. Any reference to the Japanese Borrowing shall include the Japanese
        Loans.

               "Japanese Closing Date" shall mean the date, not later than
        August 31, 1998, designated by LLJS in the Notice of Japanese Borrowing
        as the date of the Japanese Borrowing.

               "Japanese Commitment" shall mean, with respect to each Lender,
        the Yen amount set forth under the caption "Japanese Commitment"
        opposite such Lender's name on Part A of Schedule I, or, if changed,
        such Yen amount as may be set forth for such Lender in the Register.

               "Japanese Lender" shall mean (a) prior to the Japanese Closing
        Date, a Lender having a Japanese Commitment or (b) thereafter, a Lender
        having a Japanese Loan.

               "Japanese Lending Office" shall mean, with respect to any
        Japanese Lender and the Japanese Borrowing, (a) initially, such Lender's
        office designated as such in Part B of Schedule I (or, in the case of
        any Japanese Lender which becomes a Japanese Lender by an assignment
        pursuant to Subparagraph 8.05(c), its office designated as such in the
        applicable Assignment Agreement) and (b) subsequently, such other office
        or offices as such Lender may designate to Agent as the office at which
        such Lender's Japanese Loans will thereafter be maintained and for the
        account of which all payments of principal of, and interest on, such
        Lender's Japanese Loans will thereafter be made.

               "Japanese Loan" shall have the meaning given to that term in
        Subparagraph 2.02(a).

               "Lender Rate Contract" shall mean any Rate Contract entered into
        by either Borrower or any of its Subsidiaries with a Lender or its
        Affiliates as permitted by this Agreement of which Agent will be given
        written notice upon the occurrence and during the continuance of an
        Event of Default.

                                       11
<PAGE>   12

               "Lenders" shall have the meaning given to that term in clause (3)
        of the introductory paragraph hereof.

               "LIBO Rate" shall mean, with respect to any Interest Period for
        the LIBOR Loans in any U.S. Borrowing, a rate per annum equal to the
        quotient (rounded upward if necessary to the nearest 1/100 of one
        percent) of (a) the arithmetic mean (rounded upward if necessary to the
        nearest 1/16 of one percent) of the rates per annum appearing on
        Telerate Page 3750 (or any successor publication) on the second Business
        Day prior to the first day of such Interest Period at or about 11:00
        A.M. (London time) (for delivery on the first day of such Interest
        Period) for a term comparable to such Interest Period, divided by (b)
        one minus the Reserve Requirement for such LIBOR Loans in effect from
        time to time. If for any reason rates are not available as provided in
        clause (a) of the preceding sentence, the rate to be used in clause (a)
        shall be, at the Agent's discretion, (i) the rate per annum at which
        Dollar deposits are offered to Agent in the London interbank market or
        (ii) the rate at which Dollar deposits are offered to Agent in, or by
        Agent to major banks in, any offshore interbank market selected by
        Agent, in each case on the second Business Day prior to the commencement
        of such Interest Period at or about 10:00 A.M. (New York time) (for
        delivery on the first day of such Interest Period) for a term comparable
        to such Interest Period and in an amount approximately equal to the
        amount of the LIBOR Loan to be made or funded by Agent as part of such
        U.S. Borrowing. The LIBO Rate shall be adjusted automatically as to all
        LIBOR Loans then outstanding as of the effective date of any change in
        the Reserve Requirement.

               "LIBOR Loan" shall mean, at any time, a U.S. Loan which then
        bears interest at a rate specified in clause (ii) of Subparagraph
        2.01(d).

               "Lien" shall mean any mortgage, deed of trust, pledge, security
        interest, assignment, deposit arrangement, charge or encumbrance, lien
        (statutory or other), or other preferential arrangement (including any
        conditional sale or other title retention agreement, or any financing
        lease having substantially the same economic effect as any of the
        foregoing or any agreement to give any security interest, but excluding
        any operating lease, regardless of whether precautionary filings are
        made in respect thereof under Section 9408 of the California Uniform
        Commercial Code).

               "LLJS" shall have the meaning given to that term in clause (2) of
        the introductory paragraph hereof.

               "Loan" shall mean a U.S. Revolving Loan, a U.S. 364 Day Loan or a
        Japanese Loan.

               "Loan Account" shall have the meaning given to that term in
        Subparagraph 2.07(a).

               "LSI" shall have the meaning given to that term in clause (1) of
        the introductory paragraph hereof.

               "LSI Guaranty" shall have the meaning given to that term in
        Subparagraph 2.13(a).

                                       12
<PAGE>   13

               "Material Adverse Effect" shall mean (a) a material adverse
        change in, or a material adverse effect upon, the operations, business,
        properties, condition (financial or otherwise) or prospects of either
        Borrower or either Borrower and its Subsidiaries taken as a whole; (b) a
        material impairment of the ability of either Borrower to perform its
        Obligations or to pay any Indebtedness described in Subparagraph
        6.01(e); or (c) a material adverse effect upon the legality, validity,
        binding effect or enforceability of any Credit Document.

               "Maturity" shall mean, with respect to any Loan, interest, fee or
        other amount payable by either Borrower under this Agreement or the
        other Credit Documents, the date such Loan, interest, fee or other
        amount becomes due, whether upon the stated maturity or due date, upon
        acceleration or otherwise.

               "Multiemployer Plan" shall mean a "multiemployer plan" as defined
        in Sections 3(37) and 4001(a)(3) of ERISA.

               "Net Proceeds" shall mean, with respect to any sale of any asset
        (including any sale of assets to be leased back in connection with a
        "synthetic" lease of such assets) or any sale or issuance of any
        Indebtedness or equity securities by any Person, the aggregate
        consideration received by such Person from such sale or issuance less
        the sum of the actual amount of the reasonable fees and commissions
        payable to Persons other than such Person or any Affiliate of such
        Person, the reasonable legal expenses and other costs and expenses
        directly related to such sale or issuance that are to be paid by such
        Person.

               "Note" shall have the meaning given to that term in Subparagraph
        2.07(b).

               "Notice of Borrowing" shall mean a Notice of U.S. Borrowing or
        the Notice of Japanese Borrowing.

               "Notice of Interest Period Selection" shall mean a Notice of U.S.
        Borrowing Interest Period Selection or a Notice of Japanese Borrowing
        Interest Period Selection

               "Notice of Japanese Borrowing" shall have the meaning given to
        that term in Subparagraph 2.02(b).

               "Notice of Japanese Borrowing Interest Period Selection" shall
        have the meaning given to that term in Subparagraph 2.02(d).

               "Notice of U.S. Borrowing" shall have the meaning given to that
        term in Subparagraph 2.01(c).

               "Notice of U.S. Borrowing Conversion" shall have the meaning
        given to that term in Subparagraph 2.01(e).

               "Notice of U.S. Borrowing Interest Period Selection" shall have
        the meaning given to that term in Subparagraph 2.01(f).

                                       13
<PAGE>   14

               "Obligations" shall mean and include all loans, advances, debts,
        liabilities, and obligations, howsoever arising, owed by either Borrower
        individually to Agent or any Lender of every kind and description
        (whether or not evidenced by any note or instrument and whether or not
        for the payment of money), direct or indirect, absolute or contingent,
        due or to become due, now existing or hereafter arising pursuant to the
        terms of this Agreement or any of the other Credit Documents, including
        all interest, fees, charges, expenses, attorneys' fees and accountants'
        fees chargeable to Borrowers or payable by Borrowers thereunder.

               "Original Credit Agreement" shall have the meaning given to that
        term in Recital A.

               "Outstanding Japanese Loan Facility" shall mean the Yen credit
        facility provided pursuant to the Agreement for "25,000,000,000 Floating
        Rate Guaranteed Credit Facility, dated December 27, 1995, as amended,
        among LLJS, as borrower, LSI, as guarantor, the banks and financial
        institutions parties thereto, as lenders, ABN AMRO, as agent for such
        lenders, and The Industrial Bank of Japan, Limited, as co-agent for such
        lenders.

               "Outstanding Japanese Lease Facility" shall mean the Yen
        "synthetic" lease provided pursuant to the Master Lease Agreement, dated
        June 16, 1995, as amended, among LLJS, as lessee, and certain financial
        institutions parties thereto, as lessors, including IBJ Leasing Co.,
        Ltd., as lead lessor.

               "Outstanding U.S. Loan Facility" shall mean the Dollar credit
        facility provided pursuant to the Credit Agreement, dated as of December
        20, 1996, as amended, among LSI, as borrower, the financial institutions
        parties thereto, as lenders, and ABN AMRO, as agent for such lenders.

               "Overnight Rate" shall mean, for any amount payable in Yen on any
        day, the per annum interest rate at which overnight deposits in Yen in
        an amount approximately equal to such amount would be offered for such
        day by ABN AMRO's Japanese Lending Office to major banks in the Tokyo
        interbank market.

               "Participant" shall have the meaning given to that term in
        Subparagraph 8.05(b).

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

               "Pension Plan" shall mean any employee pension benefit plan
        covered by Title IV of ERISA (other than a Multiemployer Plan) that is
        maintained for employees of LSI or any ERISA Affiliate or with regard to
        which LSI or an ERISA Affiliate is a contributing sponsor within the
        meaning of Section 4001(a)(13) or 4069 of ERISA.

        "Permitted Investments" shall mean any investments selected by LSI in
        accordance with its Corporate Cash Investment Policy as adopted by LSI
        on August 16, 1996 (as the same may be amended from time to time with
        the approval of Agent); provided that any investments not meeting the
        standards set forth in such Corporate Cash Investment Policy shall
        nevertheless be deemed to be "Permitted Investments" if they do

                                       14
<PAGE>   15

        not exceed at any time, in the aggregate, ten percent (10%) of all
        Permitted Investments at such time.

               "Permitted Liens" shall mean:

                      (a) Liens which may at any time be granted in favor of
               Agent or any Lender to secure the Obligations;

                      (b) Liens in existence as of the date of this Agreement
               listed on Schedule 5.02(a), and any substitutions or renewals
               thereof, provided that (i) any substitute or renewal Lien is
               limited to the property encumbered by the existing Lien, and (ii)
               the principal amount of the obligations secured thereby is not
               increased;

                      (c) Liens for current taxes, assessments or other
               Governmental Charges which are not delinquent or remain payable
               without any penalty or which are being contested in good faith
               via appropriate proceedings, with appropriate reserves
               established therefor in accordance with GAAP;

                      (d) Liens in connection with workers' compensation,
               unemployment insurance or other social security obligations;

                      (e) Mechanics', workers', materialmen's, landlords',
               carriers' or other like Liens arising in the ordinary and normal
               course of business with respect to obligations which are not past
               due or which are being contested in good faith via appropriate
               proceedings, with appropriate reserves established therefor in
               accordance with GAAP;

                      (f) Purchase money security interests (including by way of
               installment sales and title retention agreements) in personal or
               real property hereafter acquired when the security interest is
               granted contemporaneously with such acquisition (or within nine
               months thereafter), Liens created to secure the cost of
               construction or improvement of property and Liens created to
               secure Indebtedness incurred to finance such purchase price or
               cost (including Liens in favor of the United States or any state
               thereof, or any department, agency, instrumentality or political
               subdivision thereof, securing any real property or other assets
               in connection with the financing of industrial revenue bond
               facilities or of any equipment or other property designed
               primarily for the purpose of air or water pollution control);
               provided that (i) any such Lien shall attach only to the property
               so purchased. constructed or improved, together with attachments
               and accessions thereto, and rents, proceeds, products,
               substitutions, replacements and profits thereof and attachments
               and accessories thereto, and (ii) the amount of Indebtedness
               secured by any such Lien shall not exceed the purchase or
               construction price of such property plus transaction costs and
               financing charges relating to the acquisition or construction
               thereof;

                      (g) Liens arising from attachments or similar
               proceedings, pending litigation, judgments or taxes or
               assessments in any such event whose validity or

                                       15
<PAGE>   16

               amount is being contested in good faith by appropriate
               proceedings and for which adequate reserves have been
               established and are maintained in accordance with GAAP;

                      (h) Liens arising in the ordinary course of business or by
               operation of law, not securing Indebtedness, but securing such
               obligations as (i) judgments or awards, which (A) are covered by
               applicable insurance or (B) have been outstanding less than
               thirty (30) consecutive days, (ii) interests of landlords or
               lessors under leases of real or personal property entered into in
               the ordinary course of business arising by contract or operation
               of law, (iii) Liens in favor of customs and revenue authorities
               which secure payment of customs in connection with the
               importation of goods, (iv) Liens which constitute rights of
               set-off of a customary nature or bankers' liens on amounts on
               deposit, whether arising by contract or by operation of law, in
               connection with arrangements entered into with depository
               institutions in the ordinary course of business, (v) such minor
               defects, irregularities, encumbrances, easements, rights of way,
               and clouds on title as normally exist with respect to similar
               properties which do not, individually or in the aggregate,
               materially impair the property affected thereby or the use
               thereof and (vi) subleases, licenses, and sublicenses granted to
               third parties, the granting of which does not result in a
               Material Adverse Effect;

                      (i) Liens securing reimbursement obligations of either
               Borrower or any of its Subsidiaries under documentary letters of
               credit; provided that such Liens shall attach only to documents
               relating to such letters of credit, goods covered thereby and
               products and proceeds thereof;

                      (j) Liens on insurance policies or the proceeds of
               insurance policies incurred solely to secure the financing of
               premiums owing with respect thereto;

                      (k) Liens existing on property (including the proceeds and
               accessions thereto) acquired by either Borrower or any of its
               Subsidiaries (including Liens on assets of any corporation at the
               time it becomes a Subsidiary), but excluding any Liens created in
               contemplation of any such acquisition;

                      (l) Liens encumbering customary initial deposits and
               margin deposits, and other Liens that are within the general
               parameters customary in the industry and incurred in the ordinary
               course of business in connection with Rate Contracts or portfolio
               investments maintained with financial intermediaries; and

                      (m) Liens related to a "synthetic" lease financing of
               equipment, provided that (i) such Liens cover only the equipment
               and related property and (ii) the "principal" amount of such
               financing does not exceed $250,000,000.

               "Person" shall mean and include an individual, a partnership, a
        corporation (including a business trust), a joint stock company, an
        unincorporated association, a limited liability company, a joint
        venture, a trust or other entity or a Governmental Authority.

                                       16
<PAGE>   17

               "Plan" shall mean an employee benefit plan (as defined in Section
        3(3) of ERISA) which LSI or any ERISA Affiliate sponsors or maintains,
        or to which LSI or any ERISA Affiliate makes, is making, or is obligated
        to make contributions, and includes any Pension Plan.

               "Pricing Grid" shall mean Schedule II.

               "Pricing Period" shall mean each consecutive calendar quarter
        which commences on the day following the last day of the immediately
        preceding calendar quarter and ends on the last day of that calendar
        quarter.

               "Pricing Ratio" shall mean, as of the last day of any fiscal
        quarter, the ratio of (a) Senior Debt as of such date to (b) annualized
        Consolidated EBITDA for such fiscal quarter and the immediately
        preceding fiscal quarter.

               "Pricing Ratio Certificate" shall have the meaning given to that
        term in clause (iv) of Subparagraph 5.01(a).

               "Prime Rate" shall mean the per annum rate publicly announced by
        ABN AMRO from time to time at its Chicago office. The Prime Rate is
        determined by ABN AMRO from time to time as a means of pricing credit
        extensions to some customers and is neither directly tied to any
        external rate of interest or index nor necessarily the lowest rate of
        interest charged by ABN AMRO at any given time for any particular class
        of customers or credit extensions. Any change in the Base Rate resulting
        from a change in the Prime Rate shall become effective on the Business
        Day on which each change in the Prime Rate occurs.

               "Proportionate Share" shall mean:

                      (a) With respect to any U.S. Lender and its U.S. Revolving
               Commitment or U.S. Revolving Loans, if any, the ratio (expressed
               as a percentage rounded to the eighth digit to the right of the
               decimal point) of (i) such Lender's U.S. Revolving Commitment to
               the Total U.S. Revolving Commitment at any time on or prior to
               the Revolving Termination Date or (ii) the aggregate principal
               amount of such Lender's U.S. Revolving Loans to the aggregate
               principal amount of the U.S. Revolving Borrowings outstanding at
               any time after the Revolving Termination Date;

                      (b) With respect to any U.S. Lender and its U.S. 364 Day
               Commitment or U.S. 364 Day Loans, if any, the ratio (expressed as
               a percentage rounded to the eighth digit to the right of the
               decimal point) of (i) such Lender's U.S. 364 Day Commitment to
               the Total U.S. 364 Day Commitment at any time on or prior to the
               U.S. 364 Day Termination Date or (ii) the aggregate principal
               amount of such Lender's U.S. 364 Day Loans to the aggregate
               principal amount of the U.S. 364 Day Borrowings outstanding at
               any time after the U.S. 364 Day Termination Date;

                                       17
<PAGE>   18

                      (c) With respect to any Japanese Lender and its Japanese
               Commitment or Japanese Loans, if any, the ratio (expressed as a
               percentage rounded to the eighth digit to the right of the
               decimal point) of (i) such Lender's Japanese Commitment to the
               Total Japanese Commitment at any time on or prior to the Japanese
               Closing Date or (ii) the aggregate principal amount of such
               Lender's Japanese Loans to the aggregate principal amount of the
               Japanese Borrowing outstanding at any time after the Japanese
               Closing Date; and

                      (d) With respect to any Lender without reference to a
               particular type of Commitment or Loan, the ratio (expressed as a
               percentage rounded to the eighth digit to the right of the
               decimal point) of (i) the aggregate of such Lender's U.S.
               Revolving Commitment, U.S. 364 Day Commitment and the Dollar
               Equivalent of such Lender's Japanese Commitment to the sum of the
               Total U.S. Revolving Commitment, the Total U.S. 364 Day
               Commitment and the Dollar Equivalent of the Total Japanese
               Commitment at any time on or prior to the Initial Closing Date or
               (ii) the weighted average of the sums determined for such Lender
               pursuant to clauses (a), (b) and (c) above at any time after the
               Initial Closing Date.

               "Rate Contracts" shall mean interest rate swaps, caps, floors and
        collars, currency swaps, or other similar financial products designed to
        provide protection against fluctuations in interest, currency or
        exchange rates.

               "Register" shall have the meaning given to that term in
Subparagraph 8.05(d).

               "Reportable Event" shall mean any of the events set forth in
        Section 4043(b) of ERISA or the regulations promulgated thereunder,
        other than any such event for which the 30-day notice requirement under
        ERISA has been waived in regulations issued by the PBGC.

               "Required Lenders" shall mean, at any time, Lenders whose
        Proportionate Shares equal or exceed fifty-one percent (51%).

               "Reserve Requirement" shall mean (a) with respect to any day in
        an Interest Period for a LIBOR Loan, the aggregate of the reserve
        requirement rates (expressed as a decimal) in effect on such day for
        eurodollar funding (currently referred to as "Eurocurrency liabilities"
        in Regulation D of the FRB) maintained by a member bank of the Federal
        Reserve System or (b) with respect to any day in an Interest Period for
        a Japanese Loan, the aggregate of the reserve requirement rates, if any
        (expressed as a decimal), in effect on such day for Yen funding in Tokyo
        maintained by commercial banks in Tokyo. As used herein, the term
        "reserve requirement" shall include, without limitation, any basic,
        supplemental or emergency reserve requirements imposed on any Lender by
        any Governmental Authority.

               "Responsible Officer" shall mean, with respect to any Person,
        the chief executive officer, the president, the chief financial officer
        or the treasurer of such Person, or any other senior officer of such
        Person having substantially the same authority and responsibility; or,
        with respect to compliance with financial covenants, the chief financial

                                       18
<PAGE>   19

        officer or the treasurer of any such Person, or any other senior officer
        of such Person involved principally in the financial administration or
        controllership function of such Person and having substantially the same
        authority and responsibility.

               "Revolving Termination Date" shall mean August 4, 2002, or, with
        respect to U.S. Revolving Borrowings, such earlier date as the Total
        U.S. Revolving Commitment is cancelled pursuant to Subparagraph 2.03(c).

               "Scheduled Reduction Date" means each of December 31, 1999, March
        31, 2000 and June 30, 2000.

               "SEC" shall mean the Securities and Exchange Commission, or any
        successor thereto.

               "Second Closing Date" shall mean the later of the U.S. Closing
        Date and the Japanese Closing Date. (If the U.S. Closing Date and the
        Japanese Closing Date are the same date, the Initial Closing Date and
        the Second Closing Date shall be the same date.)

               "Security Documents" shall mean and include the LSI Guaranty and
        any other instruments, agreements, certificates, opinions and documents
        (including Uniform Commercial Code financing statements and fixture
        filings and landlord waivers) delivered to Agent or any Lender to secure
        the Obligations.

               "Senior Debt" shall mean all Indebtedness, other than
        Subordinated Debt, of LSI and its Subsidiaries on a consolidated basis.

               "Significant Subsidiary" shall mean, at any time, any Subsidiary
        of LSI having at such time total assets, as of the last day of the
        preceding fiscal quarter, having a net book value in excess of
        $10,000,000 (exclusive of intercompany assets and liabilities), based
        upon LSI's most recent annual or quarterly Financial Statements
        delivered to Agent under Subparagraph 5.01(a).

               "Solvent" shall mean, with respect to any Person, that as of the
        date of determination, (a) the then fair saleable value of the property
        of such Person is (ii) greater than the total amount of liabilities
        (including reasonably anticipated liabilities with respect to contingent
        obligations) of such Person and (ii) greater than the amount that will
        be required to pay the probable liabilities on such Person's then
        existing debts as they become absolute and matured considering all
        financing alternatives and potential asset sales reasonably available to
        such Person, and (b) such Person has not incurred and does not intend to
        incur, or does not believe that it will incur, debts beyond its ability
        to pay such debts as they become due.

               "Subordinated Debt" shall mean any Indebtedness of LSI or any of
        its Subsidiaries the stated maturity date of any scheduled principal
        payment of which is not earlier than the first anniversary of the
        Revolving Termination Date and which is subordinated on terms and
        conditions reasonably acceptable to Required Lenders; provided, that any
        Subordinated Debt having subordination provisions no more favorable to
        the holder than those attached as Exhibit K hereto shall be deemed to be
        reasonably

                                       19
<PAGE>   20

        acceptable to Required Lenders for the purposes hereof. Without limiting
        the foregoing, the terms of such Subordinated Debt shall not include any
        requirement that the holders thereof approve the issuance of the Senior
        Debt or Designated Senior Debt (as defined in Exhibit K) entitled to the
        benefit of such subordination provisions.

               "Subsidiary" shall mean any corporation, association,
        partnership, joint venture or other business entity of which more than
        fifty percent (50%) of the voting stock or other equity interest is
        owned directly or indirectly by any Person or one or more of the other
        Subsidiaries of such Person or a combination thereof. (All references in
        this Agreement and the other Credit Documents to Subsidiaries of LSI
        shall, unless otherwise indicated, include LLJS and its Subsidiaries.)

               "Swap Termination Value" shall mean, in respect of any one or
        more Rate Contracts, after taking into account the effect of any legally
        enforceable netting agreement relating to such Rate Contracts, (a) for
        any date on or after the date such Rate Contracts have been closed out
        and termination value(s) determined in accordance therewith, such
        termination value(s), and (b) for any date prior to the date referenced
        in clause (a) the amount(s) determined as the mark-to-market value(s)
        for such Rate Contracts, as determined based upon one or more mid-
        market or other readily available quotations provided by any recognized
        dealer in such Rate Contracts (which may include any Lender).

               "Symbios" shall mean Symbios, Inc., a Delaware corporation.

               "Symbios Acquisition" shall mean the acquisition by LSI of the
        capital stock of Symbios pursuant to the Symbios Acquisition Documents.

               "Symbios Acquisition Documents" shall mean the Stock Purchase
        Agreement, dated as of June 28, 1998, by and among LSI, Hyundai
        Electronics America, a California corporation, and Hyundai Electronics
        Industries Ltd., a legal entity under the laws of the Republic of Korea,
        and all material documents, instruments and agreements delivered to or
        by LSI in connection with the Symbios Acquisition.

               "Taxes" shall have the meaning given to such term in
        Subparagraph 2.11(a).

               "TIBO Rate" shall mean, with respect to any Interest Period for
        the Japanese Loans in the Japanese Borrowing, a rate per annum equal to
        the quotient (rounded upward if necessary to the nearest 1/100 of one
        percent) of (a) the rate per annum appearing on the Reuter Screen TIBM
        Page (All Banks Average) (or any successor publication) on the second
        Business Day prior to the first day of such Interest Period at or about
        11:00 A.M. (Tokyo time) (for delivery on the first day of such Interest
        Period) in an amount substantially equal to Agent's Japanese Loan for
        the Japanese Borrowing and for a term comparable to such Interest
        Period, divided by (b) one minus the Reserve Requirement for such
        Japanese Loan in effect from time to time. If for any reason rates are
        not available as provided in clause (a) of the preceding sentence, the
        rate to be used in clause (a) shall be the rate per annum at which Yen
        deposits are offered to Agent (or if Agent does not have a Japanese Loan
        at such time, another Japanese Lender selected by

                                       20
<PAGE>   21

        Agent) in the Tokyo interbank market or, if such rate is not available,
        the rate at which Yen deposits are offered to Agent in, or by Agent to
        major banks in, any offshore interbank market selected by Agent, in each
        case on the second Business Day prior to the commencement of such
        Interest Period at or about 11:00 A.M. (Tokyo time) (for delivery on the
        first day of such Interest Period) for a term comparable to such
        Interest Period and in an amount approximately equal to the amount of
        the Japanese Loan to be made or funded by Agent (or such other Japanese
        Lender selected by Agent) as part of the Japanese Borrowing. The TIBO
        Rate shall be adjusted automatically as to all Japanese Loans then
        outstanding as of the effective date of any change in the Reserve
        Requirement.

               "Total Capital" shall mean the sum of Equity Capital, Senior Debt
        and Subordinated Debt.

               "Total Japanese Commitment" shall mean Eight Billion Six Hundred
        Million Yen ("8,600,000,000).

               "Total U.S. Revolving Commitment" shall mean Two Hundred Forty
        Million Dollars ($240,000,000), or such amount as reduced pursuant to
        Subparagraph 2.03(b) or Subparagraph 2.03(c).

               "Total U.S. 364 Day Commitment" shall mean One Hundred Fifty
        Million Dollars ($150,000,000) , or such amount as reduced pursuant to
        Subparagraph 2.03(b) or Subparagraph 2.03(c).

               "Type" shall mean, with respect to any U.S. Loan or U.S.
        Borrowing at any time, the classification of such Loan or Borrowing by
        the type of interest rate it then bears, whether an interest rate based
        upon the Base Rate or the LIBO Rate.

               "Unfunded Pension Liability" shall mean the excess of a Plan's
        benefit liabilities under Section 4001(a)(16) of ERISA, over the current
        value of that Plan's assets, determined in accordance with the
        assumptions used for funding the Plan pursuant to Section 412 of the IRC
        for the applicable plan year.

               "United States" and "U.S." each shall mean the United States of
        America.

               "U.S. Borrowing" shall mean a U.S. Revolving Borrowing or a U.S.
        364 Day Borrowing.

               "U.S. Closing Date" shall mean the date, not later than August
        31, 1998, designated by LSI in the initial Notice of U.S. Borrowing as
        the date on which the initial U.S. Borrowing is to occur.

               "U.S. Lender" shall mean a Lender having a U.S. Revolving
        Commitment or a U.S. 364 Day Commitment or, after the U.S. 364 Day
        Termination Date, a Lender having a U.S. Loan or a U.S. Revolving
        Commitment.

               "U.S. Loan" shall mean a U.S. Revolving Loan or a U.S. 364 Day
        Loan.

                                       21
<PAGE>   22

               "U.S. Revolving Borrowing" shall mean a borrowing by LSI
        consisting of U.S. Revolving Loans made by U.S. Lenders on the same date
        and of the same Type pursuant to a single Notice of U.S. Borrowing. Any
        reference to a U.S. Revolving Borrowing shall include the U.S. Revolving
        Loans made pursuant to such U.S. Revolving Borrowing.

               "U.S. Revolving Commitment" shall mean, with respect to each
        Lender, the Dollar amount set forth under the caption "U.S. Revolving
        Commitment" opposite such Lender's name on Part A of Schedule I, or, if
        changed, such Dollar amount as may be set forth for such Lender in the
        Register.

               "U.S. Revolving Commitment Fees" shall have the meaning given to
        that term in Subparagraph 2.04(b).

               "U.S. Revolving Loan" has the meaning given to that term in
        Subparagraph 2.01(a).

               "U.S. 364 Day Borrowing" shall mean a borrowing by LSI consisting
        of U.S. 364 Day Loans made by U.S. Lenders on the same date and of the
        same Type pursuant to a single Notice of U.S. Borrowing. Any reference
        to a U.S. 364 Day Borrowing shall include the U.S. 364 Day Loans made
        pursuant to such U.S. 364 Day Borrowing.

               "U.S. 364 Day Commitment" shall mean, with respect to each
        Lender, the Dollar amount set forth under the caption "U.S. 364 Day
        Commitment" opposite such Lender's name on Part A of Schedule I, or, if
        changed, such Dollar amount as may be set forth for such Lender in the
        Register.

               "U.S. 364 Day Commitment Fees" shall have the meaning given to
        that term in Subparagraph 2.04(b).

               "U.S. 364 Day Loan" has the meaning given to that term in
        Subparagraph 2.01(b).

               "U.S. 364 Day Termination Date" shall mean August 3, 1999, or
        such earlier date as the Total U.S. 364 Day Commitment is cancelled
        pursuant to Subparagraph 2.03(c).

               "Yen" and "Yen (Symbol)" shall mean the lawful currency of Japan
        and, in relation to any payment under this Agreement, same day or
        immediately available funds.

               "Yen Equivalent" shall mean, as to any amount denominated in
        Dollars as of any date of determination, the equivalent amount in Yen as
        determined by Agent on the basis of the Telegraphic Transfer Mid Rate
        quoted by Bank of Tokyo Mitsubishi at or about 10:00 a.m. (Tokyo time)
        on such date.

        1.02. GAAP. Unless otherwise expressly provided in this Agreement or any
other Credit Document, all accounting terms used in this Agreement or any other
Credit Document shall be construed, and all accounting and financial
computations hereunder or thereunder shall be computed, in accordance with GAAP.
If GAAP changes during the term of this Agreement such that any covenants
contained herein would then be calculated in a different manner or with

                                       22
<PAGE>   23

different components, Borrowers, Lenders and Agent agree to negotiate in good
faith to amend this Agreement in such respects as are necessary to conform those
covenants as criteria for evaluating Borrowers' financial condition to
substantially the same criteria as were effective prior to such change in GAAP;
provided, however, that, until Borrowers, Lenders and Agent so amend this
Agreement, all such covenants shall be calculated in accordance with GAAP as in
effect immediately prior to such change.

        1.03. Headings. Headings in this Agreement and each of the other Credit
Documents are for convenience of reference only and are not part of the
substance hereof or thereof.

        1.04. Plural Terms. All terms defined in this Agreement or any other
Credit Document in the singular form shall have comparable meanings when used in
the plural form and vice versa.

        1.05. Governing Law. Unless otherwise expressly provided in any Credit
Document, this Agreement and each of the other Credit Documents shall be
governed by and construed in accordance with the laws of the State of California
without reference to conflicts of law rules.

        1.06. English Language. This Agreement and the other Credit Documents
are executed and shall be construed in the English language. All instruments,
agreements, certificates, opinions and other documents to be furnished or
communications to be given or made under this Agreement or any other Credit
Document shall be in the English language, except that LLJS may deliver the
Japanese language version of (a) any LLJS corporate document initially prepared
in the ordinary course of its business in the Japanese language or (b) any
certificate or other document prepared by a Japanese Governmental Authority in
the Japanese language, provided that, in each such case, the Japanese language
version of such document is delivered along with an English language translation
thereof which shall be binding upon Borrowers.

        1.07. Construction. This Agreement is the result of negotiations among,
and has been reviewed by, Borrowers, each Lender, Agent and their respective
counsel. Accordingly, this Agreement shall be deemed to be the product of all
parties hereto, and no ambiguity shall be construed in favor of or against
either Borrower, any Lender or Agent.

        1.08. Entire Agreement. This Agreement and each of the other Credit
Documents, taken together, constitute and contain the entire agreement of
Borrowers, Lenders and Agent and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications among the
parties, whether written or oral, respecting the subject matter hereof
(excluding the Agent's Fee Letter and the Agent's Syndication Letter but
including the commitment letter dated as of July 17, 1998 between LSI and ABN
AMRO).

        1.09. Calculation of Interest and Fees. All calculations of interest and
fees under this Agreement and the other Credit Documents for any period (a)
shall include the first day of such period and exclude the last day of such
period and (b) shall be calculated on the basis of a year of 360 days for actual
days elapsed, except that during any period any Loan bears interest based upon
the Prime Rate, such interest shall be calculated on the basis of a year of 365
or 366 days, as appropriate, for actual days elapsed.

                                       23
<PAGE>   24

        1.10. References.

               (a) References in this Agreement to "Recitals," "Sections,"
        "Paragraphs," "Subparagraphs," "Exhibits" and "Schedules" are to
        recitals, sections, paragraphs, subparagraphs, exhibits and schedules
        therein and thereto unless otherwise indicated.

               (b) References in this Agreement or any other Credit Document to
        any document, instrument or agreement (i) shall include all exhibits,
        schedules and other attachments thereto, (ii) shall include all
        documents, instruments or agreements issued or executed in replacement
        thereof if such replacement is permitted hereby, and (iii) shall mean
        such document, instrument or agreement, or replacement or predecessor
        thereto, as amended, modified and supplemented from time to time and in
        effect at any given time if such amendment, modification or supplement
        is permitted hereby.

               (c) References in this Agreement or any other Credit Document to
        any Governmental Rule (i) shall include any successor Governmental Rule,
        (ii) shall include all rules and regulations promulgated under such
        Governmental Rule (or any successor Governmental Rule), and (iii) shall
        mean such Governmental Rule (or successor Governmental Rule) and such
        rules and regulations, as amended, modified, codified or reenacted from
        time to time and in effect at any given time.

               (d) References in this Agreement or any other Credit Document to
        any Person in a particular capacity (i) shall include any permitted
        successors to and assigns of such Person in that capacity and (ii) shall
        exclude such Person individually or in any other capacity.

        1.11. Other Interpretive Provisions. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement or any other
Credit Document shall refer to this Agreement or such other Credit Document, as
the case may be, as a whole and not to any particular provision of this
Agreement or such other Credit Document, as the case may be. The words "include"
and "including" and words of similar import when used in this Agreement or any
other Credit Document shall not be construed to be limiting or exclusive. In the
event of any inconsistency between the terms of this Agreement and the terms of
any other Credit Document, the terms of this Agreement shall govern.

SECTION II. CREDIT FACILITIES.

        2.01. U.S. Borrowings.

               (a) U.S. Revolving Borrowing Availability. Subject to the terms
        and conditions of this Agreement (including the amount limitations set
        forth in Paragraph 2.03), each U.S. Lender with a U.S. Revolving
        Commitment severally agrees to advance to LSI from time to time during
        the period beginning on the U.S. Closing Date and ending on the
        Revolving Termination Date such loans in Dollars as LSI may request
        under this Subparagraph 2.01(a) (individually, a "U.S. Revolving Loan");
        provided, however, that

                                       24
<PAGE>   25

                      (i) the aggregate principal amount of all U.S. Revolving
               Loans made by such Lender at any time outstanding shall not
               exceed such Lender's U.S. Revolving Commitment at such time; and

                      (ii) the aggregate principal amount of all U.S. Revolving
               Loans made by all Lenders at any time outstanding shall not
               exceed the Total U.S. Revolving Commitment at such time.

        All U.S. Revolving Loans shall be made on a pro rata basis by all U.S.
        Lenders with U.S. Revolving Commitments in accordance with their
        respective Proportionate Shares of the Total U.S. Revolving Commitment,
        with each U.S. Revolving Borrowing to be comprised of a U.S. Revolving
        Loan by each U.S. Lender with a U.S. Revolving Commitment equal to such
        Lender's Proportionate Share of such U.S. Revolving Borrowing. Except as
        otherwise provided herein, LSI may borrow, repay and reborrow U.S.
        Revolving Loans until the Revolving Termination Date.

               (b) U.S. 364 Day Borrowing Availability. Subject to the terms
        and conditions of this Agreement (including the amount limitations set
        forth in Paragraph 2.03), each U.S. Lender with a U.S. 364 Day
        Commitment severally agrees to advance to LSI from time to time during
        the period beginning on the U.S. Closing Date and ending on the U.S. 364
        Day Termination Date such loans in Dollars as LSI may request under this
        Subparagraph 2.01(b) (individually, a "U.S. 364 Day Loan"); provided,
        however, that

                      (i) the aggregate principal amount of all U.S. 364 Day
               Loans made by such Lender at any time outstanding shall not
               exceed such Lender's U.S. 364 Day Commitment at such time; and

                      (ii) the aggregate principal amount of all U.S. 364 Day
               Loans made by all Lenders at any time outstanding shall not
               exceed the Total U.S. 364 Day Commitment at such time.

        All U.S. 364 Day Loans shall be made on a pro rata basis by all U.S.
        Lenders with U.S. 364 Day Commitments in accordance with their
        respective Proportionate Shares of the Total U.S. 364 Day Commitment,
        with each U.S. 364 Day Borrowing to be comprised of a U.S. 364 Day Loan
        by each U.S. Lender with a U.S. 364 Day Commitment equal to such
        Lender's Proportionate Share of such U.S. 364 Day Borrowing. Except as
        otherwise provided herein, LSI may borrow, repay and reborrow U.S. 364
        Day Loans until the U.S. 364 Day Termination Date.

               (c) Notice of Borrowing. LSI shall request each U.S. Borrowing by
        delivering to Agent an irrevocable written notice in the form of Exhibit
        A, appropriately completed (a "Notice of U.S. Borrowing"), which
        specifies, among other things:

                      (i) Whether the requested U.S. Borrowing is a U.S.
               Revolving Borrowing or a U.S. 364 Day Borrowing;

                                       25
<PAGE>   26

                      (ii) The principal amount of the requested U.S. Borrowing,
               which shall be in the minimum amount of $15,000,000 or an
               integral multiple of $5,000,000 in excess thereof;

                      (iii) Whether the requested U.S. Borrowing is to consist
               of Base Rate Loans or LIBOR Loans;

                      (iv) If the requested U.S. Borrowing is to consist of
               LIBOR Loans, the initial Interest Period selected by LSI for such
               LIBOR Loans in accordance with Subparagraph 2.01(f); and

                      (v) The date of the requested U.S. Borrowing, which (A) in
               the case of a U.S. Revolving Borrowing, shall be a Business Day
               not later than the Revolving Termination Date, and (B) in the
               case of a U.S. 364 Day Borrowing, shall be a Business Day not
               later than the U.S. 364 Day Termination Date;

        LSI shall give each Notice of U.S. Borrowing to Agent at least three (3)
        Business Days before the date of the requested U.S. Borrowing in the
        case of a U.S. Borrowing consisting of LIBOR Loans and at least one (1)
        Business Day before the date of the requested U.S. Borrowing in the case
        of a U.S. Borrowing consisting of Base Rate Loans. Each Notice of U.S.
        Borrowing shall be delivered by first-class mail or facsimile to Agent
        at the office or facsimile number and during the hours specified in
        Paragraph 8.01; provided, however, that LSI shall promptly deliver to
        Agent the original of any Notice of U.S. Borrowing initially delivered
        by facsimile. Agent shall promptly notify each U.S. Lender with a U.S.
        Revolving Commitment of each Notice of U.S. Borrowing requesting a U.S.
        Revolving Borrowing and of the amount and Type of (and, if applicable,
        the Interest Period for) each U.S. Revolving Loan to be made by such
        Lender as part of the requested U.S. Revolving Borrowing, and Agent
        shall promptly notify each U.S. Lender with a U.S. 364 Day Commitment of
        each Notice of U.S. Borrowing requesting a U.S. 364 Day Borrowing and of
        the amount and Type of (and, if applicable, the Interest Period for)
        each U.S. 364 Day Loan to be made by such Lender as part of the
        requested U.S. 364 Day Borrowing.

               (d) Interest Rates. LSI shall pay interest on the unpaid
        principal amount of each U.S. Loan from the date of such U.S. Loan until
        the Maturity thereof, at one of the following rates per annum:

                      (i) During such periods as such U.S. Loan is a Base Rate
               Loan, at a rate per annum equal to the Base Rate plus the
               Applicable Margin therefor, such rate to change from time to time
               as the Applicable Margin or Base Rate shall change; and

                      (ii) During such periods as such U.S. Loan is a LIBOR
               Loan, at a rate per annum equal at all times during each Interest
               Period for such LIBOR Loan to the LIBO Rate for such Interest
               Period plus the Applicable Margin therefor, such rate to change
               from time to time as the Applicable Margin shall change.

                                       26
<PAGE>   27

        All U.S. Loans in each U.S. Borrowing shall, at any given time prior to
        Maturity, bear interest at one, and only one, of the above rates. The
        number of U.S. Borrowings consisting of LIBOR Loans shall not exceed
        four (4) at any time.

               (e) Conversion of U.S. Loans. LSI may convert any U.S. Borrowing
        from one Type of U.S. Borrowing to the other Type; provided, however,
        that any conversion of a U.S. Borrowing consisting of LIBOR Loans into a
        U.S. Borrowing consisting of Base Rate Loans shall be made on, and only
        on, the last day of an Interest Period for such LIBOR Loans. LSI shall
        request such a conversion by an irrevocable written notice to Agent in
        the form of Exhibit B, appropriately completed (a "Notice of U.S.
        Borrowing Conversion"), which specifies, among other things:

                      (i) The U.S. Borrowing which is to be converted;

                      (ii) The Type of U.S. Borrowing into which it is to be
               converted;

                      (iii) If any U.S. Borrowing is to be converted into a U.S.
               Borrowing consisting of LIBOR Loans, the initial Interest Period
               selected by LSI for such LIBOR Loans in accordance with
               Subparagraph 2.01(f); provided, that no such conversion shall be
               made if a Default has occurred and is continuing; and

                      (iv) The date of the requested conversion, which shall be
               a Business Day.

        LSI shall give each Notice of U.S. Borrowing Conversion to Agent at
        least three (3) Business Days before the date of the requested
        conversion. Each Notice of U.S. Borrowing Conversion shall be delivered
        by first-class mail or facsimile to Agent at the office or to the
        facsimile number and during the hours specified in Paragraph 8.01;
        provided, however, that LSI shall promptly deliver to Agent the original
        of any Notice of U.S. Borrowing Conversion initially delivered by
        facsimile. Agent shall promptly notify each U.S. Lender with U.S.
        Revolving Loans of the contents of each Notice of U.S. Borrowing
        Conversion relating to such U.S. Revolving Loans, and Agent shall
        promptly notify each U.S. Lender with U.S. 364 Day Loans of the contents
        of each Notice of U.S. Borrowing Conversion relating to such U.S. 364
        Day Loans.

               (f) LIBOR Loan Interest Periods.

                      (i) The initial and each subsequent Interest Period
               selected by LSI for a U.S. Borrowing consisting of LIBOR Loans
               shall be one (1), two (2), three (3) or six (6) months; provided,
               however, that (A) any Interest Period which would otherwise end
               on a day which is not a Business Day shall be extended to the
               next succeeding Business Day unless such next Business Day falls
               in another calendar month, in which case such Interest Period
               shall end on the immediately preceding Business Day; (B) any
               Interest Period which begins on the last Business Day of a
               calendar month (or on a day for which there is no numerically
               corresponding day in the calendar month at the end of such
               Interest Period) shall end on the last Business Day of a calendar
               month; (C) with respect to any U.S. 364 Day Borrowing, no
               Interest Period shall end after the U.S. 364 Day Termination
               Date;

                                       27
<PAGE>   28

               and (D) with respect to any U.S. Revolving Borrowing, no Interest
               Period shall end after a Scheduled Reduction Date unless, after
               giving effect to such Interest Period, the aggregate principal
               amount of all U.S. Revolving Borrowings consisting of Base Rate
               Loans and LIBOR Loans having Interest Periods ending on or prior
               to such Scheduled Reduction Date equals or exceeds the amount of
               the Total U.S. Revolving Commitment on such Scheduled Reduction
               Date, and no Interest Period shall end after the Revolving
               Termination Date.

                      (ii) LSI shall notify Agent by an irrevocable written
               notice in the form of Exhibit C, appropriately completed (a
               "Notice of U.S. Borrowing Interest Period Selection"), at least
               three (3) Business Days prior to the last day of each Interest
               Period for a U.S. Borrowing consisting of LIBOR Loans of the
               Interest Period selected by LSI for the next succeeding Interest
               Period for such LIBOR Loans. Each Notice of U.S. Borrowing
               Interest Period Selection shall be given to Agent by first-class
               mail or facsimile to the office or the facsimile number and
               during the hours specified in Paragraph 8.01; provided, however,
               that LSI shall promptly deliver to Agent the original of any
               Notice of U.S. Borrowing Interest Period Selection initially
               delivered by facsimile. If LSI fails to notify Agent of the next
               Interest Period for a U.S. Borrowing consisting of LIBOR Loans in
               accordance with this Subparagraph 2.01(f), such LIBOR Loans shall
               automatically convert to Base Rate Loans on the last day of the
               current Interest Period therefor.

               (g) Scheduled Payments. Unless earlier repayment is required by
        Subparagraph 2.05(c), LSI shall repay the principal amount of the U.S.
        Revolving Loans on the Revolving Termination Date. LSI shall repay the
        principal amount of the U.S. 364 Day Loans on the U.S. 364 Day
        Termination Date. LSI shall pay accrued interest on the unpaid principal
        amount of each U.S. Loan in arrears (i) in the case of a Base Rate Loan,
        on the last day in each March, June, September and December (commencing
        with the first such day after the U.S. Closing Date), (ii) in the case
        of a LIBOR Loan, on the last day of each Interest Period (and if any
        such Interest Period is equal to or longer than three (3) months, every
        three (3) months); and (iii) in the case of all U.S. Loans, upon
        prepayment (to the extent thereof) and at Maturity.

               (h) Purpose. LSI shall use the proceeds of the U.S. Borrowings
        to consummate the Symbios Acquisition, repay in full all amounts owing
        under the Outstanding U.S. Loan Facility and for general corporate
        purposes.

        2.02. Japanese Borrowing.

               (a) Availability. Subject to the terms and conditions of this
        Agreement (including the amount limitations set forth in Paragraph
        2.03), each Japanese Lender severally agrees to advance to LLJS in a
        single advance on the Japanese Closing Date a term loan in Yen under
        this Paragraph 2.02 (individually, a "Japanese Loan"); provided,
        however, that

                                       28
<PAGE>   29

                      (i) the aggregate principal amount of all Japanese Loans
               made by such Lender shall not exceed such Lender's Japanese
               Commitment on such date; and

                      (ii) the aggregate principal amount of the Japanese
               Borrowing shall not exceed the Total Japanese Commitment.

        All Japanese Loans shall be made on a pro rata basis by all Japanese
        Lenders in accordance with their respective Proportionate Shares of the
        Total Japanese Commitment. LLJS may not reborrow the principal amount of
        any Japanese Loan after repayment or prepayment thereof.

               (b) Notice of Borrowing. LLJS shall request the Japanese
        Borrowing by delivering to Agent an irrevocable written notice in the
        form of Exhibit D, appropriately completed (the "Notice of Japanese
        Borrowing"), which specifies, among other things:

                      (i) The principal amount of the Japanese Borrowing, which
               shall be in the minimum amount of (Yen)1,000,000,000 or an
               integral multiple of (Yen)100,000,000 in excess thereof;

                      (ii) The initial Interest Period selected by LLJS for the
               Japanese Borrowing in accordance with Subparagraph 2.02(d); and

                      (iii) The date of the Japanese Borrowing, which shall be a
               Business Day not later than August 31, 1998.

        LLJS shall give the Notice of Japanese Borrowing to Agent at least four
        (4) Business Days before the Japanese Closing Date. The Notice of
        Japanese Borrowing shall be delivered by first-class mail or facsimile
        to Agent at the office or facsimile number and during the hours
        specified in Paragraph 8.01; provided, however, that LLJS shall promptly
        deliver to Agent the original of the Notice of Japanese Borrowing if
        initially delivered by facsimile. Agent shall promptly notify each
        Japanese Lender of the amount of and Interest Period for each Japanese
        Loan to be made by such Lender as part of the Japanese Borrowing.

               (c) Interest Rates. LLJS shall pay interest on the unpaid
        principal amount of each Japanese Loan from the date of such Japanese
        Loan until the Maturity thereof, at a rate per annum equal at all times
        during each Interest Period to the TIBO Rate for such Interest Period
        plus the Applicable Margin therefor, such rate to change from time to
        time as the Applicable Margin shall change.

                                       29
<PAGE>   30

               (d) Japanese Borrowing Interest Periods.

                      (i) The initial and each subsequent Interest Period
               selected by LLJS for the Japanese Borrowing shall be one (1), two
               (2), three (3) or six (6) months; provided, however, that (A) any
               Interest Period which would otherwise end on a day which is not a
               Business Day shall be extended to the next succeeding Business
               Day unless such next Business Day falls in another calendar
               month, in which case such Interest Period shall end on the
               immediately preceding Business Day; (B) any Interest Period which
               begins on the last Business Day of a calendar month (or on a day
               for which there is no numerically corresponding day in the
               calendar month at the end of such Interest Period) shall end on
               the last Business Day of a calendar month; and (C) no Interest
               Period shall end after the Revolving Termination Date.

                      (ii) LLJS shall notify Agent by an irrevocable written
               notice in the form of Exhibit E, appropriately completed (a
               "Notice of Japanese Borrowing Interest Period Selection"), at
               least four (4) Business Days prior to the last day of each
               Interest Period for the Japanese Borrowing of the Interest Period
               selected by LLJS for the next succeeding Interest Period for the
               Japanese Borrowing. Each Notice of Japanese Borrowing Interest
               Period Selection shall be given to Agent by first-class mail or
               facsimile to the office or the facsimile number and during the
               hours specified in Paragraph 8.01; provided, however, that LLJS
               shall promptly deliver to Agent the original of any Notice of
               Japanese Borrowing Interest Period Selection initially delivered
               by facsimile. If LLJS fails to notify Agent of the next Interest
               Period for the Japanese Borrowing in accordance with this
               Subparagraph 2.02(d), the Japanese Borrowing shall automatically
               have an Interest Period of one (1) month following the current
               Interest Period.

               (e) Scheduled Payments. Unless earlier repayment is required by
        Subparagraph 2.05(c), LLJS shall repay the principal amount of the
        Japanese Borrowing on the Revolving Termination Date. LLJS shall pay
        accrued interest on the unpaid principal amount of each Japanese Loan in
        arrears on the last day of each Interest Period (and if any such
        Interest Period is equal to or longer than three (3) months, every three
        (3) months), upon prepayment (to the extent thereof) and at Maturity.

               (f) Purpose. LLJS shall use the proceeds of the Japanese
        Borrowing to repay in full the Outstanding Japanese Loan Facility and
        for its general corporate purposes.

        2.03. Amount Limitations, Commitment Reductions, Etc.

               (a) Total Commitments. The aggregate principal amount of all
        U.S. Revolving Loans outstanding at any time shall not exceed the Total
        U.S. Revolving Commitment at such time, and the aggregate principal
        amount of all U.S. 364 Day Loans outstanding at any time shall not
        exceed the Total U.S. 364 Day Commitment. Until the Outstanding Japanese
        Loan Facility is terminated and repaid in full, the unused amount of the
        Commitments (including the Yen Equivalent of the U.S. Revolving
        Commitments

                                       30
<PAGE>   31

        and the U.S. 364 Day Commitments) shall not be less than the aggregate
        amount outstanding under the Outstanding Japanese Loan Facility.

               (b) Mandatory Reduction of Commitments. The Commitments shall be
        reduced as follows:

                      (i) On each Scheduled Reduction Date, the Total U.S.
               Revolving Commitment shall be permanently reduced by an amount
               equal to Thirty-Four Million Three Hundred Seventy-Five Thousand
               Dollars ($34,375,000); provided, that LSI's obligation under this
               provision to reduce the Total U.S. Revolving Commitment shall not
               exceed the amount necessary to reduce the Total U.S. Revolving
               Commitment to $240,000,000, after taking into account any
               mandatory reduction pursuant to clause (ii) of this Subparagraph
               2.03(b) and any voluntary reduction pursuant to Subparagraph
               2.03(c)..

                      (ii) If at any time after the Initial Closing Date LSI or
               any of its Subsidiaries sells assets other than in the ordinary
               course of business (including any sale of assets to be leased
               back in connection with a "synthetic" lease of such assets), or
               sells or issues any Indebtedness for borrowed money (including
               Indebtedness evidenced by notes, bonds, debentures or other
               similar instruments), yielding Net Proceeds which exceed
               $50,000,000 for any single transaction or series of related
               transactions, immediately after such sale or issuance the Total
               U.S. 364 Day Commitment shall be permanently reduced by an
               aggregate amount equal to the Net Proceeds of such sale or
               issuance and, if such Net Proceeds exceed the Total U.S. 364 Day
               Commitment, the Total U.S. Revolving Commitment shall be
               permanently reduced by an aggregate amount equal to such excess
               Net Proceeds; provided, that with respect to the Net Proceeds
               from "synthetic" leases or Indebtedness for borrowed money, LSI's
               obligation under this provision to reduce the Total U.S.
               Revolving Commitment shall not exceed the amount necessary to
               reduce the Total U.S. Revolving Commitment to $240,000,000, after
               taking into account any mandatory reduction pursuant to clause
               (i) of this Subparagraph 2.03(b) and any voluntary reduction
               pursuant to Subparagraph 2.03(c).

               (c) Voluntary Reduction or Cancellation of Commitments. LSI may,
        upon three (3) Business Days written notice to Agent, permanently reduce
        or cancel in their entirety either of the Total U.S. Revolving
        Commitment or the Total 364 Day Commitment; provided, however, that:

                      (i) Any reduction of the Total U.S. Revolving Commitment
               shall be in the amount of $15,000,000 or an integral multiple of
               $5,000,000 in excess thereof and LSI shall not reduce or cancel
               the Total U.S. Revolving Commitment prior to the Revolving
               Termination Date, if, after giving effect to such reduction, the
               aggregate principal amount of all U.S. Revolving Loans then
               outstanding would exceed the Total U.S. Revolving Commitment as
               so reduced or, after giving effect to such cancellation, any U.S.
               Revolving Loan would then remain outstanding; and

                                       31
<PAGE>   32

                      (ii) Any reduction of the Total U.S. 364 Day Commitment
               shall be in the amount of $15,000,000 or an integral multiple of
               $5,000,000 in excess thereof and LSI shall not reduce or cancel
               the Total U.S. 364 Day Commitment prior to the U.S. 364 Day
               Termination Date, if, after giving effect to such reduction, the
               aggregate principal amount of all U.S. 364 Day Loans then
               outstanding would exceed the Total U.S. 364 Day Commitment as so
               reduced or, after giving effect to such cancellation, any U.S.
               364 Day Loan would then remain outstanding.

               (d) Effect of Commitment Reductions. From the effective date of
        any reduction of any of the Commitments, the Commitment Fees payable
        with respect to such Commitments pursuant to Subparagraph 2.04(b) shall
        be computed on the basis of the Commitments as so reduced. Once reduced
        or cancelled, Commitments may not be increased or reinstated without the
        prior written consent of all Lenders holding Loans of the type covered
        by such Commitments. Any reduction of the Total U.S. Revolving
        Commitment or the Total U.S. 364 Day Commitment pursuant to Subparagraph
        2.03(b) shall be applied ratably to reduce each Lender's U.S. Revolving
        Commitment or U.S. 364 Day Commitment, as the case may be, in accordance
        with clause (i) of Subparagraph 2.09(a). Any reduction of the Total U.S.
        Revolving Commitment pursuant to clause (ii) of Subparagraph 2.03(b) or
        Subparagraph 2.03(c) shall be in addition to, and not in substitution
        for, the reduction of the Total U.S. Revolving Commitment required by
        clause (i) of Subparagraph 2.03(b).

        2.04. Fees.

               (a) Agent's Fee. LSI shall pay to Agent, for its own account,
        agent's fees and other compensation in the amounts and at the times set
        forth in the Agent's Fee Letter and the Agent's Syndication Letter.

               (b) Commitment Fees.

                      (i) LSI shall pay to Agent, for the ratable benefit of
               U.S. Lenders with U.S. Revolving Commitments as provided in
               clause (iv) of Subparagraph 2.09(a), commitment fees (the "U.S.
               Revolving Commitment Fees") equal to the per annum percentage
               which is determined pursuant to the Pricing Grid of the daily
               average difference between the Total U.S. Revolving Commitment
               and the aggregate principal amount of all U.S. Revolving Loans
               outstanding for each day during the period beginning on the date
               of this Agreement and ending on the Revolving Termination Date.
               LSI shall pay the U.S. Revolving Commitment Fees in arrears on
               the last day in each March, June, September and December
               (commencing with the first such day after the U.S. Closing Date)
               and the Revolving Termination Date.

                      (ii) LSI shall pay to Agent, for the ratable benefit of
               U.S. Lenders with U.S. 364 Day Commitments as provided in clause
               (v) of Subparagraph 2.09(a), commitment fees (the "U.S. 364 Day
               Commitment Fees") of twenty-two and one-half hundredths of one
               percent (0.225%) of the daily average difference between the
               Total U.S. 364 Day Commitment and the aggregate principal amount

                                       32
<PAGE>   33

                of all U.S. 364 Day Loans outstanding for each day during the
                period beginning on the date of this Agreement and ending on the
                U.S. 364 Day Termination Date. LSI shall pay the U.S. 364 Day
                Commitment Fees in arrears on the last day in each March, June,
                September and December (commencing with the first such day after
                the U.S. Closing Date) and the U.S. 364 Day Termination Date.

        2.05. Prepayments.

               (a) Terms of all Prepayments. Upon the prepayment of any
        Borrowing (whether such prepayment is an optional prepayment under
        Subparagraph 2.05(b) or a mandatory prepayment required by any provision
        of this Agreement or the other Credit Documents, including a prepayment
        upon acceleration), the Borrower making such prepayment shall pay to the
        applicable Lenders (i) all accrued interest to the date of such
        prepayment on the amount prepaid and (ii) if such prepayment is the
        prepayment of LIBOR Loans or the prepayment of Japanese Loans on a day
        other than the last day of an Interest Period for such Loans, all
        amounts payable to such Lenders pursuant to Paragraph 2.12.

               (b) Optional Prepayments. At its option, LSI may, upon one (1)
        Business Day notice to Agent in the case of Base Rate Loans or three (3)
        Business Days notice to Agent in the case of LIBOR Loans, prepay any
        U.S. Borrowing in part, in an aggregate principal amount of $15,000,000
        or more, or in whole. At its option, LLJS may, upon four (4) Business
        Days notice to Agent, prepay the Japanese Borrowing in part, in an
        aggregate principal amount of (Yen)1,000,000,000 or more, or in whole.

               (c) Mandatory Prepayments. Borrowers shall prepay the Loans as
        follows:

                      (i) If at any time the aggregate principal amount of all
               U.S. Revolving Loans then outstanding exceeds the Total U.S.
               Revolving Commitment at such time, LSI shall immediately prepay
               U.S. Revolving Loans in an aggregate principal amount equal to
               such excess.

                      (ii) If at any time the aggregate principal amount of all
               U.S. 364 Day Loans then outstanding exceeds the Total U.S. 364
               Day Commitment at such time, LSI shall immediately prepay U.S.
               364 Day Loans in an aggregate principal amount equal to such
               excess.

                      (iii) If at any time after the U.S. Closing Date LSI or
               any of its Subsidiaries sells assets other than in the ordinary
               course of business (including any sale of assets to be leased
               back in connection with a "synthetic" lease of such assets), or
               sells or issues any Indebtedness for borrowed money (including
               Indebtedness evidenced by notes, bonds, debentures or other
               similar instruments), yielding Net Proceeds which exceed
               $50,000,000 for any single transaction or series of related
               transactions, LSI shall, immediately after such sale or issuance,
               prepay the U.S. 364 Day Loans in an aggregate amount equal to the
               Net Proceeds of such sale or issuance and, if such Net Proceeds
               exceed the total amount payable with respect to the U.S. 364 Day
               Loans, LSI shall prepay the U.S.

                                       33
<PAGE>   34

               Revolving Loans in an aggregate amount equal to such
               excess Net Proceeds; provided, that with respect to the Net
               Proceeds from "synthetic" leases or Indebtedness for borrowed
               money, LSI's obligation under this provision to prepay such U.S.
               Loans shall not exceed the amount necessary to reduce the
               aggregate outstanding principal amount of the U.S. Loans to
               $240,000,000, after taking into account any optional prepayment
               pursuant to Subparagraph 2.05(b).

               (d) Application of Prepayments. All prepayments of the U.S.
        Borrowings shall, to the extent possible, be first applied to prepay
        Base Rate Loans, if any, and then if any funds remain, to prepay LIBOR
        Loans.

        2.06.  Other Payment Terms.

               (a) Place and Manner.

                      (i) LSI shall make all payments due to each U.S. Lender or
               Agent related to U.S. Borrowings by payments to Agent at Agent's
               U.S. office located at the address specified in Paragraph 8.01,
               with each such payment due to a U.S. Lender to be for the account
               of such Lender and such Lender's applicable Domestic Lending
               Office or Euro-Dollar Lending Office.

                      (ii) LLJS shall make all payments due to each Japanese
               Lender or Agent related to the Japanese Borrowing by payments to
               Agent at Agent's Tokyo office located at the address specified in
               Paragraph 8.01, with each such payment due to a Japanese Lender
               to be for the account of such Lender and such Lender's Japanese
               Lending Office.

                      (iii) Each Borrower shall, unless otherwise directed by
               Agent, make all other payments due to each Lender or Agent
               hereunder by payments to Agent's U.S. office located at the
               address specified in Paragraph 8.01, with each such payment due
               to a Lender to be for the account of such Lender and such
               Lender's Applicable Lending Office.

                      (iv) Borrowers shall make all payments hereunder in the
               lawful currency required by Subparagraph 2.06(c) and in same day
               or immediately available funds and without deduction or offset
               not later than 11:00 a.m. (Chicago time, in the case of any
               payment to be made to Agent's U.S. office located at the address
               specified in Paragraph 8.01, or Tokyo time, in the case of any
               payment to be made to Agent's Tokyo office located at the address
               specified in Paragraph 8.01) and on the date due. Agent shall
               promptly disburse to each Lender each payment received by Agent
               for the account of such Lender.

               (b) Date. Whenever any payment due hereunder shall fall due on a
        day other than a Business Day, such payment shall be made on the next
        succeeding Business Day, and such extension of time shall be included in
        the computation of interest or fees, as the case may be, unless such
        next Business Day falls in another calendar month, in which case such
        payment shall be due on the immediately preceding Business Day.

                                       34
<PAGE>   35

               (c) Currency of Payment.

                      (i) LSI shall pay principal of, interest on and all other
               amounts related to U.S. Borrowings in Dollars, and LLJS shall pay
               principal of, interest on and all other amounts related to the
               Japanese Borrowing in Yen. Borrowers shall pay all other amounts
               payable under this Agreement and the other Credit Documents in
               Dollars. If, for any reason, LLJS is prohibited by any
               Governmental Rule from making any required Yen payment hereunder
               in Yen, LLJS shall make such payment in Dollars in the Dollar
               Equivalent of such Yen amount.

                      (ii) If any amounts required to be paid by either Borrower
               under this Agreement, any other Credit Document or any order,
               judgment or award given or rendered in relation hereto or thereto
               has to be converted from the currency (the "first currency") in
               which the same is payable hereunder or thereunder into another
               currency (the "second currency") for the purpose of (A) making or
               filing a claim or proof against such Borrower with any
               Governmental Authority, (B) obtaining an order or judgment in any
               court or other tribunal or (C) enforcing any order or judgment
               given or made in relation hereto, such Borrower shall, to the
               fullest extent permitted by law, indemnify and hold harmless each
               of the Persons to whom such amounts are payable from and against
               any loss suffered as a result of any discrepancy between (1) the
               rate of exchange used for such purpose to convert the amounts in
               question from the first currency into the second currency and (2)
               the rate or rates of exchange at which such Person may, using
               reasonable efforts in the ordinary course of business, purchase
               the first currency with the second currency upon receipt of a sum
               paid to it in satisfaction, in whole or in part, of any such
               order, judgment, claim or proof. The foregoing indemnity shall
               constitute a separate obligation of each Borrower distinct from
               their other respective obligations hereunder and shall survive
               the giving or making of any judgment or order in relation to all
               or any of such obligations. The respective obligations of
               Borrowers under this Subparagraph 2.06(c) shall survive the
               payment and performance of their respective Obligations and the
               termination of this Agreement.

               (d) Late Payments. If any amount required to be paid by either
        Borrower under this Agreement or the other Credit Documents (including,
        without limitation, principal or interest payable on any Loan, any fees
        or any other amount) remains unpaid after such amount is due and after
        the expiration of any applicable grace period, such Borrower shall pay
        interest on the aggregate, outstanding balance of such amount from the
        date due until such amount is paid in full at a per annum rate equal to
        (i) in the case any amount payable in Dollars, the Base Rate plus two
        percent (2.00%), such rate to change from time to time as the Base Rate
        shall change, and (ii) in the case of any amount payable in Yen, the
        Overnight Rate for such amount plus three percent (3.00%), such rate to
        change from time to time as the Overnight Rate shall change.

               (e) Application of Payments. Unless an Event of Default has
        occurred and is continuing, each Borrower may specify that any payment
        made by such Borrower be applied to any amount then due and owing under
        this Agreement or the other Credit

                                       35
<PAGE>   36

        Documents in a written notice given to Agent at the time such payment is
        made. Upon an Event of Default or if the applicable Borrower does not so
        specify the application of any payment, (i) all payments hereunder shall
        be applied first to unpaid fees, costs and expenses then due and payable
        under this Agreement or the other Credit Documents, second to accrued
        interest then due and payable under this Agreement or the other Credit
        Documents and finally to reduce the principal amount of outstanding
        Loans, and (ii) a payment in Dollars to be applied to accrued interest
        or principal shall be applied to all accrued interest or principal then
        due and payable on all outstanding U.S. Loans and a payment in Yen to be
        applied to accrued interest or principal shall be applied to all accrued
        interest or principal then due and payable on all outstanding Japanese
        Loans.

               (f) Failure to Pay Agent. Unless Agent shall have received notice
        from a Borrower at least one (1) Business Day prior to the date on which
        any payment is due to Lenders hereunder that such Borrower will not make
        such payment in full, Agent shall be entitled to assume that such
        Borrower has made or will make such payment in full to Agent on such
        date and Agent may, in reliance upon such assumption, cause to be paid
        to the applicable Lenders on such due date an amount equal to the amount
        then due such Lenders. If and to the extent such Borrower shall not have
        so made such payment in full to Agent, each such Lender shall repay to
        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 Agent, at a per annum rate equal to (i) the Federal Funds Rate
        for the first three (3) days and the Base Rate thereafter for any amount
        in Dollars or (ii) the Overnight Rate plus one percent (1%) for any
        amount in Yen. A certificate of Agent submitted to any Lender with
        respect to any amount owing by such Lender under this Subparagraph
        2.06(f) shall constitute prima facie evidence of such amount.

        2.07. Loan Accounts; Notes.

               (a) Loan Accounts. The obligation of each Borrower to repay the
        Loans made to it by each Lender and to pay interest thereon at the rates
        provided herein shall be evidenced by an account or accounts maintained
        by such Lender on its books (individually, a "Loan Account"), except
        that any Lender may request that its U.S. Loans be evidenced by a note
        or notes pursuant to Subparagraph 2.07(b). Each Lender shall record in
        its Loan Accounts (i) the date and amount of each Loan made by such
        Lender, (ii) the interest rates applicable to each such Loan and the
        effective dates of all changes thereto, (iii) the Interest Period for
        each LIBOR Loan and each Japanese Loan, (iv) the date and amount of each
        principal and interest payment on each Loan and (v) such other
        information as such Lender may determine is necessary for the
        computation of principal and interest payable to it by each Borrower
        hereunder; provided, however, that any failure by a Lender to make, or
        any error by any Lender in making, any such notation shall not affect
        Borrowers' Obligations hereunder. The Loan Accounts shall constitute
        prima facie evidence of the matters noted therein.

               (b) Notes. If any Lender so requests, such Lender's U.S. Loans
        shall be evidenced by one or more promissory notes in the form of
        Exhibit F (individually, a "Note"), each of which shall be (i) payable
        to the order of such Lender, (ii) in the amount

                                       36
<PAGE>   37

        of such Lender's U.S. Revolving Commitment or U.S. 364 Day Commitment,
        as the case may be, (iii) dated the U.S. Closing Date, and (iv)
        otherwise appropriately completed.

        2.08. Loan Funding.

               (a) Lender Funding and Disbursements to Borrowers.

                      (i) Each U.S. Lender shall, before 12:00 noon (Chicago
               time) on the date of each U.S. Borrowing, make available to Agent
               at Agent's U.S. office specified in Paragraph 8.01, in
               immediately available funds, such Lender's Proportionate Share of
               such U.S. Borrowing. After Agent's receipt of such funds and upon
               satisfaction of the applicable conditions set forth in Section
               III, Agent shall promptly disburse such funds to LSI no later
               than 2:00 p.m. (Chicago time) in immediately available funds.
               Agent shall disburse the proceeds of such U.S. Borrowing to the
               account or accounts specified by LSI in the applicable Notice of
               U.S. Borrowing.

                      (ii) Each Japanese Lender shall, before 10:00 a.m. (Tokyo
               time) on the date of the Japanese Borrowing, make available to
               Agent at Agent's Tokyo office specified in Paragraph 8.01, in
               immediately available funds, such Lender's Proportionate Share of
               the Japanese Borrowing. After Agent's receipt of such funds and
               upon satisfaction of the applicable conditions set forth in
               Section III, Agent shall promptly disburse such funds to LLJS no
               later than 1:00 p.m. (Tokyo time) in immediately available funds.
               Agent shall disburse the proceeds of the Japanese Borrowing to
               the account or accounts specified by LLJS in the Notice of
               Japanese Borrowing.

               (b) Lender Failure to Fund. Unless Agent shall have received
        notice from a Lender prior to the date of any Borrowing that such Lender
        will not make available to Agent such Lender's Proportionate Share of
        such Borrowing, Agent shall be entitled to assume that such Lender has
        made or will make such portion available to Agent on the date of such
        Borrowing in accordance with Subparagraph 2.08(a), and Agent may on such
        date, in reliance upon such assumption, disburse or otherwise credit to
        the applicable Borrower a corresponding amount. If any Lender does not
        make the amount of its Proportionate Share of such Borrowing available
        to Agent on or prior to the date of such Borrowing, such Lender shall
        pay to Agent, on demand, interest which shall accrue on such amount from
        the date of such Borrowing until such amount is paid to Agent at rates
        equal to (i) the Federal Funds Rate for the first three (3) days and the
        Base Rate thereafter for any amount in Dollars or (ii) the Overnight
        Rate plus one percent (1%) for any amount in Yen. A certificate of Agent
        submitted to any Lender with respect to any amount owing by such Lender
        under this Subparagraph 2.08(b) shall constitute prima facie evidence of
        such amount. If the amount of any Lender's Proportionate Share of any
        Borrowing is not paid to Agent by such Lender within three (3) Business
        Days after the date of such Borrowing, the applicable Borrower shall
        repay such amount to Agent, on demand, together with interest thereon,
        for each day from the date such amount was disbursed to such Borrower
        until the date such amount is repaid to Agent, at the interest rate
        applicable at the time to the Loans comprising such Borrowing.

                                       37
<PAGE>   38

               (c) Lenders' Obligations Several. The failure of any Lender to
        make a Loan to be made by it as part of any Borrowing shall not relieve
        any other Lender of its obligation hereunder to make its Loan as part of
        such Borrowing, but no Lender shall be obligated in any way to make any
        Loan which another Lender has failed or refused to make or otherwise be
        in any way responsible for the failure or refusal of any other Lender to
        make any Loan required to be made by such other Lender.

        2.09.  Pro Rata Treatment.

               (a) Borrowings, Commitment Reductions, Etc. Except as otherwise
        provided herein:

                      (i) Each U.S. Revolving Borrowing and reduction in the
               Total U.S. Revolving Commitment shall be made or shared by U.S.
               Lenders with U.S. Revolving Commitments pro rata according to
               their applicable respective U.S. Revolving Commitments, each U.S.
               364 Day Borrowing and reduction in the Total U.S. 364 Day
               Commitment shall be made or shared by U.S. Lenders with U.S. 364
               Day Commitments pro rata according to their applicable respective
               U.S. 364 Day Commitments, and the Japanese Borrowing shall be
               made by Japanese Lenders pro rata according to their applicable
               respective Japanese Commitments;

                      (ii) Each payment of principal on Loans in any Borrowing
               shall be shared among Lenders which made or funded the Loans in
               such Borrowing pro rata according to the respective unpaid
               principal amounts of such Loans then owed to such Lenders;

                      (iii) Each payment of interest on Loans in any Borrowing
               shall be shared among Lenders which made or funded the Loans in
               such Borrowing pro rata according to (A) the respective unpaid
               principal amounts of such Loans so made or funded by such Lenders
               and (B) the dates on which such Lenders so made or funded such
               Loans;

                      (iv) Each payment of U.S. Revolving Commitment Fees shall
               be shared among U.S. Lenders with U.S. Revolving Commitments
               (except for Defaulting Lenders) pro rata according to (A) their
               respective Proportionate Shares of the Total U.S. Revolving
               Commitment and (B) in the case of each U.S. Lender which becomes
               a U.S. Lender with a U.S. Revolving Commitment hereunder after
               the date hereof and before the Revolving Termination Date, the
               date upon which such U.S. Lender so became a U.S. Lender with a
               U.S. Revolving Commitment;

                      (v) Each payment of U.S. 364 Day Commitment Fees shall be
               shared among U.S. Lenders with U.S. 364 Day Commitments (except
               for Defaulting Lenders) pro rata according to (A) their
               respective Proportionate Shares of the Total U.S. 364 Day
               Commitment and (B) in the case of each U.S. Lender which becomes
               a U.S. Lender with a U.S. 364 Day Commitment hereunder after the
               date

                                       38
<PAGE>   39

               hereof and before the U.S. 364 Day Termination Date, the date
               upon which such U.S. Lender so became a U.S. Lender with a U.S.
               364 Day Commitment;

                      (vi) Each payment of interest (other than interest on
               Loans) shall be shared among Lenders and Agent owed the amount
               upon which such interest accrues pro rata according to (A) the
               respective amounts so owed such Lenders and Agent and (B) the
               dates on which such amounts became owing to such Lenders and
               Agent; and

                      (vii) All other payments under this Agreement and the
               other Credit Documents shall be for the benefit of the Person or
               Persons specified.

               (b) Sharing of Payments, Etc. If any Lender shall obtain any
        payment (whether voluntary, involuntary, through the exercise of any
        right of setoff, or otherwise) on account of Loans owed to it as part of
        any Borrowing in excess of its ratable share of payments on account of
        all Loans in such Borrowing obtained by all applicable Lenders entitled
        to such payments, such Lender shall forthwith purchase from such other
        Lenders such participations in their Loans as shall be necessary to
        cause such purchasing Lender to share the excess payment ratably with
        each of them; provided, however, that if all or any portion of such
        excess payment is thereafter recovered from such purchasing Lender, such
        purchase shall be rescinded and each other applicable Lender shall repay
        to the purchasing Lender the purchase price to the extent of such
        recovery together with an amount equal to such other Lender's ratable
        share (according to the proportion of (i) the amount of such other
        Lender's required repayment to (ii) the total amount so recovered from
        the purchasing Lender) of any interest or other amount paid or payable
        by the purchasing Lender in respect of the total amount so recovered.
        Each Borrower agrees that any Lender so purchasing a participation from
        another Lender pursuant to this Subparagraph 2.09(b) may, to the fullest
        extent permitted by law, exercise all its rights of payment (including
        the right of setoff) with respect to such participation as fully as if
        such Lender were the direct creditor of such Borrower in the amount of
        such participation.

        2.10. Change of Circumstances.

               (a) Inability to Determine Rates. If, on or before the first day
        of any Interest Period for any LIBOR Loan or any Japanese Loan, (i) any
        U.S. Lender or Japanese Lender, as the case may be, shall advise Agent
        that the LIBO Rate or TIBO Rate, as the case may be, for such Interest
        Period cannot be adequately and reasonably determined due to the
        unavailability of funds in or other circumstances affecting the London
        interbank market or the Tokyo interbank market, as the case may be, or
        (ii) any U.S. Lender or Japanese Lender, as the case may be, shall
        advise Agent that the rate of interest for such Loan does not adequately
        and fairly reflect the cost to such Lender of making or maintaining such
        Loan, Agent shall immediately give notice of such condition to the
        applicable Borrower and the other U.S. Lenders or Japanese Lenders, as
        the case may be. After the giving of any such notice and until Agent
        shall otherwise notify the applicable Borrower that the circumstances
        giving rise to such condition no longer exist, such Borrower's right to
        obtain, continue or convert to LIBOR Loans or Japanese Loans, as the

                                       39
<PAGE>   40

        case may be, shall be suspended. Any LIBOR Loans outstanding at the
        commencement of any such suspension affecting the LIBO Rate shall be
        converted at the end of the then current Interest Period for such LIBOR
        Loans into Base Rate Loans unless such suspension has then ended. All
        Japanese Loans outstanding at the commencement of any such suspension
        affecting the TIBO Rate shall after the end of the then current Interest
        Period for such Japanese Loans bear interest at the Overnight Rate plus
        one percent (1.0%), such rate to change from time to time as the
        Overnight Rate shall change, until such suspension has ended.

               (b) Illegality. If, after the date of this Agreement, the
        adoption of any Governmental Rule, any change in any Governmental Rule
        or the application or requirements thereof (whether such change occurs
        in accordance with the terms of such Governmental Rule as enacted, as a
        result of amendment or otherwise), any change in the interpretation or
        administration of any Governmental Rule by any Governmental Authority,
        or compliance by any Lender with any request or directive (whether or
        not having the force of law) of any Governmental Authority (a "Change of
        Law") shall make it unlawful or impossible for any U.S. Lender to make
        or maintain any LIBOR Loans or any Japanese Lender to make or maintain
        any Japanese Loans, such Lender shall immediately notify Agent and the
        applicable Borrower of such Change of Law. Upon receipt of such notice,
        (i) such Borrower's right to obtain, continue or convert to LIBOR Loans
        or Japanese Loans, as the case may be, shall be suspended until such
        time as Agent shall notify such Borrower and the applicable Lenders that
        the circumstances giving rise to such suspension no longer exist, and
        (ii) such Borrower shall, if so requested by such Lender, immediately
        repay such Loans if such Lender shall notify such Borrower that such
        Lender may not lawfully continue to fund and maintain such Loans. Any
        conversion or prepayment of LIBOR Loans or Japanese Loans made pursuant
        to the preceding sentence prior to the last day of an Interest Period
        for such Loans shall be deemed a prepayment thereof for purposes of
        Paragraph 2.12. After any Lender notifies Agent and the applicable
        Borrower of such a Change in Law and until such Lender notifies Agent
        and such Borrower that it is no longer unlawful or impossible for such
        Lender to make or maintain a LIBOR Loan, all U.S. Loans of such Lender
        shall be Base Rate Loans.

               (c) Increased Costs. If, after the date of this Agreement, any
        Change of Law:

                      (i) Shall subject any U.S. Lender or Japanese Lender to
               any tax, duty or other charge with respect to any LIBOR Loan or
               Japanese Loan, as the case may be, or shall change the basis of
               taxation of payments by either Borrower to any such Lender on or
               in respect to such LIBOR Loan or Japanese Loan, as the case may
               be, under this Agreement (except for changes in the rate of
               taxation on the overall net income of such Lender imposed by its
               jurisdiction of incorporation or the jurisdiction of its
               Applicable Lending Office); or

                      (ii) Shall impose, modify or hold applicable any reserve
               (excluding any Reserve Requirement or other reserve to the extent
               included in the calculation of the LIBO Rate or TIBO Rate for any
               Loans), special deposit or similar requirement against assets
               held by, deposits or other liabilities in or for the

                                       40
<PAGE>   41

               account of, advances or loans by, or any other acquisition of
               funds by any Lender for any LIBOR Loans or Japanese Loans, as
               the case may be; or

                      (iii) Shall impose on any Lender any other condition
               related to any LIBOR Loans or Japanese Loans or such Lender's
               Commitments;

        And the effect of any of the foregoing is to increase the cost to such
        Lender of making, continuing or maintaining any such LIBOR Loans,
        Japanese Loans or its Commitments or to reduce any amount receivable by
        such Lender hereunder; then the applicable Borrower shall from time to
        time, within twenty (20) days after written demand by such Lender, pay
        to such Lender additional amounts sufficient to reimburse such Lender
        for such increased costs or to compensate such Lender for such reduced
        amounts; provided, however, that such Borrower shall have no obligation
        to make any payment to any demanding party under this Subparagraph
        2.10(c) on account of any such increased costs or reduced amounts unless
        such Borrower receives notice of such increased costs or reduced amounts
        from the demanding party within six (6) months after they are incurred
        or realized. A certificate setting forth in reasonable detail the amount
        of such increased costs or reduced amounts, submitted by such Lender to
        such Borrower, shall constitute prima facie evidence of such costs or
        amounts. The obligations of Borrowers under this Subparagraph 2.10(c)
        shall survive the payment and performance of the Obligations and the
        termination of this Agreement.

               (d) Capital Requirements. If, after the date of this Agreement,
        any Lender determines that (i) any Change of Law affects the amount of
        capital required or expected to be maintained by such Lender or any
        Person controlling such Lender (a "Capital Adequacy Requirement") and
        (ii) the amount of capital maintained by such Lender or such Person
        which is attributable to or based upon the Loans, the Commitments or
        this Agreement must be increased as a result of such Capital Adequacy
        Requirement (taking into account such Lender's or such Person's policies
        with respect to capital adequacy), the applicable Borrower shall pay to
        such Lender or such Person, within twenty (20) days after written demand
        of such Lender, such amounts as such Lender or such Person shall
        determine are necessary to compensate such Lender or such Person for the
        increased costs to such Lender or such Person of such increased capital;
        provided, however, that such Borrower shall have no obligation to make
        any payment to any demanding party under this Subparagraph 2.10(d) on
        account of any such increased costs unless such Borrower receives notice
        of such increased costs from the demanding party within twelve (12)
        months after they are incurred or realized. A certificate setting forth
        in reasonable detail the amount of such increased costs, submitted by
        any Lender to such Borrower, shall constitute prima facie evidence of
        such costs. The obligations of Borrowers under this Subparagraph 2.10(d)
        shall survive the payment and performance of the Obligations and the
        termination of this Agreement.

               (e) Mitigation. Any Lender which becomes aware of (i) any Change
        of Law which will make it unlawful or impossible for such Lender to make
        or maintain any LIBOR Loan or Japanese Loan or (ii) any Change of Law or
        other event or condition which will obligate either Borrower to pay any
        amount pursuant to Subparagraph 2.10(c) or Subparagraph 2.10(d) shall
        notify such Borrower and Agent thereof as promptly as

                                       41
<PAGE>   42

        practical. If any Lender has given notice of any such Change of Law or
        other event or condition and thereafter becomes aware that such Change
        of Law or other event or condition has ceased to exist, such Lender
        shall notify such Borrower and Agent thereof as promptly as practical.
        Each Lender affected by any Change of Law which makes it unlawful or
        impossible for such Lender to make or maintain any LIBOR Loan or
        Japanese Loan or to which either Borrower is obligated to pay any amount
        pursuant to Subparagraph 2.10(c) or Subparagraph 2.10(d) shall use
        reasonable commercial efforts (including changing the jurisdiction of
        its Applicable Lending Offices) to avoid the effect of such Change of
        Law or to avoid or materially reduce any amounts which either Borrower
        is obligated to pay pursuant to Subparagraph 2.10(c) or Subparagraph
        2.10(d) if, in the reasonable opinion of such Lender, such efforts would
        not be disadvantageous to such Lender or contrary to such Lender's
        normal banking practices.

        2.11. Taxes on Payments.

               (a) Payments Free of Taxes. All payments made by Borrowers under
        this Agreement and the other Credit Documents shall be made free and
        clear of, and without deduction or withholding for or on account of, all
        present and future income, stamp, documentary and other taxes and
        duties, and all other levies, imposts, charges, fees, deductions and
        withholdings, now or hereafter imposed, levied, collected, withheld or
        assessed by any Governmental Authority (except net income taxes and
        franchise taxes in lieu of net income taxes imposed on Agent or any
        Lender by its jurisdiction of incorporation or the jurisdiction in which
        its Applicable Lending Office is located) (all such non-excluded taxes,
        duties, levies, imposts, duties, charges, fees, deductions and
        withholdings being hereinafter called "Taxes"). If any Taxes are
        required to be withheld from any amounts payable to Agent or any Lender
        hereunder or under the other Credit Documents, the amounts so payable to
        Agent or such Lender shall be increased to the extent necessary to yield
        to Agent or such Lender (after payment of all Taxes) interest or any
        such other amounts payable hereunder at the rates or in the amounts
        specified in this Agreement and the other Credit Documents. Whenever any
        Taxes are payable by either Borrower, as promptly as possible
        thereafter, such Borrower shall send to Agent for its own account or for
        the account of such Lender, as the case may be, a certified copy of an
        original official receipt received by such Borrower showing payment
        thereof. If either Borrower fails to pay any Taxes when due to the
        appropriate taxing authority or fails to remit to Agent the required
        receipts or other required documentary evidence, such Borrower shall
        indemnify Agent and Lenders for any Taxes (including interest or
        penalties) that may become payable by Agent or any Lender as a result of
        any such failure. The obligations of Borrowers under this Subparagraph
        2.11(a) shall survive the payment and performance of the Obligations and
        the termination of this Agreement.

               (b) Withholding Exemption Certificates. On or prior to the
        applicable Closing Date, each U.S. Lender which is not organized under
        the laws of the United States of America or a state thereof and each
        Japanese Lender which is not organized under the laws of Japan shall
        deliver to LSI or LLJS, respectively, and Agent such certificates and
        other evidence as such Borrower or Agent may reasonably request to
        establish that such Lender is entitled to receive payments under this
        Agreement on account of any U.S. Borrowing or the Japanese Borrowing, as
        the case may be, without

                                       42
<PAGE>   43

        deduction or withholding of any United States federal income taxes or
        Japanese income taxes, respectively. Each such Lender further agrees (i)
        promptly to notify the applicable Borrower and Agent of any change of
        circumstances (including any change in any treaty, law or regulation)
        which would prevent such Lender from receiving payments hereunder
        without any deduction or withholding of such taxes and (ii) on or before
        the date that any certificate or other form delivered by such Lender
        under this Subparagraph 2.11(b) expires or becomes obsolete or after the
        occurrence of any event requiring a change in the most recent such
        certificate or form previously delivered by such Lender, to deliver to
        the applicable Borrower and Agent a new certificate or form, certifying
        that such Lender is entitled to receive payments under this Agreement
        without deduction or withholding of such taxes. If any Lender fails to
        provide to Borrowers or Agent pursuant to this Subparagraph 2.11(b) (or,
        in the case of an Assignee Lender, Subparagraph 8.05(c)) any
        certificates or other evidence required by such provision to establish
        that such Lender is, at the time it becomes a Lender hereunder, entitled
        to receive payments under this Agreement on account of any U.S.
        Borrowing or the Japanese Borrowing, as the case may be, without
        deduction or withholding of any United States federal income taxes or
        Japanese income taxes, respectively, such Lender shall not be entitled
        to any indemnification under Subparagraph 2.11(a) for any Taxes imposed
        on such Lender primarily as a result of such failure.

               (c) Mitigation. If Agent or any Lender claims any additional
        amounts to be payable to it pursuant to this Paragraph 2.11, such Person
        shall use reasonable commercial efforts to file any certificate or
        document requested in writing by the applicable Borrower reflecting a
        reduced rate of withholding or to change the jurisdiction of its
        Applicable Lending Office if the making of such a filing or such change
        in the jurisdiction of its Applicable Lending Office would avoid the
        need for or materially reduce the amount of any such additional amounts
        which may thereafter accrue and if, in the reasonable opinion of such
        Person, in the case of a change in the jurisdiction of its Applicable
        Lending Office, such change would not be disadvantageous to such Person
        or contrary to such Person's normal banking practices.

               (d) Tax Returns. Nothing contained in this Paragraph 2.11 shall
        require Agent or any Lender to make available any of its tax returns (or
        any other information relating to its taxes which it deems to be
        confidential).

               (e) Lender Rate Contracts. Nothing contained in this Paragraph
        2.11 shall override or supercede any term or provision of any Lender
        Rate Contract regarding withholding taxes relating to Rate Contracts.

        2.12. Funding Loss Indemnification. If either Borrower shall (a) repay
or prepay any LIBOR Loan or Japanese Loan, or convert any LIBOR Loan, on any day
other than the last day of an Interest Period therefor (whether a scheduled
payment, an optional prepayment or conversion, a mandatory prepayment or
conversion, a payment upon acceleration or otherwise), (b) fail to borrow any
LIBOR Loan or Japanese Loan after delivering the applicable Notice of Borrowing
therefor to Agent (whether as a result of the failure to satisfy any applicable
conditions or otherwise) or (c) fail to convert any U.S. Borrowing into LIBOR
Loans in accordance with a Notice of U.S. Borrowing Conversion delivered to
Agent (whether as a result

                                       43
<PAGE>   44

of the failure to satisfy any applicable conditions or otherwise), such Borrower
shall, within twenty (20) days after written demand of such Lender, reimburse
such Lender for and hold such Lender harmless from all reasonable costs and
losses incurred by such Lender as a result of such repayment, prepayment,
conversion or failure; provided, however, that such Borrower shall have no
obligation to make any payment to any demanding party under this Paragraph 2.12
on account of any such costs or losses unless such Borrower receives notice of
such costs or losses from the demanding party within six (6) months after they
are incurred or realized. Borrowers understand that such costs and losses may
include, without limitation, losses incurred by a Lender as a result of funding
and other contracts entered into by such Lender to fund a LIBOR Loan or Japanese
Loan. Each Lender demanding payment under this Paragraph 2.12 shall deliver to
the applicable Borrower, with a copy to Agent, a certificate setting forth the
amount of costs and losses for which demand is made, which certificate shall set
forth in reasonable detail the calculation of the amount demanded. Such a
certificate so delivered to such Borrower shall constitute prima facie evidence
of such costs and losses. The obligations of Borrowers under this Paragraph 2.12
shall survive the payment and performance of the Obligations and the termination
of this Agreement.

        2.13. Security.

               (a) The Obligations of LLJS shall be secured by a guaranty duly
        executed by LSI in the form of Exhibit G (the "LSI Guaranty").

               (b) Further Assurances. Each Borrower shall deliver to Agent such
        other instruments, agreements, certificates, opinions and documents
        (including Uniform Commercial Code financing statements) as Agent may
        reasonably request to implement the provisions of Subparagraph 2.13(a)
        and otherwise to establish, maintain, protect and evidence the rights
        provided to Agent, for the benefit of Agents and Lenders, pursuant to
        the Security Documents. Each Borrower shall fully cooperate with Agent
        and Lenders and perform all additional acts reasonably requested by
        Agent or any Lender to effect the purposes of this Paragraph 2.13.

        2.14. Replacement of Lenders. If any Lender shall (a) become a
Defaulting Lender more than one (1) time in a period of twelve (12) consecutive
months, (b) continue as a Defaulting Lender for more than five (5) Business Days
at any time, (c) suspend its obligation to make or maintain LIBOR Loans or
Japanese Loans pursuant to Subparagraph 2.10(b) for a reason which is not
applicable to any other Lender or (d) demand any payment under Subparagraph
2.10(c), 2.10(d) or 2.11(a) for a reason which is not applicable to any other
Lender, then Agent may (or upon the written request of Borrowers, shall) replace
such Lender (the "affected Lender"), or cause such affected Lender to be
replaced, with another lender (the "replacement Lender") satisfying the
requirements of an Assignee Lender under Subparagraph 8.05(c), by having the
affected Lender sell and assign all of its rights and obligations under this
Agreement and the other Credit Documents to the replacement Lender pursuant to
Subparagraph 8.05(c); provided, however, that if Borrowers seek to exercise such
right, they must do so within sixty (60) days after either Borrower first knows
or should have known of the occurrence of the event or events giving rise to
such right, and neither Agent nor any Lender shall have any obligation to
identify or locate a replacement Lender for Borrowers. Upon receipt by any
affected Lender of a written notice from Agent stating that Agent is exercising
the replacement right set forth in this Paragraph 2.14, such affected Lender
shall sell and assign all of its rights

                                       44
<PAGE>   45

and obligations under this Agreement and the other Credit Documents to the
replacement Lender pursuant to an Assignment Agreement and Subparagraph 8.05(c)
for a purchase price equal to the sum of the principal amount of the affected
Lender's Loans so sold and assigned, all accrued and unpaid interest thereon and
its ratable share of all fees to which it is entitled.

SECTION III. CONDITIONS.

        3.01. Initial Closing Date Conditions. The obligations of the applicable
Lenders to make the Loans to be made on the Initial Closing Date are subject to
(a) receipt by Agent, on or prior to the Initial Closing Date, of each item
listed in Part I of Schedule 3.01, each in form and substance satisfactory to
Agent and each Lender, and with sufficient copies for, Agent and each Lender,
(b) the termination of the Outstanding U.S. Loan Facility and payment by LSI in
full of all amounts payable thereunder, (c) either confirmation in form and
substance satisfactory to Agent and each Lender that the transactions
contemplated by this Agreement do not contravene the provisions of the
Outstanding Japanese Loan Facility, if the Initial Closing Date is the U.S.
Closing Date, or the termination of the Outstanding Japanese Loan Facility and
payment by LLJS in full of all amounts payable thereunder, if the Initial
Closing Date is the Japanese Closing Date, and (d) confirmation in form and
substance satisfactory to Agent and each Lender that the transactions
contemplated by this Agreement do not contravene the provisions of the
Outstanding Japanese Lease Facility. The obligations of the applicable Lenders
to maintain the Loans made on the Initial Closing Date are subject to receipt by
Agent within ten (10) Business Days after the Initial Closing Date of each item
listed in Part II of Schedule 3.01, each in form and substance satisfactory to
Agent and each Lender, and with sufficient copies for, Agent and each Lender.

        3.02. Second Closing Date Conditions Precedent. The obligations of the
applicable Lenders to make the Loans to be made on the Second Closing Date are
subject to (a) the satisfaction of the conditions set forth in Paragraph 3.01,
(b) if such Loans are U.S. Loans, the receipt by Agent, on or prior to the
Second Closing Date, of each Note requested by a U.S. Lender, each duly executed
by LSI, and (c) if such Loans are Japanese Loans, the receipt by Agent of the
LSI Guaranty duly executed by LSI and the termination of the Outstanding
Japanese Loan Facility and payment by LLJS in full of all amounts payable
thereunder on or prior to the Second Closing Date.

        3.03. Conditions Precedent to Each Credit Event. The occurrence of each
Credit Event (including the initial Borrowing) is subject to the further
conditions that:

               (a) Borrowers shall have delivered to Agent the Notice of
        Borrowing, Notice of U.S. Borrowing Conversion or Notice of Interest
        Period Selection, as the case may be, for such Credit Event in
        accordance with this Agreement; and

               (b) On the date such Credit Event is to occur and after giving
        effect to such Credit Event, the following shall be true and correct:

                      (i) The representations and warranties of Borrowers and
               their Subsidiaries set forth in Paragraph 4.01 and in the other
               Credit Documents are

                                       45
<PAGE>   46

               true and correct in all material respects as if made on such date
               (except for representations and warranties expressly made as of a
               specified date, which shall be true in all material respects as
               of such date); and

                      (ii) No Default has occurred and is continuing or will
               result from such Credit Event.

The submission by either Borrower to Agent of each Notice of Borrowing, each
Notice of U.S. Borrowing Conversion (other than a notice for a conversion to
Base Rate Loans) and each Notice of Interest Period Selection (other than a
notice selecting an Interest Period of one (1) month for the Japanese Borrowing)
shall be deemed to be a representation and warranty by such Borrower that each
of the statements set forth above in this Subparagraph 3.03(b) is true and
correct as of the date of such notice.

        3.04. Covenant to Deliver. Unless a condition is waived by Agent,
Borrowers agree (not as a condition but as a covenant) to deliver to Agent each
item required to be delivered to Agent as a condition to the occurrence of any
Credit Event if such Credit Event occurs. Borrowers expressly agree that the
occurrence of any such Credit Event prior to the receipt by Agent of any such
item shall not constitute a waiver by Agent or any Lender of Borrowers'
obligation to deliver such item, unless expressly waived in writing by Agent.

SECTION IV. REPRESENTATIONS AND WARRANTIES.

        4.01. Borrowers' Representations and Warranties. In order to induce
Agent and Lenders to enter into this Agreement, Borrowers hereby represent and
warrant to Agent and Lenders as follows:

               (a) Organization and Powers. Each of Borrowers and the
        Significant Subsidiaries is a corporation or partnership duly organized
        or formed, as the case may be, validly existing and in good standing
        under the laws of the jurisdiction of its incorporation or formation, is
        qualified to do business and is in good standing in each jurisdiction in
        which the failure so to qualify or be in good standing would result in a
        Material Adverse Effect and has all requisite power and authority to own
        its assets and carry on its business and, with respect to each Borrower,
        to execute, deliver and perform its obligations under the Credit
        Documents and the Symbios Acquisition Documents to which it is a party.

               (b) Authorization; No Conflict. The execution, delivery and
        performance by each Borrower of the Credit Documents and the Symbios
        Acquisition Documents to which it is a party have been duly authorized
        by all necessary corporate action of each Borrower and do not and will
        not (i) contravene the terms of the certificate or articles, as the case
        may be, of incorporation and the bylaws of either Borrower or result in
        a breach of or constitute a material default under any material
        Contractual Obligation to which either Borrower is a party or by which
        it or its properties may be bound or affected; or (ii) violate in any
        material respect any provision of Governmental Rule binding on or
        affecting either Borrower.

                                       46
<PAGE>   47

               (c) Binding Obligation. The Credit Documents and the Symbios
        Acquisition Documents constitute, or when delivered will constitute,
        legal, valid and binding obligations of each Borrower which is a party
        thereto, enforceable against such Borrower in accordance with their
        respective terms, except to the extent the enforceability thereof would
        be subject to bankruptcy, insolvency, receivership or similar laws
        providing relief from creditors, or principles of equity generally.

               (d) Governmental Consents. No authorization, consent, approval,
        license, exemption of, or filing or registration with, any Governmental
        Authority, or approval or consent of any other Person, is required for
        the due execution, delivery or performance by either Borrower of any of
        the Credit Documents or the Symbios Acquisition Documents except those
        set forth on Schedule 4.01(d) which have been obtained or made and are
        in full force and effect.

               (e) No Defaults. None of Borrowers and their Significant
        Subsidiaries is in default under any material Contractual Obligation or
        Governmental Rule to which it is a party or by which it or its
        properties may be bound which, individually or together with all such
        defaults, could reasonably be expected to have a Material Adverse
        Effect.

               (f) Title to Properties. Each Borrower and each Significant
        Subsidiary has good record and marketable title in fee simple to, or
        valid leasehold interests in, all real property necessary or used in the
        ordinary conduct of their respective businesses, except for such defects
        in title as could not, individually or in the aggregate, have a Material
        Adverse Effect. The property of Borrowers and their Significant
        Subsidiaries is subject to no Liens, other than Liens permitted under
        Subparagraph 5.02(a).

               (g) Litigation. Except as set forth in Schedule 4.01(g), there
        are no actions, suits or proceedings pending or, to the best of either
        Borrower's knowledge, threatened against or affecting such Borrower or
        any of its Significant Subsidiaries or the properties of such Borrower
        or any of its Significant Subsidiaries before any Governmental Authority
        or arbitrator which is likely to be determined adversely to such
        Borrower or any such Significant Subsidiary and would be reasonably
        likely to result in a Material Adverse Effect.

               (h) Compliance with Consents and Licenses. Every consent required
        by either Borrower or any of its Significant Subsidiaries (including
        those required under or pursuant to any Environmental Law) in connection
        with the conduct of its business and the ownership, use, exploitation or
        occupation of its property and assets has been obtained and is in full
        force and effect and there has not been any default in the observance of
        the conditions and restrictions (if any) imposed in, or in connection
        with, any of the same, except where the failure to obtain any of the
        foregoing would not reasonably be expected to have a Material Adverse
        Effect.

               (i) Compliance with Environmental Law. Except as set forth in
        Schedule 4.01(i), to the best of each Borrower's knowledge after due
        investigation, (i) the properties of each Borrower and its Subsidiaries
        do not contain and have not previously contained (at, under, or about
        any such property) any Hazardous Substances or other

                                       47
<PAGE>   48

        contamination (A) in amounts or concentrations that constitute or
        constituted a violation of, or could give rise to liability under, any
        Environmental Laws, in either case where such violation or liability
        could reasonably be expected to result in a Material Adverse Effect, (B)
        which could interfere with the continued operation of such property, or
        (C) which could materially impair the fair market value thereof; and
        (ii) there has been no transportation or disposal of Hazardous
        Substances from, nor any release or threatened release of Hazardous
        Substances at or from, any property of either Borrower or any of its
        Subsidiaries in violation of or in any manner which could give rise to
        liability under any Environmental Laws, where such violation or
        liability, individually or in the aggregate, could reasonably be
        expected to result in a Material Adverse Effect.

               (j) Governmental Regulation. None of Borrowers and their
        Significant Subsidiaries is subject to regulation under the Public
        Utility Holding Company Act of 1935, the Federal Power Act, the
        Investment Company Act of 1940, the Interstate Commerce Act, any state
        public utilities code or any other Governmental Rule limiting its
        ability to incur Indebtedness.

               (k) Employment Benefit Plans.

                      (i) Except as specifically disclosed to Agent and Lenders
               in writing prior to the date of this Agreement: (A) each Plan is
               in compliance in all material respects with the applicable
               provisions of ERISA, the IRC and other Governmental Rules; (B)
               there are no pending, or to the best knowledge of either
               Borrower, threatened, claims, actions or lawsuits, or action by
               any Governmental Authority, with respect to any Plan which has
               resulted or could reasonably be expected to result in a Material
               Adverse Effect; (C) there has been no prohibited transaction or
               other violation of the fiduciary responsibility rule with respect
               to any Plan which could reasonably result in a Material Adverse
               Effect; (D) no ERISA Event has occurred or is reasonably expected
               to occur with respect to any Pension Plan; (E) no Pension Plan
               has any Unfunded Pension Liability; (F) neither Borrower has
               incurred, nor does it reasonably expect to incur, any liability
               under Title IV of ERISA with respect to any Pension Plan (other
               than premiums due and not delinquent under Section 4007 of
               ERISA); (G) no trade or business (whether or not incorporated
               under common control with either Borrower within the meaning of
               Section 414(b), (c), (m) or (a) of the IRC) maintains or
               contributes to any Pension Plan or other Plan subject to Section
               412 of the IRC; and (H) none of Borrowers and any entity under
               common control with either Borrower in the preceding sentence has
               ever contributed to any Multiemployer Plan.

                      (ii) All employer and employee contributions required by
               any applicable Governmental Rule in connection with all Foreign
               Plans have been made, or, if applicable, accrued, in accordance
               with the country-specific accounting practices. The fair market
               value of the assets of each funded Foreign Plan, the liability of
               each insurer for any Foreign Plan funded through insurance or the
               book reserve established for any Foreign Plan, together with any
               accrued contributions, is sufficient to procure or provide for
               the accrued benefit

                                       48
<PAGE>   49

               obligations, as of the date hereof, with respect to all
               current and former participants in such Foreign Plan according to
               the actuarial assumptions and valuations most recently used to
               determine employer contributions to such Foreign Plan, which
               actuarial assumptions are commercially reasonable. Each Foreign
               Plan required to be registered has been registered and has been
               maintained in good standing with applicable Governmental
               Authorities. Each Foreign Plan reasonably complies in all
               material respects with all applicable Governmental Rules.

               (l) Significant Subsidiaries. The name and ownership of each
        Significant Subsidiary on the date of this Agreement is as set forth in
        Schedule 4.01(l). All of the outstanding capital stock of, or any other
        interest in, each such Significant Subsidiary has been validly issued,
        and is fully paid and nonassessable.

               (m) Margin Regulations. Neither Borrower is engaged in the
        business of extending credit for the purpose of purchasing or carrying
        "margin stock" (within the meaning of Regulation U of the FRB). No part
        of the proceeds of the Loans will be used to purchase or carry any
        margin stock or to extend credit to others for the purpose of purchasing
        or carrying any margin stock, except in compliance with said Regulation
        U.

               (n) Taxes. Borrowers and their Significant Subsidiaries have
        filed all federal and other material tax returns and reports required to
        be filed, and have paid all federal and other material taxes,
        assessments, fees and other Governmental Charges levied or imposed upon
        them or their properties, income or assets otherwise due and payable,
        except those which are being contested in good faith by appropriate
        proceedings and for which adequate reserves have been provided in
        accordance with GAAP. There is no proposed tax assessment against either
        Borrower or any of its Significant Subsidiaries except those for which
        adequate reserves have been provided in accordance with GAAP.

               (o) Patents and Other Rights. Each Borrower and each Significant
        Subsidiary possesses all permits, franchises, licenses, patents,
        trademarks, trade names, service marks, copyrights and all rights with
        respect thereto, free from maintenance and operation of its business,
        except where the failure to obtain any of the foregoing would not
        reasonably be expected to have a Material Adverse Effect.

               (p) Insurance. The properties of each Borrower and its
        Significant Subsidiaries are insured against losses and damages of the
        kinds and in amounts which are deemed prudent by such Borrower in its
        reasonable business judgment and within the general parameters customary
        among similarly situated businesses in the industry, and such insurance
        is maintained with financially sound and reputable insurance companies
        or pursuant to a plan or plans of self-insurance to such extent as is
        usual for companies of similar size engaged in the same or similar
        businesses and owning similar properties.

               (q) Financial Statements. The audited Financial Statements of
        LSI and its Subsidiaries for the fiscal year ended December 31, 1997 and
        the unaudited Financial Statements of LSI and its Subsidiaries for the
        fiscal quarter ended March 31, 1998 are complete and correct and fairly
        present the financial condition of LSI and its Subsidiaries

                                       49
<PAGE>   50

        as at such dates and the results of operations of LSI and its
        Subsidiaries for the periods covered by such statements, in each case in
        accordance with GAAP consistently applied, subject, in the case of the
        March 31, 1998 Financial Statements, to normal year-end adjustments and
        the absence of notes. Since December 31, 1997, there has been no
        Material Adverse Effect.

               (r) Liabilities. None of Borrowers and their Significant
        Subsidiaries has any material liabilities, fixed or contingent, that are
        not reflected in the Financial Statements referred to in Subparagraph
        4.01(q), in the notes thereto or otherwise disclosed in writing to the
        Agent and Lenders, other than liabilities arising in the ordinary course
        of business since March 31, 1998.

               (s) Labor Disputes. Etc. There are no strikes, lockouts or other
        labor disputes against either Borrower or any of its Significant
        Subsidiaries, or, to the best of either Borrower's knowledge, threatened
        against or affecting either Borrower or any of its Significant
        Subsidiaries, which may result in a Material Adverse Effect.

               (t) Solvency. Each Borrower and its Subsidiaries on a
        consolidated basis are Solvent.

               (u) Disclosure. None of the representations or warranties made by
        either Borrower in the Credit Documents as of the date of such
        representations and warranties, and none of the statements contained in
        any exhibit, report, statement or certificate furnished by or on behalf
        of either Borrower or any of its Significant Subsidiaries to Agent or
        any Lender in connection with the Credit Documents, contains any untrue
        statement of a material fact or omits any material fact required to be
        stated therein or necessary to make the statements made therein, in
        light of the circumstances under which they are made, not misleading in
        any material respect as of the time when made or delivered.

        4.02. Reaffirmation. Each Borrower shall be deemed to have reaffirmed,
for the benefit of Lenders and Agent, each representation and warranty contained
in Paragraph 4.01 on and as of the date of each Credit Event (except for
representations and warranties expressly made as of a specified date, which
shall be true in all material respects as of such date).

SECTION V. COVENANTS.

        5.01. Affirmative Covenants. Until the termination of this Agreement and
the satisfaction in full by each Borrower of all of their respective
Obligations, each Borrower will comply, and will cause compliance, with the
following affirmative covenants, unless Required Lenders shall otherwise consent
in writing:

               (a) Financial Statements and Other Reports. LSI, on behalf of
        Borrowers, will furnish to Agent in sufficient copies for distribution
        to Lenders:

                                       50
<PAGE>   51

                      (i) As soon as available and in any event within fifty
               (50) days after the end of each of the first three fiscal
               quarters of each fiscal year, the consolidated Financial
               Statements of LSI and its Subsidiaries for such fiscal quarter,
               prepared in accordance with GAAP consistently applied, all in
               reasonable detail;

                      (ii) As soon as available and in any event within one
               hundred (100) days after the end of each fiscal year, the
               consolidated Financial Statements of LSI and its Subsidiaries for
               such fiscal year, prepared in accordance with GAAP consistently
               applied, all in reasonable detail, and accompanied by a report
               thereon of PricewaterhouseCoopers LLP or another firm of
               independent certified public accountants of recognized national
               standing, which report shall be unqualified as to scope of audit
               or the status of LSI and its Subsidiaries as a going concern;

                      (iii) Together with the Financial Statements required
               pursuant to clauses (i) and (ii) of this Subparagraph 5.01(a), a
               compliance certificate of a Responsible Officer of LSI (a
               "Compliance Certificate") which (A) states that such Financial
               Statements fairly present the financial condition of LSI and its
               Subsidiaries as at the last day of the fiscal quarter or fiscal
               year covered by such Financial Statements and the results of
               operations of LSI and its Subsidiaries for such quarter or year
               and have been prepared in accordance with GAAP consistently
               applied, subject to normal, year-end audit adjustments in the
               case of the Financial Statements for any fiscal quarter; (B)
               states that no Default has occurred and is continuing, or, if any
               such Default has occurred and is continuing, a statement as to
               the nature thereof and what action LSI or LLJS proposes to take
               with respect thereto; and (C) sets forth, for the fiscal quarter
               or fiscal year covered by such Financial Statements or as of the
               last day of such quarter or year, the calculation of the
               financial ratios and tests provided in Paragraph 5.03;

                      (iv) As soon as available and in any event within fifty
               (50) days after the end of each fiscal quarter, a certificate of
               a Responsible Officer of LSI (a "Pricing Ratio Certificate")
               which sets forth the calculation of the Pricing Ratio as of the
               last day of such quarter;

                      (v) Promptly after the giving, sending or filing thereof,
               copies of all reports, if any, which each Borrower or any of its
               Subsidiaries sends generally to any class of holders of its
               respective capital stock or other securities and of all reports
               or filings, if any, by each Borrower or any of its Subsidiaries
               with the SEC or any national securities exchange;

                      (vi) Promptly after either Borrower has knowledge or
               becomes aware thereof, notice of the occurrence or existence of
               any Default;

                      (vii) Prompt written notice of any action, event or
               occurrence that could reasonably be expected to result in a
               Material Adverse Effect due to environmental liability under
               Environmental Laws;

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<PAGE>   52

                      (viii) Prompt written notice of all actions, suits and
               proceedings before any Governmental Authority or arbitrator
               pending, or to the best of either Borrower's knowledge,
               threatened against or affecting either Borrower or any of its
               Subsidiaries which (A) if adversely determined would involve an
               aggregate liability of $25,000,000 or more in excess of amounts
               covered by third-party insurance, or (B) otherwise may have a
               Material Adverse Effect;

                      (ix) Promptly after either Borrower has knowledge or
               becomes aware thereof, (A) notice of the occurrence of any ERISA
               Event, together with a copy of any notice of such ERISA Event to
               the PBGC, and (B) the details concerning any action taken or
               proposed to be taken by the IRS, PBGC, Department of Labor or
               other Person with respect thereto;

                      (x) Promptly upon the commencement or increase of
               contributions to, the adoption of, or an amendment to, a Plan by
               LSI or an ERISA Affiliate, if such commencement or increase of
               contributions, adoption, or amendment could reasonably be
               expected to result in a net increase in unfunded liability to LSI
               or an ERISA Affiliate in excess of $10,000,000, a calculation of
               the net increase in unfunded liability;

                      (xi) Promptly after filing or receipt thereof by LSI or
               any ERISA Affiliate, copies of the following:

                             (A) Any notice received from the PBGC of intent to
                      terminate or have a trustee appointed to administer any
                      Pension Plan;

                             (B) Any notice received from the sponsor of a
                      Multiemployer Plan concerning the imposition, delinquent
                      payment, or amount of withdrawal liability;

                             (C) Any demand by the PBGC under Subtitle D of
                      Title IV of ERISA; and

                             (D) Any notice received from the IRS regarding the
                      disqualification of a Plan intended to qualify under
                      Section 401(a) of the IRC;

                      (xii) Within forty-five (45) days of the date thereof, or,
               if earlier, on the date of delivery of any Financial Statements
               pursuant to clause (i) or (ii) of this Subparagraph 5.01(a),
               notice of any change in accounting policies or financial
               reporting practices by either Borrower or any of the Significant
               Subsidiaries that is expected to affect (or has affected)
               materially under U.S. GAAP the consolidated financial condition
               of LSI and its Subsidiaries;

                      (xiii) Promptly after the occurrence thereof, notice of
               any labor controversy resulting in or threatening to result in
               any strike, work stoppage, boycott, shutdown or other material
               labor disruption against or involving either

                                       52
<PAGE>   53

               Borrower or any of its Subsidiaries which could result in
               a Material Adverse Effect;

                      (xiv) Upon the request from time to time of Agent or any
               Lender (through Agent), the Swap Termination Values, together
               with a description of the method by which such values were
               determined, relating to any then-outstanding Rate Contracts to
               which either Borrower or any of its Subsidiaries is party;

                      (xv) Prompt written notice of any change in either
               Borrower's fiscal year;

                      (xvi) Prompt written notice of any Person or Subsidiary
               not identified on Schedule 4.01(l) that becomes a Significant
               Subsidiary after the date of this Agreement;

                      (xvii) Prompt written notice of any other condition or
               event which has resulted, or that could reasonably be expected to
               result, in a Material Adverse Effect;

                      (xviii) Prior written notice of any sale of assets other
               than in the ordinary course of business (including any sale of
               assets to be leased back in connection with a "synthetic" lease
               of such assets) or any sale or issuance of Indebtedness for
               borrowed money (including Indebtedness evidenced by notes, bonds,
               debentures or other similar instruments) for Net Proceeds which
               exceed $50,000,000 for any single transaction or series of
               related transactions; and

                      (xix) Such other information respecting the operations,
               properties, business or condition (financial or otherwise) of
               either Borrower or the Significant Subsidiaries as Agent or any
               Lender (through Agent) may from time to time reasonably request.

        Each notice pursuant to clauses (vi) -- (xix) of this Subparagraph
        5.01(a) shall be accompanied by a written statement by a Responsible
        Officer of LSI setting forth details of the occurrence referred to
        therein, and stating what action LSI or LLJS proposes to take with
        respect thereto.

               (b) Preservation of Corporate Existence. Etc. Each Borrower
        shall and shall cause each of its Significant Subsidiaries to:

                      (i) Preserve and maintain in full force and effect its
               corporate existence and good standing under the laws of its state
               or jurisdiction of incorporation or formation, except in
               connection with transactions permitted by Paragraph 5.02 and (B)
               in the case of any Significant Subsidiary (other than LLJS) to
               the extent that failure to obtain or maintain the foregoing would
               not reasonably be expected to have a Material Adverse Effect;

                      (ii) Preserve and maintain in full force and effect all
               governmental rights, privileges, qualifications, permits,
               licenses and franchises necessary or

                                       53
<PAGE>   54

               desirable in the normal conduct of its business, except to
               the extent that the failure to obtain or maintain the foregoing
               would not reasonably be expected to have a Material Adverse
               Effect;

                      (iii) Use reasonable efforts, in the ordinary course of
               business, to preserve its business organization and goodwill,
               except in the case of any Significant Subsidiary (other than
               LLJS) to the extent that the failure to obtain or maintain the
               foregoing would not reasonably be expected to have a Material
               Adverse Effect; and

                      (iv) Preserve or renew all of its registered patents,
               trademarks, trade names and service marks, the non-preservation
               of which could reasonably be expected to have a Material Adverse
               Effect.

               (c) Payment of Taxes. Etc. Each Borrower will, and will cause
        each of its Significant Subsidiaries to, pay and discharge all material
        taxes, fees, assessments, levies and other Governmental Charges imposed
        upon it or upon its properties or assets prior to the date on which
        penalties attach thereto, and all lawful and material claims for labor,
        materials and supplies which, if unpaid, might become a Lien upon any
        properties or assets of such Borrower or any of its Significant
        Subsidiaries, except to the extent such taxes, fees, assessments, levies
        or other Governmental Charges, or such claims, are being contested in
        good faith by appropriate proceedings and are adequately reserved
        against in accordance with GAAP.

               (d) Licenses. Each Borrower will, and will cause each of its
        Significant Subsidiaries to, obtain and maintain all licenses,
        authorizations, consents, filings, exemptions, registrations and other
        governmental approvals necessary in connection with the execution,
        delivery and performance of the Credit Documents, the consummation of
        the transactions therein contemplated or the operation and conduct of
        its business and ownership of its properties, except to the extent that
        the failure to obtain or maintain the foregoing would not reasonably be
        expected to have a Material Adverse Effect.

               (e) Maintenance of Property. Except as otherwise permitted under
        Subparagraph 5.02(c) or Subparagraph 5.02(d), each Borrower shall, and
        shall cause each of its Subsidiaries to, maintain and preserve all its
        property which is used in its business in good working order and
        condition in all material respects, ordinary wear and tear excepted.

               (f) Insurance. Each Borrower shall maintain, and shall cause each
        of its Significant Subsidiaries to maintain, with financially sound and
        reputable independent insurers, insurance with respect to its properties
        and business against losses and damages of the kinds and in amounts
        which are deemed prudent by such Borrower in its reasonable business
        judgment and within the general parameters customary among similarly
        situated businesses in the industry.

               (g) Compliance with Laws. Each Borrower shall comply, and shall
        cause each of its Significant Subsidiaries to comply, in all material
        respects with the

                                       54
<PAGE>   55

        requirements of all Environmental Laws and all other Governmental Rules
        applicable to it or its business.

               (h) Employment Benefit Plans.

                      (i) LSI shall, and shall cause each of its ERISA
               Affiliates to: (A) maintain each Plan in compliance in all
               material respects with the applicable provisions of ERISA, the
               IRC and other federal or state law; (B) cause each Plan which is
               qualified under Section 401(a) of the IRC to maintain such
               qualification; and (C) make all required contributions to any
               Plan subject to Section 412 of the IRC.

                      (ii) None of Borrowers and their Significant Subsidiaries
               shall (A) engage in any transaction prohibited by any
               Governmental Rule applicable to any Foreign Plan, (B) fail to
               make full payment when due of all amounts due as contributions to
               any Foreign Plan or (C) otherwise fail to comply with the
               requirements of any Governmental Rule applicable to any Foreign
               Plan, where singly or cumulatively, the above would be reasonably
               likely to have a Material Adverse Effect.

               (i) Inspection of Property and Books and Records. Each Borrower
        shall maintain and shall cause each of its Significant Subsidiaries to
        maintain proper books of record and account, in which full, true and
        correct entries in conformity with GAAP consistently applied shall be
        made of all financial transactions and matters involving the assets and
        business of such Borrower or such Significant Subsidiary. Each Borrower
        shall permit, and shall cause each of its Significant Subsidiaries to
        permit, representatives and independent contractors of Agent or any
        Lender to visit and inspect any of their respective properties, to
        examine its respective corporate, financial and operating records, and
        make copies thereof or abstracts therefrom, and to discuss its
        respective affairs, finances and accounts with its respective directors,
        officers, and independent public accountants, all at the expense of such
        Borrower and at such reasonable times during normal business hours and
        as often as may be reasonably desired, upon reasonable advance notice to
        such Borrower; provided, however, that (i) unless an Event of Default
        shall have occurred and be continuing, (A) Borrowers shall be
        responsible under this Subparagraph 5.01(i) for the reasonable costs and
        expenses of Agent only, (B) all inspections, visits, examinations and
        other actions permitted or authorized hereunder shall be coordinated
        only through Borrowers, and (C) physical inspections of either
        Borrower's or any such Significant Subsidiary's facilities in Japan
        shall be made on two weeks' prior notice and shall occur no more
        frequently than semiannually in the case of inspections by Agent and no
        more frequently than annually otherwise, and (ii) when an Event of
        Default exists Agent or any Lender may make any visit, inspection or
        examination or take any other action authorized hereunder at the expense
        of Borrowers at any time during normal business hours, without advance
        notice and without being subject to any of the other restrictions
        described in clause (i).

               (j) Use of Proceeds. Except as otherwise expressly provided in
        Subparagraph 2.01(h) or Subparagraph 2.02(f), each Borrower will use the
        proceeds of the Loans solely

                                       55
<PAGE>   56

        for general corporate purposes, including for working capital, capital
        expenditures, Permitted Investments and Acquisitions. If either Borrower
        uses the proceeds of the Loans to purchase or carry "margin stock"
        (within the meaning of Regulation U of the FRB) or extend credit to
        others for the purpose of purchasing or carrying margin stock, such
        Borrower will do so only in compliance with said Regulation U and only
        if not more than twenty percent (20%) of the value of the assets of such
        Borrower and its Subsidiaries on a consolidated basis consists of margin
        stock.

               (k) Further Assurances and Additional Acts. Each Borrower will
        execute, acknowledge, deliver, file, notarize and register at its own
        expense all such further agreements, instruments, certificates,
        documents and assurances and perform such acts as Agent or Required
        Lenders shall deem necessary or appropriate to effectuate the purposes
        of the Credit Documents, and promptly provide Agent with evidence of the
        foregoing satisfactory in form and substance to Agent or Required
        Lenders.

        5.02. Negative Covenants. Until the termination of this Agreement and
the satisfaction in full by each Borrower of all of their respective
Obligations, each Borrower will comply, and will cause compliance, with the
following negative covenants, unless Required Lenders shall otherwise consent in
writing:

               (a) Liens. Neither Borrowers nor any of its Significant
        Subsidiaries will create, incur, assume or suffer to exist any Lien upon
        or with respect to any of their properties, revenues or assets, whether
        now owned or hereafter acquired, other than (i) Permitted Liens and (ii)
        other Liens that, in the aggregate at any time, secure obligations in an
        amount not in excess of ten percent (10%) of Consolidated Total Assets
        determined as of the last day of the immediately preceding fiscal
        quarter (or fiscal year, as the case may be).

               (b) Change in Nature of Business. None of Borrowers and their
        Significant Subsidiaries will engage in any material line of business
        other than the electronics business and other businesses incidental or
        reasonably related thereto.

               (c) Restrictions on Fundamental Changes. None of Borrowers and
        their Significant Subsidiaries will merge with or consolidate into, or
        acquire all or substantially all of the assets of, any Person, or sell,
        transfer, lease or otherwise dispose of (whether in one transaction or
        in a series of transactions) all or substantially all of its assets,
        except that:

                      (i) Any of LSI's Significant Subsidiaries may merge with,
               consolidate into or transfer all or substantially all of its
               assets to another of LSI's Significant Subsidiaries or to LSI and
               in connection therewith such Significant Subsidiary (other than
               LSI) may be liquidated or dissolved, provided that (A) if the
               transaction involves either Borrower, such Borrower shall be the
               surviving Person, and (B) if any transaction shall be between a
               non-wholly owned Significant Subsidiary and a wholly owned
               Significant Subsidiary, the wholly owned Significant Subsidiary
               shall be the continuing or surviving Person, and provided further
               that no Material Adverse Effect or Default shall result
               therefrom;

                                       56
<PAGE>   57

                      (ii) Either Borrower or any of its Significant
               Subsidiaries may sell or dispose of assets in accordance with the
               provisions of Subparagraph 5.02(d);

                      (iii) Either Borrower or any of its Significant
               Subsidiaries may make any investment or Acquisition permitted by
               Subparagraph 5.02(e); and

                      (iv) Either Borrower may merge with or consolidate into
               any other Person, provided that (A) such Borrower is the
               surviving Person, and (B) no such merger or consolidation shall
               be made while there exists a Default or if a Default or Material
               Adverse Effect would occur as a result thereof.

               (d) Sales of Assets. None of Borrowers and their Significant
        Subsidiaries will convey, sell, lease, transfer, or otherwise dispose
        of, or part with control of (whether in one transaction or a series of
        transactions) any assets (including any shares of stock in any
        Subsidiary or other Person), except:

                      (i) Sales or other dispositions of inventory in the
               ordinary course of business;

                      (ii) Sales or other dispositions of assets in the ordinary
               course of business which have become worn out or obsolete or
               which are promptly being replaced;

                      (iii) Sales of accounts receivable to financial
               institutions not affiliated with either Borrower; provided that
               (A) the discount rate shall not at any time exceed ten percent
               (10%), (B) the amount of all accounts receivable permitted to be
               sold in any fiscal quarter shall not exceed twenty percent (20%)
               of the consolidated accounts receivable of LSI and its
               Subsidiaries, determined as of the last day of the immediately
               preceding fiscal quarter (or fiscal year, as the case may be),
               and (C) the sole consideration received for such sales shall be
               cash;

                      (iv) Sales of equipment to be leased back to LSI in
               conjunction with a "synthetic" lease financing of such equipment,
               provided that the "principal" amount of such financing does not
               exceed $250,000,000;

                      (v) Sales or other dispositions of assets outside the
               ordinary course of business which do not constitute Substantial
               Assets (as defined below);

                      (vi) Sales of assets which yield Net Proceeds which are
               applied to prepay the U.S. Loans pursuant to clause (iv) of
               Subparagraph 2.05(c); and

                      (vii) Sales or other dispositions of Permitted
               Investments.

        For purposes of clause (v) above, a sale, lease, transfer or other
        disposition of assets shall be deemed to be of "Substantial Assets" if
        such assets, when added to all other assets conveyed, sold, leased,
        transferred or otherwise disposed of by LSI and its Subsidiaries in any
        period of four consecutive fiscal quarters (other than assets sold in
        the ordinary course of business or pursuant to clause (iii) above),
        shall exceed ten percent (10%) of

                                       57

<PAGE>   58
        Consolidated Total Assets as determined as of the last day of the fiscal
        quarter of LSI immediately preceding the date of determination.

                (e) Loans and Investments. None of Borrowers and their
        Significant Subsidiaries will enter into any Acquisition or otherwise
        extend any credit to, guarantee the obligations of or make any
        additional investments in or acquire any interest in, any Person, other
        than in connection with:

                        (i) Extensions of credit in the nature of accounts
                receivable or notes receivable arising from the sales of goods
                or services in the ordinary course of business;

                        (ii) Permitted Investments;

                        (iii) Additional purchases of or investments in the
                stock of, or guarantees of the obligations of, Subsidiaries;

                        (iv) Employee loans and guarantees in accordance with
                LSI's usual and customary practices with respect thereto;

                        (v) Any Acquisition; or

                        (vi) Additional investments not exceeding, in the
                aggregate with all such investments, $300,000,000 during the
                period from the date of this Agreement through the Revolving
                Termination Date;

        provided that in the case of an Acquisition referred to in clause (v)
        above or an investment referred to in clause (vi) above, no such
        Acquisition or investment shall be made while there exists a Default or
        if a Default or Material Adverse Effect would occur as a result thereof.

                (f) Distributions. Neither Borrower will declare or pay any
        dividends in respect of its capital stock, or purchase, redeem, retire
        or otherwise acquire for value any of its capital stock now or hereafter
        outstanding, return any capital to its shareholders as such, or make any
        distribution of assets to its shareholders as such, or permit any of its
        Subsidiaries to purchase, redeem, retire, or otherwise acquire for value
        any stock of either Borrower, except that LLJS may declare and pay
        dividends and distributions to LSI and either Borrower may:

                        (i) Declare and deliver dividends and distributions
                payable only in common stock of such Borrower;

                        (ii) Purchase shares of its capital stock from time to
                time in connection with the issuance of shares under such
                Borrower's employee stock option plans;

                        (iii) Purchase, redeem, retire, or otherwise acquire
                shares of its capital stock with the proceeds received from a
                substantially concurrent issue of new shares of its capital
                stock; and

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<PAGE>   59

                        (iv) In addition to the dividends, purchases,
                redemptions, retirements and other acquisitions permitted by the
                foregoing clauses (i) through (iii) above, declare and deliver
                dividends and distributions, and purchase, redeem, retire, or
                otherwise acquire shares of its capital stock, in an aggregate
                amount not exceeding $100,000,000 in any period of four
                consecutive fiscal quarters.

                (g) Transactions with Related Parties. None of Borrowers and
        their Significant Subsidiaries will enter into any transaction,
        including the purchase, sale or exchange of property or the rendering of
        any services, with any Affiliate, any officer or director thereof or any
        Person which beneficially owns or holds twenty percent (20%) or more of
        the equity securities, or twenty percent (20%) or more of the equity
        interest, thereof (a "Related Party"), or enter into, assume or suffer
        to exist, or permit any such Significant Subsidiary to enter into,
        assume or suffer to exist, any employment or consulting contract with
        any Related Party, except (i) a transaction or contract which is in the
        ordinary course of such Borrower's or Significant Subsidiary's business,
        including a transaction in the ordinary course of business between or
        among such Borrower and one or more of its Subsidiaries, and (ii) any
        other transaction which is upon fair and reasonable terms not less
        favorable to such Borrower or Significant Subsidiary than it would
        obtain in a comparable arm's length transaction with a Person not a
        Related Party. For purposes of this Subparagraph 5.02(g), the sale,
        transfer or disposition of more than thirty percent (30%) of its assets
        (in any transaction or a series of related transactions) by a Borrower
        or any of its Significant Subsidiaries shall be deemed to be outside the
        ordinary course of business.

                (h) Accounting Changes. None of Borrowers and their Significant
        Subsidiaries will make any significant change in accounting treatment or
        reporting practices, except as required or permitted by GAAP (or, in the
        case of any such Significant Subsidiary domiciled in a jurisdiction
        other than the United States, in accordance with generally accepted
        accounting principles and practices in such jurisdiction).

        5.03. Financial Covenants. Until the termination of this Agreement and
the satisfaction in full by each Borrower of all of their respective
Obligations, LSI will comply, and will cause compliance, with the following
financial covenants, unless Required Lenders shall otherwise consent in writing:

                (a) Consolidated Total Debt to Total Capital. LSI will maintain
        a ratio of Consolidated Total Debt to Total Capital of not more than
        0.50 to 1.0 as of the last day of each fiscal quarter.

                (b) Quick Ratio. LSI will maintain a ratio of Consolidated Quick
        Assets to Consolidated Current Liabilities of not less than 1.25 to 1.00
        as of the last day of each fiscal quarter.

                (c) Minimum Consolidated Tangible Net Worth. LSI will maintain
        Consolidated Tangible Net Worth (exclusive of the cumulative translation
        adjustment account as reported in the consolidated balance sheet of LSI
        and its Subsidiaries as of

                                       59
<PAGE>   60

        such date) as of the end of each fiscal quarter of not less than (i)
        $1,198,926,000 plus (ii) one hundred percent (100%) of the Net Proceeds
        received by LSI or any of its Subsidiaries from the sale or issuance of
        equity securities (including equity securities issued upon the
        conversion of Subordinated Debt) to any Person other than LSI or any of
        its Subsidiaries after December 31, 1999, plus (iii) eighty percent
        (80%) of the sum of Consolidated Net Income, if such sum is positive,
        for each fiscal quarter elapsed after December 31, 1999, minus (iv) the
        net value of LSI stock not exceeding $250,000,000 in aggregate amount
        repurchased by LSI pursuant to employee stock ownership and purchase
        plans (provided that LSI shall not so repurchase stock in an aggregate
        amount which exceeds five percent (5%) of its stock outstanding as of
        the last day of such fiscal quarter).

                (d) Debt Service Coverage Ratio. LSI will maintain a ratio of
        (i) Consolidated EBITDA to (ii) the sum of Consolidated CMLTD, plus
        Consolidated Interest Expense, plus Capitalized Interest, that is not
        less than 2.00 to 1.00 for any period of four consecutive fiscal
        quarters, calculated as of the end of such period.

                (e) Subordinated Debt. LSI will not, and will not permit any of
        its Subsidiaries to, make any voluntary or optional payment or repayment
        on, redemption, exchange or acquisition for value of (other than any
        such payment, repayment, redemption, exchange or acquisition which would
        not constitute a payment for purposes of Section 13.10 of the
        subordination provisions attached hereto as Exhibit K), or any sinking
        fund or similar payment with respect to, any Subordinated Debt (a
        "restricted payment") if a Default shall then exist or would occur as a
        result thereof. In no event shall any restricted payment be made if the
        ratio of Consolidated Quick Assets to Consolidated Current Liabilities
        is less than 1.50 to 1.00 as of the last day of the fiscal quarter
        immediately preceding such restricted payment and after giving effect to
        such restricted payment. At or prior to the time notice of such
        restricted payment is given to the holders of Subordinated Debt (or if
        no such notice is required, prior to the time of such restricted
        payment), LSI shall give written notice to Agent of the maximum amount
        of such restricted payment and of the satisfaction of the foregoing
        condition.

SECTION VI.    DEFAULT.

        6.01. Events of Default. The occurrence or existence of any one or more
of the following shall constitute an "Event of Default" hereunder:

                (a) Non-Payment. Either Borrower shall (i) fail to pay when due
        any principal of any Loan or fail to make any payment or transfer when
        due under any Lender Rate Contract or (ii) fail to pay within five (5)
        Business Days after the same becomes due any interest, fee or other
        payment required under the terms of this Agreement or any of the other
        Credit Documents; or

                (b) Specific Defaults. Either Borrower or any of its Significant
        Subsidiaries shall fail to observe or perform any covenant, obligation,
        condition or agreement set forth in Paragraph 5.02 or Paragraph 5.03; or

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<PAGE>   61

                (c) Other Defaults. Either Borrower or any of its Significant
        Subsidiaries shall fail to observe or perform any other covenant,
        obligation, condition or agreement contained in this Agreement or the
        other Credit Documents and such failure shall continue unremedied for a
        period of thirty (30) days after the earlier of (i) either Borrower's
        written acknowledgement of such failure and (ii) Agent's written notice
        to Borrowers of such failure; provided, however, that such failure shall
        not constitute an Event of Default if it is capable of being remedied
        and Borrowers diligently proceed to remedy such failure and complete
        such remediation within 180 days after such written acknowledgment or
        notice; or

                (d) Representations and Warranties. Any representation,
        warranty, certificate, information or other statement (financial or
        otherwise) made or furnished by or on behalf of either Borrower to Agent
        or any Lender in or in connection with this Agreement or any of the
        other Credit Documents, or as an inducement to Agent or any Lender to
        enter into this Agreement, shall be false, incorrect or inaccurate in
        any material respect when made (or deemed made) or furnished; provided,
        however, that such misrepresentation or breach of warranty shall not
        constitute an Event of Default if it is capable of being remedied and
        Borrowers remedy such misrepresentation or breach of warranty within
        thirty (30) days after the earlier of (i) either Borrower's written
        acknowledgment of such misrepresentation or breach of warranty or (ii)
        Agent's written notice to Borrowers of such misrepresentation or breach
        of warranty; or

                (e) Cross-Default. (i) Either Borrower or any of its Significant
        Subsidiaries shall fail to make any payment on account of any
        Indebtedness of such Person (other than the Obligations) when due
        (whether at scheduled maturity, by required prepayment, upon
        acceleration or otherwise) and such failure shall continue beyond any
        period of grace provided with respect thereto, if the aggregate amount
        of such Indebtedness exceeds $10,000,000 or the effect of such failure
        is to cause, or permit the holder or holders thereof to cause,
        Indebtedness of either Borrower or any of its Significant Subsidiaries
        (other than the Obligations) in an aggregate amount exceeding
        $10,000,000 to become due (whether at scheduled maturity, by required
        prepayment, upon acceleration or otherwise) or (ii) either Borrower or
        any of its Significant Subsidiaries shall otherwise fail to observe or
        perform any agreement, term or condition contained in any agreement or
        instrument relating to any Indebtedness of such Person (other than the
        Obligations), or any other event shall occur or condition shall exist,
        and such failure, event or condition shall continue beyond any period of
        grace provided with respect thereto, if the effect of such failure,
        event or condition is to cause, or permit the holder or holders thereof
        to cause, Indebtedness of either Borrower or any of its Significant
        Subsidiaries (other than the Obligations) in an aggregate amount
        exceeding $10,000,000 to become due (and/or to be secured by cash
        collateral); or

                (f) Insolvency, Voluntary Proceedings. Either Borrower or any of
        its Significant Subsidiaries shall (i) apply for or consent to the
        appointment of a receiver, trustee, liquidator or custodian of itself or
        of all or a substantial part of its property, (ii) be unable, or admit
        in writing its inability, to pay its debts generally as they mature,
        (iii) make a general assignment for the benefit of its or any of its
        creditors, (iv) be dissolved or liquidated in full or in part, (v)
        become insolvent (as such term may be defined or

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<PAGE>   62

        interpreted under any applicable statute), (vi) commence a voluntary
        case or other proceeding seeking liquidation, reorganization or other
        relief with respect to itself or its debts under any bankruptcy,
        insolvency or other similar law now or hereafter in effect or consent to
        any such relief or to the appointment of or taking possession of its
        property by any official in an involuntary case or other proceeding
        commenced against it, or (vi) take any action for the purpose of
        effecting any of the foregoing; or

                (g) Involuntary Proceedings. Proceedings for the appointment of
        a receiver, trustee, liquidator or custodian of either Borrower or any
        of its Significant Subsidiaries or of all or a substantial part of the
        property thereof, or an involuntary case or other proceedings seeking
        liquidation, reorganization or other relief with respect to either
        Borrower or any of its Significant Subsidiaries or the debts thereof
        under any bankruptcy, insolvency or other similar law now or hereafter
        in effect shall be commenced and an order for relief entered or such
        proceeding shall not be dismissed or discharged within sixty (60) days
        of commencement; or

                (h) Judgments. (i) A final nonappealable judgment or order for
        the payment of money against either Borrower or any of its Significant
        Subsidiaries in an amount of $25,000,000 or more in excess of amounts
        covered by third-party insurance shall remain unpaid for ninety (90)
        days following the due date for such payment; or (ii) any non-monetary
        judgment or order shall be rendered against either Borrower or any of
        its Significant Subsidiaries which has or would reasonably be expected
        to have a Material Adverse Effect; or

                (i) Process Issued. A warrant of attachment, execution,
        distraint, or similar process against any substantial part of the assets
        of either Borrower or any of its Significant Subsidiaries is issued
        which remains undismissed or undischarged for a period of thirty (30)
        days, if as a result thereof there is reasonably expected to occur a
        Material Adverse Effect; or

                (j) Seizure. All or a material part of the undertaking, assets,
        rights or revenues of either Borrower or any of its Significant
        Subsidiaries are seized, nationalized, expropriated or compulsorily
        acquired by or under the authority of any Governmental Authority; or

                (k) ERISA. (i) An ERISA Event shall occur with respect to a
        Pension Plan which has resulted or could reasonably be expected to
        result in liability of either Borrower or any of its Subsidiaries under
        Title IV of ERISA to the Pension Plan or PBGC in an aggregate amount in
        excess of $10,000,000; (ii) the commencement or increase of
        contributions to, or the adoption of or the amendment of a Pension Plan
        by either Borrower or any of its Subsidiaries which has resulted or
        could reasonably be expected to result in an increase in Unfunded
        Pension Liability among all Pension Plans in an aggregate amount in
        excess of $10,000,000; or (iii) any of the representations and
        warranties contained in Subparagraph 4.01(k) shall cease to be true and
        correct which, individually or in combination, has resulted or could
        reasonably be expected to result in a Material Adverse Effect; or

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<PAGE>   63

                (l) Credit Documents. Any Credit Document or any material term
        thereof shall cease to be, or be asserted by either Borrower or any of
        its Significant Subsidiaries not to be, a legal, valid and binding
        obligation of such Borrower or such Significant Subsidiary enforceable
        in accordance with its terms; or

                (m) Dissolution. Etc. Either Borrower or any of its Significant
        Subsidiaries shall (i) liquidate, wind up or dissolve (or suffer any
        liquidation, wind-up or dissolution), except to the extent expressly
        permitted by clause (i) of Subparagraph 5.02(c), (ii) suspend its
        operations other than in the ordinary course of business, or (iii) take
        any corporate action to authorize any of the actions or events set forth
        above in this Subparagraph; or

                (n) Change of Control. Any Change of Control shall occur; or

                (o) Material Adverse Effect. Any event(s) or condition(s) which
        is (are) reasonably likely to have a Material Adverse Effect shall occur
        or exist; or

                (p) Repurchase of Subordinated Debt. Any event shall occur
        permitting the holders of any Subordinated Debt to require the
        repurchase of such Subordinated Debt prior to its stated maturity, which
        shall not include restricted payments made pursuant to Subparagraph
        5.03(e).

        6.02. Remedies. At any time after the occurrence and during the
continuance of any Event of Default (other than an Event of Default referred to
in Subparagraph 6.01(f) or 6.01(g) or any Event of Default which has been cured
by LSI under the LSI Guaranty), Agent may, with the consent of the Required
Lenders, or shall, upon instructions from the Required Lenders, by written
notice to Borrowers, (a) terminate the Commitments and the obligations of
Lenders to make Loans and/or (b) declare all outstanding Obligations payable by
Borrowers to be immediately due and payable without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the Notes to the contrary notwithstanding. Upon
the occurrence or existence of any Event of Default described in Subparagraph
6.01(f) or 6.01(g), immediately and without notice, (1) the Commitments and the
obligations of Lenders to make Loans shall automatically terminate and (2) all
outstanding Obligations payable by Borrowers hereunder shall automatically
become immediately due and payable, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the Notes to the contrary notwithstanding. In addition to
the foregoing remedies, upon the occurrence or existence of any Event of
Default, Agent may exercise any other right, power or remedy available to it
under any of the Credit Documents or otherwise by law, either by suit in equity
or by action at law, or both.

        6.03. Lender Rate Contract Remedies. Notwithstanding any other provision
of this Section VI, each Lender or its Affiliate which has entered into a Lender
Rate Contract shall have the right, with prior notice to Agent, but without the
approval or consent of Agent or any other Lender, (a) to declare an event of
default, termination event or other similar event thereunder which will result
in the early termination of such Lender Rate Contract, (b) to determine Swap
Termination Values in accordance with the terms of such Lender Rate Contract and
to set-off amounts between Lender Rate Contracts of such Lender, and (c) to
prosecute any legal action

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<PAGE>   64

against either Borrower or its Subsidiaries to enforce Swap Termination Values
owing to such Lender or its Affiliate under such Lender Rate Contracts.

SECTION VII.   THE AGENT AND RELATIONS AMONG LENDERS.

        7.01. Appointment, Powers and Immunities. Each Lender hereby appoints
and authorizes Agent to act as its agent hereunder and under the other Credit
Documents with such powers as are expressly delegated to Agent by the terms of
this Agreement and the other Credit Documents, together with such other powers
as are reasonably incidental thereto. Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in any
other Credit Document, be a trustee for any Lender or have any fiduciary duty to
any Lender. Notwithstanding anything to the contrary contained herein Agent
shall not be required to take any action which is contrary to this Agreement or
any other Credit Document or any applicable Governmental Rule. Neither Agent nor
any Lender shall be responsible to any other Lender for any recitals,
statements, representations or warranties made by either Borrower or any of its
Subsidiaries contained in this Agreement or in any other Credit Document, for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other Credit Document or for any failure by either
Borrower or any of its Subsidiaries to perform its respective obligations
hereunder or thereunder. Agent may employ agents and attorneys-in-fact and shall
not be responsible to any Lender for the negligence or misconduct of any such
agents or attorneys-in-fact selected by it with reasonable care. Neither Agent
nor any of its directors, officers, employees, agents or advisors shall be
responsible to any Lender for any action taken or omitted to be taken by it or
them hereunder or under any other Credit Document or in connection herewith or
therewith, except for its or their own gross negligence or willful misconduct.
Except as otherwise provided under this Agreement, Agent shall take such action
with respect to the Credit Documents as shall be directed by the Required
Lenders.

        7.02. Reliance by Agent. Agent shall be entitled to rely upon any
certificate, notice or other document (including any cable, telegram, facsimile
or telex) believed by it in good faith 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 Agent with reasonable care. As to any other matters not
expressly provided for by this Agreement, Agent shall not be required to take
any action or exercise any discretion, but shall be required to act or to
refrain from acting upon instructions of the Required Lenders and shall in all
cases be fully protected by Lenders in acting, or in refraining from acting,
hereunder or under any other Credit Document in accordance with the instructions
of the Required Lenders, and such instructions of the Required Lenders and any
action taken or failure to act pursuant thereto shall be binding on all of
Lenders.

        7.03. Defaults. Agent shall not be deemed to have knowledge or notice of
the occurrence of any Default unless Agent has received a written notice from a
Lender or either Borrower, referring to this Agreement, describing such Default
and stating that such notice is a "Notice of Default". If Agent receives such a
notice of the occurrence of a Default, Agent shall give prompt notice thereof to
Lenders. Agent shall take such action with respect to such Default as shall be
reasonably directed by the Required Lenders; provided, however, that until Agent
shall have received such directions, Agent may (but shall not be obligated to)
take such action, or

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<PAGE>   65

refrain from taking such action, with respect to such Default as it shall deem
advisable in the best interest of Lenders.

        7.04. Indemnification. Without limiting the Obligations of Borrowers
hereunder, each Lender agrees to indemnify Agent, ratably in accordance with
their Proportionate Shares, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may at any time be imposed on, incurred
by or asserted against Agent in any way relating to or arising out of this
Agreement or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or the enforcement of any of the
terms hereof or thereof; provided, however, that no Lender shall be liable for
any of the foregoing to the extent they arise from Agent's gross negligence or
willful misconduct. Agent shall be fully justified in refusing to take or in
continuing to take any action hereunder unless it shall first be indemnified to
its satisfaction by Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
obligations of each Lender under this Paragraph 7.04 shall survive the payment
and performance of the Obligations, the termination of this Agreement and any
Lender ceasing to be a party to this Agreement (with respect to events which
occurred prior to the time such Lender ceased to be a Lender hereunder).

        7.05. Non-Reliance. Each Lender represents that it has, independently
and without reliance on Agent, or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own appraisal of the
business, prospects, management, financial condition and affairs of Borrowers
and their Subsidiaries and its own decision to enter into this Agreement and
agrees that it will, independently and without reliance upon Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own appraisals and decisions in taking or not
taking action under this Agreement. Neither Agent nor any of its affiliates nor
any of their respective directors, officers, employees, agents or advisors shall
(a) be required to keep any Lender informed as to the performance or observance
by either Borrower or any of its Subsidiaries of the obligations under this
Agreement or any other document referred to or provided for herein or to make
inquiry of, or to inspect the properties or books of either Borrower or any of
its Subsidiaries; (b) have any duty or responsibility to provide any Lender with
any credit or other information concerning either Borrower or any of its
Subsidiaries which may come into the possession of Agent, except for notices,
reports and other documents and information expressly required to be furnished
to Lenders by Agent hereunder; or (c) be responsible to any Lender for (i) any
recital, statement, representation or warranty made by either Borrower or any
officer, employee or agent of either Borrower in this Agreement or in any of the
other Credit Documents, (ii) the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any Credit Document, (iii)
the value or sufficiency of any collateral or the validity or perfection of any
of the liens or security interests intended to be created by the Credit
Documents, or (iv) any failure by either Borrower to perform its obligations
under this Agreement or any other Credit Document.

        7.06. Resignation or Removal of Agent. Agent may resign at any time by
giving thirty (30) days prior written notice thereof to Borrowers and Lenders,
and Agent may be removed at any time with or without cause by the Required
Lenders. Upon any such resignation or removal, the Required Lenders shall have
the right to appoint a successor Agent, which Agent, if not a

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<PAGE>   66

Lender, shall be reasonably acceptable to Borrowers; provided, however, that
Borrowers shall have no right to approve a successor Agent if a Default has
occurred and is continuing. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from the duties and
obligations thereafter arising hereunder. After any retiring Agent's resignation
or removal hereunder as Agent, the provisions of this Section VII shall continue
in effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Agent.

        7.07. Agent in its Individual Capacity. Agent and its affiliates may
make loans to, accept deposits from and generally engage in any kind of banking
or other business with Borrowers and their Subsidiaries and affiliates as though
Agent were not Agent hereunder. With respect to Loans, if any, made by Agent in
its capacity as a Lender, Agent in its capacity as a Lender shall have the same
rights and powers under this Agreement and the other Credit Documents as any
other Lender and may exercise the same as though it were not Agent, and the
terms "Lender" or "Lenders" shall include Agent in its capacity as a Lender.

SECTION VIII.  MISCELLANEOUS.

        8.01. Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
either Borrower, any Lender or Agent under this Agreement or the other Credit
Documents shall be in writing and faxed, mailed or delivered, if to either
Borrower or Agent, at its respective facsimile number or address set forth below
or, if to any Lender, at the address or facsimile number specified for such
Lender in Part B of Schedule I (or to such other facsimile number or address for
any party as indicated in any notice given by that party to the other parties).
All such notices and communications shall be effective (a) when sent by an
overnight courier service of recognized standing, on the second Business Day
following the deposit with such service; (b) when mailed, first class postage
prepaid and addressed as aforesaid through the United States Postal Service or
registered mail through the Japanese Post Office, upon receipt; (c) when
delivered by hand, upon delivery; and (d) when faxed, upon confirmation of
receipt; provided, however, that any notice delivered to Agent under Section II
shall not be effective until received by Agent.

               Agent:        For notices related to the Japanese Borrowing:

                             ABN AMRO Bank N.V.
                             Tokyo Branch
                             13F, Shiroyama JT Mori Building
                             4-3-1, Toranomon, Minato-ku
                             Tokyo 105
                             Japan
                             Attn: Kiyoharu Michiwaki or Takamasa Marito
                             Tel. No: 81-3-5405-6575 or 6565
                             Fax No: 81-3-5405-6902 or 6903

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<PAGE>   67

                             For notices related to any U.S. Borrowing, all
                             other notices and copies of notices related to the
                             Japanese Borrowing:

                             ABN AMRO Bank N.V.
                             Syndications Group 1325 Avenue of the Americas, 9th
                             Floor
                             New York, NY 10019
                             U.S.A.
                             Attn:  Linda Boardman
                             Tel. No: (212) 314-1724
                             Fax. No: (212) 314-1712

                             With a copy in each case to:

                             ABN AMRO Bank N.V.
                             101 California Street, Suite 4550
                             San Francisco, CA  94111-5812
                             Attn:  Thomas R. Wagner
                             Tel: (415) 984-3734
                             Fax: (415) 362-3524

               LSI:          LSI Logic Corporation
                             1551 McCarthy Boulevard
                             Milpitas, CA  95035
                             Attn:  Mark R. Kent, Treasurer
                                    Mail Stop D106
                             Tel: (408) 433-7189
                             Fax: (408) 433-6896

               LLJS:         LSI Logic Japan Semiconductor, Inc.
                             10, Kitahara
                             Tsukuba-shi
                             Ibaraki, Japan
                             Attn: Makoto Kaneda
                             Tel: (81) ###-##-####
                             Fax: (81) ###-##-####

                             with a copy to LSI as provided above.

Each Notice of U.S. Borrowing, Notice of U.S. Borrowing Conversion and Notice of
U.S. Borrowing Interest Period Selection shall be given by LSI to Agent's U.S.
office located at the address referred to above during such office's normal
business hours; provided, however, that any such notice received by Agent after
1:00 p.m. (Chicago time) on any Business Day shall be deemed received by Agent
on the next Business Day. The Notice of Japanese Borrowing and each Notice of
Japanese Borrowing Interest Period Selection shall be given by LLJS to Agent's
Tokyo office at the address referred to above during such office's normal
business hours;

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<PAGE>   68

provided, however, that any such notice received by Agent after 10:00 a.m.
(Tokyo time) on any Business Day shall be deemed received by Agent on the next
Business Day. In any case where this Agreement authorizes notices, requests,
demands or other communications by Borrowers to Agent or any Lender to be made
by telephone or facsimile, Agent or any Lender may conclusively presume that
anyone purporting to be a Person designated in any incumbency certificate or
other similar document received by Agent or a Lender is such a Person.

        8.02. Expenses. LSI agrees to pay promptly upon receipt of an invoice
therefor, whether or not any Loan is made hereunder, (a) all reasonable fees and
expenses, including reasonable attorneys' fees and expenses, incurred by Agent
in connection with the syndication of the credit facilities provided hereunder,
the preparation, negotiation, execution and delivery of, and the exercise of its
duties under, this Agreement and the other Credit Documents, and the
preparation, negotiation, execution and delivery of amendments and waivers
hereunder and thereunder and (b) all reasonable fees and expenses, including
reasonable attorneys' fees and expenses, incurred by Agent and Lenders in the
enforcement or attempted enforcement of any of the Obligations or in preserving
any of Agent's or Lenders' rights and remedies (including, without limitation,
all such fees and expenses incurred in connection with any "workout" or
restructuring affecting the Credit Documents or the Obligations or any
bankruptcy or similar proceeding involving either Borrower or any of its
Subsidiaries). As used herein, the term "reasonable attorneys' fees and
expenses" shall include, without limitation, allocable costs and expenses of
Agent's and Lenders' in-house legal counsel and staff. The obligations of LSI
under this Paragraph 8.02 shall survive the payment and performance of the
Obligations and the termination of this Agreement.

        8.03. Indemnification. To the fullest extent permitted by law, LSI
agrees to protect, indemnify, defend and hold harmless Agent, Lenders and their
Affiliates and their respective directors, officers, employees, agents and
advisors ("Indemnitees") from and against any and all liabilities, losses,
damages or expenses of any kind or nature and from any suits, claims or demands
(including in respect of or for reasonable attorney's fees and other expenses)
arising on account of or in connection with any matter or thing or action or
failure to act by Indemnitees, or any of them, arising out of or relating to the
Credit Documents or any transaction contemplated thereby, including without
limitation any use by either Borrower of any proceeds of the Loans, except to
the extent such liability arises from the willful misconduct or gross negligence
of such Indemnitee. Upon receiving knowledge of any suit, claim or demand
asserted by a third party that Agent or any Lender believes is covered by this
indemnity, Agent or such Lender shall give LSI notice of the matter and an
opportunity to defend it, at LSI's sole cost and expense, with legal counsel
satisfactory to Agent or such Lender, as the case may be. Agent or such Lender
may also require LSI to defend the matter. Any failure or delay of Agent or any
Lender to notify LSI of any such suit, claim or demand shall not relieve LSI of
its obligations under this Paragraph 8.03 but shall reduce such obligations to
the extent of any increase in those obligations caused solely by any such
failure or delay which is unreasonable. The obligations of LSI under this
Paragraph 8.03 shall survive the payment and performance of the Obligations and
the termination of this Agreement.

        8.04. Waivers; Amendments. Any term, covenant, agreement or condition of
this Agreement or any other Credit Document may be amended or waived, and any
consent under this Agreement or any other Credit Document may be given, if such
amendment, waiver or

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<PAGE>   69

consent is in writing and is signed by Borrowers and the Required Lenders (or
Agent on behalf of the Required Lenders with the written approval of the
Required Lenders); provided, however that:

                (a) Any amendment, waiver or consent which would (i) reduce any
        fees or other amounts payable for the account of all Lenders hereunder
        or extend the scheduled date for payment of any such fees or amounts,
        (ii) amend this Paragraph 8.04, (iii) amend the definition of Required
        Lenders or (iv) release the LSI Guaranty or any substantial part of any
        other guaranty or collateral which may be granted under the Security
        Documents, must be in writing and signed or approved in writing by all
        Lenders;

                (b) Any amendment, waiver or consent which would (i) extend the
        Revolving Termination Date with respect to the U.S. Revolving
        Borrowings, (ii) increase the Total U.S. Revolving Commitment or (iii)
        reduce the principal of or interest on the U.S. Revolving Loans or the
        U.S. Revolving Commitment Fees or any other fees or amounts payable for
        the account of all U.S. Lenders with U.S. Revolving Commitments or
        extend the scheduled date for payment of any such principal, interest,
        fees or amounts, must be in writing and signed or approved in writing by
        all U.S. Lenders with U.S. Revolving Commitments or U.S. Revolving
        Loans;

                (c) Any amendment, waiver or consent which would (i) extend the
        U.S. 364 Day Termination Date, (ii) increase the Total U.S. 364 Day
        Commitment or (iii) reduce the principal of or interest on the U.S. 364
        Day Loans or the U.S. 364 Day Commitment Fees or any other fees or
        amounts payable for the account of all U.S. Lenders with U.S. 364 Day
        Commitments or extend the scheduled date for payment of any such
        principal, interest, fees or amounts, must be in writing and signed or
        approved in writing by all U.S. Lenders with U.S. 364 Day Commitments or
        U.S. 364 Day Loans;

                (d) Any amendment, waiver or consent which would (i) extend the
        Maturity with respect to the Japanese Borrowing, (ii) increase the Total
        Japanese Commitment or (iii) reduce the principal of or interest on the
        Japanese Loans or any other fees or amounts payable for the account of
        all Japanese Lenders hereunder or extend the scheduled date for payment
        of any such principal, interest, fees or amounts, must be in writing and
        signed or approved in writing by all Japanese Lenders;

                (e) Any amendment, waiver or consent which would increase or
        decrease the Commitment of any Lender (except for a pro rata decrease in
        the Commitments of all Lenders with the same type of Commitment) must be
        in writing and signed by such Lender; and

                (f) Any amendment, waiver or consent which affects the rights or
        obligations of Agent must be in writing and signed by Agent.

No failure or delay by Agent or any Lender in exercising any right under this
Agreement or any other Credit Document shall operate as a waiver thereof or of
any other right hereunder or thereunder nor shall any single or partial exercise
of any such right preclude any other further exercise thereof or of any other
right hereunder or thereunder. Unless otherwise specified in

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<PAGE>   70

such waiver or consent, a waiver or consent given hereunder shall be effective
only in the specific instance and for the specific purpose for which given.

        8.05. Successors and Assigns.

                (a) Binding Effect. This Agreement and the other Credit
        Documents shall be binding upon and inure to the benefit of Borrowers,
        Lenders, Agent, all future holders of the Notes and their respective
        successors and permitted assigns, except that neither Borrower may
        assign or transfer any of its rights or obligations under any Credit
        Document without the prior written consent of Agent and each Lender.

                (b) Participations. Any Lender may at any time sell to one or
        more banks or other financial institutions ("Participants")
        participating interests in any Loan owing to such Lender, any Note held
        by such Lender, any Commitment of such Lender or any other interest of
        such Lender under this Agreement and the other Credit Documents. In the
        event of any such sale by a Lender of participating interests, such
        Lender's obligations under this Agreement shall remain unchanged, such
        Lender shall remain solely responsible for the performance thereof, such
        Lender shall remain the holder of its Notes for all purposes under this
        Agreement and Borrowers and Agent shall continue to deal solely and
        directly with such Lender in connection with such Lender's rights and
        obligations under this Agreement. Any agreement pursuant to which any
        such sale is effected may require the selling Lender to obtain the
        consent of the Participant in order for such Lender to agree in writing
        to any amendment, waiver or consent of a type specified in clause
        (a)(iv), (b)(i), (b)(iii), (c)(i), (c)(iii), (d)(i), (d)(iii) or
        Subparagraph (e) of Paragraph 8.04 but may not otherwise require the
        selling Lender to obtain the consent of such Participant to any other
        amendment, waiver or consent hereunder. Borrowers also agree that any
        Lender which has transferred any participating interest in its
        Commitments or Loans shall, notwithstanding any such transfer, be
        entitled to the full benefits accorded such Lender under Paragraph 2.10,
        Paragraph 2.11, and Paragraph 2.12, as if such Lender had not made such
        transfer.

                (c) Assignments. Any Lender may, at any time, sell and assign to
        any other Lender or any Eligible Assignee (individually, an "Assignee
        Lender") all or a portion of its rights and obligations under this
        Agreement and the other Credit Documents (such a sale and assignment to
        be referred to herein as an "Assignment") pursuant to an assignment
        agreement in the form of Exhibit H (an "Assignment Agreement"), executed
        by each Assignee Lender and such assignor Lender (an "Assignor Lender")
        and delivered to Agent for its acceptance and recording in the Register;
        provided, however, that:

                        (i) Without the written consent of Agent and, if no
                Default has occurred and is continuing, LSI (which consent of
                Agent and LSI shall not be unreasonably withheld), no U.S.
                Lender may make any Assignment of its U.S. Revolving Commitment,
                U.S. 364 Day Commitment or U.S. Loans to any Assignee Lender
                which is not, immediately prior to such Assignment, a U.S.
                Lender hereunder or an Affiliate thereof acting through an
                office or branch located in the United States;

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<PAGE>   71

                        (ii) Without the written consent of Agent and, if no
                Default has occurred and is continuing, LLJS (which consent of
                Agent and LLJS shall not be unreasonably withheld), no Japanese
                Lender may make any Assignment of its Japanese Commitment or
                Japanese Loans to any Assignee Lender which is not, immediately
                prior to such Assignment, a Japanese Lender hereunder or an
                Affiliate thereof acting through an office or branch located in
                Japan;

                        (iii) Without the written consent of Agent and, if no
                Default has occurred and is continuing, LSI (which consent of
                Agent and LSI shall not be unreasonably withheld), no U.S.
                Lender may make any Assignment of its U.S. Revolving Commitment,
                U.S. 364 Day Commitment or U.S. Loans to any Assignee Lender if,
                after giving effect to such Assignment, the U.S. Revolving
                Commitment, the U.S. 364 Day Commitment or the U.S. Loans of
                such Lender or such Assignee Lender would in the aggregate be
                less than Ten Million Dollars ($10,000,000) (except that a U.S.
                Lender may make an Assignment which reduces its U.S. Revolving
                Commitment, U.S. 364 Day Commitment and U.S. Loans to zero
                without the written consent of LSI and Agent);

                        (iv) Without the written consent of Agent and, if no
                Default has occurred and is continuing, LLJS (which consent of
                Agent and LLJS shall not be unreasonably withheld), no Japanese
                Lender may make any Assignment of its Japanese Commitment or
                Japanese Loans to any Assignee Lender if, after giving effect to
                such Assignment, the Japanese Commitment or Japanese Loans of
                such Lender or such Assignee Lender would in the aggregate be
                less than One Billion Yen (Yen1,000,000,000) (except that a
                Japanese Lender may make an Assignment which reduces its
                Japanese Commitment and Japanese Loans to zero without the
                written consent of LSI and Agent);

                        (v) Without the written consent of Agent and, if no
                Default has occurred and is continuing, LSI (which consent of
                Agent and LSI shall not be unreasonably withheld), no U.S.
                Lender with a U.S. Revolving Commitment may make any Assignment
                of its U.S. Revolving Commitment or U.S. Revolving Loans which
                does not assign and delegate an equal pro rata interest in all
                rights, duties and obligations of such Lender under this
                Agreement and the other Credit Documents (except for its rights
                and duties, if any, relating to its U.S. 364 Day Commitment or
                U.S. 364 Day Loans or its Japanese Commitment or Japanese
                Loans);

                        (vi) Without the written consent of Agent and, if no
                Default has occurred and is continuing, LSI (which consent of
                Agent and LSI shall not be unreasonably withheld), no U.S.
                Lender with a U.S. 364 Day Commitment may make any Assignment of
                its U.S. 364 Day Commitment or U.S. 364 Day Loans which does not
                assign and delegate an equal pro rata interest in all rights,
                duties and obligations of such Lender under this Agreement and
                the other Credit Documents (except for its rights and duties, if
                any, relating to its U.S. Revolving Commitment or U.S. Revolving
                Loans or its Japanese Commitment or Japanese Loans);

                                       71
<PAGE>   72

                        (vii) Without the written consent of Agent and, if no
                Default has occurred and is continuing, LLJS (which consent of
                Agent and LLJS shall not be unreasonably withheld), no Japanese
                Lender may make any Assignment of its Japanese Commitment or
                Japanese Loan which does not assign and delegate an equal pro
                rata interest in all rights, duties and obligations of such
                Lender under this Agreement and the other Credit Documents
                (except for its rights and duties, if any, relating to its U.S.
                Revolving Commitment or U.S. Revolving Loans or its U.S. 364 Day
                Commitment or U.S. 364 Day Loans); and

                        (viii) Any Assignor Lender which is, or which has an
                Affiliate which is, a party to a Lender Rate Contract may not
                make an Assignment of all of its Commitment or all of its Loans
                to an Assignee Lender unless such Assignee Lender or its
                Affiliate shall also assume all obligations of such Assignor
                Lender or its Affiliate with respect to such Lender Rate
                Contract.

        Upon such execution, delivery, acceptance and recording of each
        Assignment Agreement, from and after the Assignment Effective Date
        determined pursuant to such Assignment Agreement, (A) each Assignee
        Lender thereunder shall be a Lender hereunder with Commitments or Loans
        as set forth on Attachment 1 to such Assignment Agreement (under the
        caption "Commitments or Loans After Assignment") and shall have the
        rights, duties and obligations of such a Lender under this Agreement and
        the other Credit Documents, and (B) the Assignor Lender thereunder shall
        be a Lender with Commitments or Loans as set forth on Attachment 1 to
        such Assignment Agreement (under the caption "Commitments or Loans After
        Assignment"), or, if the Commitments or Loans of the Assignor Lender
        have been reduced to zero, the Assignor Lender shall cease to be a
        Lender and to have any obligation to make any Loan; provided, however,
        that any such Assignor Lender which ceases to be a Lender shall continue
        to be entitled to the benefits of any provision of this Agreement which
        by its terms survives the termination of this Agreement. Each Assignment
        Agreement shall be deemed to amend Schedule I to the extent, and only to
        the extent, necessary to reflect the addition of each Assignee Lender,
        the deletion of each Assignor Lender which reduces its Commitments or
        Loans to zero, and the resulting adjustment of Commitments or Loans
        arising from the purchase by each Assignee Lender of all or a portion of
        the rights and obligations of an Assignor Lender under this Agreement
        and the other Credit Documents. On or prior to the Assignment Effective
        Date determined pursuant to each Assignment Agreement, LSI, at its own
        expense, shall, if requested by Assignee Lenders, execute and deliver to
        Agent, in exchange for the surrendered Notes, if any, of the Assignor
        Lender thereunder, new Notes to the order of each Assignee Lender
        thereunder and, if the Assignor Lender is continuing as a Lender
        hereunder, new Notes to the order of the Assignor Lender. The Notes
        surrendered by the Assignor Lender shall be returned by Agent to LSI
        marked "Replaced". Each Assignee Lender which becomes a U.S. Lender and
        was not previously a U.S. Lender hereunder and which is not incorporated
        under the laws of the United States of America or a state thereof shall,
        within three (3) Business Days of becoming a U.S. Lender, deliver to LSI
        and Agent such certificates and other evidence as LSI or Agent may
        reasonably request to establish that such Lender is entitled to receive
        payments under this Agreement on account of its U.S. Loans without
        deduction or withholding of any United States federal income taxes. Each
        Assignee Lender which

                                       72
<PAGE>   73

        becomes a Japanese Lender and was not previously a Japanese Lender
        hereunder and which is not incorporated under the laws of Japan shall,
        within three (3) Business Days of becoming a Japanese Lender, deliver to
        LLJS and Agent such certificates and other evidence as LLJS or Agent may
        reasonably request to establish that such Lender is entitled to receive
        payments under this Agreement on account of its Japanese Loans without
        deduction or withholding of any Japanese income taxes.

                (d) Register. Agent shall maintain at its address referred to in
        Paragraph 8.01 a copy of each Assignment Agreement delivered to it and a
        register (the "Register") for the recordation of the names and addresses
        of Lenders and the Commitments or Loans of each Lender from time to
        time. The entries in the Register shall be conclusive in the absence of
        manifest error, and Borrowers, Agent and Lenders may treat each Person
        whose name is recorded in the Register as the owner of the Commitments
        or Loans recorded therein for all purposes of this Agreement. The
        Register shall be available for inspection by either Borrower or any
        Lender at any reasonable time and from time to time upon reasonable
        prior notice.

                (e) Registration. Upon its receipt of an Assignment Agreement
        executed by an Assignor Lender and an Assignee Lender (and, to the
        extent required by Subparagraph 8.05(c), by Borrowers and Agent)
        together with payment to Agent by Assignor Lender of a registration and
        processing fee of $3,000, Agent shall (i) promptly accept such
        Assignment Agreement and (ii) on the Assignment Effective Date
        determined pursuant thereto record the information contained therein in
        the Register and give notice of such acceptance and recordation to
        Lenders and Borrowers. Agent may, from time to time at its election,
        prepare and deliver to Lenders and Borrowers a revised Schedule I
        reflecting the names, addresses and respective Commitments or Loans of
        all Lenders then parties hereto.

                (f) Confidentiality. Subject to Paragraph 8.12, Agent and
        Lenders may disclose the Credit Documents and any financial or other
        information relating to Borrowers or any of their Subsidiaries to each
        other or to any potential Participant or Assignee Lender.

                (g) Pledges to Federal Reserve Banks. Notwithstanding any other
        provision of this Agreement, any Lender may at any time assign all or a
        portion of its rights under this Agreement and the other Credit
        Documents to a Federal Reserve Bank. No such assignment shall relieve
        the assigning Lender from its obligations under this Agreement and the
        other Credit Documents.

                                       73
<PAGE>   74

        8.06. Setoff; Security Interest.

                (a) Setoff. In addition to any rights and remedies of Lenders
        provided by law, each Lender shall have the right, with the prior
        consent of Agent but without prior notice to or consent of Borrowers,
        any such notice and consent being expressly waived by Borrowers to the
        extent permitted by applicable law, upon the occurrence and during the
        continuance of an Event of Default, to set-off and apply against the
        Obligations of either Borrower any amount owing from such Lender to such
        Borrower. The aforesaid right of set-off may be exercised by such Lender
        against a Borrower or against any trustee in bankruptcy, debtor in
        possession, assignee for the benefit of creditors, receiver or
        execution, judgment or attachment creditor of such Borrower or against
        anyone else claiming through or against such Borrower or such trustee in
        bankruptcy, debtor in possession, assignee for the benefit of creditors,
        receiver, or execution, judgment or attachment creditor, notwithstanding
        the fact that such right of set-off may not have been exercised by such
        Lender at any prior time. Each Lender agrees promptly to notify the
        applicable Borrower 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.

                (b) Security Interest. As security for the Obligations, each
        Borrower hereby grants to Agent and each Lender, for the benefit of all
        Lenders, a continuing security interest in any and all deposit accounts
        or moneys of such Borrower now or hereafter maintained with such Lender.
        Each Lender shall have all of the rights of a secured party with respect
        to such security interest.

        8.07. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the parties hereto and their permitted successors and assigns
hereunder, any benefit or legal or equitable right, remedy or claim under or by
virtue of this Agreement or under or by virtue of any provision herein.

        8.08. Partial Invalidity. If at any time any provision of this Agreement
is or becomes illegal, invalid or unenforceable in any respect under the law or
any jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.

        8.09. Jury Trial. EACH OF BORROWERS, LENDERS AND AGENT, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT.

        8.10. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.

                                       74
<PAGE>   75

        8.11. Borrowers' Liabilities. LSI is individually liable for the payment
of the U.S. Revolving Commitment Fees, the U.S. 364 Day Commitment Fees and the
principal of, interest on and all other amounts related to the U.S. Loans and
all expenses and indemnification payable under Paragraphs 8.02 and 8.03, and
LLJS is individually liable for the payment of the principal of, interest on and
all other amounts related to the Japanese Loans. LSI also is liable for the
payment and performance of all Obligations of LLJS under this Agreement and the
other Credit Documents as provided in the LSI Guaranty.

        8.12. Confidentiality. Neither any Lender nor Agent shall disclose to
any Person any information with respect to Borrowers or any of their
Subsidiaries which is furnished pursuant to this Agreement or under the other
Credit Documents, except that any Lender or Agent may disclose any such
information (a) to its own directors, officers, employees, auditors, counsel and
other advisors and to its Affiliates to the extent reasonably determined by such
Lender or Agent to be necessary for the administration or enforcement of the
Credit Documents; (b) to any other Lender or Agent; (c) which is otherwise
available to the public; (d) if required or appropriate in any report, statement
or testimony submitted to any Governmental Authority having or claiming to have
jurisdiction over such Lender or Agent; (e) if required in response to any
summons or subpoena; (f) in connection with any enforcement by Lenders and Agent
of their rights under this Agreement or the other Credit Documents or any
litigation among the parties relating to the Credit Documents or the
transactions contemplated thereby; (g) to comply with any requirement of law
applicable to such Lender or Agent; (h) to any Assignee Lender or Participant or
any prospective Assignee Lender or Participant, provided that such Assignee
Lender or Participant or prospective Assignee Lender or Participant agrees to be
bound by this Paragraph 8.12; or (i) otherwise with the prior consent of
Borrowers; provided, however, that (i) any Lender or Agent served with any
summons or subpoena demanding the disclosure of any such information shall use
reasonable efforts to notify Borrowers promptly of such summons or subpoena if
not prohibited by any requirement of law and, if requested by Borrowers and not
disadvantageous to such Lender or Agent, to cooperate with Borrowers in
obtaining a protective order restricting such disclosure, and (ii) any
disclosure made in violation of this Agreement shall not affect the obligations
of Borrowers and their Subsidiaries under this Agreement and the other Credit
Documents.

        8.13. Consent to Jurisdiction. Each Borrower irrevocably submits to the
non-exclusive jurisdiction of the courts of the State of California and the
courts of the United States of America located in the Northern District of
California and agrees that any legal action, suit or proceeding arising out of
or relating to this Agreement or any of the other Credit Documents may be
brought against such party in any such courts. Final judgment against either
Borrower in any such action, suit or proceeding shall be conclusive and may be
enforced in any other jurisdiction by suit on the judgment, a certified or
exemplified copy of which shall be conclusive evidence of the judgment, or in
any other manner provided by law. Nothing in this Paragraph 8.13 shall affect
the right of Agent or any Lender to commence legal proceedings or otherwise sue
either Borrower in any other appropriate jurisdiction, or concurrently in more
than one jurisdiction, or to serve process, pleadings and other papers upon
either Borrower in any manner authorized by the laws of any such jurisdiction.
Each Borrower agrees that process served either personally or by registered mail
shall, to the extent permitted by law, constitute adequate service of process in
any such suit. Without limiting the foregoing, each Borrower hereby appoints, in
the case of any such action or proceeding brought in the courts of or in the
State of California, CT Corporation,

                                       75
<PAGE>   76

with offices on the date hereof at 818 West Seventh Street, Los Angeles,
California 90017, to receive for it and on its behalf, service of process in the
State of California with respect thereto, provided each Borrower may appoint any
other Person, reasonably acceptable to Agent, with offices in the State of
California to replace such agent for service of process upon delivery to Agent
of a reasonably acceptable agreement of such new agent agreeing so to act. Each
Borrower irrevocably waives to the fullest extent permitted by applicable law
(a) any objection which it may have now or in the future to the laying of the
venue of any such action, suit or proceeding in any court referred to in the
first sentence above; (b) any claim that any such action, suit or proceeding has
been brought in an inconvenient forum; (c) its right of removal of any matter
commenced by any other party in the courts of the State of California to any
court of the United States of America; (d) any immunity which it or its assets
may have in respect of its obligations under this Agreement or any other Credit
Document from any suit, execution, attachment (whether provisional or final, in
aid of execution, before judgment or otherwise) or other legal process; and (e)
any right it may have to require the moving party in any suit, action or
proceeding brought in any of the courts referred to above arising out of or in
connection with this Agreement or any other Credit Document to post security for
the costs of such Borrower or to post a bond or to take similar action.

        8.14. Effect on Existing Credit Agreement. Borrowers, Agent and Lenders
agree that on and after the date that this Agreement is executed by Borrowers
and the Required Lenders, (a) this Agreement shall amend, restate in its
entirety and replace, without notation, the Existing Credit Agreement, (b) the
Notes executed and delivered by LSI shall remain in full force and effect with
respect to the U.S. Loans outstanding hereunder and (c) the LSI Guaranty shall
remain in full force and effect with respect to this Agreement and the
obligations of LLJS hereunder; provided, however, that nothing contained herein
shall (i) operate as a waiver of any right, power or remedy of Agent or any
Lender under the Existing Credit Agreement or any related document, instrument
or agreement or (ii) extinguish or impair any obligations of either Borrower
under the Existing Credit Agreement or any related document, instrument or
agreement except to the extent any such obligation is actually satisfied by such
Borrower; and provided, further, that all Loans outstanding under the Existing
Credit Agreement shall remain outstanding and shall be deemed to have been made
under this Agreement on a pro rata basis by the Lenders hereunder in accordance
with their respective Proportionate Shares for the applicable category of Loan.

                       [The first signature page follows.]

                                       76
<PAGE>   77

        IN WITNESS WHEREOF, Borrowers, Lenders and Agent have caused this Second
Amended and Restated Credit Agreement to be executed as of the day and year
first above written.

BORROWERS:                          LSI LOGIC CORPORATION

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

                                    LSI LOGIC JAPAN SEMICONDUCTOR, INC.

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

AGENT:                              ABN AMRO BANK N.V.

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

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

LENDERS:                            ABN AMRO BANK N.V.

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

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

                                      S-1
<PAGE>   78

                                    BANCA DI ROMA

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

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

                                    BANK OF AMERICA N.A.

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

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

                                    BANK ONE, N.A.

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

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

                                      S-2
<PAGE>   79

                                    THE BANK OF NOVA SCOTIA

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

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

                                    BANQUE NATIONALE DE PARIS

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

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

                                    CHIAO TUNG BANK CO., LTD.

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

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

                                      S-3
<PAGE>   80

                                    CREDIT LYONNAIS,
                                    LOS ANGELES BRANCH

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

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

                                    DAI-ICHI KANGYO BANK, LIMITED

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

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

                                    FIRST SECURITY BANK, N.A.

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

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

                                      S-4
<PAGE>   81

                                    FLEET NATIONAL BANK

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

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

                                    THE INDUSTRIAL BANK OF JAPAN, LIMITED

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

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

                                    KEYBANK NATIONAL ASSOCIATION

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

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

                                      S-5
<PAGE>   82

                                    MELLON BANK

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

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

                                    SANWA BANK CALIFORNIA

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

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

                                    SOCIETE GENERALE

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

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

                                      S-6
<PAGE>   83

                                    UNION BANK OF CALIFORNIA, N.A.

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

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

                                    U.S. BANK NATIONAL ASSOCIATION

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

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

                                      S-7
<PAGE>   84

                                   SCHEDULE I

                                     LENDERS

                              PART A - COMMITMENTS

<TABLE>
<CAPTION>
                                         U.S.
                                       REVOLVING           U.S 364 DAY            JAPANESE
LENDER                                 COMMITMENT          COMMITMENT            COMMITMENT
------                                 ----------          ----------            ----------
<S>                                    <C>
ABN AMRO Bank N.V.                     $19,661,505.13

Banca di Roma                            3,606,194.68

Bank of America, N.A.                   21,276,548.60

Bank One, N.A.                          12,364,096.04

The Bank of Nova Scotia                 18,185,524.59

Banque Nationale de Paris               14,424,778.71

Chiao Tung Bank Co., Ltd.                5,409,292.02

Credit Lyonnais Los Angeles              9,015,486.70
Branch

Dai-Ichi Kangyo Bank, Limited           12,364,096.04

First Security Bank, N.A.                9,015,486.70

Fleet National Bank                     36,061,946.78

The Industrial Bank of                  10,457,964.57
Japan, Limited

KeyBank National Association            21,276,548.60

Mellon Bank                              9,015,486.70

Sanwa Bank California                   10,818,584.04

Societe Generale                         9,015,486.70
</TABLE>

                                      I-1
<PAGE>   85

<TABLE>
<S>                                   <C>                               <C>                    <C>
Union Bank of California,                9,015,486.70
N.A.

U.S. Bank National                       9,015,486.70
Association

TOTAL                                 $240,000,000.00                   0                      0
</TABLE>

                                      I-2
<PAGE>   86

                      PART B - ADDRESSES FOR NOTICES, ETC.

ABN AMRO BANK N.V.

Domestic Lending Office and Euro-Dollar Lending Office:

        ABN AMRO Bank N.V.
        135 South LaSalle Street
        Chicago, IL 60603

Japanese Lending Office:

        ABN AMRO Bank N.V.
        Tokyo Branch
        13F, Shiroyama JT Mori Building
        4-3-1, Toranomon, Minato-ku
        Tokyo 105, Japan

Address for Notices related to U.S. Borrowings:

        ABN AMRO Bank N.V.
        San Francisco International Branch
        101 California Street, Suite 4550
        San Francisco, CA 94111
        Attn: Thomas R. Wagner
        Tel. No: (415) 984-3734
        Fax No: (415) 362-3524

Address for Notices related to the Japanese Borrowing:

        ABN AMRO Bank N.V.
        Tokyo Branch
        13F, Shiroyama JT Mori Building
        4-3-1, Toranomon, Minato-ku
        Tokyo 105, Japan
        Attn: Kiyoharu Michiwaki or Takamasa Marito
        Tel. No: 81-3-5405-6575 or 6565
        Fax No: 81-3-5405-6902 or 6903

                                      I-3
<PAGE>   87

With a copy of all notices to:

        ABN AMRO North America, Inc.
        Syndications Group
        1325 Avenue of the Americas, 9th Floor
        New York, NY 10019
        Attn: Linda Boardman
        Tel. No: (212) 314-1724
        Fax No: (212) 314-1712

Wiring Instructions for U.S. Borrowings:

        ABN AMRO Bank N.V.
        New York, New York
        RT/ABA No.: 026009580
        Account Name: ABN AMRO Bank N.V. - Chicago CPU
        Account No.: 650-001-1789-41
        Reference: LSI Logic Corporation

Wiring Instructions for the Japanese Borrowing:

        Paying Bank:         Sakura Bank, Tokyo Eigyo-bu
        Beneficiary:         Oranda Ginko Tokyo Shiten
        (Japanese Account Name for ABN AMRO Bank Tokyo Branch)
        Type of Account:     Current
        Account No.:         1008000
        Reference:           LSI Logic Japan 1998 Credit Facility

        -or-

        BOJ Net (Bank of Japan Financial Network System)
        Tohzo Yokin Furikae
        Account No.:         0422-001
        Settlement:          Kokan Jiri

                                      I-4
<PAGE>   88

BANCA DI ROMA

Domestic Lending Office and Euro-Dollar Lending Office:

        Banca di Roma
        One Market Street
        Steuart Tower, Suite 1000
        San Francisco, CA  94105

Address for Notices related to U.S. Borrowings:

        Banca di Roma
        One Market Street
        Steuart Tower, Suite 1000
        San Francisco, CA  94105
        Attn: Augusto Bianchi
        Tel. No: (415) 977-7306
        Fax No: (415) 357-9869

Wiring Instructions for U.S. Borrowings:

        Bank of America, N.A.
        San Francisco, CA
        ABA No.:      121-000-358
        Account Name: Banca di Roma San Francisco Branch
        Account No.:  62903-01919
        Reference:    LSI Logic Corporation

                                      I-5
<PAGE>   89

BANK OF AMERICA, N.A.

Domestic Lending Office and Euro-Dollar Lending Office:

        Bank of America, N.A.
        Global Payments Operations #5693
        1850 Gateway Boulevard, 3rd Floor
        Concord, CA  94520

Address for Notices related to U.S. Borrowings:

        Bank of America, N.A.
        Global Payments Operations #5693
        1850 Gateway Boulevard, 3rd Floor
        Concord, CA  94520
        Attn: John Sanchez, Account Administrator
        Tel. No: (925) 675-7331
        Fax No: (925) 675-7531 or 7532

Wiring Instructions for U.S. Borrowings:

        Bank of America, N.A.
        Concord, CA
        ABA No.: 121000358
        Account No.: 12331-83920
        Reference: LSI Logic Corporation

                                      I-6
<PAGE>   90

BANK ONE, N.A.

Domestic Lending Office and Euro-Dollar Lending Office:

        Bank One, N.A.
        One Bank One Plaza, 10th Floor
        Chicago, IL  60670

Japanese Lending Office:

        Bank One, N.A., Tokyo Branch
        7th Floor, Hibiya Central Building
        2-9, Nishi-Shimbashi 1-chome
        Minato-ku, Tokyo 105, Japan

Address for Notices related to U.S. Borrowings:

        Bank One, N.A.
        777 S. Figueroa Street, 4th Floor
        Los Angeles, CA  90017
        Attn: James P. Moore
        Tel. No: (213) 683-4966
        Fax No: (213) 683-4949

Address for Notices related to the Japanese Borrowing:

        Bank One, N.A., Tokyo Branch
        7th Floor, Hibiya Central Building
        2-9, Nishi-Shimbashi 1-chome
        Minato-ku, Tokyo 105, Japan
        Attn:  Hiroaki Tanabe
        Tel. No:  81-3-3596-8708
        Fax No:  81-3-3596-8744

        With a copy of all notices to:

        Bank One, N.A.
        One Bank One Plaza, 10th Floor
        Chicago, IL  60670
        Attn: Hien Le
        Tel. No: (312) 732-8573
        Fax No: (312) 732-4840

                                      I-7
<PAGE>   91

Wiring Instructions for U.S. Borrowings:

        Bank One, N.A.
        Chicago, Illinois
        ABA No.:      071000013
        Account No.:  75217653
        Reference:    LSI Logic
        Attn:         Hien Le

Wiring Instructions for the Japanese Borrowing:

        Paying Bank:         The Dai-Ichi Kangyo Bank, Ltd. Head Office
        Beneficiary:         Bank One, N.A., Tokyo Branch
        Account No.:         0123631 (Current Account)
        Reference:           LSI Logic Japan

        -or-

        BOJ Net (Bank of Japan Financial Network System)
        Tohzo Yokin Furikae
        Account No.:  0440-001
        Settlement:   Kokan-Jiri

                                      I-8
<PAGE>   92

THE BANK OF NOVA SCOTIA

Domestic Lending Office and Euro-Dollar Lending Office:

        The Bank of Nova Scotia
        600 Peachtree Street, N.E.
        Suite 2700
        Atlanta, GA  30308

Japanese Lending Office:

        The Bank of Nova Scotia, Tokyo Branch
        Toranomon Waiko Building, 6th Floor
        12-1, Toranomon 5-chome
        Minato-ku, Tokyo, 105-0001
        Japan

Address for Notices related to U.S. Borrowings:

        The Bank of Nova Scotia
        580 California Street, Suite 2100
        San Francisco, CA  94104
        Attn: Chris Osborn
        Tel. No: (415) 986-1100
        Fax No: (415) 397-0791

Address for Notices related to the Japanese Borrowing:

        The Bank of Nova Scotia, Tokyo Branch
        Toranomon Waiko Building, 6th Floor
        12-1, Toranomon 5-chome
        Minato-ku, Tokyo, 105-0001
        Japan
        Attn:  Arata Matsushita
        Tel. No:  81-3-5408-0911
        Fax No:  81-3-5408-0937

                                      I-9
<PAGE>   93

Wiring Instructions for U.S. Borrowings:

        The Bank of Nova Scotia
        One Liberty Plaza
        New York, NY
        ABA No.: 026002532
        Account Name: The Bank of Nova Scotia
        Account No.: 0610135
        Reference: LSI Logic Corporation

Wiring Instructions for the Japanese Borrowing:

        BOJ Net (Bank of Japan Financial Network System)
        Tohzo Yokin Furikae
        Account No.:  0469-001
        Settlement:   Kokan Jiri

                                      I-10
<PAGE>   94

BANQUE NATIONALE DE PARIS

Domestic Lending Office and Euro-Dollar Lending Office:

        Banque Nationale de Paris
        180 Montgomery Street, 3rd Floor
        San Francisco, CA  94104

Address for Notices related to U.S. Borrowings:

        Banque Nationale de Paris
        180 Montgomery Street, 3rd Floor
        San Francisco, CA  94104
        Attn: Rafael Lumanlan, Vice President
        Tel. No: (415) 956-0707
        Fax No: (415) 296-8954

        With a copy of all notices to:

        Banque Nationale de Paris
        180 Montgomery Street, 3rd Floor
        San Francisco, CA  94104
        Attn: Don Hart, Vice President - Treasury
        Tel. No: (415) 956-2511
        Fax No: (415) 989-9041

Wiring Instructions for U.S. Borrowings:

        The Federal Reserve Bank of New York
        ABA No.:      026007689 Banque Nationale de Paris
        Beneficiary:  BNP San Francisco
        Account No.:  14334000176
        Reference:    By order:  LSI Logic Corporation
                      state whether principal paydown, commitment fee,
                      interest payment, etc.
        Attn:         Peggy Tatum

                                      I-11
<PAGE>   95

CHIAO TUNG BANK CO., LTD.

Domestic Lending Office and Euro-Dollar Lending Office:

        Chiao Tung Bank Co., Ltd.
        One World Financial Center
        200 Liberty Street, 30th Floor
        New York, NY  10281

Address for Notices related to U.S. Borrowings:

        Chiao Tung Bank Co., Ltd.
        One World Financial Center
        200 Liberty Street, 30th Floor
        New York, NY  10281
        Attn: Kuang-Si Shiu
        Tel. No: (212) 285-2666
        Fax No: (212) 285-2922

Wiring Instructions for U.S. Borrowings:

        Corestates Bank International
        New York Branch
        ABA No.:      026005092
        Account Name: Chiao Tung Bank Co., Ltd.
        Account No.:  19174633
        Reference:    LSI Logic Corporation

                                      I-12
<PAGE>   96

CREDIT LYONNAIS

Domestic Lending Office and Euro-Dollar Lending Office:

        Credit Lyonnais
        Los Angeles Branch
        515 South Flower Street, 22nd Floor
        Los Angeles, CA  90071

Address for Notices related to U.S. Borrowings:

        Credit Lyonnais
        Los Angeles Branch
        515 South Flower Street, 22nd Floor
        Los Angeles, CA  90071
        Attn: Rita Raychaudhuri or Christina Moore
        Tel. No: (213) 362-5954 or 362-5958
        Fax No: (213) 623-3437

        With a copy of all notices to:

        Credit Lyonnais
        Los Angeles Branch
        515 South Flower Street, 22nd Floor
        Los Angeles, CA  90071
        Attn: Penny Chu
        Tel. No: (213) 362-5960
        Fax No: (213) 623-3437

Wiring Instructions for U.S. Borrowings:

        Credit Lyonnais
        1301 Avenue of the Americas
        New York, NY  10019
        ABA No.:      026-008-073
        Reference:    LSI Logic
        Attn:         Rita Raychaudhuri

                                      I-13
<PAGE>   97

DAI-ICHI KANGYO BANK, LIMITED

Domestic Lending Office and Euro-Dollar Lending Office:

        Dai-Ichi Kangyo Bank, Limited
        Los Angeles Agency
        555 W. Fifth Street
        Los Angeles, CA  90013

Japanese Lending Office:

        Dai-Ichi Kangyo Bank, Limited, Head Office
        1-1-5, Uchisaiwaicho, Chiyoda-ku
        Tokyo 100-0011, Japan

Address for Notices related to U.S. Borrowings:

        Dai-Ichi Kangyo Bank, Limited
        Los Angeles Agency
        555 W. Fifth Street
        Los Angeles, CA  90013
        Attn: Credit Administration
        Tel. No: (213) 243-4774
        Fax No: (213) 243-4896

Address for Notices related to the Japanese Borrowing:

        Dai-Ichi Kangyo Bank, Limited, Head Office
        1-1-5, Uchisaiwaicho, Chiyoda-ku
        Tokyo 100-0011, Japan
        Attn:  Fumitake Koyae
        Tel. No:  81-3-3596-5577
        Fax No:  81-3-3596-5698

Wiring Instructions for U.S. Borrowings:

        Dai-Ichi Kangyo Bank, Limited
        New York Branch
        ABA No.:      026-004-307
        Account Name: Dai-Ichi Kangyo Bank, Limited Los Angeles Agency
        Account No.:  799740111195
        Reference:    LSI Logic Corporation
        Attn:         Credit Administration

                                      I-14
<PAGE>   98

Wiring Instructions for the Japanese Borrowing:

        BOJ Net (Bank of Japan Financial Network System)
        Tohzo Yokin Furikae
        Account No.:  0001-001
        Settlement:   Kokan-Jiri

                                      I-15
<PAGE>   99

FIRST SECURITY BANK, N.A.

Domestic Lending Office and Euro-Dollar Lending Office:

        First Security Bank, N.A.
        4949 Meadows Road, Suite 150
        Lake Oswego, OR  97035

Address for Notices related to U.S. Borrowings:

        First Security Bank, N.A.
        4949 Meadows Road, Suite 150
        Lake Oswego, OR  97035
        Attn: Janice Sauer
        Tel. No: (503) 675-3255
        Fax No: (503) 675-3209

Wiring Instructions for U.S. Borrowings:

        First Security Bank, N.A.
        Lake Oswego, OR
        ABA No.:
        Account No.:
        Reference:    LSI Logic Corporation

                                      I-16
<PAGE>   100

FLEET NATIONAL BANK

Domestic Lending Office and Euro-Dollar Lending Office:

        Fleet National Bank
        One Federal Street, Mail Stop MAOF D07A
        Boston, MA  02110

Address for Notices related to U.S. Borrowings:

        Fleet National Bank
        One Federal Street, Mail Stop MAOF D07A
        Boston, MA  02110
        Attn: Mat Glauninger
        Tel. No: (617) 346-0029
        Fax No: (617) 346-0151

With a copy of all notices to:

        Fleet National Bank
        One Federal Street, Mail Stop MAOF D07A
        Boston, MA  02110
        Attn: Scott Lander
        Tel. No: (617) 346-5424
        Fax No: (617) 346-0151

Wiring Instructions for U.S. Borrowings:

        Fleet National Bank
        Boston, MA
        ABA No.: 011000138
        Account No.:  151-0351-03156
                      For further credit to Commercial Loan in Process
        Reference: LSI Logic

                                      I-17
<PAGE>   101

THE INDUSTRIAL BANK OF JAPAN, LIMITED

Domestic Lending Office and Euro-Dollar Lending Office:

        The Industrial Bank of Japan, Limited
        San Francisco Agency
        555 California Street, Suite 3110
        San Francisco, CA  94104

Japanese Lending Office:

        The Industrial Bank of Japan, Limited
        Head Office
        3-3, Marunouchi 1-chome, Chiyoda-Ku
        Tokyo 100-8210, Japan

Address for Notices related to U.S. Borrowings:

        The Industrial Bank of Japan, Limited
        San Francisco Agency
        555 California Street, Suite 3110
        San Francisco, CA  94104
        Attn: Greg Stewart
        Tel. No: (415) 693-1824
        Fax No: (415) 982-1917

Address for Notices related to the Japanese Borrowing:

        The Industrial Bank of Japan, Limited
        Head Office
        3-3, Marunouch 1-chome, Chiyoda-Ku
        Tokyo 100-8210, Japan
        Attn: Eisuke Inaba and Manabu Kawashima
        Tel. No: 81-3-5200-7424
        Fax No: 81-3-3201-3468

With a copy of all notices to:

        The Industrial Bank of Japan, Limited
        Los Angeles Agency
        350 South Grand Avenue, Suite 1500
        Los Angeles, CA  90071
        Attn: Credit Administration Department
        Tel. No: (213) 893-6498
        Fax No: (213) 688-7486

                                      I-18
<PAGE>   102

Wiring Instructions for U.S. Borrowings:

        Bank of America, N.A.
        International Deposit Services #6561
        1850 Gateway Boulevard
        Concord, CA 94520 ABA No.: 121-000-358
        Account Name:   The Industrial Bank of Japan, Limited
                        Los Angeles Agency
        Account No.:  62906-14014
                      For credit to IBJ SFA Account No. 2601-22011

Wiring Instructions for the Japanese Borrowing:

        BOJ Net (Bank of Japan Financial Network System)
        Tohzo Yokin Furikae
        Account No.:  0396-100
        Settlement:   Kokan Jiri

                                      I-19
<PAGE>   103

KEYBANK NATIONAL ASSOCIATION

Domestic Lending Office and Euro-Dollar Lending Office:

        KeyBank National Association
        700 Fifth Avenue, 46th Floor
        Seattle, WA  98104

Address for Notices related to U.S. Borrowings:

        KeyBank National Association
        700 Fifth Avenue, 46th Floor
        Seattle, WA  98104
        Attn: Mary Young
        Tel. No: (206) 684-6085
        Fax No: (206) 684-6035

With a copy of all notices to:

        KeyBank National Association
        431 Parkcenter Boulevard
        Boise, ID  83704
        Attn: Specialty Services Team
        Tel. No: (800) 297-5518
        Fax No: (800) 297-5495

Wiring Instructions for U.S. Borrowings:

        KeyBank National Association
        Seattle, WA
        ABA No.: 125000574
        Account No.: 01500163
        Reference: LSI Logic

                                      I-20
<PAGE>   104

MELLON BANK

Domestic Lending Office and Euro-Dollar Lending Office:

        Mellon Bank
        Three Mellon Bank Center, 153-1203
        Pittsburgh, PA  15259

Address for Notices related to U.S. Borrowings:

        Mellon Bank
        435 Tasso Street, Suite 100
        Palo Alto, CA  94301
        Attn: Michael Rogers
        Tel. No: (650) 326-3005
        Fax No: (650) 326-2382

        With a copy of all notices to:

        Mellon Bank
        Three Mellon Bank Center, 153-1203
        Pittsburgh, PA  15259
        Attn: Alice Sejka, Loan Serving Specialist
        Tel. No: (412) 234-8161
        Fax No: (412) 209-6151

Wiring Instructions for U.S. Borrowings:

        Mellon Bank
        Pittsburgh, PA
        ABA No.:      043000261
        Account No.:  990-8738000
        Reference:    Loan Administration Re: LSI Logic

                                      I-21
<PAGE>   105

SANWA BANK CALIFORNIA

Domestic Lending Office and Euro-Dollar Lending Office:

        Sanwa Bank California
        220 Almaden Boulevard
        San Jose, CA  95113

Address for Notices related to U.S. Borrowings:

        Sanwa Bank California
        220 Almaden Boulevard
        San Jose, CA  95113
        Attn: Jillian Mathur
        Tel. No: (408) 297-6598
        Fax No: (408) 292-4092

        With a copy of all notices to:

        Sanwa Bank California
        220 Almaden Boulevard
        San Jose, CA  95113
        Attn: Vergie Ramos or Jennifer Chu
        Tel. No: (408) 297-6500
        Fax No: (408) 292-4092

Wiring Instructions for U.S. Borrowings:

        Sanwa Bank California
        San Jose, CA
        ABA No.:      122-003-516
        Account Name: Sanwa Money Net Account
        Account No.:  1128-19005
        Reference:    LSI Logic
        Attn:         Jill Mathur

                                      I-22
<PAGE>   106

SOCIETE GENERALE

Domestic Lending Office and Euro-Dollar Lending Office:

        Societe Generale
        Los Angeles Branch
        2029 Century Park East
        Suite 2900
        Los Angeles, CA  90067

Address for Notices related to U.S. Borrowings:

        Societe Generale
        One Montgomery Street
        Suite 3220
        San Francisco, CA  94104
        Attn: Jay Bal
        Tel. No: (415) 433-8400
        Fax No: (415) 989-9922

        With a copy of all notices to:

        Societe Generale
        Los Angeles Branch
        2029 Century Park East
        Suite 2900
        Los Angeles, CA  90067
        Attn: Doris Yun
        Tel. No: (310) 788-7116
        Fax No: (310) 203-0539

Wiring Instructions for U.S. Borrowings:

        Societe Generale
        1221 Avenue of the Americas
        New York, New York
        ABA No.:      0260-0422-6
        Account No.:
        Reference:    LSI Logic Corporation

                                      I-23
<PAGE>   107

UNION BANK OF CALIFORNIA, N.A.

Domestic Lending Office and Euro-Dollar Lending Office:

        Union Bank of California, N.A.
        350 California Street, 6th Floor
        San Francisco, CA  94104

Address for Notices related to U.S. Borrowings:

        Union Bank of California, N.A.
        1980 Saturn Street
        Monterey Park, CA  91755-7417
        Attn: Maria Flores
        Tel. No: (213) 720-2679
        Fax No: (213) 724-6198

Wiring Instructions for U.S. Borrowings:

        Union Bank of California, N.A.
        Monterey Park, CA
        ABA No.:      1220-0049-6
        Account No.:  070196431
        Reference:    LSI Logic Corporation
        Attn:         192 Note Center

                                      I-24
<PAGE>   108

U.S. BANK NATIONAL ASSOCIATION

Domestic Lending Office and Euro-Dollar Lending Office:

        U.S. Bank National Association
        555 S.W. Oak Street
        Portland, OR  97204

Address for Notices related to U.S. Borrowings:

        U.S. Bank National Association
        2890 N. Main Street
        Walnut Creek, CA  94596
        Attn: David Marron
        Tel. No: (925) 942-9489
        Fax No: (925) 945-6919

        With a copy of all notices to:

        U.S. Bank National Association
        555 S.W. Oak Street
        Portland, OR  97204
        Attn: Joe Ramirez
        Tel. No: (503) 275-3259
        Fax No: (503) 275-8181

Wiring Instructions for U.S. Borrowings:

        U.S. Bank National Association
        Portland, OR
        ABA No.:      121122676
        Account Name: Commercial Loan Servicing West - PL7
        Account No.:  00340012160600
        Reference:    LSI Logic Corporation
        Attn:         Joe Ramirez

                                      I-25
<PAGE>   109

                                   SCHEDULE II

                                  PRICING GRID

<TABLE>
<CAPTION>
                                                       APPLICABLE        APPLICABLE        APPLICABLE
                                                         MARGIN            MARGIN            MARGIN
                  PRICING                                 FOR               FOR               FOR
   PRICING         PERIOD        U.S. REVOLVING        BASE RATE           LIBOR            JAPANESE
    RATIO          LEVEL         COMMITMENT FEES         LOANS             LOANS             LOANS
    -----         -------        ---------------       ----------        ----------        ----------
<S>               <C>            <C>                   <C>               <C>               <C>
    <0.75            1               0.250%                0%              0.750%            0.750%

    >0.75,
    <1.50            2               0.300%                0%              1.000%            1.000%

    >1.50            3               0.325%                0%              1.250%            1.250%
</TABLE>

                                   EXPLANATION

1.      The U.S. Revolving Commitment Fees and the Applicable Margin For Base
        Rate Loans, LIBOR Loans and Japanese Loans will be set for each Pricing
        Period and will vary depending upon whether such period is a Level 1
        Period, a Level 2 Period or a Level 3 Period.

2.      The first Pricing Period which commences on the date of this Agreement
        and ends on September 30, 1998, will be a Level 3 Period.

3.      Each Pricing Period thereafter will be a Level 1 Period, a Level 2
        Period, or a Level 3 Period depending upon the Pricing Ratio calculated
        on an annualized basis for the most recent consecutive two-quarter
        period ending on the last day of the quarter that ended prior to the
        first day of such Pricing Period.

4.      If the Applicable Margin has not yet been determined for a Pricing
        Period on the date any Interest Period commences or any interest is
        payable with respect to any Loans, interest shall accrue and be paid on
        such Loans calculated on the basis of the Applicable Margin for the
        applicable category of Loans during the prior Pricing Period. When the
        Applicable Margin is determined for such Pricing Period, accrued but
        unpaid interest on the Loans outstanding during such Pricing Period
        shall be recalculated on the basis of such Applicable Margin, but Agent
        and Lenders shall not be required to refund any excess interest and
        Borrowers shall not be required to pay any additional interest with
        respect to Loans on which interest was paid during such Pricing Period
        prior to determination of the Applicable Margin.

                                      II-1
<PAGE>   110

5.      Examples:

                (a) Pricing Ratio is 1.55 on an annualized basis for the
        consecutive two-quarter period ending on September 30, 1998. The Pricing
        Period of October 1, 1998 through December 31, 1998 will be a Level 3
        Period.

                (b) Pricing Ratio is 1.10 on an annualized basis for the
        consecutive two-quarter period ending on December 31, 1998. The Pricing
        Period of January 1, 1999 through March 31, 1999 will be a Level 2
        Period.

                                      II-2
<PAGE>   111

                                  SCHEDULE 3.01

I.      INITIAL CLOSING DATE CONDITIONS PRECEDENT

        A.      PRINCIPAL CREDIT DOCUMENTS.

                (1) The Credit Agreement, duly executed by each Borrower, each
        Lender and Agent;

                (2) Agent's Syndication Letter, duly executed by each Borrower;

                (3) If the Initial Closing Date is the U.S. Closing Date, a Note
        payable to each applicable U.S. Lender requesting such a Note for its
        U.S. Revolving Loans or U.S. 364 Day Loans, each duly executed by LSI;
        and

                (4) If the Initial Closing Date is the Japanese Closing Date,
        the LSI Guaranty, duly executed by LSI.

        B.      LSI CORPORATE DOCUMENTS.

                (1) The Certificate of Incorporation of LSI, certified as of a
        recent date prior to the Initial Closing Date by the Secretary of State
        of Delaware;

                (2) A Certificate of Good Standing (or comparable certificate)
        for LSI, certified as of a recent date prior to the Initial Closing Date
        by the Secretary of State of Delaware;

                (3) A certificate of the Secretary or an Assistant Secretary of
        LSI, dated the Initial Closing Date, certifying (a) that attached
        thereto is a true and correct copy of the Bylaws of LSI as in effect on
        the Initial Closing Date; (b) that attached thereto are true and correct
        copies of resolutions duly adopted by the Board of Directors of LSI and
        continuing in effect, which (i) authorize the execution, delivery and
        performance by LSI of this Agreement and the other Credit Documents
        executed or to be executed by LSI and the consummation of the
        transactions contemplated hereby and thereby and (ii) designate the
        officers authorized so to execute, deliver and perform on behalf of LSI;
        and (c) that there are no proceedings for the dissolution or liquidation
        of LSI;

                (4) A certificate of the Secretary or an Assistant Secretary of
        LSI, dated the Initial Closing Date, certifying the incumbency,
        signatures and authority of the officers of LSI authorized to execute,
        deliver and perform this Agreement, the other Credit Documents and all
        other documents, instruments or agreements related thereto executed or
        to be executed by LSI;

                (5) Certificates of Good Standing (or comparable certificates)
        for LSI, certified as of a recent date prior to the Initial Closing Date
        by the Secretaries of State (or comparable official) of California and
        each other jurisdiction in which LSI is qualified to do business and has
        assets with a net book value in excess of $10,000,000 (exclusive of
        intercompany assets and liabilities); and

                                     3.01-1
<PAGE>   112

                (6) Acceptance of appointment as agent for service of process on
        LSI relating to the Credit Documents, executed by CT Corporation prior
        to the Initial Closing Date.

        C.      LLJS CORPORATE DOCUMENTS.

                (1) The Articles of Association (Teikan) of LLJS, certified as
        of a recent date prior to the Initial Closing Date by a Representative
        Director of LLJS;

                (2) A copy of the commercial registry (Syougyou Tookibotoohon)
        for LLJS, issued as of a recent date prior to the Initial Closing Date
        by the registrar of the Tokyo Legal Affairs Bureau of the Ministry of
        Justice;

                (3) A certificate of a Representative Director of LLJS, dated
        the Initial Closing Date, certifying (a) that attached thereto are true
        and correct copies of resolutions duly adopted by the Board of Directors
        of LLJS and continuing in effect, which (i) authorize the execution,
        delivery and performance by LLJS of this Agreement and the other Credit
        Documents executed or to be executed by LLJS and the consummation of the
        transactions contemplated hereby and (ii) designate the officers,
        directors and attorneys authorized so to execute, deliver and perform on
        behalf of LLJS; and (b) that there are no proceedings for the
        dissolution or liquidation of LLJS, together with an English translation
        thereof (if appropriate);

                (4) A certificate of a Representative Director of LLJS, dated
        the Initial Closing Date, certifying the incumbency, signatures and
        authority of the officers, directors or attorneys of LLJS authorized to
        execute, deliver and perform this Agreement, the other Credit Documents
        and all other documents, instruments or agreements related thereto
        executed or to be executed by LLJS, together with an English translation
        thereof (if appropriate); and

                (5) Acceptance of appointment as agent for service of process on
        LLJS relating to the Credit Documents, executed by CT Corporation prior
        to the Initial Closing Date.

        D.      FINANCIAL STATEMENTS, FINANCIAL CONDITION, ETC.

                (1) A copy of the unaudited Financial Statements of LSI and its
        Subsidiaries for the fiscal quarter ended March 31, 1998, and for the
        fiscal year to such date (prepared on a consolidated and consolidating
        basis), certified by the Chief Financial Officer or Treasurer of LSI to
        present fairly the financial condition, results of operations and other
        information reflected therein and to have been prepared in accordance
        with GAAP (subject to normal year-end audit adjustments);

                (2) A copy of the audited consolidated Financial Statements of
        LSI for the fiscal year ended December 31, 1997, prepared by Ernst &
        Young LLP, together with a copy of the unqualified opinion and
        management letter delivered by such accountants in connection with such
        Financial Statements;

                                     3.01-2
<PAGE>   113

                (3) A copy of the 10-Q report filed by LSI with the SEC for the
        quarter ended March 31, 1998;

                (4) A copy of the 10-K report filed by LSI with the SEC for the
        fiscal year ended December 31, 1997;

                (5) A final sources and uses statement for the Symbios
        Acquisition (including transaction costs);

                (6) A pro forma balance sheet of LSI prepared as of June 30,
        1998, but incorporating all preclosing adjustments and reflecting the
        consummation of the Symbios Acquisition, the Loans to be made in
        connection therewith and the other transactions contemplated by the
        Symbios Acquisition Documents, certified by the Chief Financial Officer
        or Treasurer of LSI as having been prepared based upon reasonable
        assumptions and in good faith; and

                (7) Such other financial, business and other information
        regarding Borrowers or any of their Subsidiaries as Agent or any Lender
        may reasonably request, including information as to the Symbios
        Acquisition and possible contingent liabilities, tax matters,
        environmental matters and obligations for employee benefits and
        compensation.

        E.      OPINIONS.

                A favorable written opinion from Wilson, Sonsini, Goodrich &
        Rosati, counsel for Borrowers and LSI as guarantor under the LSI
        Guaranty, in the form of Exhibit I, dated the Initial Closing Date,
        addressed to Agent for the benefit of Agent and Lenders, covering such
        legal matters as Agent may reasonably request and otherwise in form and
        substance satisfactory to Agent:

        F.      OTHER ITEMS.

                (1) A duly completed and timely delivered Notice of Borrowing
        for the applicable Borrowing;

                (2) Copies of the principal Symbios Acquisition Documents;

                (3) Copies of all filings made by LSI with the SEC in connection
        with the Symbios Acquisition, together with all exhibits and all
        amendments thereto through the Initial Closing Date;

                (4) A certificate from each of the Chief Financial Officer or
        Treasurer of LSI and a Representative Director of LLJS, respectively,
        addressed to Agent and dated the Initial Closing Date, certifying that:

                        (a) The representations and warranties set forth in
                Paragraph 4.01 and in the other Credit Documents are true and
                correct in all material respects as of such date (except for
                such representations and warranties made as of a specified date,
                which shall be true as of such date); and

                                     3.01-3
<PAGE>   114

                        (b) No Default has occurred and is continuing as of such
                date.

                (5) All fees and expenses payable to Agent and Lenders on or
        prior to the Initial Closing Date (including all fees payable to Agent
        pursuant to the Agent's Fee Letter);

                (6) All fees and expenses of Agent's counsels through the
        Initial Closing Date;

                (7) Such other evidence as Agent or any Lender may reasonably
        request to establish the accuracy and completeness of the
        representations and warranties and the compliance with the terms and
        conditions contained in this Agreement and the other Credit Documents;

                (8) Copies of the irrevocable notices delivered by LLJS pursuant
        to the Outstanding Japanese Loan Facility of its intention to cancel all
        commitments and prepay all amounts outstanding thereunder by no later
        than August 31, 1998;

                (9) Copies of the form of LSI's 5 1/2% Subordinated Notes due
        2001 and the indenture relating thereto;

                (10) Such documentation as ABN AMRO may require in order for
        LLJS to open an account with its Tokyo branch, including, without
        limitation, an Agreement on Bank Transactions and an Agreement on
        Overdraft in Current Account.

II.     POST-CLOSING CONDITIONS SUBSEQUENT

        A. English translations of the Articles of Association (Teikan) and
commercial registry (Syougyou Tookibotoohon) for LLJS delivered pursuant to
Items C(1) and C(2) of Part I of this Schedule 3.01.

        B. A favorable written opinion from Nagashima & Ohno, , Japanese counsel
for LLJS, in the form of Exhibit J, addressed to Agent for the benefit of Agent
and Lenders, covering such legal matters as Agent may reasonably request and
otherwise in form and substance satisfactory to Agent:

                                     3.01-4
<PAGE>   115

                                    EXHIBIT A

                            NOTICE OF U.S. BORROWING

                                     [Date]

ABN AMRO Bank N.V.,
   as Agent
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY  10019
U.S.A.
Attn:  Linda Boardman

        1. Reference is made to that certain Second Amended and Restated Credit
Agreement, dated as of April 21, 2000 (the "Credit Agreement"), among LSI Logic
Corporation ("LSI"), LSI Logic Japan Semiconductor, Inc., the financial
institutions listed in Schedule I to the Credit Agreement (the "Lenders") and
ABN AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). Unless
otherwise indicated, all terms defined in the Credit Agreement have the same
respective meanings when used herein.

        2. Pursuant to Subparagraph 2.01(c) of the Credit Agreement, LSI hereby
irrevocably requests a U.S. Borrowing upon the following terms:

                (a) The requested U.S. Borrowing is to be a [U.S. Revolving
        Borrowing][U.S. 364 Day Borrowing];

                (b) The principal amount of the requested U.S. Borrowing is to
        be $________;

                (c) The requested U.S. Borrowing is to consist of [Base
        Rate][LIBOR] Loans;

                (d) If the requested U.S. Borrowing is to consist of LIBOR
        Loans, the initial Interest Period for such Loans will be month[s]; and

                (e) The date of the requested U.S. Borrowing is to be
        __________, ____.

        3. LSI hereby certifies to Lenders and Agent that, on the date of this
Notice of U.S. Borrowing and after giving effect to the requested U.S.
Borrowing:

                (a) The representations and warranties of Borrowers and their
        Subsidiaries set forth in Paragraph 4.01 of the Credit Agreement and in
        the other Credit Documents are true and correct in all material respects
        as if made on such date (except for representations and warranties
        expressly made as of a specified date, which shall be true in all
        material respects as of such date); and

                                      A-1

<PAGE>   116

                (b) No Default has occurred and is continuing.

        4. Please disburse the proceeds of the requested U.S. Borrowing to
_______________________________________________________________________________.

        IN WITNESS WHEREOF, LSI has executed this Notice of U.S. Borrowing on
the date set forth above.

                                    LSI LOGIC CORPORATION

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

                                      A-2

<PAGE>   117
                                                                  EXHIBIT 10.19

                                    EXHIBIT B

                       NOTICE OF U.S. BORROWING CONVERSION

                                     [Date]

ABN AMRO Bank N.V.,
  as Agent
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY  10019
U.S.A.
Attn:  Linda Boardman

        1. Reference is made to that certain Second Amended and Restated Credit
Agreement, dated as of April 21, 2000 (the "Credit Agreement"), among LSI Logic
Corporation ("LSI"), LSI Logic Japan Semiconductor, Inc., the financial
institutions listed in Schedule I to the Credit Agreement (the "Lenders") and
ABN AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). Unless
otherwise indicated, all terms defined in the Credit Agreement have the same
respective meanings when used herein.

        2. Pursuant to Subparagraph 2.01(e) of the Credit Agreement, LSI hereby
irrevocably requests to convert a U.S. Borrowing as follows:

                (a) The U.S. Borrowing to be converted consists of ["Base Rate"
        or "LIBOR"] Loans in the aggregate principal amount of $__________ which
        were initially advanced to LSI on , , as a [U.S. Revolving Borrowing or
        U.S. 364 Day Borrowing][, and have a current Interest Period of ____
        month[s] expiring on __________, ____];

                (b) The U.S. Loans in such U.S. Borrowing are to be converted
        into ["Base Rate" or "LIBOR"] Loans;

                (c) If such U.S. Loans are to be converted into LIBOR Loans, the
        initial Interest Period for such U.S. Loans commencing upon conversion
        will be month[s]; and

                (d) The date of the requested conversion is to be __________,
        ____.

                                      B-1
<PAGE>   118

        3. LSI hereby certifies to Lenders and Agent that, on the date of this
Notice of U.S. Borrowing Conversion, and after giving effect to the requested
conversion:

                (a) The representations and warranties of Borrowers and their
        Subsidiaries set forth in Paragraph 4.01 of the Credit Agreement and in
        the other Credit Documents are true and correct in all material respects
        as if made on such date (except for representations and warranties
        expressly made as of a specified date, which shall be true in all
        material respects as of such date); and

                (b) No Default has occurred and is continuing.

        IN WITNESS WHEREOF, LSI has executed this Notice of U.S. Borrowing
Conversion on the date set forth above.

                                            LSI LOGIC CORPORATION

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

                                      B-2
<PAGE>   119

                                    EXHIBIT C

               NOTICE OF U.S. BORROWING INTEREST PERIOD SELECTION

                                     [Date]

ABN AMRO Bank N.V.,
  as Agent
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY  10019
U.S.A.
Attn:  Linda Boardman

        1. Reference is made to that certain Second Amended and Restated Credit
Agreement, dated as of April 21, 2000 (the "Credit Agreement"), among LSI Logic
Corporation ("LSI"), LSI Logic Japan Semiconductor, Inc., the financial
institutions listed in Schedule I to the Credit Agreement (the "Lenders") and
ABN AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). Unless
otherwise indicated, all terms defined in the Credit Agreement have the same
respective meanings when used herein.

        2. Pursuant to Subparagraph 2.01(f) of the Credit Agreement, LSI hereby
irrevocably selects a new Interest Period for a U.S. Borrowing as follows:

                (a) The U.S. Borrowing for which a new Interest Period is to be
        selected consists of LIBOR Loans in the aggregate principal amount of
        $__________ which were initially advanced to LSI on ___________, ____,
        as a [U.S. Revolving Borrowing or U.S. 364 Day Borrowing];

                (b) The last day of the current Interest Period for such LIBOR
        Loans is ___________, ____; and

                (c) The next Interest Period for such LIBOR Loans commencing
        upon the last day of the current Interest Period is to be _________
        month[s].

        3. LSI hereby certifies to Lenders and Agent that, on the date of this
Notice of U.S. Borrowing Interest Period Selection, and after giving effect to
the requested selection:

                (a) The representations and warranties of Borrowers and their
        Subsidiaries set forth in Paragraph 4.01 of the Credit Agreement and in
        the other Credit Documents are true and correct in all material respects
        as if made on such date (except for representations and warranties
        expressly made as of a specified date, which shall be true in all
        material respects as of such date); and

                (b) No Default has occurred and is continuing.

                                       C-1
<PAGE>   120

        IN WITNESS WHEREOF, LSI has executed this Notice of U.S. Borrowing
Interest Period Selection on the date set forth above.

                                            LSI LOGIC CORPORATION

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

                                      C-2
<PAGE>   121

                                    EXHIBIT D

                          NOTICE OF JAPANESE BORROWING

                                     [Date]

ABN AMRO Bank N.V.,
  as Agent
13F, Shiroyama JT Mori Building
4-3-1, Toranomon, Minato-ku
Tokyo 105, Japan
Attn: Kiyoharu Michiwaki

        1. Reference is made to that certain Credit Agreement, dated as of
August 5, 1998 (the "Credit Agreement"), among LSI Logic Corporation, LSI Logic
Japan Semiconductor, Inc. ("LLJS"), the financial institutions listed in
Schedule I to the Credit Agreement (the "Lenders") and ABN AMRO Bank N.V., as
agent for Lenders (in such capacity, "Agent"). Unless otherwise indicated, all
terms defined in the Credit Agreement have the same respective meanings when
used herein.

        2. Pursuant to Subparagraph 2.02(b) of the Credit Agreement, LLJS hereby
irrevocably requests the Japanese Borrowing upon the following terms:

                (a) The principal amount of the Japanese Borrowing is to be
        (Yen)__________;

                (b) The initial Interest Period of the Japanese Borrowing will
        be month[s]; and

                (c) The date of the Japanese Borrowing is to be __________,
        ____.

        3. LLJS hereby certifies to Lenders and Agent that, on the date of this
Notice of Japanese Borrowing and after giving effect to the Japanese Borrowing:

                (a) The representations and warranties of Borrowers and their
        Subsidiaries set forth in Paragraph 4.01 of the Credit Agreement and in
        the other Credit Documents are true and correct in all material respects
        as if made on such date (except for representations and warranties
        expressly made as of a specified date, which shall be true as of such
        date);

                (b) No Default has occurred and is continuing; and

                (c) All of the Credit Documents are in full force and effect.

                                      D-1

<PAGE>   122

        4. Please disburse the proceeds of the Japanese Borrowing to __________
______________________________________________________________________________.

        IN WITNESS WHEREOF, LLJS has executed this Notice of Japanese Borrowing
on the date set forth above.

                                          LSI LOGIC JAPAN SEMICONDUCTOR, INC.

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

                                      D-2

<PAGE>   123

                                    EXHIBIT E

             NOTICE OF JAPANESE BORROWING INTEREST PERIOD SELECTION

                                     [Date]

ABN AMRO Bank N.V.,
  as Agent
13F, Shiroyama JT Mori Building
4-3-1, Toranomon, Minato-ku
Tokyo 105, Japan
Attn: Kiyoharu Michiwaki

        1. Reference is made to that certain Second Amended and Restated Credit
Agreement, dated as of April 21, 2000 (the "Credit Agreement"), among LSI Logic
Corporation, LSI Logic Japan Semiconductor, Inc. ("LLJS"), the financial
institutions listed in Schedule I to the Credit Agreement (the "Lenders") and
ABN AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). Unless
otherwise indicated, all terms defined in the Credit Agreement have the same
respective meanings when used herein.

        2. Pursuant to Subparagraph 2.02(d) of the Credit Agreement, LLJS hereby
irrevocably selects a new Interest Period for the Japanese Borrowing as follows:

                (a) The last day of the current Interest Period for the Japanese
        Borrowing is ___________, ____; and

                (b) The next Interest Period for the Japanese Borrowing
        commencing upon the last day of the current Interest Period is to be
        _________ month[s].

        3. LLJS hereby certifies to Lenders and Agent that, on the date of this
Notice of Japanese Borrowing Interest Period Selection, and after giving effect
to the requested selection:

                (a) The representations and warranties of Borrowers and their
        Subsidiaries set forth in Paragraph 4.01 of the Credit Agreement and in
        the other Credit Documents are true and correct in all material respects
        as if made on such date (except for representations and warranties
        expressly made as of a specified date, which shall be true in all
        material respects as of such date); and

                (b) No Default has occurred and is continuing.

                                      E-1

<PAGE>   124

        IN WITNESS WHEREOF, LLJS has executed this Notice of Japanese Borrowing
Interest Period Selection on the date set forth above.

                                          LSI LOGIC JAPAN SEMICONDUCTOR, INC.

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

                                      E-2

<PAGE>   125

                                    EXHIBIT F

                                      NOTE

$_____________                                 ____________________, __________
                                                         ________________, ____

        FOR VALUE RECEIVED, LSI LOGIC CORPORATION, a Delaware corporation
("Borrower"), hereby promises to pay to the order of ____________________, a
____________________ ("Lender"), the principal sum of
______________________________ DOLLARS ($__________), or such lesser amount as
shall equal the aggregate outstanding principal balance of the [U.S. Revolving
Loans][U.S. 364 Day Loans] made by Lender to Borrower pursuant to the Credit
Agreement referred to below (as amended from time to time, the "Credit
Agreement"), on or before the [Revolving Termination Date][U.S. 364 Day
Termination Date] specified in the Credit Agreement; and to pay interest on the
outstanding amount of said sum, or such lesser amount, at the rates and on the
dates provided in the Credit Agreement.

        Borrower shall make all payments hereunder, for the account of Lender's
Applicable Lending Office, to Agent as indicated in the Credit Agreement, in
lawful money of the United States and in same day or immediately available
funds.

        Borrower hereby authorizes Lender to record on the schedule(s) annexed
to this note the date and amount of each [U.S. Revolving Loan][U.S. 364 Day
Loan] and of each payment or prepayment of principal made by Borrower and agrees
that all such notations shall constitute prima facie evidence of the matters
noted; provided, however, that the failure of Lender to make any such notation
shall not affect Borrower's obligations hereunder.

        This note is one of the Notes referred to in the Amended and Restated
Credit Agreement, dated as of September 22, 1998, among Borrower, LSI Logic
Japan Semiconductor, Inc., Lender and the other financial institutions from time
to time parties thereto (collectively, the "Lenders") and ABN AMRO Bank N.V., as
agent for Lenders. This note is subject to the terms of the Credit Agreement,
including the rights of prepayment and the rights of acceleration of Maturity
set forth therein. Terms used herein have the meanings assigned to those terms
in the Credit Agreement, unless otherwise defined herein.

        The transfer, sale or assignment of any rights under or interest in this
note is subject to certain restrictions contained in the Credit Agreement,
including Paragraph 8.05 thereof.

                                      F-1
<PAGE>   126

        Borrower shall pay all reasonable fees and expenses, including
reasonable attorneys' fees, incurred by Lender in the enforcement or attempt to
enforce any of Borrower's obligations hereunder not performed when due. Borrower
hereby waives notice of presentment, demand, protest or notice of any other
kind. This note shall be governed by and construed in accordance with the laws
of the State of California.

                                          LSI LOGIC CORPORATION

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

                                      F-2
<PAGE>   127

                         LOANS AND PAYMENTS OF PRINCIPAL

<TABLE>
<CAPTION>
                                                                         Amount of
                 Type of          Amount of           Interest          Principal Paid           Unpaid              Notation
    Date          Loan              Loan               Period             or Prepaid       Principal Balance          Made By
<S>              <C>              <C>                 <C>                <C>               <C>                       <C>
----------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       F-3
<PAGE>   128

                                    EXHIBIT G

                                  LSI GUARANTY

        THIS GUARANTY, dated as of [ ], 1998, is executed by LSI LOGIC
CORPORATION, a Delaware corporation ("Guarantor"), in favor of ABN AMRO BANK
N.V., acting as agent (in such capacity, and each successor thereto in such
capacity, "Agent") for the financial institutions which are from time to time
parties to the Credit Agreement referred to in Recital A below (collectively,
"Lenders").

                                    RECITALS

        A. Pursuant to a Credit Agreement dated as of August 5, 1998 (as amended
from time to time, the "Credit Agreement"), among LSI Logic Japan Semiconductor,
Inc. ("Borrower"), Guarantor, Lenders and Agent, Lenders have agreed to extend
certain credit facilities to Borrower and Guarantor upon the terms and subject
to the conditions set forth therein. Borrower is a wholly-owned Subsidiary of
Guarantor.

        B. Lenders' obligations to extend the credit facilities to Borrower and
Guarantor under the Credit Agreement are subject, among other conditions, to
receipt by Agent of this Guaranty, duly executed by Guarantor.

                                    AGREEMENT

        NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Guarantor hereby agrees with Agent, for the ratable benefit of
Lenders and Agent, as follows:

        1. DEFINITIONS AND INTERPRETATION.

                (a) Definitions. When used in this Guaranty, the following terms
        shall have the following respective meanings:

                "Agent" shall have the meaning given to that term in the
        introductory paragraph hereof.

                "Borrower" shall have the meaning given to that term in the
        Recital A hereof.

                "Credit Agreement" shall have the meaning given to that term in
        the Recital A hereof.

                "Debtor Relief Proceeding" shall mean any suit, action, case or
        other proceeding commenced by, against or for Borrower or Guarantor or
        its property

                                      G-1
<PAGE>   129

        seeking the dissolution, liquidation, reorganization, rearrangement or
        other relief of Borrower or Guarantor or its debts under any applicable
        bankruptcy, insolvency or debtor relief law or other similar
        Governmental Rule now or hereafter in effect or seeking the appointment
        of a receiver, trustee, liquidator, custodian or other similar official
        for Borrower or Guarantor or any substantial part of its property or any
        general assignment by Borrower or Guarantor for the benefit of its
        creditors, whether or not any such suit, action, case or other
        proceeding is voluntary or involuntary.

                "Disallowed Post-Commencement Interest and Expenses" shall mean
        interest computed at the rate provided in the Credit Agreement and
        claims for reimbursement, costs, expenses or indemnities under the terms
        of any of the Credit Documents accruing or claimed at any time after the
        commencement of any Debtor Relief Proceeding, if the claim for such
        interest, reimbursement, costs, expenses or indemnities is not
        allowable, allowed or enforceable against Borrower in such Debtor Relief
        Proceeding.

                "Guaranteed Obligations" shall mean and include all loans,
        advances, debts, liabilities, and obligations, howsoever arising, owed
        by Borrower to Agent or any Lender of every kind and description
        (whether or not evidenced by any note or instrument and whether or not
        for the payment of money), direct or indirect, absolute or contingent,
        due or to become due, now existing or hereafter arising pursuant to the
        terms of the Credit Documents, including all interest, fees, charges,
        expenses, attorneys' fees and accountants' fees chargeable to Borrower
        or payable by Borrower thereunder.

                "Guarantor" shall have the meaning given to that term in the
        introductory paragraph hereof.

                "Lenders" shall have the meaning given to that term in the
        introductory paragraph hereof.

                "Subordinated Obligations" shall have the meaning given to that
        term in Paragraph 4 hereof.

                "Taxes" shall have the meaning given to such term in
        Subparagraph 5(h).

Unless otherwise defined herein, all other capitalized terms used herein and
defined in the Credit Agreement shall have the respective meanings given to
those terms in the Credit Agreement.

        (b) Other Interpretive Provisions. The rules of construction set forth
in Section I of the Credit Agreement shall, to the extent not inconsistent with
the terms of this Guaranty, apply to this Guaranty and are hereby incorporated
by reference.

                                      G-2
<PAGE>   130

2. GUARANTY.

        (a) Payment Guaranty. Guarantor unconditionally guarantees and promises
to pay and perform as and when due, whether at stated maturity, upon
acceleration or otherwise, any and all of the Guaranteed Obligations. If any
Debtor Relief Proceeding relating to Borrower is commenced, Guarantor further
unconditionally guarantees and promises to pay and perform, upon the demand of
Agent, any and all of the Guaranteed Obligations (including any and all
Disallowed Post-Commencement Interest and Expenses) in accordance with the terms
of the Credit Documents, whether or not such obligations are then due and
payable by Borrower and whether or not such obligations are modified, reduced or
discharged in such Debtor Relief Proceeding. This Guaranty is a guaranty of
payment and not of collection.

        (b) Continuing Guaranty. This Guaranty is an irrevocable continuing
guaranty of the Guaranteed Obligations which shall continue in effect until all
obligations of Lenders to extend credit to Borrower have terminated and all of
the Guaranteed Obligations have been fully paid. If any payment on any
Guaranteed Obligation is set aside, avoided or rescinded or otherwise recovered
from Agent or any Lender, such recovered payment shall constitute a Guaranteed
Obligation hereunder and, if this Guaranty was previously released or
terminated, it automatically shall be fully reinstated, as if such payment was
never made.

        (c) Independent Obligation. The liability of Guarantor hereunder is
independent of the Guaranteed Obligations, and a separate action or actions may
be brought and prosecuted against Guarantor irrespective of whether action is
brought against Borrower or any other guarantor of the Guaranteed Obligations or
whether Borrower or any other guarantor of the Guaranteed Obligations is joined
in any such action or actions.

        (d) Fraudulent Transfer Limitation. If, in any action to enforce this
Guaranty, any court of competent jurisdiction determines that enforcement
against Guarantor for the full amount of the Guaranteed Obligations is not
lawful under or would be subject to avoidance under Section 548 of the
Bankruptcy Code or any applicable provision of any comparable law of any state
or other jurisdiction, the liability of Guarantor under this Guaranty shall be
limited to the maximum amount lawful and not subject to such avoidance.

        (e) Termination. Notwithstanding any termination of this Guaranty in
accordance with Paragraph 3 hereof, this Guaranty shall continue to be in full
force and effect and applicable to any Guaranteed Obligations arising thereafter
which arise because prior payments of Guaranteed Obligations are rescinded or
otherwise required to be surrendered by Agent or any Lender after receipt.

                                      G-3
<PAGE>   131

        3. AUTHORIZATIONS, WAIVERS, ETC.

        (a) Authorizations. Guarantor authorizes Agent and Lenders, in their
discretion, without notice to Guarantor, irrespective of any change in the
financial condition of Borrower, Guarantor or any other guarantor of the
Guaranteed Obligations since the date hereof, and without affecting or impairing
in any way the liability of Guarantor hereunder, from time to time to:

                (i) Create new Guaranteed Obligations and renew, compromise,
        extend, accelerate or otherwise change the time for payment or
        performance of, or otherwise amend or modify the Credit Documents or
        change the terms of the Guaranteed Obligations or any part thereof,
        including increase or decrease of the rate of interest thereon;

                (ii) Take and hold security for the payment or performance of
        the Guaranteed Obligations and exchange, enforce, waive or release any
        such security; apply such security and direct the order or manner of
        sale thereof; and purchase such security at public or private sale;

                (iii) Otherwise exercise any right or remedy they may have
        against Borrower, Guarantor, any other guarantor of the Guaranteed
        Obligations or any security, including, without limitation, the right to
        foreclose upon any such security by judicial or nonjudicial sale;

                (iv) Settle, compromise with, release or substitute any one or
        more makers, endorsers or guarantors of the Guaranteed Obligations; and

                (v) Assign the Guaranteed Obligations, this Guaranty or the
        other Credit Documents in whole or in part to the extent provided in the
        Credit Agreement and the other Credit Documents.

        (b) Waivers. Guarantor hereby waives:

                (i) Any right to require Agent or any Lender to (A) proceed
        against Borrower or any other guarantor of the Guaranteed Obligations,
        (B) proceed against or exhaust any security received from Borrower,
        Guarantor or any other guarantor of the Guaranteed Obligations or
        otherwise marshall the assets of Borrower, Guarantor or any other
        guarantor of the Guaranteed Obligations or (C) pursue any other remedy
        in Agent's or any Lender's power whatsoever;

                (ii) Any defense arising by reason of the application by
        Borrower of the proceeds of any borrowing;

                (iii) Any defense resulting from the absence, impairment or loss
        of any right of reimbursement, subrogation, contribution or other right
        or remedy of Guarantor against Borrower, any other guarantor of the
        Guaranteed Obligations or

                                      G-4
<PAGE>   132

        any security, whether resulting from an election by Agent or any Lender
        to foreclose upon security by nonjudicial sale, or otherwise;

                (iv) Any setoff or counterclaim of Borrower or any defense which
        results from any disability or other defense of Borrower or the
        cessation or stay of enforcement from any cause whatsoever of the
        liability of Borrower (including, without limitation, the lack of
        validity or enforceability of any of the Credit Documents);

                (v) Any defense based upon any law, rule or regulation which
        provides that the obligation of a surety must not be greater or more
        burdensome than the obligation of the principal;

                (vi) Until all obligations of Agent or any Lender to extend
        credit to Borrower have terminated and all of the Guaranteed Obligations
        have been fully paid, any right of subrogation, reimbursement,
        indemnification or contribution and other similar right to enforce any
        remedy which Agent, Lenders or any other Person now has or may hereafter
        have against Borrower on account of the Guaranteed Obligations, and any
        benefit of, and any right to participate in, any security now or
        hereafter received by Agent, any Lender or any other Person on account
        of the Guaranteed Obligations;

                (vii) All presentments, demands for performance, notices of
        non-performance, notices delivered under the Credit Documents, protests,
        notice of dishonor, and notices of acceptance of this Guaranty and of
        the existence, creation or incurring of new or additional Guaranteed
        Obligations and notices of any public or private foreclosure sale;

                (viii) The benefit of any statute of limitations to the extent
        permitted by law;

                (ix) Any appraisement, valuation, stay, extension, moratorium
        redemption or similar law or similar rights for marshalling;

                (x) Any right to be informed by Agent or any Lender of the
        financial condition of Borrower or any other guarantor of the Guaranteed
        Obligations or any change therein or any other circumstances bearing
        upon the risk of nonpayment or nonperformance of the Guaranteed
        Obligations;

                (xi) Until all obligations of Agent or any Lender to extend
        credit to Borrower have terminated and all of the Guaranteed Obligations
        have been fully paid, any right to revoke this Guaranty;

                (xii) Any defense arising from an election for the application
        of Section 1111(b)(2) of the Bankruptcy Code which applies to the
        Guaranteed Obligations;

                                      G-5
<PAGE>   133

                (xiii) Any defense based upon any borrowing or grant of a
        security interest under Section 364 of the Bankruptcy Code; and

                (xiv) Any right it may have to a fair value hearing to determine
        the size of a deficiency judgment following any foreclosure on any
        security for the Guaranteed Obligations.

Without limiting the scope of any of the foregoing provisions of this Paragraph
3, Guarantor hereby further waives (A) all rights and defenses arising out of an
election of remedies by Agent or any Lender, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security for a
Guaranteed Obligation, has destroyed Guarantor's rights of subrogation and
reimbursement against Borrower by the operation of Section 580d of the
California Code of Civil Procedure or otherwise, (B) all rights and defenses
Guarantor may have by reason of protection afforded to Borrower with respect to
the Guaranteed Obligations pursuant to the antideficiency or other laws of
California limiting or discharging the Guaranteed Obligations, including,
without limitation, Section 580a, 580b, 580d, or 726 of the California Code of
Civil Procedure, and (C) all other rights and defenses available to Guarantor by
reason of Sections 2787 to 2855, inclusive, Section 2899 or Section 3433 of the
California Civil Code or Section 3605 of the California Commercial Code.

                (c) Financial Condition of Borrower, Etc. Guarantor is fully
        aware of the financial condition and affairs of Borrower. Guarantor has
        executed this Guaranty without reliance upon any representation,
        warranty, statement or information concerning Borrower furnished to
        Guarantor by Agent or any Lender and has, independently and without
        reliance on Agent or any Lender, and based on such documents and
        information as it has deemed appropriate, made its own appraisal of the
        financial condition and affairs of Borrower and of other circumstances
        affecting the risk of nonpayment or nonperformance of the Guaranteed
        Obligations. Guarantor is in a position to obtain, and assumes full
        responsibility for obtaining, any additional information about the
        financial condition and affairs of Borrower and of other circumstances
        affecting the risk of nonpayment or nonperformance of the Guaranteed
        Obligations and will, independently and without reliance upon Agent or
        any Lender, and based on such documents and information as it shall deem
        appropriate at the time, continue to make its own appraisals and
        decisions in taking or not taking action in connection with this
        Guaranty.

        4. SUBORDINATION. Guarantor hereby subordinates any and all debts,
liabilities and obligations owed to Guarantor by Borrower (the "Subordinated
Obligations") to the Guaranteed Obligations as provided in this Paragraph 4.

                (a) Prohibited Payments, Etc. Except during the continuance of a
        Default (including the commencement and continuation of any Debtor
        Relief Proceeding relating to Borrower), Guarantor may receive regularly
        scheduled payments from Borrower on account of Subordinated Obligations.
        After the occurrence and during the continuance of any Default
        (including the commencement and continuation of any Debtor Relief
        Proceeding relating to Borrower), however, unless Agent otherwise
        agrees, Guarantor

                                      G-6
<PAGE>   134

        shall not demand, accept or take any action to collect any payment on
        account of the Subordinated Obligations.

                (b) Prior Payment of Guaranteed Obligations. In any Debtor
        Relief Proceeding relating to Borrower, Guarantor agrees that Agent and
        Lenders shall be entitled to receive payment of all Guaranteed
        Obligations (including any and all Disallowed Post-Commencement Interest
        and Expenses) before Guarantor receives payment of any Subordinated
        Obligations.

                (c) Turn-Over. After the occurrence and during the continuance
        of any Default (including the commencement and continuation of any
        Debtor Relief Proceeding relating to Borrower), Guarantor shall, if
        Agent so requests, collect, enforce and receive payments on account of
        the Subordinated Obligations as trustee for Agent and Lenders and
        deliver such payments to Agent on account of the Guaranteed Obligations
        (including any and all Disallowed Post-Commencement Interest and
        Expenses), together with any necessary endorsements or other instruments
        of transfer, but without reducing or affecting in any manner the
        liability of Guarantor under the other provisions of this Guaranty.

                (d) Agent Authorization. After the occurrence and during the
        continuance of any Default (including the commencement and continuation
        of any Debtor Relief Proceeding relating to Borrower), Agent is
        authorized and empowered (but without any obligation to so do), in its
        discretion, (i) in the name of Guarantor to collect and enforce, and to
        submit claims in respect of, Subordinated Obligations and to apply any
        amounts received thereon to the Guaranteed Obligations (including any
        and all Disallowed Post-Commencement Interest and Expenses), and (ii) to
        require Guarantor (A) to collect and enforce, and to submit claims in
        respect of, Subordinated Obligations and (B) to pay any amounts received
        on such obligations to Agent for application to the Guaranteed
        Obligations (including any and all Disallowed Post-Commencement Interest
        and Expenses).

5. MISCELLANEOUS.

                (a) Notices. Except as otherwise specified herein, all notices,
        requests, demands, consents, instructions or other communications to or
        upon Guarantor or Agent under this Agreement shall be given as provided
        in Paragraph 8.01 of the Credit Agreement.

                (b) Payments.

                        (i) Guarantor shall make all payments of the Guaranteed
                Obligations to Agent, or its order, at the office of Agent and
                at the times specified in the Credit Documents for the payment
                of such Guaranteed Obligations. Guarantor shall make all other
                payments hereunder at such office as Agent may designate. Each
                payment shall be made in same day or immediately available funds
                not later

                                      G-7
<PAGE>   135

                than 11:00 a.m.(local time of the office of Agent at which such
                payment is to be made) on the date due.

                        (ii) Guarantor shall make all payments of the Guaranteed
                Obligations hereunder in the currency in which such Guaranteed
                Obligations are required to be paid by Borrower pursuant to the
                Credit Documents and shall make all other payments hereunder in
                Dollars; provided, however, that, if Agent shall request
                Guarantor to pay any amount hereunder which would otherwise be
                payable in another currency in the lawful currency of the United
                States, Guarantor shall pay to Agent the Dollar Equivalent of
                such amount.

                        (iii) If any sum due from Guarantor under this Guaranty
                or any other Credit Document to which Guarantor is a party or
                any order, judgment or award given or rendered in relation
                hereto or thereto has to be converted from the currency (the
                "first currency") in which the same is payable hereunder or
                thereunder into another currency (the "second currency") for the
                purpose of (A) making or filing a claim or proof against
                Guarantor with any Governmental Authority, (B) obtaining an
                order or judgment in any court or other tribunal or (C)
                enforcing any order or judgment given or made in relation
                hereto, Guarantor shall, to the fullest extent permitted by law,
                indemnify and hold harmless each of the Persons to whom such sum
                is due from and against any loss suffered as a result of any
                discrepancy between (1) the rate of exchange used for such
                purpose to convert the amounts in question from the first
                currency into the second currency and (2) the rate or rates of
                exchange at which such Person may, using reasonable efforts in
                the ordinary course of business, purchase the first currency
                with the second currency upon receipt of a sum paid to it in
                satisfaction, in whole or in part, of any such order, judgment,
                claim or proof. The foregoing indemnity shall constitute a
                separate obligation of Guarantor distinct from its other
                obligations hereunder and shall survive the giving or making of
                any judgment or order in relation to all or any of such
                obligations.

                        (iv) If any amounts required to be paid by Guarantor
                under this Guaranty or any order, judgment or award given or
                rendered in relation hereto remain unpaid after such amounts are
                due, Guarantor shall pay interest on the aggregate, outstanding
                balance of such amounts from the date due until those amounts
                are paid in full at a per annum rate equal to:

                              (A) In the case of amounts payable in Dollars, the
                        Base Rate plus two percent (2.00%), such rate to change
                        from time to time as the Base Rate shall change.

                              (B) In the case of amounts payable in Yen, the
                        Overnight Rate plus three percent (3.00%), such rate to
                        change from time to time as the Overnight Rate shall
                        change.

                (c) Expenses. Guarantor shall pay promptly upon receipt of an
        invoice therefor, (i) all reasonable fees and

                                      G-8
<PAGE>   136

        expenses, including reasonable attorneys' fees and expenses, incurred by
        Agent in connection with the preparation, execution and delivery of, and
        the exercise of its duties under, this Guaranty and the preparation,
        execution and delivery of amendments and waivers hereunder and (ii) all
        reasonable fees and expenses, including reasonable attorneys' fees and
        expenses, incurred by Agent and Lenders in connection with the
        enforcement or attempted enforcement of this Guaranty or any of the
        Guaranteed Obligations or in preserving any of Agent's or Lenders'
        rights and remedies (including, without limitation, all such fees and
        expenses incurred in connection with any "workout" or restructuring
        affecting the Credit Documents or the Guaranteed Obligations or any
        bankruptcy or similar proceeding involving Guarantor, Borrower or any of
        their affiliates).

                (d) Waivers; Amendments. This Guaranty may not be amended or
        modified, nor may any of its terms be waived, except by written
        instruments signed by Guarantor and Agent. Each waiver or consent under
        any provision hereof shall be effective only in the specific instances
        for the purpose for which given. No failure or delay on Agent's or any
        Lender's part in exercising any right hereunder shall operate as a
        waiver thereof or of any other right nor shall any single or partial
        exercise of any such right preclude any other further exercise thereof
        or of any other right.

                (e) Successors and Assigns. This Guaranty shall be binding upon
        and inure to the benefit of Agent, Lenders, Guarantor and their
        respective successors and assigns; provided, however, that Guarantor may
        not assign or transfer any of its rights and obligations under this
        Guaranty without the prior written consent of Agent and Lenders, and,
        provided, further, that Agent or any Lender may sell, assign and
        delegate their respective rights and obligations hereunder only as
        permitted by the Credit Agreement. All references in this Guaranty to
        any Person shall be deemed to include all permitted successors and
        assigns of such Person.

                (f) Cumulative Rights, etc. The rights, powers and remedies of
        Agent and Lenders under this Guaranty shall be in addition to all
        rights, powers and remedies given to Agent and Lenders by virtue of any
        applicable law, rule or regulation of any Governmental Authority, the
        Credit Agreement, any other Credit Document or any other agreement, all
        of which rights, powers, and remedies shall be cumulative and may be
        exercised successively or concurrently without impairing Agent's or any
        Lender's rights hereunder. Guarantor waives any right to require Agent
        or any Lender to proceed against any Person or to exhaust any collateral
        or to pursue any remedy in Agent's or such Lender's power.

                (g) Setoff; Security Interest.

                        (i) In addition to any rights and remedies of Lenders
                provided by law, each Lender shall have the right, with the
                prior consent of Agent but without prior notice to or consent of
                Guarantor, any such notice and consent being expressly waived by
                Guarantor to the extent permitted by applicable law, upon the
                occurrence and during the continuance of an Event of Default, to
                set-off and apply against the obligations of Guarantor any
                amount owing from such Lender to Guarantor. The aforesaid right
                of set-off may be exercised by such Lender

                                      G-9
<PAGE>   137

                against Guarantor or against any trustee in bankruptcy, debtor
                in possession, assignee for the benefit of creditors, receiver
                or execution, judgment or attachment creditor of Guarantor or
                against anyone else claiming through or against Guarantor or
                such trustee in bankruptcy, debtor in possession, assignee for
                the benefit of creditors, receiver, or execution, judgment or
                attachment creditor, notwithstanding the fact that such right of
                set-off may not have been exercised by such Lender at any prior
                time. Each Lender agrees promptly to notify Guarantor 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.

                        (ii) As security for the obligations of Guarantor
                hereunder, Guarantor hereby grants to Agent and each Lender, for
                the benefit of all Lenders, a continuing security interest in
                any and all deposit accounts or moneys of Guarantor now or
                hereafter maintained with such Lender. Each Lender shall have
                all of the rights of a secured party with respect to such
                security interest.

                (h) Payments Free of Taxes. All payments made by Guarantor under
        this Guaranty shall be made free and clear of, and without deduction or
        withholding for or on account of, all present and future income, stamp,
        documentary and other taxes and duties, and all other levies, imposts,
        charges, fees, deductions and withholdings, now or hereafter imposed,
        levied, collected, withheld or assessed by any Governmental Authority
        (except net income taxes and franchise taxes in lieu of net income taxes
        imposed on Agent or any Lender by its jurisdiction of incorporation or
        the jurisdiction in which its Applicable Lending Office is located) (all
        such non-excluded taxes, duties, levies, imposts, duties, charges, fees,
        deductions and withholdings being hereinafter called "Taxes"). If any
        Taxes are required to be withheld from any amounts payable to Agent or
        any Lender hereunder, the amounts so payable to Agent or such Lender
        shall be increased to the extent necessary to yield to Agent or such
        Lender (after payment of all Taxes) interest or any such other amounts
        payable hereunder at the rates or in the amounts specified in this
        Guaranty or the other Credit Documents, as applicable. Whenever any
        Taxes are payable by Guarantor, as promptly as possible thereafter,
        Guarantor shall send to Agent for its own account or for the account of
        such Lender, as the case may be, a certified copy of an original
        official receipt received by Guarantor showing payment thereof. If
        Guarantor fails to pay any Taxes when due to the appropriate taxing
        authority or fails to remit to Agent the required receipts or other
        required documentary evidence, Guarantor shall indemnify Agent and
        Lenders for any taxes (including interest or penalties) that may become
        payable by Agent or any Lender as a result of any such failure. The
        obligations of Guarantor under this Subparagraph 5(h) shall survive the
        payment and performance of the Guaranteed Obligations and the
        termination of this Guaranty. Nothing contained in this Subparagraph
        5(h) shall require Agent or any Lender to make available any of its tax
        returns (or any other information relating to its taxes which it deems
        to be confidential).

                (i) Partial Invalidity. If at any time any provision of this
        Guaranty is or becomes illegal, invalid or unenforceable in any respect
        under the law or any jurisdiction, neither the legality, validity or
        enforceability of the remaining provisions of this Guaranty

                                      G-10
<PAGE>   138

        nor the legality, validity or enforceability of such provision under the
        law of any other jurisdiction shall in any way be affected or impaired
        thereby.

                (j) Jury Trial. EACH OF GUARANTOR, LENDERS AND AGENT, TO THE
        FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES
        ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY
        ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
        GUARANTY.

                (k) Governing Law, Consent to Jurisdiction, Etc.

                        (i) This Guaranty shall be governed by and construed in
                accordance with the laws of the State of California without
                reference to conflicts of law rules.

                        (ii) Guarantor irrevocably submits to the non-exclusive
                jurisdiction of the courts of the State of California and the
                courts of the United States of America located in the Northern
                District of California and agrees that any legal action, suit or
                proceeding arising out of or relating to this Guaranty or any of
                the other Credit Documents may be brought against Guarantor in
                any such courts. Final judgment against Guarantor in any such
                action, suit or proceeding shall be conclusive and may be
                enforced in any other jurisdiction by suit on the judgment, a
                certified or exemplified copy of which shall be conclusive
                evidence of the judgment, or in any other manner provided by
                law. Nothing in this Subparagraph 5(k) shall affect the right of
                Agent or any Lender to commence legal proceedings or otherwise
                sue Guarantor in any other appropriate jurisdiction, or
                concurrently in more than one jurisdiction, or to serve process,
                pleadings and other papers upon Guarantor in any manner
                authorized by the laws of any such jurisdiction. Guarantor
                agrees that process served either personally or by registered
                mail shall, to the extent permitted by law, constitute adequate
                service of process in any such suit. Without limiting the
                foregoing, Guarantor hereby appoints, in the case of any such
                action or proceeding brought in the courts of or in the State of
                California, CT Corporation, with offices on the date hereof at
                818 West Seventh Street, Los Angeles, California 90017, to
                receive for it and on its behalf, service of process in the
                State of California with respect thereto, provided Guarantor may
                appoint any other Person, reasonably acceptable to Agent, with
                offices in the State of California to replace such agent for
                service of process upon delivery to Agent of a reasonably
                acceptable agreement of such new agent agreeing so to act.
                Guarantor irrevocably waives to the fullest extent permitted by
                applicable law (A) any objection which it may have now or in the
                future to the laying of the venue of any such action, suit or
                proceeding in any court referred to in the first sentence above;
                (B) any claim that any such action, suit or proceeding has been
                brought in an inconvenient forum; (C) its right of removal of
                any matter commenced by any other party in the courts of the
                State of California to any court of the United States of
                America; (D) any immunity which it or its assets may have in
                respect of its obligations under this Agreement or any other
                Credit Document from any suit, execution, attachment (whether
                provisional or final, in aid of execution, before judgment or
                otherwise) or other legal process; and (E) any right it may have
                to

                                      G-11
<PAGE>   139

                require the moving party in any suit, action or proceeding
                brought in any of the courts referred to above arising out of or
                in connection with this Agreement or any other Credit Document
                to post security for the costs of Guarantor or to post a bond or
                to take similar action.

        IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed as
of the day and year first above written.

                                          LSI LOGIC CORPORATION

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

                                      G-12
<PAGE>   140

                                    EXHIBIT H

                              ASSIGNMENT AGREEMENT

        THIS ASSIGNMENT AGREEMENT, dated as of the Assignment Effective Date set
forth in Attachment 1 hereto, by and among:

                (1) The bank designated in Attachment 1 hereto as the Assignor
        Lender ("Assignor Lender"); and

                (2) Each bank designated in Attachment 1 hereto as an Assignee
        Lender (individually, an "Assignee Lender").

                                    RECITALS

        A. Assignor Lender is one of the Lenders which is a party to the Second
Amended and Restated Credit Agreement dated as of April 21, 2000, by and among
LSI Logic Corporation ("LSI"), LSI Logic Japan Semiconductor, Inc. ("LLJS"),
Assignor Lender and the other financial institutions parties thereto
(collectively, the "Lenders") and ABN AMRO Bank N.V., as agent for Lenders (in
such capacity, "Agent"). (Such credit agreement, as amended, supplemented or
otherwise modified in accordance with its terms from time to time to be referred
to herein as the "Credit Agreement").

        B. Assignor Lender wishes to sell, and each Assignee Lender wishes to
purchase, all or a portion of Assignor Lender's rights under the Credit
Agreement pursuant to Subparagraph 8.05(c) of the Credit Agreement.

                                    AGREEMENT

        Now, therefore, the parties hereto hereby agree as follows:

        1. Definitions. Except as otherwise defined in this Assignment
Agreement, all capitalized terms used herein and defined in the Credit Agreement
have the respective meanings given to those terms in the Credit Agreement.

        2. Sale and Assignment. Subject to the terms and conditions of this
Assignment Agreement, Assignor Lender hereby agrees to sell, assign and delegate
to each Assignee Lender and each Assignee Lender hereby agrees to purchase,
accept and assume the rights, obligations and duties of a Lender under the
Credit Agreement and the other Credit Documents with Commitments or Loans equal
to the respective amounts set forth under the caption "Commitments or Loans
Assigned" opposite such Assignee Lender's name on Attachment 1 hereto. Such
sale, assignment and delegation shall become effective on the date designated in
Attachment 1 hereto (the "Assignment Effective Date"), which date shall be,
unless Agent shall otherwise consent, at least five (5) Business Days after the
date following the date counterparts of this Assignment Agreement are delivered
to Agent in accordance with Paragraph 3 hereof.

                                      H-1
<PAGE>   141

        3. Assignment Effective Notice. Upon (a) receipt by Agent of five (5)
counterparts of this Assignment Agreement (to each of which is attached a fully
completed Attachment 1), each of which has been executed by Assignor Lender and
each Assignee Lender (and, to the extent required by Subparagraph 8.05(c) of the
Credit Agreement, by Borrowers and Agent) and (b) payment to Agent of the
registration and processing fee specified in Subparagraph 8.05(e) of the Credit
Agreement by Assignor Lender, Agent will transmit to Borrowers, Assignor Lender
and each Assignee Lender an Assignment Effective Notice substantially in the
form of Attachment 2 hereto, fully completed (an "Assignment Effective Notice").

        4. Assignment Effective Date. At or before 12:00 noon (Chicago time for
a U.S. Loan and Tokyo time for a Japanese Loan) on the Assignment Effective
Date, each Assignee Lender shall pay to Assignor Lender, in immediately
available or same day funds, an amount equal to the purchase price, as agreed
between Assignor Lender and such Assignee Lender (the "Purchase Price"), for
each portion of a Commitment or Loan purchased by such Assignee Lender
hereunder. Effective upon receipt by Assignor Lender of each Purchase Price
payable by each Assignee Lender, the sale, assignment and delegation to such
Assignee Lender of such Commitments or Loans as described in Paragraph 2 hereof
shall become effective.

        5. Payments After the Assignment Effective Date. Assignor Lender and
each Assignee Lender hereby agree that Agent shall, and hereby authorize and
direct Agent to, allocate amounts payable under the Credit Agreement and the
other Credit Documents as follows:

                (a) All principal payments made after the Assignment Effective
        Date with respect to each portion of a Loan assigned to an Assignee
        Lender pursuant to this Assignment Agreement shall be payable to such
        Assignee Lender.

                (b) All interest, fees and other amounts accrued after the
        Assignment Effective Date with respect to each portion of a Loan
        assigned to an Assignee Lender pursuant to this Assignment Agreement
        shall be payable to such Assignee Lender.

Assignor Lender and each Assignee Lender shall make any separate arrangements
between themselves which they deem appropriate with respect to payments between
them of amounts paid under the Credit Documents on account of the Commitments or
Loans assigned to such Assignee Lender, and neither Agent nor Borrowers shall
have any responsibility to effect or carry out such separate arrangements.

        6. Delivery of Notes. On or prior to the Assignment Effective Date,
Assignor Lender will deliver to Agent any Notes payable to Assignor Lender with
respect to its U.S. Loans. On or prior to the Assignment Effective Date, LSI
will deliver to Agent new Notes for each Assignee Lender and Assignor Lender, in
each case in principal amounts reflecting, in accordance with the Credit
Agreement, their respective U.S. Revolving Commitments or U.S. 364 Day
Commitments, as the case may be (as adjusted pursuant to this Assignment
Agreement). Promptly after the Assignment Effective Date, Agent will send to
each of Assignor Lender and the Assignee Lenders its new Notes and will send to
LSI the superseded Note payable to Assignor Lender, marked "Replaced."

                                      H-2
<PAGE>   142

        7. Delivery of Copies of Credit Documents. Concurrently with the
execution and delivery hereof, Assignor Lender will provide to each Assignee
Lender (if it is not already a Lender party to the Credit Agreement) conformed
copies of all documents delivered to Assignor Lender on or prior to the Closing
Date in satisfaction of the conditions precedent set forth in the Credit
Agreement.

        8. Further Assurances. Each of the parties to this Assignment Agreement
agrees that at any time and from time to time upon the written request of any
other party, it will execute and deliver such further documents and do such
further acts and things as such other party may reasonably request in order to
effect the purposes of this Assignment Agreement.

        9. Further Representations, Warranties and Covenants. Assignor Lender
and each Assignee Lender further represent and warrant to and covenant with each
other, Agent and Lenders as follows:

                (a) Other than the representation and warranty that it is the
        legal and beneficial owner of the interest being assigned hereby free
        and clear of any adverse claim, Assignor Lender makes no representation
        or warranty and assumes no responsibility with respect to any
        statements, warranties or representations made in or in connection with
        the Credit Agreement or the other Credit Documents or the execution,
        legality, validity, enforceability, genuineness, sufficiency or value of
        the Credit Agreement or the other Credit Documents furnished or any
        collateral or any security interest therein.

                (b) Assignor Lender makes no representation or warranty and
        assumes no responsibility with respect to the financial condition of
        Borrowers or any of their obligations under the Credit Agreement or any
        other Credit Documents.

                (c) Each Assignee Lender confirms that it has received a copy of
        the Credit 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 Agreement.

                (d) Each Assignee Lender will, independently and without
        reliance upon Agent, Assignor Lender or any other Lender and based upon
        such documents and information as it shall deem appropriate at the time,
        continue to make its own credit decisions in taking or not taking action
        under the Credit Agreement and the other Credit Documents.

                (e) Each Assignee Lender appoints and authorizes Agent to take
        such action as Agent on its behalf and to exercise such powers under the
        Credit Agreement and the other Credit Documents as Agent is authorized
        to exercise by the terms thereof, together with such powers as are
        reasonably incidental thereto, all in accordance with Section VII of the
        Credit Agreement.

                (f) Each Assignee Lender agrees that it will perform in
        accordance with their terms all of the obligations which by the terms of
        the Credit Agreement and the other Credit Documents are required to be
        performed by it as a Lender.

                                      H-3
<PAGE>   143

                (g) Attachment 1 hereto sets forth administrative information
        with respect to each Assignee Lender.

        10. Effect of this Assignment Agreement. On and after the Assignment
Effective Date, (a) each Assignee Lender shall be a Lender with Commitments or
Loans as set forth under the caption "Commitments or Loans After Assignment"
opposite such Assignee Lender's name on Attachment 1 hereto and shall have the
rights, duties and obligations of such a Lender under the Credit Agreement and
the other Credit Documents and (b) Assignor Lender shall be a Lender with
Commitments or Loans as set forth under the caption "Commitments or Loans After
Assignment" opposite Assignor Lender's name on Attachment 1 hereto and shall
have the rights, duties and obligations of such a Lender under the Credit
Agreement and the other Credit Documents, or, if the Commitments and Loans of
Assignor Lender have been reduced to $0, Assignor Lender shall cease to be a
Lender and shall have no further obligation to make any Loans.

        11. Miscellaneous. This Assignment Agreement shall be governed by, and
construed in accordance with, the laws of the State of California. Paragraph
headings in this Assignment Agreement are for convenience of reference only and
are not part of the substance hereof.

                                      H-4
<PAGE>   144

        IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective duly authorized officers as of the
date set forth in Attachment 1 hereto.

                                             ______________________________, as
                                             Assignor Lender

                                             By:_______________________________
                                                Name: _________________________
                                                Title: ________________________

                                             ___________________________, as an
                                             Assignee Lender

                                             By:_______________________________
                                                Name: _________________________
                                                Title: ________________________

                                             ___________________________, as an
                                             Assignee Lender

                                             By:_______________________________
                                                Name: _________________________
                                                Title: ________________________

                                             ___________________________, as an
                                             Assignee Lender

                                             By:_______________________________
                                                Name: _________________________
                                                Title: ________________________

                                      H-5
<PAGE>   145

CONSENTED TO AND ACKNOWLEDGED BY:

By:______________________________
   Name:_________________________
   Title:________________________

ABN AMRO BANK N.V.,
  as Agent

By:______________________________
   Name:_________________________
   Title:________________________

ACCEPTED FOR RECORDATION
  IN REGISTER:

ABN AMRO BANK N.V.,
  as Agent

By:______________________________
   Name:_________________________
   Title:________________________

                                      H-6
<PAGE>   146

                                  ATTACHMENT 1

                             TO ASSIGNMENT AGREEMENT

                                     PART A

<TABLE>
<CAPTION>
                                        Commitments or Loans                                  Commitments or Loans
                                             Assigned                                            After Assignment
                        ------------------------------------------------       --------------------------------------------------
                                               U.S.
                        U.S. Revolving       364 Day           Japanese        U.S. Revolving      U.S. 364 Day         Japanese
                         Commitment/       Commitment/       Commitment/         Commitment/        Commitment/       Commitment/
                            Loan               Loan              Loan                Loan              Loan               Loan
                        --------------     -----------       -----------       --------------      ------------       -----------
<S>                      <C>               <C>              <C>                <C>                <C>                 <C>
Assignor Lender:
______________           $__________       $__________     (Yen)________       $____________       $___________     (Yen)__________

Assignee Lenders:

______________           $__________       $__________     (Yen)________       $____________       $___________     (Yen)__________
______________           $__________       $__________     (Yen)________       $____________       $___________     (Yen)__________
______________           $__________       $__________     (Yen)________       $____________       $___________     (Yen)__________
______________           $__________       $__________     (Yen)________       $____________       $___________     (Yen)__________
</TABLE>

                                     H(1)-1

<PAGE>   147

                                     PART B

[ASSIGNEE PARTICIPANT]

Domestic Lending Office:

Euro-Dollar Lending Office:

Japanese Lending Office:

Address for Notices related to U.S. Borrowings:

Address for Notices related to the Japanese Borrowing:

Wiring Instructions for U.S. Borrowings:

Wiring Instructions for the Japanese Borrowing:

                                     H(1)-2

<PAGE>   148

                                     PART C

                    ASSIGNMENT EFFECTIVE DATE ________, ____

                                     H(1)-3
<PAGE>   149

                                  ATTACHMENT 2
                             TO ASSIGNMENT AGREEMENT

                                     FORM OF
                           ASSIGNMENT EFFECTIVE NOTICE

        Reference is made to the Second Amended and Restated Credit Agreement,
dated as of April 21, 2000, among LSI Logic Corporation ("LSI"), LSI Logic Japan
Semiconductor, Inc., the financial institutions parties thereto (the "Lenders")
and ABN AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). Agent
hereby acknowledges receipt of five executed counterparts of a completed
Assignment Agreement, a copy of which is attached hereto. [Note: Attach copy of
Assignment Agreement.] Terms defined in such Assignment Agreement (whether
directly or indirectly by reference) are used herein as therein defined.

        1. Pursuant to such Assignment Agreement, you are advised that the
Assignment Effective Date will be __________.

        [2. Pursuant to such Assignment Agreement, Assignor Lender is required
to deliver to Agent on or before the Assignment Effective Date the Notes payable
to Assignor Lender.]

        [3. Pursuant to such Assignment Agreement, LSI is required to deliver to
Agent on or before the Assignment Effective Date the following Notes, each dated
_________________ [Insert appropriate date]:

        [Describe each new Note for Assignor Lender and each Assignee Lender as
to principal amount.]]

        4. Pursuant to such Assignment Agreement, each Assignee Lender is
required to pay its Purchase Price to Assignor Lender at or before 12:00 noon [(
time)] on the Assignment Effective Date in immediately available funds.

                                          Very truly yours,

                                          ABN AMRO BANK N.V.,
                                            as Agent

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

                                     H(2)-1
<PAGE>   150

                                    EXHIBIT I

              FORM OF OPINION OF WILSON, SONSINI, GOODRICH & ROSATI

        (a) LSI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, is qualified to do business
and is in good standing in the State of California and has all requisite power
and authority to execute, deliver and perform its obligations under the Credit
Documents and the Symbios Acquisition Documents to which it is a party.

        (b) The execution, delivery and performance by LSI of the Credit
Documents and the Symbios Acquisition Documents to which it is a party have been
duly authorized by all necessary corporate action of LSI and will not contravene
the terms of the certificate of incorporation and the bylaws of LSI.

        (c) The execution, delivery and performance by each Borrower of the
Credit Documents and the Symbios Acquisition Documents to which it is a party
will not (i) to our knowledge, result in a breach of or constitute a default
under any material Contractual Obligation to which either Borrower is a party or
by which it or its properties may be bound or affected or (ii) violate any
provision of Governmental Rule binding on or affecting either Borrower.

        (d) The Credit Documents and the Symbios Acquisition Documents
constitute legal, valid and binding obligations of each Borrower which is a
party thereto, enforceable against such Borrower in accordance with their
respective terms, except to the extent the enforceability thereof would be
subject to bankruptcy, insolvency, receivership or similar laws providing relief
from creditors, or principles of equity generally.

        (e) No authorization, consent, approval, license, exemption of, or
filing or registration with, any Governmental Authority, or, to our knowledge,
approval or consent of any other Person, is required for the due execution,
delivery or performance by either Borrower of any of the Credit Documents or the
Symbios Acquisition Documents except those set forth on Schedule 4.01(d) which
have been obtained or made and are in full force and effect.

        (f) To our knowledge, except as set forth in Schedule 4.01(g), there are
no actions, suits or proceedings pending or threatened against or affecting
either Borrower or any of its Significant Subsidiaries or the properties of such
Borrower or any of its Significant Subsidiaries before any Governmental
Authority or arbitrator which if determined adversely to such Borrower or any
such Significant Subsidiary would be reasonably likely to result in a Material
Adverse Effect.

        (g) None of Borrowers and their Significant Subsidiaries is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Investment Company Act of 1940, the Interstate Commerce Act, any
state public utilities code or any other Governmental Rule limiting its ability
to incur Indebtedness.

                                      I-1
<PAGE>   151

        (h) The use of proceeds from the U.S. Borrowings to consummate the
Symbios Acquisition as provided in Subparagraph 2.01(h) of the Credit Agreement
will not violate Regulation U of the FRB.

                                      I-2
<PAGE>   152

                                    EXHIBIT J

                       FORM OF OPINION OF JAPANESE COUNSEL

        (a) LLJS is a corporation duly organized, validly existing and in good
standing under the laws of Japan and has all requisite power and authority to
execute, deliver and perform its obligations under the Credit Documents to which
it is a party.

        (b) The execution, delivery and performance by LLJS of the Credit
Documents to which it is a party have been duly authorized by all necessary
corporate action of LLJS and will not contravene the terms of the articles of
association of LLJS.

        (c) The execution, delivery and performance by LLJS of the Credit
Documents to which it is a party will not (i) to our knowledge, result in a
breach of or constitute a default under any material Contractual Obligation to
which LLJS is a party or by which it or its properties may be bound or affected
or (ii) violate any provision of Governmental Rule binding on or affecting LLJS.

        (d) The Credit Documents to which LLJS is a party constitute legal,
valid and binding obligations of LLJS, enforceable against LLJS in accordance
with their respective terms, except to the extent the enforceability thereof
would be subject to bankruptcy, insolvency, receivership or similar laws
providing relief from creditors, or principles of equity generally.

        (e) No authorization, consent, approval, license, exemption of, or
filing or registration with, any Governmental Authority, or, to our knowledge,
approval or consent of any other Person, is required for the due execution,
delivery or performance by LLJS of any of the Credit Documents to which LLJS is
a party.

        (f) To our knowledge, except as set forth in Schedule 4.01(g), there are
no actions, suits or proceedings pending or threatened against or affecting LLJS
or any of its Significant Subsidiaries or the properties of LLJS or any of its
Significant Subsidiaries before any Governmental Authority or arbitrator which
if determined adversely to LLJS or any such Significant Subsidiary would be
reasonably likely to result in a Material Adverse Effect.

        (g) The execution and delivery by LLJS of the Credit Documents to which
it is a party are not subject to any stamp duty or other tax, and no deduction
or withholding on account of any taxes of any nature whatsoever is required to
be made from any payment by LLJS under the Credit Documents to which it is a
party.

        (h) The obligations of LLJS under the Credit Documents to which it is a
party rank at least pari passu in order of priority with all its other unsecured
obligations.

        (i) Neither LLJS nor any of its property has any right of immunity from
jurisdiction, attachment (before or after judgment) or judgment in the courts of
Japan in respect of any action or proceeding relating to the Credit Documents to
which LLJS is a party.

                                      J-1

<PAGE>   153

        (j) The courts of Japan will (i) give effect to the choice of the law of
the State of California as the governing law of the Credit Agreement and to
LLJS's submission to jurisdiction and the manner of service of process as
provided in the Credit Agreement and (ii) recognize and enforce any judgment on
or in respect of the Credit Agreement in Japan.

                                      J-2

<PAGE>   154

                                    EXHIBIT K

                            SUBORDINATION PROVISIONS

        When used in Article 13 below, the following capitalized terms shall
have the meanings set forth below and a cross-reference to any other Article or
Section shall refer to an Article or Section comparable to the Article or
Section which was similarly cross-referenced in Article 13 of the 5 1/2%
Convertible Subordinated Notes Due 2001:

        "Designated Senior Debt" means (i) Senior Debt under the Existing Credit
Agreement, and (ii) any other particular Senior Debt in which the instrument
creating or evidencing the same or the assumption or guarantee thereof (or
related agreements or documents to which the Company is a party) expressly
provides that such Senior Debt shall be "Designated Senior Debt" for purposes of
this Indenture (provided that such instrument, agreement or other document may
place limitations and conditions on the right of such Senior Debt to exercise
the rights of Designated Senior Debt).

        "Existing Credit Agreement" means that Amended and Restated Credit
Agreement, dated as of September 22, 1998, among the Company, LSI Logic Japan
Semiconductor, Inc., the lenders from time to time parties thereto (the
"Existing Lenders"), and ABN AMRO Bank N.V., as agent for the Existing Lenders,
as such agreement may be amended, amended and restated, supplemented or
otherwise modified from time to time.

        "Indebtedness" means, with respect to any Person, (i) all obligations,
contingent or otherwise, of such Person (a) for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such Person or only
to a portion thereof), (b) evidenced by a note, debenture, bond or written
instrument (including a purchase money obligation), (c) in respect of leases of
such Person required, in conformity with generally accepted accounting
principles, to be accounted for as capitalized lease obligations on the balance
sheet of such Person and all obligations and other liabilities (contingent or
otherwise) under any lease or related document (including a purchase agreement)
in connection with the lease of real property which provides that such person is
contractually obligated to purchase or cause a third party to purchase the
leased property and thereby guarantee a minimum residual value of the leased
property to the lessor and the obligations of such person under such lease or
related document to purchase or to cause a third party to purchase such leased
property; or (d) in respect of letters of credit (including reimbursement
obligations with respect thereto), local guarantees or bankers' acceptances;
(ii) all obligations of others of the type described in clause (i) above or
clause (iii), (iv) or (v) below assumed by or guaranteed in any manner by such
Person or in effect guaranteed by such Person through an agreement to purchase,
contingent or otherwise (and the obligations of such Person under any such
assumptions, guarantees or other such arrangements); (iii) all obligations
secured by a mortgage, pledge, lien, encumbrance, charge or adverse claim
affecting title or resulting in an encumbrance to which the property or assets
of such Person are subject, whether or not the obligation secured thereby shall
have been assumed by or shall otherwise be such Person's legal liability; (iv)
to the extent not otherwise included, all obligations of such Person under
interest rate and currency swap agreements, cap, floor and collar agreements,
spot and forward contracts and similar agreements and arrangements; and (v) all
obligations, contingent or otherwise, of such Person under or in respect of any
and all deferrals, renewals,

                                       K-1
<PAGE>   155

extensions and refundings of, or amendments, modifications or supplements to,
any liability of the kind described in any of the preceding clauses (i), (ii),
(iii) or (iv).

        "Senior Debt" means the principal of, premium, if any, and interest on,
rent payable under, and any other amounts due on or in connection with any and
all Indebtedness of the Company (including, without limitation, fees, costs,
expenses and any interest accruing after the filing of a petition initiating any
proceeding pursuant to any bankruptcy law, but only to the extent allowed or
permitted to the holder of such Indebtedness against the bankruptcy or other
insolvency estate of the Company in such proceeding), whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed, guaranteed or in
effect guaranteed by the Company (including all deferrals, renewals, extensions
or refundings of, or amendments, modifications or supplements to the foregoing);
provided, however, that Senior Debt does not include (w) Indebtedness evidenced
by the Notes, (x) Indebtedness of the Company to any subsidiary of the Company,
a majority of the voting stock of which is owned by the Company except to the
extent such Indebtedness is pledged by such subsidiary as security for any
Senior Debt, (y) accounts payable of the Company to trade creditors arising in
the ordinary course of business, and (z) any particular Indebtedness in which
the instrument creating or evidencing the same or the assumption or guarantee
thereof expressly provides that such Indebtedness shall not be senior in right
of payment to, or is pari passu with, or is subordinated or junior to, the
Notes.

                                   ARTICLE 13

                                  SUBORDINATION

Section 13.1 Notes Subordinated to Senior Debt.

        The Company covenants and agrees, and each Holder of Notes, by his
acceptance thereof, likewise covenants and agrees, that the indebtedness
represented by the Notes and the payment of the principal of (and premium, if
any) and interest on each and all of the Notes is hereby expressly subordinate
and junior, to the extent and in the manner hereinafter set forth, in right of
payment to the prior payment in full of all Senior Debt.

        (a) In the event of any distribution of assets of the Company upon any
dissolution, winding up, liquidation or reorganization of the Company, whether
in bankruptcy, insolvency, reorganization or receivership proceedings or upon an
assignment for the benefit of creditors or any other marshalling of the assets
and liabilities of the Company or otherwise, then the holders of all Senior Debt
shall first be entitled to receive payment of the full amount due thereon in
respect of principal (and premium, if any) and interest, or provision shall be
made for such amount in cash or other consideration satisfactory to the Existing
Lenders, before the Holders of any of the Notes are entitled to receive any
payment or distribution of any character, whether in cash, securities or other
property, on account of the principal of (or premium, if any) or interest on the
indebtedness evidenced by the Notes.

        For purposes of this Article 13, the words, "cash, securities or other
property" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment,

                                      K-2
<PAGE>   156

the payment of which is subordinated at least to the extent provided in this
Article 13 with respect to the Notes to the payment of all Senior Debt which may
at the time be outstanding; provided that (i) the Senior Debt is assumed by the
new corporation, if any, resulting from any reorganization or readjustment, and
(ii) the rights of the holders of Senior Debt (other than leases which are not
assumed by the Company or the new corporation, as the case may be) are not,
without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company into, another Person or the liquidation or dissolution of the Company
following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another Person upon the terms and conditions
provided for in Article 7 [merger, consolidation covenant of Indenture] shall
not be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section 13.1(a) if such other corporation shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the conditions
stated in Article 7 [merger, consolidation covenant].

        (b) In the event of any default in payment of the principal of or
premium, if any, or interest on or rent under, or any other payment obligation
under any Senior Debt beyond any applicable grace period with respect thereto,
then, unless and until all such payments due in respect of such Senior Debt have
been paid in full in cash or other consideration satisfactory to the Existing
Lenders or such default shall have been cured or waived or shall have ceased to
exist, no payment shall be made by the Company with respect to the principal of,
premium, if any, or interest on the Notes or to acquire any of the Notes
(including any repurchase pursuant to the repurchase right of a Holder upon a
Fundamental Change).

        (c) In the event (i) any event of default with respect to any Designated
Senior Debt shall have occurred and be continuing permitting the holders of such
Designated Senior Debt (or a trustee or other representative on behalf of the
holders thereof) to declare such Designated Senior Debt due and payable prior to
the date on which it would otherwise have become due and payable, upon written
notice thereof to the Company and the Trustee by any holders of such Designated
Senior Debt (or a trustee or other representative on behalf of the holders
thereof) (the "Default Notice"), unless and until such event of default shall
have been cured or waived or shall have ceased to exist and such acceleration
shall have been rescinded or annulled, or (ii) any judicial proceeding shall be
pending with respect to any such default in payment or event of default, then no
payment shall be made by the Company, directly or indirectly, with respect to
principal of, premium, if any, or interest on the Notes (including any
repurchase pursuant to the exercise of the repurchase right of a Holder upon a
Fundamental Change) provided, however, that clause (i) of this paragraph shall
not prevent the making of any such payment by the Company with respect to the
Notes for more than 179 days after a Default Notice shall have been received by
the Trustee unless the Designated Senior Debt in respect of which such event of
default exists has been declared due and payable in its entirety in which case
no such payment may be made until such acceleration has been rescinded or
annulled or such Designated Senior Debt has been paid in full. Notwithstanding
the foregoing, no event of default which existed or was continuing on the date
of any Default Notice shall be made the basis for the giving of a second Default
Notice; provided, further, however, that no subsequent Default Notice shall be
effective

                                      K-3
<PAGE>   157

for purposes of this Section 13.1(c) unless and until at least 365 days shall
have elapsed since the initial effectiveness of the immediately prior Default
Notice.

        (d) If the maturity of the Notes is accelerated, no payment may be made
on the Notes until all amounts due or to become due on Senior Debt has been paid
in full in cash or other consideration satisfactory to the Existing Lenders or
until such acceleration has been cured or waived.

        (e) In the event that, notwithstanding the foregoing provisions of
Sections 13.1 (a), (b), (c) and (d), any payment on account of principal of or
interest on the Notes shall be made by or on behalf of the Company and received
by the Trustee, by any Holder or by any Paying Agent (or, if the Company is
acting as its own Paying Agent, money for any such payment shall be segregated
and held in trust), at a time when such payment is not permitted by any of such
provisions, then, unless and until all Senior Debt (or Designated Senior Debt,
in the case of Section 13.1(c)) is paid in full in cash or other consideration
satisfactory to the Existing Lenders, or such payment is otherwise permitted to
be made by the provisions of each of Sections 13.1(a), 13.1(b), 13.1(c) and
13.1(d) (subject, in each case, to the provisions of Section 13.7), such payment
on account of principal of or interest on the Notes shall be held in trust for
the benefit of, and shall be immediately paid over to, the holders of Senior
Debt (or Designated Senior Debt, in the case of Section 13.1(c)) or their
representative or representatives or the trustee or trustees under any indenture
under which any instruments evidencing any of the Senior Debt (or Designated
Senior Debt, in the case of Section 13.1(c)) may have been issued, as their
interests may appear.

        Regardless of anything to the contrary herein, nothing shall prevent (a)
any payment by the Company or the Trustee to Holders of amounts in connection
with a redemption of Notes if (i) notice of such redemption has been given
pursuant to Section 11.5 prior to the receipt by the Trustee of written notice
as aforesaid, and (ii) such notice of redemption is given not earlier than 75
days before the Redemption Date, or (b) any payment by the Trustee to the
Holders of amounts deposited with it pursuant to Sections 4.1 and 4.2.

Section 13.2 Subrogation.

        Subject to the payment in full of all Senior Debt to which the
indebtedness evidenced by the Notes is in the circumstances subordinated as
provided in Section 13.1, the Holders of the Notes (together with the holders of
any other indebtedness of the Company which is subordinate in right of payment
to the payment in full of all Senior Debt, which is not subordinate in right of
payment to the Notes and which by its terms grants such right of subrogation to
the holders thereof) shall be subrogated to the rights of the holders of such
Senior Debt to receive payments or distributions of cash, property or securities
of the Company applicable to such Senior Debt until all amounts owing on the
Notes shall be paid in full, and, as between the Company, its creditors other
than holders of such Senior Debt, and the Holders of the Notes, no such payment
or distribution made to the holders of Senior Debt by virtue of this Article
which otherwise would have been made to the Holders of the Notes shall be deemed
to be a payment by the Company on account of such Senior Debt, it being
understood that the provisions of this Article

                                      K-4
<PAGE>   158

are and are intended solely for the purpose of defining the relative rights of
the Holders of the Notes, on the one hand, and the holders of Senior Debt, on
the other hand.

Section 13.3 Obligation of Company Unconditional.

        Nothing contained in this Article or elsewhere in this Indenture or in
the Notes is intended to or shall impair, as between the Company, its creditors
other than the holders of Senior Debt, and the Holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders of the Notes the principal of (and premium, if any) and interest on the
Notes as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the Holders of
the Notes and creditors of the Company other than the holders of Senior Debt,
nor shall anything herein or therein prevent the Trustee or the Holder of any
Note from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
of the holders of Senior Debt in respect of cash, property or securities of the
Company received upon the exercise of any such remedy.

Section 13.4 Modification of Terms of Senior Debt.

        Any renewal or extension of the time of payment of any Senior Debt or
the exercise by the holders of Senior Debt of any of their rights under any
instrument creating or evidencing Senior Debt, including without limitation the
waiver of default thereunder, may be made or done all without notice to or
assent from the Holders of the Notes or the Trustee.

        No compromise, alteration, amendment, modification, extension, renewal
or other change of, or waiver, consent or other action in respect of, any
liability or obligation under or in respect of, or of any of the terms,
covenants or conditions of any indenture or other instrument under which any
Senior Debt is outstanding or of such Senior Debt, whether or not such release
is in accordance with the provisions of any applicable document, shall in any
way alter or affect any of the provisions of this Article or of the Notes
relating to the subordination thereof.

Section 13.5 Payments on Notes Permitted.

        Nothing contained in this Article or elsewhere in this Indenture, or in
any of the Notes, shall affect the obligation of the Company to make, or prevent
the Company from making, payments of the principal of, or premium, if any, or
interest on the Notes in accordance with the provisions hereof and thereof, or
shall prevent the Trustee or any Paying Agent from applying any moneys deposited
with it hereunder to the payment of the principal of, or premium, if any, or
interest on the Notes, in each case except as otherwise provided in this
Article.

Section 13.6 Effectuation of Subordination by Trustee.

        Each Holder of Notes, by his acceptance thereof, authorizes and directs
the Trustee in his behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article and appoints the
Trustee his attorney-in-fact for any and all such purposes.

                                      K-5
<PAGE>   159

        Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee and the Holders of the Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
any such dissolution, winding up, liquidation or reorganization proceeding
affecting the affairs of the Company is pending or upon a certificate of the
trustee in bankruptcy, receiver, assignee for the benefit of creditors,
liquidating trustee or agent or other Person making any payment or distribution,
delivered to the Trustee or to the Holders of the Notes, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, and as to other facts pertinent to the right of such Persons under
this Article, and if such evidence is not furnished, the Trustee may defer any
payment to such Persons pending judicial determination as to the right of such
Persons to receive such payment.

Section 13.7 Knowledge of Trustee.

        Notwithstanding the provisions of this Article or any other provisions
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any Senior Debt, of any default in payment of principal, premium
(if any) or interest on any Senior Debt, or of any facts which would prohibit
the making of any payment of moneys to or by the Trustee, or the taking of any
other action by the Trustee, unless and until a Responsible Officer of the
Trustee having responsibility for the administration of the trust established by
this Indenture shall have received written notice thereof from the Company, any
Holder of Notes, any Paying or Conversion Agent of the Company or the holder or
representative of any class of Senior Debt, and, prior to the receipt of any
such written notice, the Trustee shall be entitled in all respects to assume
that no such default or facts exist; provided, however, that unless on the third
Business Day prior to the date upon which by the terms hereof any such moneys
may become payable for any purpose (other than a payment under Article 11) the
Trustee shall have received the notice provided for in this Section 13.7, then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have full power and authority to receive such moneys and apply the same to the
purpose for which they were received, and shall not be affected by any notice to
the contrary which may be received by it on or after such date.

Section 13.8 Trustee's Relation to Senior Debt.

        The Trustee shall be entitled to all the rights set forth in this
Article with respect to any Senior Debt at the time held by it, to the same
extent as any other holder of Senior Debt and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.

        Nothing in this Article shall apply to claims of or payments to the
Trustee under or pursuant to Section 6.7.

        With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article, and no implied covenants or obligations
with respect to the holders of Senior Debt shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty
to the holders of Senior Debt and the Trustee shall not be liable to any holder
of Senior Debt if it shall pay over or deliver to Holders, the Company or any
other Person moneys or assets to which any holder of Senior Debt shall be
entitled by virtue of this Article or otherwise.

                                      K-6
<PAGE>   160

Section 13.9 Rights of Holders of Senior Debt Not Impaired.

        No right of any present or future holder of any Senior Debt to enforce
the subordination herein shall at any time or in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.

Section 13.10 Certain Conversions Not Deemed Payment.

        For the purposes of this Article 13 only, (1) the issuance and delivery
of junior securities upon conversion of Notes in accordance with Article 12
[conversion] shall not be deemed to constitute a payment or distribution on
account of the principal of, premium, if any, or interest (including Liquidated
Damages, if any) on Notes or on account of the purchase or other acquisition of
Notes, and (2) the payment, issuance or delivery of cash (except in satisfaction
of fractional shares pursuant to Section 12.3), property or securities (other
than junior securities) upon conversion of a Note shall be deemed to constitute
payment on account of the principal of, premium, if any, or interest (including
Liquidated Damages, if any) on such Note. For the purposes of this Section
13.10, the term "junior securities" means (a) shares of any stock of any class
of the Company or (b) securities of the Company that are subordinated in right
of payment to all Senior Debt to substantially the same extent as, or to a
greater extent than, the Notes are so subordinated as provided in this Article.
Nothing contained in this Article 13 or elsewhere in this Indenture or in the
Notes is intended to or shall impair, as among the Company, its creditors (other
than holders of Senior Debt) and the Holders, the right, which is absolute and
unconditional, of the holder of any Note to convert such note in accordance with
Article 12 [conversion].

                                       K-7
<PAGE>   161

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

                           SECOND AMENDED AND RESTATED
                                CREDIT AGREEMENT

                                      AMONG

                              LSI LOGIC CORPORATION

                                       AND

                       LSI LOGIC JAPAN SEMICONDUCTOR, INC.

                                       AND

                            THE LENDERS NAMED HEREIN

                                       AND

                               ABN AMRO BANK N.V.,
                              AS AGENT FOR LENDERS

                                 APRIL 21, 2000

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

<PAGE>   162

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                 PAGE
                                                                                                                 ----
<S>                                                                                                               <C>
SECTION I.                INTERPRETATION...........................................................................2

           1.01.     Definitions...................................................................................2

           1.02.     GAAP.........................................................................................22

           1.03.     Headings.....................................................................................23

           1.04.     Plural Terms.................................................................................23

           1.05.     Governing Law................................................................................23

           1.06.     English Language.............................................................................23

           1.07.     Construction.................................................................................23

           1.08.     Entire Agreement.............................................................................23

           1.09.     Calculation of Interest and Fees.............................................................23

           1.10.     References...................................................................................24

           1.11.     Other Interpretive Provisions................................................................24

SECTION II.               CREDIT FACILITIES.......................................................................24

           2.01.     U.S. Borrowings..............................................................................24

           2.02.     Japanese Borrowing...........................................................................28

           2.03.     Amount Limitations, Commitment Reductions, Etc...............................................30

           2.04.     Fees.........................................................................................32

           2.05.     Prepayments..................................................................................33

           2.06.     Other Payment Terms..........................................................................34

           2.07.     Loan Accounts; Notes.........................................................................36

           2.08.     Loan Funding.................................................................................37

           2.09.     Pro Rata Treatment...........................................................................38

           2.10.     Change of Circumstances......................................................................39

           2.11.     Taxes on Payments............................................................................42

           2.12.     Funding Loss Indemnification.................................................................43

           2.13.     Security.....................................................................................44

           2.14.     Replacement of Lenders.......................................................................44

SECTION III.              CONDITIONS..............................................................................45

           3.01.     Initial Closing Date Conditions..............................................................45
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           3.02.     Second Closing Date Conditions Precedent.....................................................45

           3.03.     Conditions Precedent to Each Credit Event....................................................45

           3.04.     Covenant to Deliver..........................................................................46

SECTION IV.               REPRESENTATIONS AND WARRANTIES..........................................................46

           4.01.     Borrowers' Representations and Warranties....................................................46

           4.02.     Reaffirmation................................................................................50

SECTION V.                COVENANTS...............................................................................50

           5.01.     Affirmative Covenants........................................................................50

           5.02.     Negative Covenants...........................................................................56

           5.03.     Financial Covenants..........................................................................59

SECTION VI.               DEFAULT.................................................................................60

           6.01.     Events of Default............................................................................60

           6.02.     Remedies.....................................................................................63

           6.03.     Lender Rate Contract Remedies................................................................63

SECTION VII.              THE AGENT AND RELATIONS AMONG LENDERS...................................................64

           7.01.     Appointment, Powers and Immunities...........................................................64

           7.02.     Reliance by Agent............................................................................64

           7.03.     Defaults.....................................................................................64

           7.04.     Indemnification..............................................................................65

           7.05.     Non-Reliance.................................................................................65

           7.06.     Resignation or Removal of Agent..............................................................65

           7.07.     Agent in its Individual Capacity.............................................................66

SECTION VIII.             MISCELLANEOUS...........................................................................66

           8.01.     Notices......................................................................................66

           8.02.     Expenses.....................................................................................68

           8.03.     Indemnification..............................................................................68

           8.04.     Waivers; Amendments..........................................................................68

           8.05.     Successors and Assigns.......................................................................70

           8.06.     Setoff; Security Interest....................................................................74
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           8.07.     No Third Party Rights........................................................................74

           8.08.     Partial Invalidity...........................................................................74

           8.09.     Jury Trial...................................................................................74

           8.10.     Counterparts.................................................................................74

           8.11.     Borrowers' Liabilities.......................................................................75

           8.12.     Confidentiality..............................................................................75

           8.13.     Consent to Jurisdiction......................................................................75

           8.14.     Effect on Existing Credit Agreement..........................................................76
</TABLE>

SCHEDULES

I               Lenders
II              Pricing Grid
3.01            Initial Closing Date Conditions Precedent
4.01(d)         Governmental Consents
4.01(g)         Litigation
4.01(i)         Environmental Compliance
4.01(l)         Significant Subsidiaries
5.02(a)         Liens

EXHIBITS

A               Notice of U.S. Borrowing (2.01(c))
B               Notice of U.S. Borrowing Conversion (2.01(e))
C               Notice of U.S. Borrowing Interest Period Selection (2.01(f))
D               Notice of Japanese Borrowing (2.02(b))
E               Notice of Japanese Borrowing Interest Period Selection (2.02(d))
F               Note (2.07(b))
G               LSI Guaranty (2.13(a))
H               Assignment Agreement (8.05(c))
I               Form of Opinion of Wilson, Sonsini, Goodrich & Rosati
J               Form of Opinion of Japanese Counsel for LLJS
K               Subordination Provisions (definition of "Subordinated Debt")

                                      iii

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