IPC INFORMATION SYSTEMS INC
S-3/A, 1998-04-24
TELEPHONE & TELEGRAPH APPARATUS
Previous: CNL AMERICAN PROPERTIES FUND INC, 424B3, 1998-04-24
Next: PALM HARBOR HOMES INC /FL/, PRE 14A, 1998-04-24



<PAGE>
 
     
  AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 1998     
 
                                                     REGISTRATION NO. 333-46229
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                               ----------------
                                
                             AMENDMENT NO. 2     
                                      TO
                                   FORM S-3
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
                         IPC INFORMATION SYSTEMS, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
                               ----------------
              DELAWARE                                 58-1636502
   (STATE OR OTHER JURISDICTION OF           (I.R.S. EMPLOYERIDENTIFICATION
   INCORPORATION OR ORGANIZATION)                        NUMBER)
                         WALL STREET PLAZA, 15TH FLOOR
                                88 PINE STREET
                           NEW YORK, NEW YORK 10005
                                (212) 825-9060
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
 
                                DANIEL UTEVSKY
                      VICE PRESIDENT AND GENERAL COUNSEL
                         IPC INFORMATION SYSTEMS, INC.
                                88 PINE STREET
                           NEW YORK, NEW YORK 10005
                                (212) 825-9060
  (NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
                          CODE, OF AGENT FOR SERVICE)
 
                                  COPIES TO:
 
    THOMAS N. TALLEY             DAVID P. BLEA            JERRY V. ELLIOTT
 THACHER PROFFITT & WOOD    MORGAN, LEWIS & BOCKIUS      JAMES S. SCOTT, SR.
 TWO WORLD TRADE CENTER               LLP                SHEARMAN & STERLING
NEW YORK, NEW YORK 10048        101 PARK AVENUE         599 LEXINGTON AVENUE
     (212) 912-7400        NEW YORK, NEW YORK 10178   NEW YORK, NEW YORK 10022
                                (212) 309-6000             (212) 848-4000
 
  APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
 
  If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
 
  If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
 
  If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
 
  If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
 
  If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
 
                        CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                              PROPOSED       PROPOSED
                                AMOUNT        MAXIMUM        MAXIMUM
         TITLE OF                TO BE       AGGREGATE      AGGREGATE       AMOUNT OF
SECURITIES TO BE REGISTERED  REGISTERED(1) PRICE PER NOTE OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------
<S>                          <C>           <C>            <C>            <C>
 Senior Discount Notes
  Due 2008..............     $180,000,000       N/A        $180,000,000     $53,100(2)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1)  Represents the original issue price of the Senior Discount Notes.
(2)  $46,315 of which has been previously paid in connection with the initial
filing of the Registration Statement on February 13, 1998.
 
                               ----------------
 
  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
 
                                    PART II
 
                    INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
 
  The following table sets forth the expenses to be borne by IPC in connection
with the offering described in this Registration Statement. All of such
amounts are estimated except for the SEC Registration Fee.
 
<TABLE>
      <S>                                                              <C>
      SEC Registration Fee............................................ $ 46,315
      Printing and Engraving Costs....................................  125,000
      Legal Fees and Expenses.........................................  275,000
      Accounting Fees and Expenses....................................  125,000
      Miscellaneous...................................................   40,685
                                                                       --------
          Total.......................................................  612,000
                                                                       ========
</TABLE>
 
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
  Section 145 of the Delaware General Corporation Law ("DGCL"), inter alia,
empowers a Delaware corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding (other than an action by or in the right of the
corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of another corporation or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Similar indemnity is
authorized for such person against expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement
of any such threatened, pending or completed action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in
or not opposed to the best interests of the corporation, and provided further
that (unless a court of competent jurisdiction otherwise provides) such person
shall not have been adjudged liable to the corporation. Any such
indemnification may be made only as authorized in each specific case upon a
determination by the shareholders or disinterested directors or by independent
legal counsel in a written opinion that indemnification is proper because the
indemnitee has met the applicable standard of conduct.
 
  Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise, against any liability asserted against such person, and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the corporation would otherwise have the power
to indemnify such person under Section 145.
 
  Section 6 of the Registrant's Restated Certificate of Incorporation provides
that a director shall not be personally liable to the Registrant or its
stockholders for damages for breach of his fiduciary duty as a director,
except to the extent such exemption from liability or limitation thereof is
expressly prohibited by DGCL. Article IX of the Registrant's Amended Bylaws
requires the Registrant, among other things, to indemnify to the fullest
extent permitted by DGCL, any person who is or was or has agreed to become a
director or officer of the Registrant, who was or is made a party to, or is
threatened to be made a party to, or has become a witness in, any threatened,
pending or completed action, suit or proceeding, including actions or suits by
or in the right of the Registrant, by reason of such agreement or service or
the fact that such person is, was or has agreed to serve as a director,
officer, employee or agent of another corporation or organization at the
written request of the Registrant.
 
                                     II-1
<PAGE>
 
  Article IX also empowers the Registrant to purchase and maintain insurance
to protect itself and its directors and officers, and those who were or have
agreed to become directors or officers, against any liability, regardless of
whether or not the Registrant would have the power to indemnify those persons
against such liability under the law or the provisions set forth in the
Restated Certificate of Incorporation or Bylaws. The Registrant is also
authorized by its Amended Bylaws to enter into individual indemnification
contracts with directors and officers. The Registrant has obtained insurance
policies under which the Registrant's directors and officers are insured,
within the limits and subject to the limitations of the policies, against
certain expenses in connection with the defense of certain actions, suits or
proceedings, and certain liabilities which might be imposed as a result of
certain actions suits or proceedings, to which they are parties by reason of
being or having been such directors or officers.
 
  The Registrant has also entered into employment agreements with certain
executive officers, which agreements require that the Registrant maintain a
directors' and officers' liability policy for the benefit of such officers and
that the Registrant will indemnify such officers to the fullest extent
permitted by law.
 
  In addition, pursuant to the Merger Agreement, the Registrant has agreed for
a period of six years following the effective time of the Merger to indemnify
present and former directors and officers of the Registrant and its
subsidiaries with respect to acts or omissions occurring prior to the
effective time of the Merger to the maximum extent permitted under the
Registrant's Certificate of Incorporation and Bylaws. The Registrant has also
agreed in the Merger Agreement to maintain for a period of six years following
the effective time of the Merger the directors' and officers' liability
insurance coverage maintained by the Registrant (or substantially equivalent
coverage under substitute policies) with respect to any claims arising out of
any actions or omissions occurring prior to the effective time of the Merger.
 
ITEM 16. EXHIBITS
 
<TABLE>   
<CAPTION>
   EXHIBIT
   NUMBER                              DESCRIPTION
   -------                             -----------
   <C>     <S>
    1      Form of Underwriting Agreement.*
    2.1    Agreement and Plan of Merger, dated December 18, 1997, by and
           between Arizona Acquisition Corp. and IPC Information Systems, Inc.
           (Incorporated by reference to Registration Statement on Form S-4
           dated April 10, 1998).
    2.2    Stockholders Agreement (Incorporated by reference to Current Report
           on Form 8-K dated December 18, 1997).
    4.1    Form of Indenture between IPC Information Systems, Inc. and U.S.
           Trust Company of New York, as Trustee.*
    4.2    Form of Senior Discount Note. (included in Exhibit 4.1).*
    5      Opinion of Thacher Proffitt & Wood regarding the legality of the
           securities being registered.*
   10      Form of Credit Agreement between IPC Information Systems, Inc. and
           Morgan Stanley Senior Funding, Inc.*
   12      Computation of Ratio of Earnings to Fixed Charges.*
   23.1    Consent of Coopers & Lybrand L.L.P.*
   23.2    Consent of Thacher Proffitt & Wood (included as part of its opinion
           filed as Exhibit 5 hereto).*
   24      Powers of Attorney (included on page II-4 of original Filing).
   25      Form T-1 Statement of Eligibility under the Trust Indenture Act of
           1939 of U.S. Trust Company of New York, as Trustee.*
</TABLE>    
  --------
     
   * Filed herewith.     
         
ITEM 17. UNDERTAKINGS
 
  The undersigned registrant undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
 
                                     II-2
<PAGE>
 
  Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions set forth in response to Item 15, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that the claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
 
  The undersigned registrant hereby undertakes that:
 
    (1) For purposes of determining any liability under the Securities Act,
  the information omitted from the form of prospectus filed as part of this
  registration statement in reliance upon Rule 430A and contained in a form
  of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
  497(h) under the Securities Act shall be deemed to be part of this
  registration statement as of the time it was declared effective.
 
    (2) For the purpose of determining any liability under the Securities
  Act, each post-effective amendment that contains a form of prospectus shall
  be deemed to be a new registration statement relating to the securities
  offered therein, and the offering of such securities at that time shall be
  deemed to be the initial bona fide offering thereof.
 
                                     II-3
<PAGE>
 
                                  SIGNATURES
   
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 2
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON THE
   DAY OF APRIL, 1998.     
 
                                          IPC Information Systems, Inc.
 
                                                    /s/ S. Terry Clontz
                                          By __________________________________
                                                      S. TERRY CLONTZ
                                            President, Chief Executive Officer
                                                       and Director
 
                               POWER OF ATTORNEY
 
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
 
                NAME                           TITLE                 DATE
 
                  *                    Chairman and             April   , 1998
- -------------------------------------   Director
       RICHARD P. KLEINKNECHT
 
                  *                    President, Chief         April   , 1998
- -------------------------------------   Executive Officer
           S. TERRY CLONTZ              and Director
                                        (Principal
                                        Executive Officer)
 
                  *                    Chief Financial          April   , 1998
- -------------------------------------   Officer (Principal
           BRIAN L. REACH               Financial Officer
                                        and Principal
                                        Accounting Officer)
 
                  *                    Vice Chairman and        April   , 1998
- -------------------------------------   Director
 
          PETER KLEINKNECHT
                  *                    Director                 April   , 1998
- -------------------------------------
         ROBERT J. MCINERNEY
 
                  *                    Director                 April   , 1998
- -------------------------------------
         THEODORE J. JOHNSON
 
                  *                    Director                 April   , 1998
- -------------------------------------
 
           PETER M. STEIN
         /s/ Daniel Utevsky                                     April   , 1998
*By _________________________________
           DANIEL UTEVSKY
          ATTORNEY-IN-FACT
 
                                     II-4
<PAGE>
 
                                                    
                                                 REGISTRATION NO. 333-46229     
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
                       
                    SECURITIES AND EXCHANGE COMMISSION     
                              
                           WASHINGTON D.C. 20549     
 
                               ----------------
                                    
                                 EXHIBITS     
                                   
                                FILED WITH     
                                 
                              AMENDMENT NO. 2     
                                       
                                    TO     
                                    
                                 FORM S-3     
                             
                          REGISTRATION STATEMENT     
                                      
                                   UNDER     
                           
                        THE SECURITIES ACT OF 1933     
 
                               ----------------
                          
                       IPC INFORMATION SYSTEMS, INC.     
             
          (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)     
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
 
       
                                  
                               EXHIBIT INDEX     
 
<TABLE>   
<CAPTION>
 EXHIBIT
 NUMBER                                DESCRIPTION
 -------                               -----------
 <C>     <S>
  1      Form of Underwriting Agreement.*
  2.1    Agreement and Plan of Merger, dated December 18, 1997, by and between
         Arizona Acquisition Corp. and IPC Information Systems, Inc.
         (Incorporated by reference to Registration Statement on Form S-4 dated
         April 10, 1998).
  2.2    Stockholders Agreement (Incorporated by reference to Current Report on
         Form 8-K dated December 18, 1997).
  4.1    Form of Indenture between IPC Information Systems, Inc. and U.S. Trust
         Company of New York, as Trustee.*
  4.2    Form of Senior Discount Note (included in Exhibit 4.1).*
         Opinion of Thacher, Proffitt & Wood regarding the legality of the
  5      securities being registered.*
 10      Form of Credit Agreement between IPC Information Systems, Inc. and
         Morgan Stanley Senior Funding, Inc.*
 12      Computation of Ratio of Earnings to Fixed Charges.*
 23.1    Consent of Coopers & Lybrand L.L.P.*
         Consent of Thacher, Proffitt & Wood (included as part of its opinion
 23.2    filed as Exhibit 5 hereto).*
 24      Powers of Attorney (included on page II-4 of original Filing).
 25.1    Form T-1 Statement of Eligibility under the Trust Indenture Act of
         1939 of U.S. Trust Company of New York, as Trustee.*
</TABLE>    
- --------
          
 *  Filed herewith.     
       

<PAGE>
 
                                                                       EXHIBIT 1


                          $[                        ]



                         IPC INFORMATION SYSTEMS, INC.

                      __ % SENIOR DISCOUNT NOTES DUE 2008



                            UNDERWRITING AGREEMENT



                                 April   , 1998
<PAGE>
 
                                                                  April   , 1998


Morgan Stanley  &  Co. Incorporated
Goldman, Sachs & Co.

c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York  10036

Dear Sirs and Mesdames:

          IPC Information Systems, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters") $[__________] principal amount at maturity ($[    ] 
initial accreted value) of its __ % Senior Discount Notes due 2008 (the
"Securities") to be issued pursuant to the provisions of an Indenture to be
dated as of April   , 1998 (the "Indenture") between the Company and United
States Trust Company of New York (the "Trustee").

          The offering of the Securities is conditioned upon (i) the
consummation of a merger of Arizona Acquisition Corp., a Delaware corporation
("AAC") into the Company (the "Merger") pursuant to an Agreement and Plan of
Merger dated December 18, 1997, as amended (the "Merger Agreement"), between AAC
and the Company, (ii) the concurrent closing of an equity investment in AAC by
Cable Systems Holdings, LLC of up to $72 million (the "Equity Investment") and a
$75 million senior secured five-year revolving credit facility provided by a
bank syndicate (the "Syndicate") led by Morgan Stanley Senior Funding, Inc. (the
"Credit Facility") and (iii) certain other matters set forth in Section 5
hereof.  The Merger, the Equity Investment and the Credit Facility will occur
concurrently with the closing of the offering of the Securities.
 
          The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Securities.  The registration statement as amended at the time it becomes
effective, including the exhibits thereto and the documents incorporated by
reference therein, and the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Original Registration Statement"; any registration statement
filed pursuant to Rule 462(b) under the Securities Act is hereinafter referred
to as the "Rule 462(b) Registration Statement"; the Original Registration
Statement and any Rule 462(b) Registration Statement are hereinafter referred to
collectively as the "Registration Statement"; and the prospectus in the form
first used to confirm sales of Securities is hereinafter referred to as the
"Prospectus."  As used herein, the term "Prospectus" shall include the documents
incorporated by reference therein.  The terms "supplement," "amendment" and
"amend" as used herein with respect to a prospectus or registration statement
shall include all documents deemed to be incorporated by reference therein 
<PAGE>
 
                                       2

that are filed subsequent to the date of such prospectus or registration
statement with the Commission pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act").

          1.   Representations and Warranties.  The Company represents and
               ------------------------------                             
warrants to and agrees with each of the Underwriters that:

          (a) The Original Registration Statement has become effective and, if
     the Company has elected to rely upon Rule 462(b) under the Securities Act,
     the Rule 462(b) Registration Statement shall have become effective not
     later than the earlier of (i) 10:00 p.m. Eastern time on the date hereof
     and (ii) the time confirmations are sent or given, as specified by Rule
     462(b)(2) under the Securities Act; no stop order suspending the
     effectiveness of the Registration Statement is in effect; and no
     proceedings for such purpose are pending before or threatened by the
     Commission.

          (b) (i) Each document filed or to be filed pursuant to the Exchange
     Act and incorporated by reference in the Prospectus complied or will 
     comply when so filed in all material respects with the Exchange Act and the
     applicable rules and regulations of the Commission thereunder, (ii) the
     Registration Statement and the Prospectus comply and, as amended or
     supplemented, if applicable, will comply in all material respects with the
     Securities Act and the applicable rules and regulations of the Commission
     thereunder, (iii) each part of the Registration Statement, when such part
     became effective, did not contain and each such part, as amended or
     supplemented, if applicable, will not contain any untrue statement of a
     material fact or omit to state a material fact required to be stated
     therein or necessary to make the statements therein not misleading, and
     (iv) the Prospectus does not contain and, as amended or supplemented, if
     applicable, will not contain any untrue statement of a material fact or
     omit to state a material fact necessary to make the statements therein, in
     light of the circumstances under which they were made, not misleading,
     except that the representations and warranties set forth in this paragraph
     do not apply (A) to statements or omissions in the Registration Statement
     or the Prospectus based upon information relating to any Underwriter
     furnished to the Company in writing by such Underwriter through you
     expressly for use therein or (B) to that part of the Registration Statement
     that constitutes the Statement of Eligibility and Qualification (Form T-1)
     under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
     Act"), of the Trustee.

          (c) The Company has been duly incorporated, is validly existing as a
     corporation in good standing under the laws of the jurisdiction of its
     incorporation, has the corporate power and authority to own its property
     and to conduct its business as described in the Prospectus and is duly
     qualified to transact business and is in good standing in each jurisdiction
     in which the conduct of its business or its ownership or leasing of
     property requires such qualification, except to the extent that the failure
     to be so qualified or be in 
<PAGE>
 
                                       3

     good standing would not have a material adverse effect on the Company and
     its subsidiaries, taken as a whole.

          (d) Each subsidiary of the Company has been duly incorporated, is
     validly existing as a corporation in good standing under the laws of the
     jurisdiction of its incorporation, has the corporate power and authority to
     own its property and to conduct its business as described in the Prospectus
     and is duly qualified to transact business and is in good standing in each
     jurisdiction in which the conduct of its business or its ownership or
     leasing of property requires such qualification, except to the extent that
     the failure to be so qualified or be in good standing would not have a
     material adverse effect on the Company and its subsidiaries, taken as a
     whole; all of the issued shares of capital stock of each subsidiary of the
     Company have been duly and validly authorized and issued, are fully paid
     and non-assessable and are owned directly by the Company, except for the
     capital stock of International Exchange Networks, Ltd. which is only 80%
     owned by the Company, free and clear of all liens, encumbrances, equities
     and claims; the two non-U.S. subsidiaries of the Company generating the
     highest percentage of the Company's telecommunications revenue are listed
     on Schedule II attached hereto.  For purposes of this Agreement, the term
     "subsidiary" or "subsidiaries" shall refer to "significant subsidiaries" as
     such term is defined in Rule 1-02 of Regulation S-X of the Exchange Act.

          (e) This Agreement has been duly authorized, executed and delivered by
     the Company.

          (f) The Indenture has been duly qualified under the Trust Indenture
     Act and has been duly authorized and, when executed and delivered by the
     Company will be a valid and binding agreement of the Company, enforceable
     in accordance with its terms, subject to applicable bankruptcy, insolvency
     or similar laws affecting creditors' rights generally and general
     principles of equity.

          (g) The Merger has been duly authorized and the Merger Agreement has
     been duly authorized, executed and delivered by the Company and is a valid
     and binding agreement of the Company and each other party thereto,
     enforceable in accordance with its terms, subject to applicable bankruptcy,
     insolvency or similar laws affecting creditors' rights generally and
     general principles of equity.  All corporate action on the part of the
     Company and its stockholders necessary to approve the Merger has been
     accomplished or will be accomplished by the Closing Date (as defined
     below).  The Merger will become effective upon the filing of a merger
     certificate with the Secretary of State of the State of Delaware (a form of
     which is attached hereto as Exhibit D).

          (h) The Securities have been duly authorized and, when executed and
     authenticated in accordance with the provisions of the Indenture and
     delivered to and paid 
<PAGE>
 
                                       4

     for by the Underwriters in accordance with the terms of this Agreement,
     will be entitled to the benefits of the Indenture, and will be valid and
     binding obligations of the Company, enforceable in accordance with their
     terms, subject to applicable bankruptcy, insolvency or similar laws
     affecting creditors' rights generally and general principles of equity.

          (i) The execution and delivery by the Company of, and the performance
     by the Company of its obligations under, this Agreement, the Indenture, the
     Merger Agreement and the Securities will not contravene any provision of
     applicable law or the certificate of incorporation or by-laws of the
     Company or any agreement or other instrument binding upon the Company or
     any of its subsidiaries that is material to the Company and its
     subsidiaries, taken as a whole, or any judgment, order or decree of any
     governmental body, agency or court having jurisdiction over the Company or
     any subsidiary, and no consent, approval, authorization or order of, or
     qualification with, any governmental body or agency is required for the
     performance by the Company of its obligations under this Agreement, the
     Indenture, the Merger Agreement or the Securities, except such as may be
     required by the securities or Blue Sky laws of the various states in
     connection with the offer and sale of the Securities.

          (j) There has not occurred any material adverse change, or any
     development involving a prospective material adverse change, in the
     condition, financial or otherwise, or in the earnings, business or
     operations of the Company and its subsidiaries, taken as a whole, from that
     set forth in the Prospectus (exclusive of any amendments or supplements
     thereto subsequent to the date of this Agreement).

          (k) There are no legal or governmental proceedings pending or, to the
     best of the Company's knowledge, threatened to which the Company or any of
     its subsidiaries is a party or to which any of the properties of the
     Company or any of its subsidiaries is subject that are required to be
     described in the Registration Statement or the Prospectus and are not so
     described or any statutes, regulations, contracts or other documents that
     are required to be described in the Registration Statement or the
     Prospectus or to be filed as exhibits to the Registration Statement that
     are not described or filed as required.

          (l) Each preliminary prospectus filed as part of the registration
     statement as originally filed or as part of any amendment thereto, or filed
     pursuant to Rule 424 or Rule 462 under the Securities Act, complied when so
     filed in all material respects with the Securities Act and the applicable
     rules and regulations of the Commission thereunder.

          (m) The Company is not and, after giving effect to the offering and
     sale of the Securities and the application of the proceeds thereof as
     described in the Prospectus, will not be an "investment company" as such
     term is defined in the Investment Company Act of 1940, as amended.
<PAGE>
 
                                       5

          (n) The Company and its subsidiaries (i) are in compliance with any
     and all applicable foreign, federal, state and local laws and regulations
     relating to the protection of human health and safety, the environment or
     hazardous or toxic substances or wastes, pollutants or contaminants
     ("Environmental Laws"), (ii) have received all permits, licenses or other
     approvals required of them under applicable Environmental Laws to conduct
     their respective businesses and (iii) are in compliance with all terms and
     conditions of any such permit, license or approval, except where such
     noncompliance with Environmental Laws, failure to receive required permits,
     licenses or other approvals or failure to comply with the terms and
     conditions of such permits, licenses or approvals would not, singly or in
     the aggregate, have a material adverse effect on the Company and its
     subsidiaries, taken as a whole.

          (o) To the best of the Company's knowledge, there are no costs or
     liabilities associated with Environmental Laws (including, without
     limitation, any capital or operating expenditures required for clean-up,
     closure of properties or compliance with Environmental Laws or any permit,
     license or approval, any related constraints on operating activities and
     any potential liabilities to third parties) which would, singly or in the
     aggregate, have a material adverse effect on the Company and its
     subsidiaries, taken as a whole.

          (p) Each of the Company and its subsidiaries has all necessary
     licenses, consents, authorizations, approvals and permits of and from, and
     has made all declarations and filings with, all federal, state, local,
     supranational, foreign and other governmental authorities, to own, lease,
     license and use its properties and assets and to conduct its business in
     the manner described in the Prospectus; and neither the Company nor any of
     its subsidiaries has received any notice of proceedings relating to the
     revocation or modification, or non-renewal of any such license, consent,
     authorization, approval, order, certificate or permit which, singly or in
     the aggregate, if the subject of an unfavorable decision, ruling or
     finding, would have a material adverse effect on the Company and its
     subsidiaries, taken as a whole, except as described in the Prospectus.

          (q)  There are no contracts, agreements or understandings between the
     Company and any person granting such person the right to require the
     Company to file a registration statement under the Securities Act with
     respect to any securities of the Company or to require the Company to
     include such securities with the Securities registered pursuant to the
     Registration Statement, except for the Registration Rights Agreement dated
     as of May 9, 1994, between the Company and Richard P. Kleinknecht and Peter
     J. Kleinknecht and the Registration Rights Agreement dated as of April 20,
     1995, by and among the Company, Gerald E. Starr and Robert Starr.
<PAGE>
 
                                       6

          (r) The Company, after giving effect to the issuance of the Securities
     and the consummation of the transactions contemplated by the Prospectus,
     will not be (i) insolvent, (ii) left with unreasonably small capital with
     which to engage in its anticipated businesses or (iii) incurring debts
     beyond its ability to pay such debts as they become due.

          2.  Agreements to Sell and Purchase.  The Company hereby agrees to
              -------------------------------                               
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective principal amounts of Securities set forth in Schedule I
hereto opposite its name at [__]% of their principal amount at maturity (the
"Purchase Price") plus accreted original issue discount, if any, from
[__________], 1998 to the date of payment and delivery.

          3.  Terms of Public Offering.  The Company is advised by you that the
              ------------------------                                         
Underwriters propose to make a public offering of their respective portions of
the Securities as soon after the Original Registration Statement and this
Agreement have become effective as in your judgment is advisable.  The Company
is further advised by you that the Securities are to be offered to the public
initially at [__]% of their principal amount at maturity (the "Public Offering
Price") plus accreted original issue discount, if any, and to certain dealers
selected by you at a price that represents a concession not in excess of [__]%
of their principal amount at maturity under the Public Offering Price, and that
any Underwriter may allow, and such dealers may reallow, a concession, not in
excess of [__]% of their principal amount at maturity, to any Underwriter or to
certain other dealers.

          4.  Payment and Delivery.  Payment for the Securities shall be made to
              --------------------                                              
the Company in Federal or other funds immediately available in New York City
against delivery of the Securities for the respective accounts of the several
Underwriters at a closing to be held at the offices of Morgan, Lewis & Bockius,
101 Park Avenue, New York, New York, at 10:00 a.m., New York City time, on April
, 1998, or at such other time on the same or such other date, not later than May
13, 1998, as shall be designated in writing by you.  The time and date of such
payment are hereinafter referred to as the "Closing Date".

          Certificates for the Securities shall be in definitive form or global
form, as specified by you, and registered in such names and in such
denominations as you shall request in writing not later than one full business
day prior to the Closing Date.  The certificates evidencing the Securities shall
be delivered to you on the Closing Date for the respective accounts of the
several Underwriters, with any transfer taxes payable in connection with the
transfer of the Securities to the Underwriters duly paid, against payment of the
Purchase Price therefor plus accrued interest, if any to the date of payment and
delivery.
<PAGE>
 
                                       7

          5.  Conditions to the Underwriters' Obligations.  The obligations of
              -------------------------------------------                     
the Company to sell the Securities to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Securities on the
Closing Date are subject to the condition that the Registration Statement shall
have become effective not later than 5:30 p.m. (New York City time) on the date
hereof.

          The several obligations of the Underwriters are subject to the
following further conditions:

          (a)  Subsequent to the execution and delivery of this Agreement and
     prior to the Closing Date,

               (i)  there shall not have occurred any downgrading, nor shall any
          notice have been given of any intended or potential downgrading or of
          any review for a possible change that does not indicate the direction
          of the possible change, in the rating accorded any of the Company's
          securities by any "nationally recognized statistical rating
          organization," as such term is defined for purposes of Rule 436(g)(2)
          under the Securities Act; and

               (ii) there shall not have occurred any change, or any development
          involving a prospective change, in the condition, financial or
          otherwise, or in the earnings, business or operations, of the Company
          and its subsidiaries, taken as a whole, from that set forth in the
          Prospectus (exclusive of any amendments or supplements thereto
          subsequent to the date of this Agreement), that, in your judgment, is
          material and adverse and that makes it, in your judgment,
          impracticable to market the Securities on the terms and in the manner
          contemplated in the Prospectus.

          (b)  The representations and warranties of the Company contained in
     this Agreement shall be true and correct as of the Closing Date and the
     Company shall have complied with all of the agreements and satisfied all of
     the conditions on its part to be performed or satisfied hereunder on or
     before the Closing Date.  The Underwriters shall have received on the
     Closing Date a certificate, dated the Closing Date and signed by an
     executive officer of the Company, to the effect set forth above and in
     clause 5(a)(i) above.

          The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.

          (c)  The Underwriters shall have received on the Closing Date an 
     opinion of Thacher Proffitt & Wood, outside counsel for the Company, dated
     the Closing Date, in the 
<PAGE>
 
                                       8

     form attached hereto as Exhibit A. The opinion of outside counsel for the 
     Company shall be rendered to you at the request of the Company and shall so
     state therein.

          (d)  The Underwriters shall have received on the Closing Date an
     opinion of Morgan, Lewis & Bockius LLP, outside counsel for Citicorp
     Venture Capital, Ltd. ("CVC"), dated the Closing Date, in the form attached
     hereto as Exhibit B.  The opinion of outside counsel for CVC shall be
     rendered to you at the request of the Company and shall so state therein.

          (e)  The Underwriters shall have received on the Closing Date an
     opinion of Vinson & Elkins, U.S. regulatory counsel for the Company, dated
     the Closing Date, in the form attached hereto as Exhibit C.  The opinion of
     Vinson & Elkins shall be rendered to you at the request of the Company and
     shall so state therein.

          (f)  The Underwriters shall have received on the Closing Date an
     opinion of Shearman & Sterling, counsel for the Underwriters, dated the
     Closing Date, with respect to the Registration Statement and the Prospectus
     and such other related matters as you may reasonably request.
 
          (g)  The Underwriters shall have received, on each of the date hereof
     and the Closing Date, a letter dated the date hereof or the Closing Date,
     as the case may be, in form and substance satisfactory to the Underwriters,
     from Coopers & Lybrand L.L.P., independent public accountants for the
     Company, containing statements and information of the type ordinarily
     included in accountants' "comfort letters" to underwriters with respect to
     the financial statements and certain financial information contained in or
     incorporated by reference into the Registration Statement and the
     Prospectus; provided that the letter delivered on the Closing Date shall
     use a "cut-off date" not earlier than the date hereof.

          (h)  As of the Closing Date, the Merger and the Equity Investment
     shall have been consummated.

          (i)  As of the Closing Date, the Credit Facility shall (i) have been
     duly authorized, executed and delivered by the Company and each member of
     the Syndicate, (ii) constitute a legal, valid and binding obligation of the
     Company and each member of the Syndicate, to the satisfaction of the
     Underwriters, and (iii) entitle the Company to draw no less than
     $_____________ under such Credit Facility.

          (j)  The Underwriters shall have received such other documents and
     certificates as are reasonably requested by you or your counsel.
<PAGE>
 
                                       9

          6.  Covenants of the Company.  In further consideration of the
              ------------------------                                  
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:

          (a) To furnish to you, without charge, three signed copies of the
     Registration Statement (including exhibits thereto and documents
     incorporated by reference) and for delivery to each other Underwriter a
     conformed copy of the Registration Statement (without exhibits thereto)
     and, to furnish to you in New York City, without charge, prior to 3:00 p.m.
     New York City time on the business day next succeeding the date of this
     Agreement and during the period mentioned in Section 6(c) below, as many
     copies of the Prospectus and any supplements and amendments thereto or to
     the Registration Statement as you may reasonably request.

          (b) Before amending or supplementing the Registration Statement or the
     Prospectus, to furnish to you a copy of each such proposed amendment or
     supplement and not to file any such proposed amendment or supplement to
     which you reasonably object, and to file with the Commission within the
     applicable period specified in Rule 424(b) under the Securities Act any
     prospectus required to be filed pursuant to such Rule.

          (c) If, during such period after the first date of the public offering
     of the Securities as in the opinion of counsel for the Underwriters the
     Prospectus is required by law to be delivered in connection with sales by
     an Underwriter or dealer, any event shall occur or condition exist as a
     result of which it is necessary to amend or supplement the Prospectus in
     order to make the statements therein, in the light of the circumstances
     when the Prospectus is delivered to a purchaser, not misleading, or if, in
     the opinion of counsel for the Underwriters, it is necessary to amend or
     supplement the Prospectus to comply with applicable law, forthwith to
     prepare, file with the Commission and furnish, at its own expense, to the
     Underwriters and to the dealers (whose names and addresses you will furnish
     to the Company) to which Securities may have been sold by you on behalf of
     the Underwriters and to any other dealers upon request, either amendments
     or supplements to the Prospectus so that the statements in the Prospectus
     as so amended or supplemented will not, in the light of the circumstances
     when the Prospectus is delivered to a purchaser, be misleading or so that
     the Prospectus, as amended or supplemented, will comply with law.

          (d) To endeavor to qualify the Securities for offer and sale under the
     securities or Blue Sky laws of such jurisdictions as you shall reasonably
     request.

          (e) If the Company elects to rely on Rule 462(b) under the Securities
     Act, the Company shall file a Rule 462(b) Registration Statement with the
     Commission in compliance with Rule 462(b) under the Securities Act no later
     than the earlier of (i) 10:00 p.m. Eastern time on the date hereof and (ii)
     the time confirmations are sent or given, as 
<PAGE>
 
                                      10

     specified by Rule 462(b)(2) under the Securities Act, and shall pay the
     applicable fees in accordance with Rule 111 under the Securities Act.

          (f) To make generally available to the Company's security holders and
     to you, as soon as practicable, but not later than 60 days after the end of
     the twelve-month period beginning at the end of the Company's fiscal
     quarter during which the effective date of the Original Registration
     Statement occurs, an earnings statement of the Company covering such
     twelve-month period that satisfies the provisions of Section 11(a) of the
     Securities Act and the rules and regulations of the Commission thereunder.

          (g)  Whether or not the transactions contemplated in this Agreement
     are consummated or this Agreement is terminated, to pay or cause to be paid
     all expenses incident to the performance of its obligations under this
     Agreement, including:  (i) the fees, disbursements and expenses of the
     Company's counsel and the Company's accountants in connection with the
     registration and delivery of the Securities under the Securities Act and
     all other fees or expenses in connection with the preparation and filing of
     the Registration Statement, any preliminary prospectus, the Prospectus and
     amendments and supplements to any of the foregoing, including all printing
     costs associated therewith, and the mailing and delivering of copies
     thereof to the Underwriters and dealers, in the quantities hereinabove
     specified, (ii) any transfer or other taxes payable in connection with the
     transfer and delivery of the Securities to the Underwriters, (iii) the cost
     of printing or producing any Blue Sky or Legal Investment memorandum in
     connection with the offer and sale of the Securities under state securities
     laws and all expenses in connection with the qualification of the
     Securities for offer and sale under state securities laws as provided in
     Section 6(d) hereof, including filing fees and the reasonable fees and
     disbursements of counsel for the Underwriters in connection with such
     qualification and in connection with the Blue Sky or Legal Investment
     memorandum, (iv) all filing fees and the reasonable fees and disbursements
     of counsel to the Underwriters incurred in connection with the review and
     qualification of the offering of the Securities by the National Association
     of Securities Dealers, Inc., (v) any fees charged by rating agencies for
     the rating of the Securities, (vi) the cost of printing certificates
     representing the Securities, (vii) the costs and charges of the Trustee,
     (viii) the costs and expenses of the Company relating to investor
     presentations on any "road show" undertaken in connection with the
     marketing of the offering of the Securities, including, without limitation,
     expenses associated with the production of road show slides and graphics,
     fees and expenses of any consultants engaged in connection with the road
     show presentations with the prior approval of the Company, travel and
     lodging expenses of the representatives and officers of the Company and any
     such consultants, and the cost of any aircraft chartered in connection with
     the road show, and (ix) all other costs and expenses incident to the
     performance of the obligations of the Company hereunder for which provision
     is not otherwise made in this Section.  It is understood, however, that
     except as provided in this Section, Section 7 entitled "Indemnity 
<PAGE>
 
                                      11

     and Contribution", and the last paragraph of Section 9 below, the
     Underwriters will pay all of their costs and expenses, including fees and
     disbursements of their counsel, stock transfer taxes payable on resale of
     any of the Securities by them and any advertising expenses connected with
     any offers they may make.
 
          7.  Indemnity and Contribution.  (a) The Company agrees to indemnify
              --------------------------                                      
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein; provided, however, that the foregoing indemnity agreement with
                 --------  -------                                             
respect to any preliminary prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased Securities, or any person controlling such Underwriter, if
it is established that a copy of the Prospectus (as then amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) was
not sent or given by or on behalf of such Underwriter to such person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Securities to such person, and if the Prospectus
(as so amended or supplemented) would have cured the defect giving rise to such
losses, claims, damages or liabilities, unless such failure is the result of
noncompliance by the Company with Section 6(a) hereof.

          (b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Underwriter, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.

          (c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 7(a) or 7(b), such person (the "indemnified party")
shall promptly notify the person against whom 
<PAGE>
 
                                      12

such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated, in the case of
parties indemnified pursuant to Section 7(a), and by the Company, in the case of
parties indemnified pursuant to Section 7(b). The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.

          (d) To the extent the indemnification provided for in Section 7(a) or
7(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Securities or (ii) if the allocation
provided by clause 7(d)(i) above is not permitted by applicable law, in such
proportion 
<PAGE>
 
                                      13

as is appropriate to reflect not only the relative benefits referred to in
clause 7(d)(i) above but also the relative fault of the Company on the one hand
and of the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand in
connection with the offering of the Securities shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Securities
(before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate Public
Offering Price of the Securities. The relative fault of the Company on the one
hand and of the Underwriters on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Underwriters' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the respective principal amounts of Securities they have purchased hereunder,
and not joint.

          (e) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 7 were determined by pro
                                                                           ---
rata allocation (even if the Underwriters were treated as one entity for such
- ----                                                                         
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in Section 7(d). The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.

          (f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person 
<PAGE>
 
                                      14

controlling any Underwriter or by or on behalf of the Company, its officers or
directors or any person controlling the Company and (iii) acceptance of and
payment for any of the Securities.

          8.  Termination.  This Agreement shall be subject to termination by
              -----------                                                    
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange or the National Association
of Securities Dealers, Inc., (ii) trading of any securities of the Company shall
have been suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York shall have been
declared by either Federal or New York State authorities or (iv) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in your judgment, is material
and adverse and (b) in the case of any of the events specified in clauses
8(a)(i) through 8(a)(iv), such event singly or together with any other such
event makes it, in your judgment, impracticable to market the Securities on the
terms and in the manner contemplated in the Prospectus.

          9.  Effectiveness; Defaulting Underwriters.  This Agreement shall
              --------------------------------------                       
become effective upon the later of (x) execution and delivery hereof by the
parties hereto and (y) release of notification of the effectiveness of the
Original Registration Statement by the Commission.

          If, on the Closing Date, one of the Underwriters shall fail or refuse
to purchase Securities that it has agreed to purchase hereunder on such date,
and the aggregate principal amount of Securities which such defaulting
Underwriter agreed but failed or refused to purchase is not more than one-tenth
of the aggregate principal amount of the Securities to be purchased on such
date, the other Underwriter shall be obligated to purchase the Securities which
such defaulting Underwriter agreed but failed or refused to purchase on such
date; provided that in no event shall the principal amount of Securities that
      --------                                                               
any Underwriter has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such principal
amount of Securities without the written consent of such Underwriter. If, on the
Closing Date, any Underwriter shall fail or refuse to purchase Securities and
the aggregate principal amount of Securities with respect to which such default
occurs is more than one-tenth of the aggregate principal amount of Securities to
be purchased, and arrangements satisfactory to you and the Company for the
purchase of such Securities are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any non-
defaulting Underwriter or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected.  Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
<PAGE>
 
                                      15

          If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriter as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.

          10.  Counterparts.  This Agreement may be signed in two or more
               ------------                                              
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

          11.  Headings.  The headings of the sections of this Agreement have
               --------                                                      
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.

          12.  Notices.  All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication.
Notices to you shall be directed to Morgan Stanley & Co. Incorporated, 1585
Broadway, New York, New York 10036, Attention:Matias Bullrich; and notices to
the Company shall be directed to it at IPC Information Systems, Inc., 88 Pine
Street, New York, New York 10005, Attention: Chief Financial Officer.
<PAGE>
 
                                      16

          12.  Applicable Law.  This Agreement shall be governed by the laws of
               --------------                                                  
the State of New York.


 
                                             Very truly yours,
                                   
                                             IPC INFORMATION SYSTEMS, INC.
                                   
                                   
                                             By:________________________________
                                                Name:
                                                Title:


Accepted as of the date hereof

MORGAN STANLEY & CO. INCORPORATED
GOLDMAN, SACHS & CO.

By: Morgan Stanley & Co. Incorporated


By:_________________________
   Name:
   Title:
<PAGE>
 
                                  SCHEDULE I


                                           Initial Accreted Value
                                               of Securities
     Underwriter                              To Be Purchased
     -----------                              ---------------


Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
 
                                              _______________


               Total ..................       =============== 
<PAGE>
 
                                  SCHEDULE II


                        TELECOMMUNICATIONS SUBSIDIARIES



International Exchange Networks, Ltd.
<PAGE>
 
                                                                       EXHIBIT A


                      OPINION OF COUNSEL FOR THE COMPANY

          Attach opinion of counsel for the Company, to be delivered pursuant to
Section 5(c) of the Underwriting Agreement to the effect that:

          (i)   the Company has been duly incorporated, is validly existing as a
     corporation in good standing under the laws of the jurisdiction of its
     incorporation, has the corporate power and authority to own its property
     and to conduct its business as described in the Prospectus and is duly
     qualified to transact business and is in good standing in each jurisdiction
     in which the conduct of its business or its ownership or leasing of
     property requires such qualification, except to the extent that the failure
     to be so qualified or be in good standing would not have a material adverse
     effect on the Company and its subsidiaries, taken as a whole;

          (ii)  each subsidiary of the Company has been duly incorporated, is
     validly existing as a corporation in good standing under the laws of the
     jurisdiction of its incorporation, has the corporate power and authority to
     own its property and to conduct its business as described in the Prospectus
     and is duly qualified to transact business and is in good standing in each
     jurisdiction in which the conduct of its business or its ownership or
     leasing of property requires such qualification, except to the extent that
     the failure to be so qualified or be in good standing would not have a
     material adverse effect on the Company and its subsidiaries, taken as a
     whole; all of the issued shares of capital stock of each subsidiary of the
     Company have been duly and validly authorized and issued, are fully paid
     and non-assessable and are owned directly by the Company, free and clear of
     all liens, encumbrances, equities and claims;

          (iii) the Underwriting Agreement has been duly authorized, executed
     and delivered by the Company;

          (iv)  the Indenture has been duly qualified under the Trust Indenture
     Act and has been duly authorized, executed and delivered by the Company and
     is a valid and binding agreement of the Company, enforceable in accordance
     with its terms, subject to applicable bankruptcy, insolvency or similar
     laws affecting creditors' rights generally and general principles of
     equity;

          (v)   the Merger has been duly authorized and the Merger Agreement has
     been duly authorized, executed and delivered by the Company and is a valid
     and binding agreement of the Company and each other party thereto,
     enforceable in accordance with its terms, subject to applicable bankruptcy,
     insolvency or similar laws affecting creditors' rights generally and
     general principles of equity; all corporate action on the part of the
<PAGE>
 
                                       2

     Company and its stockholders necessary to approve the Merger has been
     accomplished; the Merger will become effective upon the filing of a merger
     certificate (a form of which is attached hereto as Exhibit A) with the
     Secretary of State of the State of Delaware;

          (vi)   the Securities have been duly authorized and, when executed and
     authenticated in accordance with the provisions of the Indenture and
     delivered to and paid for by the Underwriters in accordance with the terms
     of the Underwriting Agreement, will be entitled to the benefits of the
     Indenture and will be valid and binding obligations of the Company,
     enforceable in accordance with their terms, subject to applicable
     bankruptcy, insolvency or similar laws affecting creditors' rights
     generally and general principles of equity;

          (vii)  the execution and delivery by the Company of, and the
     performance by the Company of its obligations under, the Underwriting
     Agreement, the Securities, the Merger Agreement and the Indenture will not
     contravene any provision of applicable law or the certificate of
     incorporation or by-laws of the Company or, to the best of such counsel's
     knowledge, any agreement or other instrument binding upon the Company or
     any of its subsidiaries that is material to the Company and its
     subsidiaries, taken as a whole, or, to the best of such counsel's
     knowledge, any judgment, order or decree of any governmental body, agency
     or court having jurisdiction over the Company or any subsidiary, and no
     consent, approval, authorization or order of or qualification with any
     governmental body or agency is required for the performance by the Company
     of its obligations under the Underwriting Agreement, the Securities, the
     Merger Agreement and the Indenture, except (A) such as may be required by
     the securities or Blue Sky laws of the various states in connection with
     the offer and sale of the Securities and (B) the approval of the Merger by
     the Federal Trade Commission and the Department of Justice under the Hart-
     Scott-Rodino Antitrust Improvements Act, which has been obtained and is in
     full force and effect;

          (viii) the statements (A) in the Prospectus under the captions
     "Certain Relationships and Other Related Transactions," "Description of
     Revolving Credit Facility," "Description of the Notes" and "Underwriters",
     (B) in the Registration Statement under Item and 15 and (C) in "Item 3--
     Legal Proceedings" of the Company's most recent annual report on Form 10-K
     and in "Item 3--Other Events" of any current report on Form 8-K included or
     incorporated by reference in the Prospectus, in each case insofar as such
     statements constitute summaries of the legal matters, documents and
     proceedings referred to therein, fairly present the information called for
     with respect to such legal matters, documents and proceedings and fairly
     summarize the matters referred to therein;

          (ix)   the statements in the Prospectus under the caption "Certain
     United States Federal Income Tax Considerations," insofar as such
     statements constitute a summary of 
<PAGE>
 
                                       3

     the United States federal tax laws referred to therein, are accurate and
     fairly summarize in all material respects the United States federal tax
     laws referred to therein;

          (x)    after due inquiry, such counsel does not know of any legal or
     governmental proceedings pending or threatened to which the Company or any
     of its subsidiaries is a party or to which any of the properties of the
     Company or any of its subsidiaries is subject that are required to be
     described in the Registration Statement or the Prospectus and are not so
     described or of any statutes, regulations, contracts or other documents
     that are required to be described in the Registration Statement or the
     Prospectus or to be filed as exhibits to the Registration Statement that
     are not described or filed as required;

          (xi)   the Company is not and, after giving effect to the offering and
     sale of the Securities and the application of the proceeds thereof as
     described in the Prospectus, will not be an "investment company," as such
     term is defined in the Investment Company Act of 1940, as amended; and

          (xii)  such counsel (A) is of the opinion that each document
     incorporated by reference in the Prospectus (except for financial
     statements and schedules and other financial and statistical data included
     therein as to which such counsel need not express any opinion), complied as
     to form when filed with the Commission in all material respects with the
     Exchange Act and the rules and regulations of the Commission thereunder,
     (B) is of the opinion that the Registration Statement and Prospectus
     (except for financial statements and schedules and other financial and
     statistical data included therein as to which such counsel need not express
     any opinion) comply as to form in all material respects with the Securities
     Act and the applicable rules and regulations of the Commission thereunder,
     (C) has no reason to believe that (except for financial statements and
     schedules and other financial and statistical data as to which such counsel
     need not express any belief and except for that part of the Registration
     Statement that constitutes the Form T-1 heretofore referred to) the
     Registration Statement and the prospectus included therein at the time the
     Registration Statement became effective contained any untrue statement of a
     material fact or omitted to state a material fact required to be stated
     therein or necessary to make the statements therein not misleading and (D)
     has no reason to believe that (except for financial statements and
     schedules and other financial and statistical data as to which such counsel
     need not express any belief) the Prospectus when issued contained and as of
     the Closing Date contains any untrue statement of a material fact or
     omitted or omits to state a material fact necessary in order to make the
     statements therein, in light of the circumstances under which they were
     made, not misleading.

     With respect to subparagraph (xii) above, such counsel may state that its
opinion and belief are based upon its participation in the preparation of the
Registration Statement and Prospectus and any amendments or supplements thereto
and review and discussion of the contents thereof, but are
<PAGE>
 
                                       4

without independent check or verification except with respect to subparagraphs
(viii) and (ix) above.
<PAGE>
 
                                                                       EXHIBIT B


             OPINION OF COUNSEL FOR CITIBANK VENTURE CAPITAL, LTD.

          Attach opinion of counsel for Citicorp Venture Capital, Ltd., to be
delivered pursuant to Section 5(d) of the Underwriting Agreement to the effect
that:

     such counsel (A) is of the opinion that each document incorporated by
     reference in the Prospectus (except for financial statements and schedules
     and other financial and statistical data included therein as to which such
     counsel need not express any opinion), complied as to form when filed with
     the Commission in all material respects with the Exchange Act and the rules
     and regulations of the Commission thereunder, (B) is of the opinion that
     the Registration Statement and Prospectus (except for financial statements
     and schedules and other financial and statistical data included therein as
     to which such counsel need not express any opinion) comply as to form in
     all material respects with the Securities Act and the applicable rules and
     regulations of the Commission thereunder, (C) has no reason to believe that
     (except for financial statements and schedules and other financial and
     statistical date as to which such counsel need not express any belief and
     except for that part of the Registration Statement that constitutes the
     Form T-1 heretofore referred to) the Registration Statement and the
     prospectus included therein at the time the Registration Statement became
     effective contained any untrue statement of a material fact or omitted to
     state a material fact required to be stated therein or necessary to make
     the statements therein not misleading and (D) has no reason to believe that
     (except for financial statements and schedules and other financial and
     statistical data as to which such counsel need not express any belief) the
     Prospectus when issued contained and as of the Closing Date contains any
     untrue statement of a material fact or omitted or omits to state a material
     fact necessary in order to make the statements therein, in light of the
     circumstances under which they were made, not misleading.

     With respect to the paragraph above, such counsel may state that its
opinion and belief are based upon its participation in the preparation of the
Registration Statement and Prospectus and any amendments or supplements thereto
and review and discussion of the contents thereof, but are without independent
check or verification.
<PAGE>
 
                                                                       EXHIBIT C


              OPINION OF U.S. REGULATORY COUNSEL FOR THE COMPANY

<PAGE>
 
                                                                       EXHIBIT D


                              MERGER CERTIFICATE

<PAGE>
 
                                                                     EXHIBIT 4.1

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


                        IPC Information Systems, Inc.,
                                              Issuer


                                      and


                   United States Trust Company of New York,
                                                  Trustee



                           _________________________

                                   Indenture

                          Dated as of April __, 1998

                           _________________________


                     [__]% Senior Discount Notes due 2008


================================================================================
<PAGE>
 
                             CROSS-REFERENCE TABLE
                             ---------------------

<TABLE> 
<CAPTION> 
TIA Sections                                              Indenture Sections
- ------------                                              ------------------
<S>                                                       <C>
(S) 310(a)(1)...........................................       7.10             
       (a)(2)...........................................       7.10             
       (b)..............................................       7.03; 7.08       
(S) 311(a)..............................................       7.03             
       (b)..............................................       7.03             
(S) 312(a)..............................................       2.03             
       (b)..............................................       10.02     
       (c)..............................................       10.02     
(S) 313(a)..............................................       7.06             
       (b)(2)...........................................       7.07             
       (c)..............................................       7.05; 7.06; 10.02
       (d)..............................................       7.06             
(S) 314(a)..............................................       7.05; 10.02      
       (a)(4)...........................................       4.17; 10.02      
       (c)(1)...........................................       10.03            
       (c)(2)...........................................       10.03            
       (e)..............................................       4.17; 10.04      
(S) 315(a)..............................................       7.02             
       (b)..............................................       7.05; 10.02      
       (c)..............................................       7.02             
       (d)..............................................       7.02             
       (e)..............................................       6.11             
(S) 316(a)(1)(A)........................................       6.05             
       (a)(1)(B)........................................       6.04             
       (b)..............................................       6.07             
       (c)..............................................       9.03             
(S) 317(a)(1)...........................................       6.08             
       (a)(2)...........................................       6.09             
       (b)..............................................       2.04             
(S) 318(a)..............................................       10.01            
       (c)..............................................       10.01  
</TABLE>

Note:     The Cross-Reference Table shall not for any purpose be deemed to be a
          part of the Indenture.
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE> 
<CAPTION> 
                                                                           Page
<S>                                                                        <C>
                                  ARTICLE ONE
                  DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01.  Definitions..................................................  1
SECTION 1.02.  Incorporation by Reference of Trust Indenture Act............ 19
SECTION 1.03.  Rules of Construction........................................ 19

                                  ARTICLE TWO
                                   THE NOTES

SECTION 2.01.  Form and Dating.............................................. 20
SECTION 2.02.  Execution, Authentication and Denominations.................. 20
SECTION 2.03.  Registrar and Paying Agent................................... 21
SECTION 2.04.  Paying Agent to Hold Money in Trust.......................... 22
SECTION 2.05.  Transfer and Exchange........................................ 23
SECTION 2.06.  Replacement Notes............................................ 24
SECTION 2.07.  Outstanding Notes............................................ 24
SECTION 2.08.  Temporary Notes.............................................. 25
SECTION 2.09.  Cancellation................................................. 26
SECTION 2.10.  CUSIP Numbers................................................ 26
SECTION 2.11.  Defaulted Interest........................................... 26
SECTION 2.12.  Issuance of Additional Notes................................. 26

                                 ARTICLE THREE
                                  REDEMPTION

SECTION 3.01.  Right of Redemption.......................................... 27
SECTION 3.02.  Notices to Trustee........................................... 27
SECTION 3.03.  Selection of Notes to Be Redeemed............................ 28
SECTION 3.04.  Notice of Redemption......................................... 28
SECTION 3.05.  Effect of Notice of Redemption............................... 29
SECTION 3.06.  Deposit of Redemption Price.................................. 29
SECTION 3.07.  Payment of Notes Called for Redemption....................... 29
SECTION 3.08.  Notes Redeemed in Part....................................... 30
</TABLE> 

_____________________
Note:     The Table of Contents shall not for any purposes be deemed to be a
          part of the Indenture.
<PAGE>

                                      ii

<TABLE> 
<S>                                                                                  <C>  
                                 ARTICLE FOUR
                                   COVENANTS

SECTION 4.01.  Payment of Notes..................................................... 30
SECTION 4.02.  Maintenance of Office or Agency...................................... 30
SECTION 4.03.  Limitation on Indebtedness........................................... 31
SECTION 4.04.  Limitation on Restricted Payments.................................... 33
SECTION 4.05.  Limitation on Dividend and Other Payment Restrictions Affecting
                Restricted Subsidiaries............................................. 36
SECTION 4.06.  Limitation on the Issuance and Sale of Capital Stock of Restricted
                Subsidiaries........................................................ 37
SECTION 4.07.  Limitation on Issuances of Guarantees by Restricted Subsidiaries..... 37
SECTION 4.08.  Limitation on Transactions with Stockholders and Affiliates.......... 38
SECTION 4.09.  Limitation on Liens.................................................. 39
SECTION 4.10.  Limitation on Sale-Leaseback Transactions............................ 39
SECTION 4.11.  Limitation on Asset Sales............................................ 40
SECTION 4.12.  Repurchase of Notes upon a Change of Control......................... 41
SECTION 4.13.  Existence............................................................ 41
SECTION 4.14.  Payment of Taxes and Other Claims.................................... 41
SECTION 4.15.  Maintenance of Properties and Insurance.............................. 41
SECTION 4.16.  Notice of Defaults................................................... 42
SECTION 4.17.  Compliance Certificates.............................................. 42
SECTION 4.18.  Commission Reports and Reports to Holders............................ 43
SECTION 4.19.  Waiver of Stay, Extension or Usury Laws.............................. 43
SECTION 4.20.  Calculation of Original Issue Discount............................... 43

                                 ARTICLE FIVE
                             SUCCESSOR CORPORATION

SECTION 5.01.  When Company May Merge, Etc.......................................... 43
SECTION 5.02.  Successor Substituted................................................ 44

                                  ARTICLE SIX
                             DEFAULT AND REMEDIES

SECTION 6.01.  Events of Default.................................................... 44
SECTION 6.02.  Acceleration......................................................... 46
SECTION 6.03.  Other Remedies....................................................... 46
SECTION 6.04.  Waiver of Past Defaults.............................................. 47
SECTION 6.05.  Control by Majority.................................................. 47
SECTION 6.06.  Limitation on Suits.................................................. 47
</TABLE> 
<PAGE>

                                      iii

<TABLE>
<S>                                                                                  <C>  
SECTION 6.07.  Rights of Holders to Receive Payment................................. 48
SECTION 6.08.  Collection Suit by Trustee........................................... 48
SECTION 6.09.  Trustee May File Proofs of Claim..................................... 48
SECTION 6.10.  Priorities........................................................... 49
SECTION 6.11.  Undertaking for Costs................................................ 49
SECTION 6.12.  Restoration of Rights and Remedies................................... 49
SECTION 6.13.  Rights and Remedies Cumulative....................................... 49
SECTION 6.14.  Delay or Omission Not Waiver......................................... 50

                                 ARTICLE SEVEN
                                    TRUSTEE

SECTION 7.01.  General.............................................................. 50
SECTION 7.02.  Certain Rights of Trustee............................................ 50
SECTION 7.03.  Individual Rights of Trustee......................................... 51
SECTION 7.04.  Trustee's Disclaimer................................................. 51
SECTION 7.05.  Notice of Default.................................................... 51
SECTION 7.06.  Reports by Trustee to Holders........................................ 52
SECTION 7.07.  Compensation and Indemnity........................................... 52
SECTION 7.08.  Replacement of Trustee............................................... 53
SECTION 7.09.  Successor Trustee by Merger, Etc..................................... 54
SECTION 7.10.  Eligibility.......................................................... 54
SECTION 7.11.  Money Held in Trust.................................................. 54

                                 ARTICLE EIGHT
                            DISCHARGE OF INDENTURE

SECTION 8.01.  Termination of Company's Obligations................................. 54
SECTION 8.02.  Defeasance and Discharge of Indenture................................ 55
SECTION 8.03.  Defeasance of Certain Obligations.................................... 57
SECTION 8.04.  Application of Trust Money........................................... 59
SECTION 8.05.  Repayment to Company................................................. 59
SECTION 8.06.  Reinstatement........................................................ 59

                                 ARTICLE NINE
                      AMENDMENTS, SUPPLEMENTS AND WAIVERS

SECTION 9.01.  Without Consent of Holders........................................... 60
SECTION 9.02.  With Consent of Holders.............................................. 60
SECTION 9.03.  Revocation and Effect of Consent..................................... 62
SECTION 9.04.  Notation on or Exchange of Notes..................................... 62
</TABLE> 
<PAGE>

                                      iv

<TABLE> 
<S>                                                                             <C> 
SECTION 9.05.  Trustee to Sign Amendments, Etc................................  62
SECTION 9.06.  Conformity with Trust Indenture Act............................  63

                                  ARTICLE TEN
                                 MISCELLANEOUS

SECTION 10.01.  Trust Indenture Act of 1939...................................  63
SECTION 10.02.  Notices.......................................................  63
SECTION 10.03.  Certificate and Opinion as to Conditions Precedent............  64
SECTION 10.04.  Statements Required in Certificate or Opinion.................  64
SECTION 10.05.  Rules by Trustee, Paying Agent or Registrar...................  65
SECTION 10.06.  Payment Date Other Than a Business Day........................  65
SECTION 10.07.  Governing Law.................................................  65
SECTION 10.08.  No Adverse Interpretation of Other Agreements.................  65
SECTION 10.09.  No Recourse Against Others....................................  65
SECTION 10.10.  Successors....................................................  66
SECTION 10.11.  Duplicate Originals...........................................  66
SECTION 10.12.  Separability..................................................  66
SECTION 10.13.  Table of Contents, Headings, Etc..............................  66

EXHIBIT A Form of Note........................................................ A-1
</TABLE>
<PAGE>
 
     INDENTURE, dated as of April __, 1998, between IPC Information Systems,
Inc., a Delaware corporation (the "Company"), and United States Trust Company of
New York, a bank and trust company organized under New York banking law,
trustee (the "Trustee").


                                   RECITALS

     The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance initially of up to $[______] aggregate
principal amount at maturity of the Company's [__]% Senior Discount Notes due
2008 (the "Notes") issuable as provided in this Indenture.  All things necessary
to make this Indenture a valid agreement of the Company, in accordance with its
terms, have been done, and the Company has done all things necessary to make the
Notes, when executed by the Company and authenticated and delivered by the
Trustee hereunder and duly issued by the Company, valid obligations of the
Company as hereinafter provided.

     This Indenture is subject to, and shall be governed by, the provisions of
the Trust Indenture Act of 1939, as amended, that are required to be a part of
and to govern indentures qualified under the Trust Indenture Act of 1939, as
amended.

                     AND THIS INDENTURE FURTHER WITNESSETH

     For and in consideration of the premises and the purchase of the Notes by
the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders, as follows.


                                  ARTICLE ONE
                  DEFINITIONS AND INCORPORATION BY REFERENCE

      SECTION 1.01.  Definitions.
                     ----------- 

     "Accreted Value" means, for any Specified Date, the amount provided below
for each $1,000 principal amount at maturity of Notes:

          (i) if the Specified Date occurs on one of the following dates (each a
     "Semi-Annual Accrual Date"), the Accreted Value will equal the amount set
      ------------------------                                                
     forth below for such Semi-Annual Accrual Date:
<PAGE>
 
                                       2

<TABLE>
<CAPTION>
          Semi-Annual Accrual Date        Accreted Value   
          ------------------------        --------------   
          <S>                             <C>             
          [____]         , 1998           $ [____________]  
          [____]         , 1999           $ [____________]  
          [____]         , 1999           $ [____________]  
          [____]         , 2000           $ [____________]  
          [____]         , 2000           $ [____________]  
          [____]         , 2001           $1,000.00          
</TABLE>
 
          (ii)   if the Specified Date occurs before the first Semi-Annual
     Accrual Date, the Accreted Value will equal the sum of (a) the original
     issue price and (b) an amount equal to the product of (1) the Accreted
     Value for the first Semi-Annual Accrual Date less the original issue price
     multiplied by (2) a fraction, the numerator of which is the number of days
     from the Closing Date to the Specified Date, using a 360-day year of twelve
     30-day months, and the denominator of which is the number of days from the
     Closing Date to the first Semi-Annual Accrual Date, using a 360-day year of
     twelve 30-day months;

          (iii)  if the Specified Date occurs between two Semi-Annual Accrual
     Dates, the Accreted Value will equal the sum of (a) the Accreted Value for
     the Semi-Annual Accrual Date immediately preceding such Specified Date and
     (b) an amount equal to the product of (1) the Accreted Value for the
     immediately following Semi-Annual Accrual Date less the Accreted Value for
     the immediately preceding Semi-Annual Accrual Date multiplied by (2) a
     fraction, the numerator of which is the number of days from the immediately
     preceding Semi-Annual Accrual Date to the Specified Date, using a 360-day
     year of twelve 30-day months, and the denominator of which is 180; or

          (iv)   if the Specified Date occurs after the last Semi-Annual Accrual
     Date, the Accreted Value will equal $1,000.

     "Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition by a Restricted Subsidiary and not Incurred in connection
with, or in anticipation of, such Person becoming a Restricted Subsidiary or
such Asset Acquisition; provided that Indebtedness of such Person which is
redeemed, defeased, retired or otherwise repaid at the time of or immediately
upon consummation of the transactions by which such Person becomes a Restricted
Subsidiary or such Asset Acquisition shall not be Acquired Indebtedness.

     "Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined in conformity with GAAP; provided that the following items shall be
excluded in computing Adjusted Consolidated Net Income (without duplication):
(i) the net income of any Person that is not a Restricted Subsidiary, except to
the extent of the amount of dividends or other distributions actually paid to
the Company 
<PAGE>
 
                                       3

or any of its Restricted Subsidiaries by such Person during such period; (ii)
solely for the purposes of calculating the amount of Restricted Payments that
may be made pursuant to clause (C) of the first paragraph of Section 4.04 (and
in such case, except to the extent includable pursuant to clause (i) above), the
net income (or loss) of any Person accrued prior to the date it becomes a
Restricted Subsidiary or is merged into or consolidated with the Company or any
of its Restricted Subsidiaries or all or substantially all of the property and
assets of such Person are acquired by the Company or any of its Restricted
Subsidiaries; (iii) the net income of any Restricted Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by the
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Restricted Subsidiary; (iv) any gains or losses (on an after-tax basis)
attributable to Asset Sales; (v) except for purposes of calculating the amount
of Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of Section 4.04, any amount paid or accrued as dividends on Preferred
Stock (other than accrued dividends which, pursuant to the terms of the relevant
governing documents, will not be payable prior to the first anniversary after
the Stated Maturity of the Notes) of the Company or any Restricted Subsidiary
owned by Persons other than the Company and any of its Restricted Subsidiaries;
and (vi) all extraordinary gains and extraordinary losses.

     "Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its Restricted
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the most recent quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in conformity with GAAP and filed with the Commission or provided to
the Trustee pursuant to Section 4.18.

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

     "Agent" means any Registrar, Co-Registrar, Paying Agent or authenticating
agent.

     "Asset Acquisition" means (i) an investment by the Company or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with the
Company or any of its Restricted Subsidiaries; provided that such Person's
primary business is related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such investment or (ii)
an acquisition 
<PAGE>
 
                                       4

by the Company or any of its Restricted Subsidiaries of the property and assets
of any Person other than the Company or any of its Restricted Subsidiaries that
constitute substantially all of a division or line of business of such Person;
provided that the property and assets acquired are related, ancillary or
complementary to the businesses of the Company and its Restricted Subsidiaries
on the date of such acquisition.

     "Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transaction) in one transaction
or a series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets (other than the Capital Stock or other
Investment in an Unrestricted Subsidiary) of the Company or any of its
Restricted Subsidiaries outside the ordinary course of business of the Company
or such Restricted Subsidiary and, in each case, that is not governed by Article
Five; provided that "Asset Sale" shall not include (a) sales or other
dispositions of inventory, receivables and other current assets, (b) sales,
transfers or other dispositions of assets constituting a Restricted Payment
permitted to be made under Section 4.04, or (c) sales or other dispositions of
assets for consideration at least equal to the fair market value of the assets
sold or disposed of, to the extent that the consideration received would satisfy
clause (B) of Section 4.11.

     "Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.

     "Board of Directors" means the Board of Directors of the Company or any
committee of such Board of Directors duly authorized to act under this
Indenture.

     "Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.

     "Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the Corporate
Trust Office of the Trustee, are authorized by law to close.

     "Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
<PAGE>
 
                                       5

     "Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.

     "Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized Lease.

     "Change of Control" means such time as (i) a "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) other than a
Permitted Holder becomes the ultimate "beneficial owner" (as defined in 
Rule 13d-3 under the Exchange Act) of Voting Stock representing more than 50% of
the total voting power of the Voting Stock of the Company on a fully diluted
basis or (ii) individuals who on the Closing Date constitute the Board of
Directors (together with any new directors whose election by the Board of
Directors or whose nomination by the Board of Directors for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
members of the Board of Directors then in office who either were members of the
Board of Directors on the Closing Date or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of the Board of Directors then in office.

     "Citicorp" means Citicorp, a Delaware Corporation.

     "Closing Date" means the date on which the Notes are originally issued
under this Indenture.

     "Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties at
such time.

     "Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's equity, other than Preferred Stock of
such Person, whether outstanding on the Closing Date or issued thereafter,
including, without limitation, all series and classes of such common stock.

     "Company" means the party named as such in the first paragraph of this
Indenture until a successor replaces it pursuant to Article Five of this
Indenture and thereafter means the successor.

     "Company Order" means a written request or order signed in the name of the
Company (i) by its Chairman, a Vice Chairman, its President or a Vice President
and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant
Secretary and delivered to the Trustee; provided, however, that such written
request or order may be signed by any two of the officers or directors listed in
clause (i) above in lieu of being signed by one of such officers or directors
listed in such clause (i) and one of the officers listed in clause (ii) above.
<PAGE>
 
                                       6

     "Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest
Expense, (ii) income taxes (other than income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses or
sales of assets), (iii) depreciation expense, (iv) amortization expense and (v)
all other non-cash items reducing Adjusted Consolidated Net Income (other than
items that will require cash payments and for which an accrual or reserve is, or
is required by GAAP to be, made), less all non-cash items increasing Adjusted
Consolidated Net Income, all as determined on a consolidated basis for the
Company and its Restricted Subsidiaries in conformity with GAAP; provided that,
if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount equal to (A) the amount of the Adjusted
Consolidated Net Income attributable to such Restricted Subsidiary multiplied by
(B) the percentage ownership interest in the income of such Restricted
Subsidiary not owned on the last day of such period by the Company or any of its
Restricted Subsidiaries.

     "Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Company and its Restricted Subsidiaries during such
period; excluding, however, (i) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated
Net Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in connection
with the offering of the Notes, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with GAAP.

     "Consolidated Leverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Indebtedness of the Company and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) the aggregate amount of Consolidated EBITDA for the then most recent four
fiscal quarters for which financial statements of the Company have been filed
with the Commission or provided to the Trustee pursuant to Section 4.18 (such
four fiscal quarter period being the "Four Quarter Period"); provided that, in
making the foregoing calculation, pro forma effect shall be given to the
following events which occur from the beginning 
<PAGE>
 
                                       7

of the Four Quarter Period through the Transaction Date (the "Reference
Period"): (i) the Incurrence of the Indebtedness with respect to which the
computation is being made and (if applicable) the application of the net
proceeds therefrom, including to refinance other Indebtedness, as if such
Indebtedness was incurred, and the application of such proceeds occurred, at the
beginning of the Four Quarter Period; (ii) the Incurrence, repayment or
retirement of any other Indebtedness by the Company and its Restricted
Subsidiaries since the first day of the Four Quarter Period as if such
Indebtedness was incurred, repaid or retired at the beginning of the Four
Quarter Period; (iii) in the case of Acquired Indebtedness, the related
acquisition, as if such acquisition occurred at the beginning of the Four
Quarter Period; (iv) any acquisition or disposition by the Company and its
Restricted Subsidiaries of any company or any business or any assets out of the
ordinary course of business, whether by merger, stock purchase or sale or asset
purchase or sale or any related repayment of Indebtedness, in each case since
the first day of the Four Quarter Period, assuming such acquisition or
disposition had been consummated on the first day of the Four Quarter Period;
and (v) the occurrence of any of the events described in clauses (i)-(iv) above
by any Person that has become a Restricted Subsidiary or has been merged with or
into the Company or any Restricted Subsidiary during the Four Quarter Period.

     "Consolidated Net Worth" means, at any date of determination, stockholders'
equity as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item to
be determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).

     "Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at 114 West 47/th/ Street, New York, New York; Attention: Louis Young.

     "Credit Agreement" means the revolving credit facility, dated the Closing
Date among the Company, Morgan Stanley Senior Funding, Inc. and the other
lenders party thereto.

     "Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.

     "CVC" means Citicorp Venture Capital, Ltd. and its Permitted Transferees.
<PAGE>
 
                                       8

     "Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.

     "Depositary" means The Depository Trust Company, its nominees, and their
respective successors.

     "Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in Section 4.11 and Section 4.12 and
such Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
repurchase of such Notes as are required to be repurchased pursuant to Section
4.11 and Section 4.12.

     "Equity Offering" means any public or private sale of common stock or
preferred stock of the Company (other than Disqualified Stock), other than
public offerings with respect to the Company's Common Stock registered on Form
S-8.

     "Event of Default" has the meaning provided in Section 6.01.

     "Excess Proceeds" has the meaning provided in Section 4.11.

     "Exchange Act" means the Securities Exchange Act of 1934.

     "fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution.

     "Foreign Subsidiary" means any Subsidiary of the Company incorporated or
organized, as the case may be, outside of the United States of America.
<PAGE>
 
                                       9

     "GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations contained or referred to in
this Indenture shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance with
the terms of the covenants and with other provisions of this Indenture shall be
made without giving effect to (i) the amortization or write off of any expenses
incurred in connection with the Transaction and (ii) except as otherwise
provided, the amortization of any amounts required or permitted by Accounting
Principles Board Opinion Nos. 16 and 17.

     "Global Notes" has the meaning provided in Section 2.01.

     "Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.

     "Guaranteed Indebtedness" has the meaning provided in Section 4.07.

     "Holder" or "Noteholder" means the registered holder of any Note.

     "Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an "Incurrence" of Acquired Indebtedness; provided that neither the
accrual of interest nor the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.

     "Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of 
<PAGE>
 
                                      10

such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto, but excluding
obligations with respect to letters of credit (including trade letters of
credit) securing obligations (other than obligations described in (i) or (ii)
above or (v), (vi) or (vii) below) entered into in the ordinary course of
business of such Person to the extent such letters of credit are not drawn upon
or, if drawn upon, to the extent such drawing is reimbursed no later than the
third Business Day following receipt by such Person of a demand for
reimbursement), (iv) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services, which purchase price is due more
than six months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services, except Trade
Payables, (v) all Capitalized Lease Obligations, (vi) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness, (vii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person and (viii) to the extent not otherwise
included in this definition, obligations under Currency Agreements and Interest
Rate Agreements. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation,
provided (A) that the amount outstanding at any time of any Indebtedness issued
with original issue discount is the original issue price of such Indebtedness,
(B) that money borrowed and set aside at the time of the Incurrence of any
Indebtedness in order to prefund the payment of the interest on such
Indebtedness shall not be deemed to be "Indebtedness" so long as such money is
held to secure the payment of such interest and (C) that Indebtedness shall not
include any liability for federal, state, local or other taxes.

     "Indenture" means this Indenture as originally executed or as it may be
amended or supplemented from time to time by one or more indentures supplemental
to this Indenture entered into pursuant to the applicable provisions of this
Indenture.

     "Interest Payment Date" means each semiannual interest payment date on
[_______] and [________] of each year, commencing [_______________], 2001.

     "Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.

     "Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances to customers in the ordinary course
of business that are, in conformity with GAAP, 
<PAGE>
 
                                      11

recorded as accounts receivable on the balance sheet of the Company or its
Restricted Subsidiaries) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
bonds, notes, debentures or other similar instruments issued by, such Person and
shall include (i) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary and (ii) the fair market value of the Capital Stock (or any other
Investment), held by the Company or any of its Restricted Subsidiaries, of (or
in) any Person that has ceased to be a Restricted Subsidiary, including without
limitation, by reason of any transaction permitted by clause (iii) of Section
4.06 provided that the fair market value of the Investment remaining in any
Person that has ceased to be a Restricted Subsidiary shall not exceed the
aggregate amount of Investments previously made in such Person valued at the
time such Investments were made less the net reduction of such Investments. For
purposes of the definition of "Unrestricted Subsidiary" and Section 4.04, (i)
"Investment" shall include the fair market value of the assets (net of
liabilities (other than liabilities to the Company or any of its Restricted
Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair market value
of the assets (net of liabilities (other than liabilities to the Company or any
of its Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be
considered a reduction in outstanding Investments and (iii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer.

     "Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest).

     "Moody's" means Moody's Investors Service, Inc. and its successors.

     "Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary as a reserve against any liabilities
associated with such 
<PAGE>
 
                                      12

Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale, all as determined in conformity with GAAP and (b) with respect to any
issuance or sale of Capital Stock, the proceeds of such issuance or sale in the
form of cash or cash equivalents, including payments in respect of deferred
payment obligations (to the extent corresponding to the principal, but not
interest, component thereof) when received in the form of cash or cash
equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary) and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of attorney's fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.

     "Notes" means any of the securities, as defined in the first paragraph of
the recitals hereof, that are authenticated and delivered under this Indenture.
For all purposes of this Indenture, the term "Notes" shall include the Notes
initially issued on the Closing Date and any other Notes issued after the
Closing Date under this Indenture. For purposes of this Indenture, all Notes
shall vote together as one series of Notes under this Indenture.

     "Offer to Purchase" means an offer to purchase Notes by the Company from
the Holders commenced by mailing a notice to the Trustee and each Holder
stating: (i) the covenant pursuant to which the offer is being made and that all
Notes validly tendered will be accepted for payment on a pro rata basis; (ii)
the purchase price and the date of purchase (which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is mailed)
(the "Payment Date"); (iii) that any Note not tendered will continue to accrue
interest (or accrete in value) pursuant to its terms; (iv) that, unless the
Company defaults in the payment of the purchase price, any Note accepted for
payment pursuant to the Offer to Purchase shall cease to accrue interest (or
accrete in value) on and after the Payment Date; (v) that Holders electing to
have a Note purchased pursuant to the Offer to Purchase will be required to
surrender the Note, together with the form entitled "Option of the Holder to
Elect Purchase" on the reverse side of the Note completed, to the Paying Agent
at the address specified in the notice prior to the close of business on the
Business Day immediately preceding the Payment Date; (vi) that Holders will be
entitled to withdraw their election if the Paying Agent receives, not later than
the close of business on the third Business Day immediately preceding the
Payment Date, a telegram, facsimile transmission or letter setting forth the
name of such Holder, the principal amount at maturity of Notes delivered for
purchase and a statement that such Holder is withdrawing his election to have
such Notes purchased; and (vii) that Holders whose Notes are being purchased
only in part will be issued new Notes equal in principal amount at maturity to
the unpurchased portion of the Notes surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount at maturity of
$1,000 or integral multiples thereof. On the Payment Date, the Company shall (i)
accept for payment on a pro rata basis Notes or portions thereof tendered
pursuant to an Offer to 
<PAGE>
 
                                      13

Purchase; (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so accepted; and (iii) deliver,
or cause to be delivered, to the Trustee all Notes or portions thereof so
accepted together with an Officers' Certificate specifying the Notes or portions
thereof accepted for payment by the Company. The Paying Agent shall promptly
mail to the Holders of Notes so accepted payment in an amount equal to the
purchase price, and the Trustee shall promptly authenticate and mail to such
Holders a new Note equal in principal amount at maturity to any unpurchased
portion of the Note surrendered; provided that each Note purchased and each new
Note issued shall be in a principal amount at maturity of $1,000 or integral
multiples thereof. The Company will publicly announce the results of an Offer to
Purchase as soon as practicable after the Payment Date. The Trustee shall act as
the Paying Agent for an Offer to Purchase. The Company shall comply with Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable, in the event
that the Company is required to repurchase Notes pursuant to an Offer to
Purchase.

     "Officer" means, with respect to the Company, (i) the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President or the
Chief Financial Officer, and (ii) the Treasurer or any Assistant Treasurer, or
the Secretary or any Assistant Secretary.

     "Officers' Certificate" means a certificate signed by one Officer listed in
clause (i) of the definition thereof and one Officer listed in clause (ii) of
the definition thereof or two officers listed in clause (i) of the definition
thereof.  Each Officers' Certificate (other than certificates provided pursuant
to TIA Section 314(a)(4)) shall include the statements provided for in TIA
Section 314(e).

     "Opinion of Counsel" means a written opinion signed by legal counsel, who
may be an employee of or counsel to the Company, that meets the requirements of
Section 10.04 hereof. Each such Opinion of Counsel shall include the statements
provided for in TIA Section 314(e).

     "Paying Agent" has the meaning provided in Section 2.03, except that, for
the purposes of Article Eight, the Paying Agent shall not be the Company or a
Subsidiary of the Company or an Affiliate of any of them. The term "Paying
Agent" includes any additional Paying Agent.

     "Payment Date" has the meaning provided in the definition of Offer to
Purchase.

     "Permitted Investment" means (i) an Investment in the Company or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash
Investments; (iii) commission, payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be treated
as expenses in accordance with GAAP; (iv) stock, obligations or securities
received in 
<PAGE>
 
                                      14

satisfaction of judgments; (v) Investments in prepaid expenses, negotiable
instruments held for collection, and lease, utility and workers' compensation,
performance and other similar deposits; and (vi) Interest Rate Agreements and
Currency Agreements to the extent permitted under clause (iv) of Section 4.03.

     "Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory and common law Liens of landlords and
carriers, warehousemen, mechanics, suppliers, material men, repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights-of-way,
municipal and zoning ordinances and similar charges, encumbrances, title defects
or other irregularities that do not materially interfere with the ordinary
course of business of the Company or any of its Restricted Subsidiaries; (vi)
Liens (including extensions and renewals thereof) upon real or personal property
acquired after the Closing Date; provided that (a) such Lien is created solely
for the purpose of securing Indebtedness Incurred, in accordance with Section
4.03, to finance the cost (including the cost of acquisition, installation,
improvement or construction) of the item of property or assets subject thereto
and such Lien is created prior to, at the time of or within six months after the
later of the acquisition, the completion of construction or the commencement of
full operation of such property (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such cost and (c) any such Lien
shall not extend to or cover any property or assets other than such item of
property or assets and any improvements on such item; (vii) leases or subleases
granted to others that do not materially interfere with the ordinary course of
business of the Company and its Restricted Subsidiaries, taken as a whole;
(viii) Liens encumbering property or assets under construction arising from
progress or partial payments by a customer of the Company or its Restricted
Subsidiaries relating to such property or assets; (ix) any interest or title of
a lessor in the property subject to any Capitalized Lease or operating lease;
(x) Liens arising from filing Uniform Commercial Code financing statements
regarding leases; (xi) Liens on property of, or on shares of Capital Stock or
Indebtedness of, any Person existing at the time such Person becomes, or becomes
a part of, any Restricted Subsidiary; provided that such Liens do not extend to
or cover any property or assets of the Company or any Restricted Subsidiary
other than the property or assets acquired; (xii) Liens in favor of the Company
or any Restricted Subsidiary; 

     "Permitted Holders" means CVC, its Permitted Transferees and any party to 
the Investors Agreement; provided that any party to the Investors Agreement and
any Permitted Transferee (other than CVC or any direct or indirect wholly owned
Subsidiary of CVC) shall not be a "Permitted Holder" if such Person is the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of Voting Stock that represents at least 30% of the
aggregate Voting Power of all classes of the Voting Stock of the Company
(without giving effect to the attribution of beneficial ownership as a result of
the provisions of the Investors Agreement as in effect on the Closing Date, and
any amendment to such agreement that does not materially change the allocation
of voting power provided for in such agreement).

     "Permitted Transferee" means with respect to CVC (i) Citicorp or any direct
or indirect wholly owned subsidiary of Citicorp and any officer, director or 
employee of CVC, Citicorp or any wholly owned subsidiary of Citicorp, (ii) any 
spouse or lineal descendant (including by adoption or stepchildren) of the 
officers, directors and employees referred to in clause (i) above and (iii) any 
trust, corporation or partnership 100% in interest of the beneficiaries, 
stockholders or partners of which consists of one or more of the persons 
described in clause (a)(i) or (ii) above.
<PAGE>
 
                                      15

(xiii) Liens arising from the rendering of a final judgment or order against the
Company or any Restricted Subsidiary that does not give rise to an Event of
Default; (xiv) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (xv) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (xvi) 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 each case, securing Indebtedness under Interest Rate
Agreements and Currency Agreements and forward contracts, options, future
contracts, futures options or similar agreements or arrangements designed solely
to protect the Company or any of its Restricted Subsidiaries from fluctuations
in interest rates, currencies or the price of commodities; (xvii) Liens arising
out of conditional sale, title retention, consignment or similar arrangements
for the sale of goods entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business in accordance with the past
practices of the Company and its Restricted Subsidiaries prior to the Closing
Date; and (xviii) Liens on or sales of receivables, including related intangible
assets and proceeds thereof; and (xix) Liens that secure Indebtedness with an
aggregate principal amount not to exceed $5 million at any time outstanding.

     "Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.

     "Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's preferred or preference equity, whether
outstanding on the Closing Date or issued thereafter, including, without
limitation, all series and classes of such preferred or preference stock.

     "principal" of a debt security, including the Notes, means the principal
amount due on the Stated Maturity as shown on such debt security.

     "Redemption Date" means, when used with respect to any Note to be redeemed,
the date fixed for such redemption by or pursuant to this Indenture.

     "Redemption Price" means, when used with respect to any Note to be
redeemed, the price at which such Note is to be redeemed pursuant to this
Indenture.

     "Registrar" has the meaning provided in Section 2.03.
<PAGE>
 
                                      16

   "Regular Record Date" for the interest payable on any Interest Payment Date
means the [________] or [________] (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.

   "Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice chairman of the board of directors, the chairman or any
vice chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, any assistant vice
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any assistant cashier, any trust officer or assistant
trust officer, the controller or any assistant controller or any other officer
of the Trustee in its corporate trust department customarily performing
functions similar to those performed by any of the above-designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his or her knowledge of and
familiarity with the particular subject.

   "Restricted Payments" has the meaning provided in Section 4.04.

   "Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.

   "Securities Act" means the Securities Act of 1933.

   "Security Register" has the meaning provided in Section 2.03.
 
   "Significant Subsidiary" means, at any date of determination, any Restricted
Subsidiary that, together with its Subsidiaries, (i) for the most recent fiscal
year of the Company, accounted for more than 10% of the consolidated revenues of
the Company and its Restricted Subsidiaries or (ii) as of the end of such fiscal
year, was the owner of more than 10% of the consolidated assets of the Company
and its Restricted Subsidiaries, all as set forth on the most recently available
consolidated financial statements of the Company for such fiscal year.

   "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, and
its successors.

   "Stated Maturity" means, (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.

   "Subsidiary" means, with respect to any Person, any corporation, association
or other business entity of which more than 50% of the voting power of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such Person.
<PAGE>
 
                                      17

   "Subsidiary Guarantee" has the meaning provided in Section 4.07.

   "Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and unconditionally guaranteed by the United States of America or any
agency thereof, (ii) time deposit accounts, certificates of deposit and money
market deposits maturing within one year of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50 million (or the
foreign currency equivalent thereof) and has outstanding debt which is rated "A"
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) commercial paper, maturing not more than one year after the
date of acquisition, issued by a corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States of America with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according
to S&P, and (v) securities with maturities of six months or less from the date
of acquisition issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by S&P or
Moody's.

   "TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939, as 
amended (15 U.S. Code (S)(S) 77aaa-77bbbb), as in effect on the date this
Indenture was executed, except as provided in Section 9.06.

   "Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.

   "Transaction Date" means, with respect to the Incurrence of any Indebtedness
by the Company or any of its Restricted Subsidiaries, the date such Indebtedness
is to be Incurred and, with respect to any Restricted Payment, the date such
Restricted Payment is to be made.
 
   "Transaction" means, collectively, the merger of Arizona Acquisition Corp.
with and into the Company; the entry into the Credit Agreement and the equity
investment in Arizona Acquisition
<PAGE>
 
                                      18

Corp. by Cable Systems Holdings, LLC of up to $72.0 million; and the ancillary
and related transactions occurring substantially contemporaneously therewith or
as a direct result thereof.

   "Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article Seven of this Indenture and thereafter means such successor.

   "United States Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended and as codified in Title 11 of the United States Code, as amended from
time to time hereafter, or any successor federal bankruptcy law.

   "U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.

   "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below; and (ii) any Subsidiary of an
Unrestricted Subsidiary.  The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under Section 4.04 and (C) if
applicable, the Incurrence of Indebtedness and the Investment referred to in
clause (A) of this proviso would be permitted under Section 4.03 and Section
4.04.  The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that (i) no Default or Event of Default shall
have occurred
<PAGE>
 
                                      19

and be continuing at the time of or after giving effect to such designation and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately after such designation would, if Incurred at such time, have been
permitted to be Incurred (and shall be deemed to have been Incurred) for all
purposes of this Indenture. Any such designation by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.

   "Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.

   "Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.

   SECTION 1.02.  Incorporation by Reference of Trust Indenture Act.  Whenever
                   ------------------------------------------------
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture.  The following TIA terms used
in this Indenture have the following meanings:

     "indenture securities" means the Notes;

     "indenture security holder" means a Holder or a Noteholder;

     "indenture to be qualified" means this Indenture;

     "indenture trustee" or "institutional trustee" means the Trustee; and

     "obligor" on the indenture securities means the Company or any other
   obligor on the Notes.

   All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
<PAGE>
 
                                      20

   SECTION 1.03.  Rules of Construction.  Unless the context otherwise requires:
                  ---------------------                               

     (i)    a term has the meaning assigned to it;

     (ii)   an accounting term not otherwise defined has the meaning assigned to
   it in accordance with GAAP;

     (iii)  "or" is not exclusive;

     (iv)   words in the singular include the plural, and words in the plural
   include the singular;

     (v)    provisions apply to successive events and transactions;

     (vi)   "herein," "hereof" and other words of similar import refer to this
   Indenture as a whole and not to any particular Article, Section or other
   subdivision;

     (vii)  all ratios and computations based on GAAP contained in this
   Indenture shall be computed in accordance with the definition of GAAP set
   forth in Section 1.01; and

     (viii) all references to Sections or Articles refer to Sections or Articles
   of this Indenture unless otherwise indicated.


                                  ARTICLE TWO
                                   THE NOTES

   SECTION 2.01.  Form and Dating.  The Notes and the Trustee's certificate of
                  ---------------                                             
authentication shall be substantially in the form annexed hereto as Exhibit A
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture.  The Notes may have notations,
legends or endorsements required by law, stock exchange agreements to which the
Company is subject or usage.  The Company shall approve the form of the Notes
and any notation, legend or endorsement on the Notes.  Each Note shall be dated
the date of its authentication.

   The terms and provisions contained in the form of the Notes annexed hereto as
Exhibit A shall constitute, and are hereby expressly made, a part of this
Indenture.  To the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions of the Notes applicable to it and to be bound thereby.
<PAGE>
 
                                      21

   The Notes shall be issued initially in the form of one or more global Notes
in registered form, substantially in the form set forth in Exhibit A (the
"Global Notes"), deposited with, or on behalf of the Depositary, duly executed
- -------------                                                                 
by the Company and authenticated by the Trustee as hereinafter provided.  Each
Global Note shall bear such legend as may be required or reasonably requested by
the Depositary.  The aggregate principal amount at maturity of the Global Notes 
may from time to time be increased or decreased by adjustments made on the 
records of the Trustee, as the custodian for the Depositor or its nominee as 
hereinafter provided.

   The definitive Notes shall be typed, printed, lithographed or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Notes may
be listed, all as determined by the Officers executing such Notes, as evidenced
by their execution of such Notes.

   SECTION 2.02.  Execution, Authentication and Denominations.  Subject to
                  -------------------------------------------             
Article Four and applicable law, the aggregate principal amount at maturity of
Notes which may be authenticated and delivered under this Indenture is
unlimited.  The Notes shall be executed by two Officers of the Company.  The
signature of these Officers on the Notes may be by facsimile or manual signature
in the name and on behalf of the Company.

   If an Officer whose signature is on a Note no longer holds that office at the
time the Trustee or authenticating agent authenticates the Note, the Note shall
be valid nevertheless.

   A Note shall not be valid until the Trustee or authenticating agent manually
signs the certificate of authentication on the Note.  The signature shall be
conclusive evidence that the Note has been authenticated under this Indenture.

   At any time and from time to time after the execution of this Indenture, the
Trustee or an authenticating agent shall upon receipt of a Company Order
authenticate for original issue Global Notes in the aggregate principal amount
at maturity specified in such Company Order; provided that the Trustee shall be
entitled to receive an Officers' Certificate and an Opinion of Counsel of the
Company in connection with such authentication of Notes.  Such Company Order
shall specify the amount of Global Notes to be authenticated and the date on
which the original issue of Notes is to be authenticated and, in case of an
issuance of Notes pursuant to Section 2.12, shall certify that such issuance is
in compliance with Article Four.

   The Trustee may appoint an authenticating agent to authenticate Notes.  An
authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such authenticating agent.  An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the Company.

   The Notes shall be issuable only in registered form without coupons and only
in denominations of $1,000 in principal amount at maturity and any integral
multiple thereof.
<PAGE>
 
                                      22

   SECTION 2.03.  Registrar and Paying Agent.  The Company shall maintain an
                  --------------------------                                
office or agency where Notes may be presented for registration of transfer or
for exchange (the "Registrar"), an office or agency where Notes may be presented
                   ---------                                                    
for payment (the "Paying Agent") and an office or agency where notices and
                  ------------                                            
demands to or upon the Company in respect of the Notes and this Indenture may be
served, which shall be in the Borough of Manhattan, The City of New York.  The
Company shall cause the Registrar to keep a register of the Notes and of their
transfer and exchange (the "Security Register").  The Security Register shall be
                            -----------------                                   
in written form or any other form capable of being converted into written form
within a reasonable time.  The Company may have one or more co-Registrars and
one or more additional Paying Agents.

   The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture.  The agreement shall implement the provisions of
this Indenture that relate to such Agent.  The Company shall give prompt written
notice to the Trustee of the name and address of any such Agent and any change
in the address of such Agent.  If the Company fails to maintain a Registrar,
Paying Agent and/or agent for service of notices and demands, the Trustee shall
act as such Registrar, Paying Agent and/or agent for service of notices and
demands.  The Company may remove any Agent upon written notice to such Agent and
the Trustee; provided that no such removal shall become effective until (i) the
acceptance of an appointment by a successor Agent to such Agent as evidenced by
an appropriate agency agreement entered into by the Company and such successor
Agent and delivered to the Trustee or (ii) notification to the Trustee that the
Trustee shall serve as such Agent until the appointment of a successor Agent in
accordance with clause (i) of this proviso.  The Company, any Subsidiary of the
Company, or any Affiliate of any of them may act as Paying Agent, Registrar or
co-Registrar, and/or agent for service of notice and demands.

   The Company initially appoints the Trustee as Registrar, Paying Agent,
authenticating agent and agent for service of notice and demands.  The Trustee
shall preserve in as current a form as is reasonably practicable the most recent
list available to it of the names and addresses of Holders and shall otherwise
comply with TIA (S) 312(a).  If the Trustee is not the Registrar, the Company
shall furnish to the Trustee as of each Regular Record Date and at such other
times as the Trustee may reasonably request the names and addresses of Holders
as they appear in the Security Register, including the aggregate principal
amount at maturity of Notes held by each Holder.

   SECTION 2.04.  Paying Agent to Hold Money in Trust.  Not later than 11:00
                  -----------------------------------                       
a.m. (New York City time) on each due date of the principal, premium, if any,
and interest on any Notes, the Company shall deposit with the Paying Agent money
in immediately available funds sufficient to pay such principal, premium, if
any, and interest so becoming due. The Company shall require each Paying Agent
other than the Trustee to agree in writing that such Paying Agent shall hold in
trust for the benefit of the Holders or the Trustee all money held by the Paying
Agent for the payment of principal of, premium, if any, and interest on the
Notes (whether such money has been paid to it by the Company or any other
obligor on the Notes), and such Paying Agent shall
<PAGE>
 
                                      23

promptly notify the Trustee of any default by the Company (or any other obligor
on the Notes) in making any such payment. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee and account for any
funds disbursed, and the Trustee may at any time during the continuance of any
payment default, upon written request to a Paying Agent, require such Paying
Agent to pay all money held by it to the Trustee and to account for any funds
disbursed. Upon doing so, the Paying Agent shall have no further liability for
the money so paid over to the Trustee. If the Company or any Subsidiary of the
Company or any Affiliate of any of them acts as Paying Agent, it will, on or
before each due date of any principal of, premium, if any, or interest on the
Notes, segregate and hold in a separate trust fund for the benefit of the
Holders a sum of money sufficient to pay such principal, premium, if any, or
interest so becoming due until such sum of money shall be paid to such Holders
or otherwise disposed of as provided in this Indenture, and will promptly notify
the Trustee of its action or failure to act.

   SECTION 2.05.  Transfer and Exchange.  When Notes are presented to the
                  ---------------------                                  
Registrar or a co-Registrar with a request to register the transfer or to
exchange them for an equal principal amount at maturity of Notes of other
authorized denominations, the Registrar shall register the transfer or make the
exchange as requested if its requirements for such transactions are met
(including that such Notes are duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and Registrar duly
executed by the Holder thereof or by an attorney who is authorized in writing to
act on behalf of the Holder).  To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall authenticate Notes at
the Registrar's request.  No service charge shall be made for any registration
of transfer or exchange or redemption of the Notes, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes or
other similar governmental charge payable upon exchanges pursuant to Section
2.08, 3.08 or 9.04).

   The Registrar shall not be required (i) to issue, register the transfer of or
exchange any Note during a period beginning at the opening of business 15 days
before the day of the mailing of a notice of redemption of Notes selected for
redemption under Section 3.03 or Section 3.08 and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of or
exchange any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.

   Notwithstanding any other provisions of this Section 2.05, unless and until
it is exchanged in whole or in part for Notes in definitive registered form, the
Global Notes representing all or a portion of the Notes may not be transferred
except as a whole by the Depositary to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary.
<PAGE>
 
                                      24

   If the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for the Global Notes or if at any time the Depositary
shall no longer be eligible under the next sentence of this paragraph, the
Company shall appoint a successor Depositary with respect to the Notes.  Each
Depositary appointed pursuant to this Section 2.05 must, at the time of its
appointment and at all times while it serves as Depositary, be a clearing agency
registered under the Exchange Act and any other applicable statute or
regulation.  The Company will execute, and the Trustee, upon receipt of an
authentication order, will authenticate and deliver, Notes in definitive
registered form in any authorized denominations, in an aggregate principal
amount at maturity equal to the principal amount at maturity of the Global Note
or Notes representing such Notes in exchange for such Global Note or Notes if
(i) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for the Global Notes or if at any time the Depositary
shall no longer be eligible to serve as Depositary and a successor Depositary
for the Notes is not appointed by the Company within 60 days after the Company
receives such notice or becomes aware of such ineligibility or (ii) an Event of
Default has occurred and is continuing.

   The Company may at any time and in its sole discretion determine that the
Notes shall no longer be represented by a Global Note or Notes.  In such event
the Company will execute, and the Trustee will, upon receipt of an
authentication order, authenticate and deliver, Notes in definitive registered
form in any authorized denominations, in an aggregate principal amount at
maturity equal to the principal amount at maturity of the Global Note or Notes
representing such Notes in exchange for such Global Note or Notes.

   Upon the exchange of a Global Note for Notes in definitive registered form,
without coupons, in authorized denominations, such Global Note shall be canceled
by the Trustee.  Notes in definitive registered form issued in exchange for a
Global Note pursuant to this Section 2.05 shall be registered in such names and
in such authorized denominations as the Depositary for such Global Note,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee.  The Trustee shall deliver such Notes to or as
directed by the Persons in whose names such Notes are so registered.

   All Notes issued upon any transfer or exchange of Notes shall be valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Notes surrendered upon such transfer or
exchange.

   SECTION 2.06.  Replacement Notes.  If a mutilated Note is surrendered to the
                  -----------------                                            
Trustee or if the Holder claims that the Note has been lost, destroyed or
wrongfully taken, then, in the absence of notice to the Company or the Trustee
that such Note has been acquired by a bona fide purchaser, the Company shall
issue and the Trustee shall authenticate a replacement Note of like tenor and
principal amount and bearing a number not contemporaneously outstanding;
provided that the requirements of this Section 2.06 are met.  If required by the
Trustee or the Company, an indemnity bond must be furnished that is sufficient
in the judgment of both the Trustee and the
<PAGE>
 
                                      25

Company to protect the Company, the Trustee or any Agent from any loss that any
of them may suffer if a Note is replaced. The Company may charge such Holder for
its expenses and the expenses of the Trustee in replacing a Note. In case any
such mutilated, lost, destroyed or wrongfully taken Note has become or is about
to become due and payable, the Company in its discretion may pay such Note
instead of issuing a new Note in replacement thereof.

   Every replacement Note is an additional obligation of the Company and shall
be entitled to the benefits of this Indenture.

   SECTION 2.07.  Outstanding Notes.  Notes outstanding at any time are all
                  -----------------                                        
Notes that have been authenticated by the Trustee except for those canceled by
it, those delivered to it for cancellation and those described in this Section
2.07 as not outstanding.

   If a Note is replaced pursuant to Section 2.06, it ceases to be outstanding
unless and until the Trustee and the Company receive proof satisfactory to them
that the replaced Note is held by a bona fide purchaser.

   If the Paying Agent (other than the Company or an Affiliate of the Company)
holds on a maturity date money sufficient to pay Notes payable on that date,
then on and after that date such Notes cease to be outstanding and interest on
them shall cease to accrue.

     A Note does not cease to be outstanding because the Company or one of its
Affiliates holds such Note, provided, however, that in determining whether the
Holders of the requisite principal amount at maturity of the outstanding Notes
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder, Notes owned by the Company or any other obligor upon the Notes
or any Affiliate of the Company or of such other obligor shall be disregarded
and deemed not to be outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes which the
Trustee has actual knowledge to be so owned shall be so disregarded. Notes so
owned which have been pledged in good faith may be regarded as outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Notes and that the pledgee is not the Company or
any other obligor upon the Notes or any Affiliate of the Company or of such
other obligor.

   SECTION 2.08.  Temporary Notes.  Until definitive Notes are ready for
                  ---------------                                       
delivery, the Company may prepare and execute and the Trustee shall authenticate
temporary Notes. Temporary Notes shall be substantially in the form of
definitive Notes but may have insertions, substitutions, omissions and other
variations determined to be appropriate by the Officers executing the temporary
Notes, as evidenced by their execution of such temporary Notes.  If temporary
Notes are issued, the Company will cause definitive Notes to be prepared without
unreasonable delay.  After the preparation of definitive Notes, the temporary
Notes shall be
<PAGE>
 
                                      26

exchangeable for definitive Notes upon surrender of the temporary Notes at the
office or agency of the Company designated for such purpose pursuant to Section
4.02, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Notes the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount at
maturity of definitive Notes of authorized denominations. Until so exchanged,
the temporary Notes shall be entitled to the same benefits under this Indenture
as definitive Notes.

   SECTION 2.09.  Cancellation.  The Company at any time may deliver to the
                  ------------                                             
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee for cancellation any Notes previously authenticated
hereunder which the Company has not issued and sold.  The Registrar and the
Paying Agent shall forward to the Trustee any Notes surrendered to them for
transfer, exchange or payment.  The Trustee shall cancel all Notes surrendered
for transfer, exchange, payment or cancellation and shall destroy them in
accordance with its normal procedure.

   SECTION 2.10.  CUSIP Numbers.  The Company in issuing the Notes may use a
                  -------------                                             
"CUSIP" number (if then generally in use), and the Company and the Trustee shall
use such CUSIP number, in notices of redemption or exchange as a convenience to
Holders; provided that any such notice shall state that no representation is
made as to the correctness of such number either as printed on the Notes or as
contained in any notice of redemption or exchange and that reliance may be
placed only on the other identification numbers printed on the Notes.  The
Company shall promptly notify the Trustee of any change in "CUSIP",  number for
the Notes.

   SECTION 2.11.  Defaulted Interest.  If the Company defaults in a payment of
                  ------------------                                          
interest on the Notes, it shall pay, or shall deposit with the Paying Agent
money in immediately available funds sufficient to pay, the defaulted interest,
plus (to the extent lawful) any interest payable on the defaulted interest, to
the Persons who are Holders on a subsequent special record date.  A special
record date, as used in this Section 2.11 with respect to the payment of any
defaulted interest, shall mean the 15th day next preceding the date fixed by the
Company for the payment of defaulted interest, whether or not such day is a
Business Day.  At least 15 days before the subsequent special record date, the
Company shall mail to each Holder and to the Trustee a notice that states the
subsequent special record date, the payment date and the amount of defaulted
interest to be paid.

   SECTION 2.12.  Issuance of Additional Notes.  The Company may, subject to
                  ----------------------------                              
Article Four of this Indenture and applicable law, issue additional Notes under
this Indenture.  The Notes issued on the Closing Date and any additional Notes
subsequently issued shall be treated as a single class for all purposes under
this Indenture.
<PAGE>
 
                                      27

                                 ARTICLE THREE
                                  REDEMPTION

   SECTION 3.01.  Right of Redemption. The Notes are redeemable, at the 
                  -------------------                                  
Company's option, in whole or in part, at any time or from time to time, on or
after [_____________], 2003 and prior to maturity, upon not less than 30 nor
more than 60 days' prior notice mailed by first class mail to each Holder's last
address as it appears in the Security Register, at the following Redemption
Prices (expressed in percentages of principal amount at maturity), plus accrued
and unpaid interest, if any, to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date that is on or prior to the
Redemption Date to receive interest due on an Interest Payment Date), if
redeemed during the 12-month period commencing [_____________],of the years set
forth below:

<TABLE>
<CAPTION>
               Year                           Redemption Price
               ----                           ----------------  
               <C>                            <S>
               2003.........................           %
               2004.........................
               2005.........................
               2006 and thereafter..........     100.00%
</TABLE>

   In addition, at any time prior to[_______], 2001, the Company may redeem up
to 35% of the principal amount at maturity of the Notes with the proceeds of one
or more Equity Offerings, at any time or from time to time in part, at a
Redemption Price (expressed as a percentage of Accreted Value) of [_______] %,
plus accrued and unpaid interest to the Redemption Date (subject to the rights
of Holders of record on the relevant Regular Record Date that is prior to the
Redemption Date to receive interest due on an Interest Payment Date); provided
that (i) Notes representing 65% of the principal amount of Notes initially
issued remain outstanding after each such redemption and (ii) notice of such
redemption is mailed within 60 days of the related Equity Offering.

   SECTION 3.02.  Notices to Trustee.  If the Company elects to redeem Notes
                  ------------------                                        
pursuant to Section 3.01, it shall notify the Trustee in writing of the
Redemption Date and the principal amount at maturity of Notes to be redeemed and
the clause of this Indenture pursuant to which redemption shall occur.

   The Company shall give each notice provided for in this Section 3.02 in an
Officers' Certificate at least ten days before mailing the notice to the Holders
pursuant to Section 3.04 (unless a shorter period shall be satisfactory to the
Trustee).

   SECTION 3.03.  Selection of Notes to Be Redeemed.  If less than all of the
                  ---------------------------------                          
Notes are to be redeemed at any time, the Trustee shall select the Notes to be
redeemed in compliance with the requirements, as certified to it by the Company,
of the principal national securities exchange, if
<PAGE>
 
                                      28

any, on which the Notes are listed or, if the Notes are not listed on a national
securities exchange or automated quotation system, by lot or by such other
method as the Trustee in its sole discretion shall deem fair and appropriate;
provided that no Note of $1,000 in principal amount at maturity or less shall be
redeemed in part.

   The Trustee shall make the selection from the Notes outstanding and not
previously called for redemption.  Notes in denominations of $1,000 in principal
amount at maturity may only be redeemed in whole.  The Trustee may select for
redemption portions (equal to $1,000 in principal amount at maturity or any
integral multiple thereof) of Notes that have denominations larger than $1,000
in principal amount at maturity.  Provisions of this Indenture that apply to
Notes called for redemption also apply to portions of Notes called for
redemption.  The Trustee shall notify the Company and the Registrar promptly in
writing of the Notes or portions of Notes to be called for redemption.

   SECTION 3.04.  Notice of Redemption.  With respect to any redemption of Notes
                  --------------------                                    
pursuant to Section 3.01, at least 30 days but not more than 60 days before a
Redemption Date, the Company shall mail a notice of redemption by first-class
mail to each Holder whose Notes are to be redeemed.

   The notice shall identify the Notes to be redeemed and shall state:

     (i)   the Redemption Date;

     (ii)  the Redemption Price;

     (iii) the name and address of the Paying Agent;

     (iv)  that Notes called for redemption must be surrendered to the Paying
   Agent in order to collect the Redemption Price;

     (v)   that, unless the Company defaults in making the redemption payment,
   interest on Notes called for redemption ceases to accrue on and after the
   Redemption Date and the only remaining right of the Holders is to receive
   payment of the Redemption Price plus accrued interest to the Redemption Date
   upon surrender of the Notes to the Paying Agent;

     (vi)  that, if any Note is being redeemed in part, the portion of the
   principal amount at maturity (equal to $1,000 in principal amount at maturity
   or any integral multiple thereof) of such Note to be redeemed and that, on
   and after the Redemption Date, upon surrender of such Note, a new Note or
   Notes in principal amount at maturity equal to the unredeemed portion thereof
   will be reissued; and
<PAGE>
 
                                      29

     (vii) that, if any Note contains a CUSIP number as provided in Section
   2.10, no representation is being made as to the correctness of the CUSIP
   number either as printed on the Notes or as contained in the notice of
   redemption and that reliance may be placed only on the other identification
   numbers printed on the Notes.

   At the Company's request (which request may be revoked by the Company at any
time prior to the time at which the Trustee shall have given such notice to the
Holders), made in writing to the Trustee at least ten days before mailing the
notice to Holders referred to in this Section 5.04 (or such shorter period as
shall be satisfactory to the Trustee) the Trustee shall give the notice of
redemption in the name and at the expense of the Company. If, however, the
Company gives such notice to the Holders, the Company shall concurrently deliver
to the Trustee an Officers' Certificate stating that such notice has been given.

   SECTION 3.05.  Effect of Notice of Redemption.  Once notice of redemption is
                  ------------------------------                               
mailed, Notes called for redemption become due and payable on the Redemption
Date and at the Redemption Price.  Upon surrender of any Notes to the Paying
Agent, such Notes shall be paid at the Redemption Price, plus accrued interest,
if any, to the Redemption Date.

   Notice of redemption shall be deemed to be given when mailed, whether or not
the Holder receives the notice.  In any event, failure to give such notice, or
any defect therein, shall not affect the validity of the proceedings for the
redemption of Notes held by Holders to whom such notice was properly given.

   SECTION 3.06.  Deposit of Redemption Price.  Prior to any Redemption 
                  ---------------------------                                
Date, the Company shall deposit with the Paying Agent (or, if the Company is
acting as its own Paying Agent, shall segregate and hold in trust as provided in
Section 2.04) money sufficient to pay the Redemption Price of and accrued
interest on all Notes to be redeemed on that date other than Notes or portions
thereof called for redemption on that date that have been delivered by the
Company to the Trustee for cancellation.

   SECTION 3.07.  Payment of Notes Called for Redemption.  If notice of
                  --------------------------------------               
redemption has been given in the manner provided above, the Notes or portion of
Notes specified in such notice to be redeemed shall become due and payable on
the Redemption Date at the Redemption Price stated therein, together with
accrued interest to such Redemption Date, and on and after such date (unless the
Company shall default in the payment of such Notes at the Redemption Price and
accrued interest to the Redemption Date, in which case the principal, until
paid, shall bear interest from the Redemption Date at the rate prescribed in the
Notes), such Notes shall cease to accrue interest.  Upon surrender of any Note
for redemption in accordance with a notice of redemption, such Note shall be
paid and redeemed by the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; provided that installments of interest
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders registered as such at the close of business on the relevant Regular
Record Date.
<PAGE>
 
                                      30

    SECTION 3.08.  Notes Redeemed in Part.  Upon surrender of any Note that is
                   ----------------------                                     
redeemed in part, the Company shall execute and the Trustee shall authenticate
and deliver to the Holder without service charge, a new Note equal in principal
amount at maturity to the unredeemed portion of such surrendered Note.


                                 ARTICLE FOUR
                                   COVENANTS

    SECTION 4.01.  Payment of Notes.  The Company shall pay the principal of,
                   ----------------                                          
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes and this Indenture. An installment of principal, premium,
if any, or interest shall be considered paid on the date due if the Trustee or
Paying Agent (other than the Company, a Subsidiary of the Company, or any
Affiliate of any of them) holds on that date money designated for and sufficient
to pay the installment. If the Company or any Subsidiary of the Company or any
Affiliate of any of them acts as Paying Agent, an installment of principal,
premium, if any, or interest shall be considered paid on the due date if the
entity acting as Paying Agent complies with the last sentence of Section 2.04.
As provided in Section 6.09, upon any bankruptcy or reorganization procedure
relative to the Company, the Trustee shall serve as the Paying Agent, if any,
for the Notes.

    The Company shall pay interest on overdue principal and premium, if any, and
interest on overdue installments of interest, to the extent lawful, at the rate
per annum specified in the Notes.

    SECTION 4.02.  Maintenance of Office or Agency.  The Company will maintain
                   -------------------------------                            
in the Borough of Manhattan, The City of New York an office or agency where
Notes may be surrendered for registration of transfer or exchange or for
presentation for payment and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served.  The Company will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency.  If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 10.02.

    The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided that no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of New York for such purposes. The Company shall give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
<PAGE>
 
                                      31

    The Company hereby initially designates the Corporate Trust Office of the
Trustee as such office of the Company in accordance with Section 2.03.

    SECTION 4.03.  Limitation on Indebtedness.  (a)  The Company will not, and
                   --------------------------                                 
will not permit any of its Restricted Subsidiaries to, Incur any Indebtedness
(other than the Notes and Indebtedness existing on the Closing Date); provided
that the Company may Incur Indebtedness if, after giving effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
therefrom, the Consolidated Leverage Ratio would be positive and (i) with
respect to any Incurrence occurring from the Closing Date through January 1,
1999, greater than zero and less than 5.5:1 and (ii) with respect to any
Incurrence occurring thereafter, greater than zero and less than 5.0:1.

    Notwithstanding the foregoing, the Company and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following: (i)
Indebtedness of the Company (Guaranteed by Subsidiaries of the Company)
outstanding at any time in an aggregate principal amount not to exceed the
greater of (x) $75 million and (y) 80% of the consolidated net book value of the
accounts receivable and 25% of the net book value of the inventory, in each case
of the Company and its Restricted Subsidiaries as set forth on the consolidated
balance sheet of the Company then most recently filed pursuant to Section 4.18,
less any amount of such Indebtedness permanently repaid as provided under
Section 4.11; (ii) Indebtedness owed (A) to the Company evidenced by an
unsubordinated promissory note or (B) to any Restricted Subsidiary; provided
that any event which results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any subsequent transfer of such Indebtedness (other
than to the Company or another Restricted Subsidiary) shall be deemed, in each
case, to constitute an Incurrence of such Indebtedness not permitted by this
clause (ii); (iii) Indebtedness issued in exchange for, or the net proceeds of
which are used to refinance or refund, then outstanding Indebtedness (other than
Indebtedness Incurred under clause (i), (ii), (iv), (vi), (viii), (x) or (xi) of
this paragraph) and any refinancings thereof in an amount not to exceed the
amount so refinanced or refunded (plus premiums, accrued interest, fees and
expenses); provided that Indebtedness the proceeds of which are used to
refinance or refund the Notes or Indebtedness that is pari passu with, or
subordinated in right of payment to, the Notes shall only be permitted under
this clause (iii) if (A) in case the Notes are refinanced in part or the
Indebtedness to be refinanced is pari passu with the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the remaining Notes, (B) in
case the Indebtedness to be refinanced is subordinated in right of payment to
the Notes, such new Indebtedness, by its terms or by the terms of any agreement
or instrument pursuant to which such new Indebtedness is issued or remains
outstanding, is expressly made subordinate in right of payment to the Notes at
least to the extent that the Indebtedness to be refinanced is subordinated to
the Notes and (C) such new Indebtedness, determined as of the date of Incurrence
of such new Indebtedness, does not mature prior to the Stated Maturity of the
Indebtedness to be refinanced or refunded, and the Average Life of such new
Indebtedness is at least equal to the remaining Average Life of the Indebtedness
to be refinanced or refunded; and
<PAGE>
 
                                      32

provided further that in no event may Indebtedness of the Company be refinanced
by means of any Indebtedness of any Restricted Subsidiary pursuant to this
clause (iii); (iv) Indebtedness (A) in respect of performance, surety or appeal
bonds or letters of credit supporting trade payables, in each case provided in
the ordinary course of business, (B) under Currency Agreements and Interest Rate
Agreements; provided that such agreements (1) are designed solely to protect the
Company or its Restricted Subsidiaries against fluctuations in foreign currency
exchange rates or interest rates and (2) do not increase the Indebtedness of the
obligor outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder; and (C) arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted Subsidiary
(other than Guarantees of Indebtedness Incurred by any Person acquiring all or
any portion of such business, assets or Restricted Subsidiary for the purpose of
financing such acquisition), in a principal amount not to exceed the gross
proceeds actually received by the Company or any Restricted Subsidiary in
connection with such disposition; (v) Indebtedness of the Company, to the extent
the net proceeds thereof are promptly (A) used to purchase Notes tendered in an
Offer to Purchase made as a result of a Change in Control or (B) deposited to
defease the Notes as described in Article Eight; (vi) Guarantees of the Notes
and Guarantees of Indebtedness of the Company by any Restricted Subsidiary,
provided the Guarantee of such Indebtedness is permitted by and made in
accordance with Section 4.07; (vii) Indebtedness Incurred to finance the cost
(including, without limitation, the cost of design, development, construction,
acquisition, installation or integration) of network assets used in the
telecommunications business (including, without limitation, ownership interests
in minimum investment units or indefeasible rights of use); (viii) Indebtedness
of the Company, not to exceed at any one time outstanding, 2 times the (A) Net
Cash Proceeds received by the Company after the Closing Date as a capital
contribution or from the issuance and sale of its Capital Stock (other than
Disqualified Stock) to a Person that is not a Subsidiary of the Company, to the
extent such Net Cash Proceeds have not been used pursuant to clause (C)(2) of
the first paragraph or clause (iii), (iv) or (vi) of the second paragraph of
Section 4.04 to make a Restricted Payment and (B) 80% of the fair market value
of property (other than cash and cash equivalents) received by the Company after
the Closing Date from a contribution of capital or the sale of its Capital Stock
(other than Disqualified Stock) to a Person that is not a Subsidiary of the
Company, to the extent such capital contribution or sale of Capital Stock has
not been used pursuant to clause (iii), (iv) or (ix) of the second paragraph of
Section 4.04 to make a Restricted Payment; provided that such Indebtedness does
not mature prior to the Stated Maturity of the Notes and has an Average Life
longer than the Notes; (ix) Indebtedness of the Company Incurred to finance
capital expenditures in an amount not to exceed $5 million in any given fiscal
year of the Company; (x) Indebtedness of Foreign Subsidiaries, not to exceed $5
million at any one time outstanding; and (xi) Indebtedness of the Company (in
addition to Indebtedness permitted under clauses (i) through (x) above) in an
aggregate principal amount outstanding at any time not to
<PAGE>
 
                                      33

exceed $100 million, less any amount of such Indebtedness permanently repaid as
provided under Section 4.11.

    (b)  Notwithstanding any other provision of this Section 4.03 the maximum
amount of Indebtedness that the Company or a Restricted Subsidiary may Incur
pursuant to this Section 4.03 shall not be deemed to be exceeded, with respect
to any outstanding Indebtedness due solely to the result of fluctuations in the
exchange rates of currencies.

    (c)  For purposes of determining any particular amount of Indebtedness under
this Section 4.03, (1) Indebtedness Incurred under the Credit Agreement on or
prior to the Closing Date shall be treated as Incurred pursuant to clause (i) of
the second paragraph of this Section 4.03, (2) Guarantees, Liens and obligations
with respect to letters of credit supporting Indebtedness otherwise included in
the determination of such particular amount shall not be included and (3) any
Liens granted pursuant to the equal and ratable provisions referred to in
Section 4.09 shall not be treated as Indebtedness. For purposes of determining
compliance with this Section 4.03, in the event that an item of Indebtedness
meets the criteria of more than one of the types of Indebtedness described in
the above clauses (other than Indebtedness referred to in clause (1) of the
preceding sentence), the Company, in its sole discretion, shall classify, and
from time to time may reclassify, such item of Indebtedness and only be required
to include the amount and type of such Indebtedness in one of such clauses.

    SECTION 4.04.  Limitation on Restricted Payments.  The Company will not, and
                   ---------------------------------                            
will not permit any Restricted Subsidiary to, directly or indirectly, (i)
declare or pay any dividend or make any distribution on or with respect to its
Capital Stock (other than (x) dividends or distributions payable solely in
shares of its Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to acquire shares of such Capital Stock and (y) pro
rata dividends or distributions on Common Stock of Restricted Subsidiaries held
by minority stockholders) held by Persons other than the Company or any of its
Restricted Subsidiaries, (ii) purchase, redeem, retire or otherwise acquire for
value any shares of Capital Stock of (A) the Company or an Unrestricted
Subsidiary (including options, warrants or other rights to acquire such shares
of Capital Stock) held by any Person or (B) a Restricted Subsidiary (including
options, warrants or other rights to acquire such shares of Capital Stock) held
by any Affiliate of the Company (other than a Wholly Owned Restricted
Subsidiary) or any holder (or any Affiliate of such holder) of 5% or more of the
Capital Stock of the Company, (iii) make any voluntary or optional principal
payment, or voluntary or optional redemption, repurchase, defeasance, or other
acquisition or retirement for value, of Indebtedness of the Company that is
subordinated in right of payment to the Notes (other than, in each case, the
purchase, repurchase or acquisition of Indebtedness in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in any case due within one year after the date of such purchase, repurchase or
acquisition) or (iv) make any Investment, other than a Permitted Investment, in
any Person (such payments or any other actions described in clauses (i) through
(iv) above being collectively "Restricted Payments") if, at the time of, and
                               -------------------                          
after giving effect to, the proposed Restricted Payment: (A) a Default or Event
of Default shall have occurred 
<PAGE>
 
                                      34

and be continuing, (B) the Company could not Incur at least $1.00 of
Indebtedness under the first paragraph of Section 4.03 or (C) the aggregate
amount of all Restricted Payments (the amount, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board Resolution) made after the Closing Date
shall exceed the sum of (1) 50% of the aggregate amount of the Adjusted
Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss,
minus 100% of the amount of such loss) (determined by excluding income resulting
from transfers of assets by the Company or a Restricted Subsidiary to an
Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken
as one accounting period) beginning on the first day of the fiscal quarter
immediately following the Closing Date and ending on the last day of the last
fiscal quarter preceding the Transaction Date for which reports have been filed
with the Commission or provided to the Trustee pursuant to Section 4.18 plus (2)
the aggregate Net Cash Proceeds received by the Company after the Closing Date
from the issuance and sale permitted by this Indenture of its Capital Stock
(other than Disqualified Stock) to a Person who is not a Subsidiary of the
Company, including an issuance or sale permitted by this Indenture of
Indebtedness of the Company for cash subsequent to the Closing Date upon the
conversion of such Indebtedness into Capital Stock (other than Disqualified
Stock) of the Company, or from the issuance to a Person who is not a Subsidiary
of the Company of any options, warrants or other rights to acquire Capital Stock
of the Company (in each case, exclusive of any Disqualified Stock or any
options, warrants or other rights that are redeemable at the option of the
holder, or are required to be redeemed, prior to the Stated Maturity of the
Notes) plus (3) an amount equal to the net reduction in Investments (other than
reductions in Permitted Investments and Investments made pursuant to clause
(vi), (ix) or (x) of the following paragraph) in any Person resulting from
payments of interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to the Company or any
Restricted Subsidiary or from the Net Cash Proceeds from the sale of any such
Investment (except, in each case, to the extent any such payment or proceeds are
included in the calculation of Adjusted Consolidated Net Income), or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued
in each case as provided in the definition of "Investment"), not to exceed, in
each case, the amount of Investments previously made by the Company or any
Restricted Subsidiary in such Person or Unrestricted Subsidiary.

    The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at said
date of declaration, such payment would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Indebtedness that is subordinated in right of payment to the Notes
including premium, if any, and accrued and unpaid interest, with the proceeds
of, or in exchange for, Indebtedness Incurred under clause (iii) of the second
paragraph of Section 4.03(a); (iii) the repurchase, redemption or other
acquisition of Capital Stock of the Company or an Unrestricted Subsidiary (or
options, warrants or other rights to acquire such Capital Stock) in exchange
for, or out of the proceeds of a substantially concurrent offering of, shares of
Capital Stock (other than Disqualified Stock) of the Company (or options,
warrants or other rights to acquire such Capital Stock); (iv) the making of any
principal payment or the repurchase,
<PAGE>
 
                                      35

redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Company which is subordinated in right of payment to the
Notes in exchange for, or out of the proceeds of, a substantially concurrent
offering of, shares of the Capital Stock (other than Disqualified Stock) of the
Company (or options, warrants or other rights to acquire such Capital Stock);
(v) payments or distributions, to dissenting stockholders pursuant to applicable
law, pursuant to or in connection with a consolidation, merger or transfer of
assets that complies with Article Five; (vi) Investments in any Person the
primary business of which is related, ancillary or complementary to the business
of the Company and its Restricted Subsidiaries on the date of such Investments;
provided that the aggregate amount of Investments made pursuant to this clause
(vi) does not exceed $20 million at any one time outstanding; (vii) the
purchase, redemption, acquisition, cancellation or other retirement for value of
shares of Capital Stock of the Company to the extent necessary, in the judgment
of the Board of Directors, to prevent the loss or secure the renewal or
reinstatement of any material license or material franchise held by the Company
or any Restricted Subsidiary from any governmental agency; (viii) the purchase,
redemption, retirement or other acquisition for value of shares of Capital Stock
of the Company, or options to purchase such shares held by directors, employees,
or former directors or employees of the Company or any Restricted Subsidiary (or
their estates or beneficiaries under their estates) upon their death,
disability, retirement, termination of employment or pursuant to the terms of
any agreement under such shares of Capital Stock or options were issued;
provided that the aggregate consideration paid for such purchase, redemption,
retirement or other acquisition for value of such shares of Capital Stock or
options after the Closing Date does not exceed $2 million in any calendar year,
or $5 million in the aggregate; (ix) Investments acquired in exchange for
Capital Stock (other than Disqualified Stock) of the Company or acquired with
Net Cash Proceeds received by the Company after the Closing Date from the
issuance and sale of its Capital Stock (other than Disqualified Stock); provided
that such Net Cash Proceeds are used to make such Investment within 90 days of
receipt thereof; or (x) Restricted Payments in any aggregate amount not to
exceed $20 million, increased by the amount of any Investment made pursuant to
this clause (x) that is an Investment and is not outstanding; provided that,
except in the case of clauses (i) and (iii), no Default or Event of Default
shall have occurred and be continuing or occur as a consequence of the actions
or payments set forth therein.

    Each Restricted Payment permitted pursuant to the preceding paragraph (other
than the Restricted Payment referred to in clause (ii) thereof, an exchange of
Capital Stock for Capital Stock or Indebtedness referred to in clause (iii) or
(iv) thereof and an Investment referred to in clause (vi) thereof), and the Net
Cash Proceeds from any issuance of Capital Stock referred to in clauses (iii)
and (iv), shall be included in calculating whether the conditions of clause (C)
of the first paragraph of this Section 4.04 have been met with respect to any
subsequent Restricted Payments. In the event the proceeds of an issuance of
Capital Stock of the Company are used for the redemption, repurchase or other
acquisition of the Notes, or Indebtedness that is pari passu with the Notes,
then the Net Cash Proceeds of such issuance shall be included in clause (C) of
the first paragraph of this Section 4.04 covenant only to the extent such
proceeds are not used for such redemption, repurchase or other acquisition of
Indebtedness.
<PAGE>
 
                                      36

    Any Restricted Payments made other than in cash shall be valued at fair
market value. The amount of any Investment "outstanding" at any time shall be
deemed to be equal to the amount of such Investment on the date made, less the
return of capital to the Company and its Restricted Subsidiaries with respect to
such Investment (up to the amount of such Investment on the date made).

    SECTION 4.05.  Limitation on Dividend and Other Payment Restrictions
                   -----------------------------------------------------
Affecting Restricted Subsidiaries.  The Company will not, and will not permit
- ---------------------------------                                            
any Restricted Subsidiary to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.

    The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Credit Agreement, this
Indenture or any other agreements in effect on the Closing Date, and any
extensions, refinancings, renewals or replacements of such agreements; provided
that the encumbrances and restrictions in any such extensions, refinancings,
renewals or replacements are no less favorable in any material respect to the
Holders than those encumbrances or restrictions that are then in effect and that
are being extended, refinanced, renewed or replaced; (ii) existing under or by
reason of applicable law; (iii) existing with respect to any Person or the
property or assets of such Person acquired by the Company or any Restricted
Subsidiary, existing at the time of such acquisition and not incurred in
contemplation thereof, which encumbrances or restrictions are not applicable to
any Person or the property or assets of any Person other than such Person or the
property or assets of such Person so acquired; (iv) in the case of clause (iv)
of the first paragraph of this Section 4.05, (A) that restrict in a customary
manner the subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or right
with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by this Indenture or (C) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract from
the value of property or assets of the Company or any Restricted Subsidiary in
any manner material to the Company or any Restricted Subsidiary; (v) with
respect to a Restricted Subsidiary and imposed pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all of the
Capital Stock of, or property and assets of, such Restricted Subsidiary or (vi)
relating solely to any Foreign Subsidiaries and supporting Indebtedness of such
Foreign Subsidiaries Incurred under clause (x) of the second paragraph of
Section 4.03. Nothing contained in this Section 4.05 shall prevent the Company
or any Restricted Subsidiary from (1) creating, incurring, assuming or suffering
to exist any Liens otherwise
<PAGE>
 
                                      37

permitted in Section 4.09 or (2) restricting the sale or other disposition of
property or assets of the Company or any of its Restricted Subsidiaries that
secure Indebtedness of the Company or any of its Restricted Subsidiaries.

    SECTION 4.06.  Limitation on the Issuance and Sale of Capital Stock of
                   -------------------------------------------------------
Restricted Subsidiaries.  The Company will not sell, and will not permit any
- -----------------------                                                     
Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of
Capital Stock of a Restricted Subsidiary (including options, warrants or other
rights to purchase shares of such Capital Stock) except (i) to the Company or a
Wholly Owned Restricted Subsidiary; (ii) issuances of director's qualifying
shares or sales to foreign nationals of shares of Capital Stock of foreign
Restricted Subsidiaries, to the extent required by applicable law; or (iii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any Investment
in such Person remaining after giving effect to such issuance or sale would have
been permitted to be made under Section 4.04 if made on the date of such
issuance or sale or (iv) issuances or sales of Common Stock of a Restricted
Subsidiary, provided that the Company or such Restricted Subsidiary applies the
Net Cash Proceeds, if any, of any such sale in accordance with clause (A) or (B)
of Section 4.11.

    SECTION 4.07.  Limitation on Issuances of Guarantees by Restricted
                   ---------------------------------------------------
Subsidiaries.  The Company will not permit any Restricted Subsidiary, directly
- ------------                                                                  
or indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Notes ("Guaranteed
                                                       ----------
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
- ------------
and delivers a supplemental indenture to this Indenture providing for a
Guarantee (a "Subsidiary Guarantee") of payment of the Notes by such Restricted
              --------------------                                             
Subsidiary and (ii) such Restricted Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to any Guarantee of any Restricted Subsidiary (x) that existed
at the time such Person became a Restricted Subsidiary and was not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary or (y) Indebtedness Incurred under clause (i) or (vii) of the second
paragraph of Section 4.03. If the Guaranteed Indebtedness is (A) pari passu with
the Notes, then the Guarantee of such Guaranteed Indebtedness shall be pari
passu with, or subordinated to, the Subsidiary Guarantee or (B) subordinated to
the Notes, then the Guarantee of such Guaranteed Indebtedness shall be
subordinated to the Subsidiary Guarantee at least to the extent that the
Guaranteed Indebtedness is subordinated to the Notes.

    Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by this
<PAGE>
 
                                      38

Indenture) or (ii) the release or discharge of the Guarantee which resulted in
the creation of such Subsidiary Guarantee, except a discharge or release by or
as a result of payment under such Guarantee.

    SECTION 4.08.  Limitation on Transactions with Stockholders and Affiliates.
                   -----------------------------------------------------------  
The Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, enter into any transaction (including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the rendering of any
service) with any holder (or any Affiliate of such holder) of 5% or more of any
class of Capital Stock of the Company or with any Affiliate of the Company or
any Restricted Subsidiary, except upon fair and reasonable terms no less
favorable to the Company or such Restricted Subsidiary than could be obtained,
at the time of such transaction or, if such transaction is pursuant to a written
agreement, at the time of the execution of the agreement providing therefor, in
a comparable arm's-length transaction with a Person that is not such a holder or
an Affiliate.

    The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the Company or such
Restricted Subsidiary from a financial point of view; (ii) any transaction
solely between the Company and any of its Wholly Owned Restricted Subsidiaries
or solely between Wholly Owned Restricted Subsidiaries; (iii) the payment of
reasonable and customary regular fees to directors of the Company who are not
employees of the Company; (iv) any payments or other transactions pursuant to
any tax-sharing agreement between the Company and any other Person with which
the Company files a consolidated tax return or with which the Company is part of
a consolidated group for tax purposes; (v) the existence of, or the performance
by the Company or any of its Restricted Subsidiaries of its obligations under
the terms of, any stockholders agreement (including any registration rights
agreement or purchase agreement related thereto) to which it is a party as of
the Closing Date and any similar agreements which it may enter into thereafter;
provided, however, that the existence of, or the performance by the Company or
any of its Restricted Subsidiaries of obligations under any future amendment to
any such existing agreement or under any similar agreement entered into after
the Closing Date shall only be permitted by this clause (v) to the extent that
the terms of any such amendment or new agreement are not otherwise
disadvantageous to the holders of the Notes in any material respect; (vi) the
payment of all fees and expenses and the performance of obligations related to
the Transaction; or (vii) any Restricted Payments not prohibited by Section
4.04. Notwithstanding the foregoing, any transaction or series of related
transactions covered by the first paragraph of this Section 4.08 and not covered
by clauses (ii) through (vii) of this paragraph, the aggregate amount of which
exceeds $2 million in value, must be approved or determined to be fair in the
manner provided for in clause (i)(A) or (B) above.
<PAGE>
 
                                      39

    SECTION 4.09.  Limitation on Liens.  The Company will not, and will not
                   -------------------                                     
permit any Restricted Subsidiary to, create, incur, assume or suffer to exist
any Lien on any of its assets or properties of any character, or any shares of
Capital Stock or Indebtedness of any Restricted Subsidiary, without making
effective provision for all of the Notes and all other amounts due under this
Indenture to be secured equally and ratably with (or, if the obligation or
liability to be secured by such Lien is subordinated in right of payment to the
Notes, prior to) the obligation or liability secured by such Lien.

    The foregoing limitation does not apply to (i) Liens existing on the Closing
Date, including Liens securing obligations under the Credit Agreement; (ii)
Liens granted after the Closing Date on any assets or Capital Stock of the
Company or its Restricted Subsidiaries created in favor of the Holders; (iii)
Liens with respect to the assets of a Restricted Subsidiary granted by such
Restricted Subsidiary to the Company or a Wholly Owned Restricted Subsidiary to
secure Indebtedness owing to the Company or such other Restricted Subsidiary;
(iv) Liens securing Indebtedness which is Incurred to refinance secured
Indebtedness which is permitted to be Incurred under clause (iii) of the second
paragraph of Section 4.03; provided that such Liens do not extend to or cover
any property or assets of the Company or any Restricted Subsidiary other than
the property or assets securing the Indebtedness being refinanced; (v) Liens on
any property or assets of a Restricted Subsidiary securing Indebtedness of such
Restricted Subsidiary permitted under Section 4.03; or (vi) Permitted Liens.

    SECTION 4.10.  Limitation on Sale-Leaseback Transactions.  The Company will
                   -----------------------------------------                   
not, and will not permit any Restricted Subsidiary to, enter into any sale-
leaseback transaction involving any of its assets or properties whether now
owned or hereafter acquired, whereby the Company or a Restricted Subsidiary
sells or transfers such assets or properties and then or thereafter leases such
assets or properties or any part thereof or any other assets or properties which
the Company or such Restricted Subsidiary, as the case may be, intends to use
for substantially the same purpose or purposes as the assets or properties sold
or transferred.

    The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between the Company and
any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted
Subsidiaries; or (iv) the Company or such Restricted Subsidiary, within 12
months after the sale or transfer of any assets or properties is completed,
applies an amount not less than the net proceeds received from such sale in
accordance with clause (A) or (B) of the first paragraph of Section 4.11.

    SECTION 4.11.  Limitation on Asset Sales.  The Company will not, and will
                   -------------------------                                 
not permit any Restricted Subsidiary to, consummate any Asset Sale, unless (i)
the consideration received by the Company or such Restricted Subsidiary is at
least equal to the fair market value of the assets sold or disposed of and (ii)
at least 75% of the consideration received consists of cash or Temporary Cash
Investments; provided that the amount of (a) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto) of the Company or
<PAGE>
 
                                      40

any Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Notes), that are assumed by the transferee of any such
assets, to the extent the creditors with respect thereto execute a written
release of such liability, in favor of the Company or the Restricted Subsidiary,
as applicable, and (b) any notes or other obligations received by the Company or
such Restricted Subsidiary from such transferee that are converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received) within 180 days following the closing of such Asset Sale, shall be
deemed to be cash for purposes of this provision. In the event and to the extent
that the Net Cash Proceeds received by the Company or any of its Restricted
Subsidiaries from one or more Asset Sales occurring on or after the Closing Date
in any period of 12 consecutive months exceed 10% of Adjusted Consolidated Net
Tangible Assets (determined as of the date closest to the commencement of such
12-month period for which a consolidated balance sheet of the Company and its
Subsidiaries has been filed pursuant to Section 4.18), then the Company shall or
shall cause the relevant Restricted Subsidiary to (i) within twelve months after
the date Net Cash Proceeds so received exceed 10% of Adjusted Consolidated Net
Tangible Assets (A) apply an amount equal to such excess Net Cash Proceeds to
permanently repay unsubordinated Indebtedness of the Company, or any Restricted
Subsidiary providing a Subsidiary Guarantee pursuant to Section 4.07 or
Indebtedness of any other Restricted Subsidiary, in each case owing to a Person
other than the Company or any of its Restricted Subsidiaries or (B) invest an
equal amount, or the amount not so applied pursuant to clause (A) (or enter into
a definitive agreement committing to so invest within 12 months after the date
of such agreement), in property or assets (other than current assets) of a
nature or type or that are used in a business (or in a company having property
and assets of a nature or type, or engaged in a business) similar or related to
the nature or type of the property and assets of, or the business of, the
Company and its Restricted Subsidiaries existing on the date of such investment
and (ii) apply (no later than the end of the 12-month period referred to in
clause (i)) such excess Net Cash Proceeds (to the extent not applied pursuant to
clause (i)) as provided in the following paragraph of this Section 4.11. The
amount of such excess Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 12-month period as set forth in clause (i)
of the preceding sentence and not applied as so required by the end of such
period shall constitute "Excess Proceeds".
                         --------------- 

    If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section 4.11 totals at least $10 million, the Company must commence, not later
than the fifteenth Business Day of such month, and consummate an Offer to
Purchase from the Holders on a pro rata basis an aggregate Accreted Value of
Notes equal to the Excess Proceeds on such date, at a purchase price equal to
100% of the Accreted Value of the Notes, plus, in each case, accrued interest
(if any) to the Payment Date.

    SECTION 4.12.  Repurchase of Notes upon a Change of Control.  The Company
                   --------------------------------------------              
shall commence, within 30 days of the occurrence of a Change of Control, and
consummate an Offer to Purchase for all Notes then outstanding, at a purchase
price equal to 101% of the Accreted Value thereof on the relevant Payment Date,
plus accrued interest, if any, to the Payment Date.
<PAGE>
 
                                      41

    SECTION 4.13.  Existence.  Subject to Article Five of this Indenture, the
                   ---------                                                 
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its existence and the existence of each of its Restricted
Subsidiaries in accordance with the respective organizational documents of the
Company and each Restricted Subsidiary and the rights (whether pursuant to
charter, partnership certificate, agreement, statute or otherwise), licenses and
franchises of the Company and each Restricted Subsidiary; provided that the
Company shall not be required to preserve any such right, license or franchise,
or the existence of any Restricted Subsidiary, if the maintenance or
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries taken as a whole.

    SECTION 4.14.  Payment of Taxes and Other Claims.  The Company will pay or
                   ---------------------------------                          
discharge and shall cause each of its Subsidiaries to pay or discharge, or cause
to be paid or discharged, before the same shall become delinquent (i) all
material taxes, assessments and governmental charges levied or imposed upon (a)
the Company or any such Subsidiary, (b) the income or profits of any such
Subsidiary which is a corporation or (c) the property of the Company or any such
Subsidiary and (ii) all material lawful claims for labor, materials and supplies
that, if unpaid, might by law become a lien upon the property of the Company or
any such Subsidiary; provided that the Company shall not be required to pay or
discharge, or cause to be paid or discharged, any such tax, assessment, charge
or claim the amount, applicability or validity of which is being contested in
good faith by appropriate proceedings and for which adequate reserves have been
established.

    SECTION 4.15.  Maintenance of Properties and Insurance.  The Company will
                   ---------------------------------------                   
cause all properties used or useful in the conduct of its business or the
business of any of its Restricted Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided that nothing in
this Section 4.15 shall prevent the Company or any Restricted Subsidiary from
discontinuing the use, operation or maintenance of any of such properties or
disposing of any of them, if such discontinuance or disposal is, in the judgment
of the Company, desirable in the conduct of the business of the Company or such
Restricted Subsidiary.

    The Company will provide or cause to be provided, for itself and its
Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, including, but not limited to,
products liability insurance and public liability insurance, with reputable
insurers or with the government of the United States of America, or an agency or
instrumentality thereof, in such amounts, with such deductibles and by such
methods as shall be customary for corporations similarly situated in the
industry in which the Company or any such Restricted Subsidiary, as the case may
be, is then conducting business.
<PAGE>
 
                                      42

    SECTION 4.16. Notice of Defaults. In the event that the Company or any
                  ------------------
Officer becomes aware of any Default or Event of Default, the Company shall
promptly deliver to the Trustee an Officers' Certificate specifying such Default
or Event of Default.

    SECTION 4.17.  Compliance Certificates.  (a)  The Company shall deliver to
                   -----------------------                                    
the Trustee, within 45 days after the end of each fiscal quarter (90 days after
the end of the last fiscal quarter of each year), an Officers' Certificate
stating whether or not the signers know of any Default or Event of Default that
occurred during such fiscal quarter.  In the case of the Officers' Certificate
delivered within 90 days after the end of the Company's fiscal year, such
certificate shall contain a certification from the principal executive officer,
principal financial officer or principal accounting officer of the Company that
a review has been conducted of the activities of the Company and its Restricted
Subsidiaries and the Company's and its Restricted Subsidiaries' performance
under this Indenture and that the Company has complied with all conditions and
covenants under this Indenture.  For purposes of this Section 4.17, such
compliance shall be determined without regard to any period of grace or
requirement of notice provided under this Indenture.  If any of the officers of
the Company signing such certificate has knowledge of such a Default or Event of
Default, the certificate shall describe any such Default or Event of Default and
its status.  The first certificate to be delivered pursuant to this Section
4.17(a) shall be for the first fiscal quarter beginning after the execution of
this Indenture.

    (b)  The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year, beginning with the fiscal year in which this Indenture was
executed, a certificate signed by the Company's independent certified public
accountants stating (i) that their audit examination has included a review of
the terms of this Indenture and the Notes as they relate to accounting matters,
(ii) that they have read the most recent Officers' Certificate delivered to the
Trustee pursuant to paragraph (a) of this Section 4.17 and (iii) whether, in
connection with their audit examination, anything came to their attention that
caused them to believe that the Company was not in compliance with any of the
terms, covenants, provisions or conditions of Article Four and Section 5.01 of
this Indenture as they pertain to accounting matters and, if any Default or
Event of Default has come to their attention, specifying the nature and period
of existence thereof; provided that such independent certified public
accountants shall not be liable in respect of such statement by reason of any
failure to obtain knowledge of any such Default or Event of Default that would
not be disclosed in the course of an audit examination conducted in accordance
with generally accepted auditing standards in effect at the date of such
examination.

    SECTION 4.18.  Commission Reports and Reports to Holders.  Whether or not
                   -----------------------------------------                 
the Company is then required to file reports with the Commission, the Company
shall file with the Commission (unless the Commission will not accept such
filing) all such reports and other information as it would be required to file
with the Commission by Section 13(a) or 15(d) under the Exchange Act if it were
subject thereto. The Company shall supply the Trustee and each Holder or shall
supply to the Trustee for forwarding to each such Holder, without cost to such
Holder, copies of such reports and other information within 15 days after the
date it would have been required to file such
<PAGE>
 
                                      43

reports or other information with the Commission had it been subject to such
Sections; provided, however, that the copies of such reports and information
supplied to Holders may omit exhibits. The Company also shall comply with the
other provisions of TIA Section 314(a).
 
    SECTION 4.19.  Waiver of Stay, Extension or Usury Laws.  The Company
                   ---------------------------------------              
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of, premium, if any, or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or that may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.

    SECTION 4.20.  Calculation of Original Issue Discount.  The Company shall
                   --------------------------------------                    
file with the Trustee promptly at the end of each calendar year (i) a written
notice specifying the amount of original issue discount (including daily rates
and accrual periods) accrued on outstanding Notes as of the end of such year and
(ii) such other specific information relating to such original issue discount as
may then be relevant under the Internal Revenue Code of 1986, as amended from
time to time and requested by the Trustee.

                                 ARTICLE FIVE
                             SUCCESSOR CORPORATION

    SECTION 5.01.  When Company May Merge, Etc.  The Company shall not
                   ---------------------------                        
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions) to, any Person or permit any Person to merge with or into the
Company unless: (i) the Company shall be the continuing Person, or the Person
(if other than the Company) formed by such consolidation or into which the
Company is merged or that acquired or leased such property and assets of the
Company shall be a corporation organized and validly existing under the laws of
the United States of America, the United Kingdom or, in each case, any
jurisdiction thereof and shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, all of the obligations of the Company on
all of the Notes and under this Indenture; (ii) immediately after giving effect
to such transaction, no Default or Event of Default shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction on a pro
forma basis, the Company or any Person becoming the successor obligor of the
Notes, as the case may be, (A) could Incur $1.00 of Indebtedness under the first
paragraph of Section 4.03 or (B) would have a Consolidated Leverage Ratio that
is positive, but equal to or lower than the Consolidated Leverage Ratio of the
Company immediately prior to such transaction; and (iv) the Company
<PAGE>
 
                                      44

delivers to the Trustee an Officers' Certificate (attaching the arithmetic
computations to demonstrate compliance with clause (iii)) and Opinion of
Counsel, in each case stating that such consolidation, merger or transfer and
such supplemental indenture complies with this provision and that all conditions
precedent provided for herein relating to such transaction have been complied
with; provided, however, that clause (iii) above does not apply if, in the good
faith determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose of
such transaction is to change the state of incorporation of the Company; and
provided further that any such transaction shall not have as one of its purposes
the evasion of the foregoing limitations.

    SECTION 5.02.  Successor Substituted.  Upon any consolidation or merger, or
                   ---------------------                                       
any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; provided that the Company shall not be released from its
obligation to pay the principal of, premium, if any, or interest on the Notes in
the case of a lease of all or substantially all of its property and assets.


                                  ARTICLE SIX
                             DEFAULT AND REMEDIES

    SECTION 6.01.  Events of Default.  Any of the following events shall
                   -----------------                                    
constitute an "Event of Default" hereunder:
               ----------------            
 
     (a) default in the payment of principal of (or premium, if any, on) any
   Note when the same becomes due and payable at maturity, upon acceleration,
   redemption or otherwise;

     (b) default in the payment of interest on any Note when the same becomes
due and payable, and such default continues for a period of 30 days;

     (c) default in the performance or breach of Article Five or the failure to
make or consummate an Offer to Purchase in accordance with Section 4.11 or
Section 4.12;

     (d) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in this Indenture or under the Notes (other
than a default specified in clause
<PAGE>
 
                                      45

     (a), (b) or (c) above) and such default or breach continues for a period of
30 consecutive days after written notice by the Trustee or the Holders of 25% or
more in aggregate principal amount of the Notes;

     (e) there occurs with respect to any issue or issues of Indebtedness of the
Company or any Significant Subsidiary having an outstanding principal amount of
$5 million or more in the aggregate for all such issues of all such Persons,
whether such Indebtedness now exists or shall hereafter be created,(I) an event
of default that has caused the holder thereof to declare such Indebtedness to be
due and payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled
within 30 days of such acceleration and/or (II) the failure to make a principal
payment at the final (but not any interim) fixed maturity and such defaulted
payment shall not have been made, waived or extended within 30 days of such
payment default;

     (f) any final judgment or order (not covered by insurance) for the payment
of money in excess of $5 million in the aggregate for all such final judgments
or orders against all such Persons (treating any deductibles, self-insurance or
retention as not so covered) shall be rendered against the Company or any
Significant Subsidiary and shall not be paid or discharged, and there shall be
any period of 30 consecutive days following entry of the final judgment or order
that causes the aggregate amount for all such final judgments or orders
outstanding and not paid or discharged against all such Persons to exceed $5
million during which a stay of enforcement of such final judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect;

     (g) a court having jurisdiction in the premises enters a decree or order
for

     (A) relief in respect of the Company or any Significant Subsidiary in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect,

     (B) appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or

     (C) the winding up or liquidation of the affairs of the Company or any
Significant Subsidiary and, in each case, such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days; or

     (h) the Company or any Significant Subsidiary

     (A) commences a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law,
<PAGE>
 
                                      46

     (B) consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Company or any Significant Subsidiary or for all or substantially all of the
property and assets of the Company or any Significant Subsidiary or

     (C) effects any general assignment for the benefit of creditors.

    SECTION 6.02.  Acceleration.  If an Event of Default (other than an Event of
                   ------------                                                 
Default specified in clause (g) or (h) of Section 6.01 that occurs with respect
to the Company) occurs and is continuing under this Indenture, the Trustee or
the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding, by written notice to the Company (and to the Trustee if such notice
is given by the Holders), may, and the Trustee at the request of such Holders
shall, declare the Accreted Value of, premium, if any, and accrued interest on
the Notes to be immediately due and payable.  Upon a declaration of
acceleration, such Accreted Value, premium, if any, and accrued interest shall
be immediately due and payable. In the event of a declaration of acceleration
because an Event of Default set forth in clause (e) of Section 6.01 has occurred
and is continuing, such declaration of acceleration shall be automatically
rescinded and annulled if the event of default triggering such Event of Default
pursuant to clause (e) shall be remedied or cured by the Company or the relevant
Significant Subsidiary or waived by the holders of the relevant Indebtedness
within 60 days after the declaration of acceleration with respect thereto. If an
Event of Default specified in clause (g) or (h) of Section 6.01 occurs with
respect to the Company, the Accreted Value of, premium, if any, and accrued
interest on the Notes then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.

   At any time after such declaration of acceleration, but before a judgment or
decree for the payment of the money due has been obtained by the Trustee, the
Holders of at least a majority in principal amount of the outstanding Notes by
written notice to the Company and to the Trustee, may waive all past Defaults
and rescind and annul a declaration of acceleration and its consequences if (a)
the Company has paid or deposited with the Trustee a sum sufficient to pay (i)
all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, (ii) all overdue interest on all Notes, (iii) the Accreted Value of
and premium, if any, on any Notes that have become due otherwise than by such
declaration or occurrence of acceleration and interest thereon at the rate
prescribed therefor by such Notes, and (iv) to the extent that payment of such
interest is lawful, interest upon overdue interest, if any, at the rate
prescribed therefor by such Notes, (b) all existing Events of Default, other
than the non-payment of the Accreted Value of, premium, if any, and accrued
interest on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived and (c) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction.
<PAGE>
 
                                      47

    SECTION 6.03.  Other Remedies.  If an Event of Default occurs and is
                   --------------                                       
continuing, the Trustee may, and at the direction of the Holders of at least a
majority in principal amount of the outstanding Notes shall, pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, premium, if any, or interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.

    The Trustee may maintain a proceeding even if it does not possess any of the
Notes or does not produce any of them in the proceeding.

    SECTION 6.04.  Waiver of Past Defaults.  Subject to Sections 6.02, 6.07 and
                   -----------------------                                     
9.02, the Holders of at least a majority in principal amount of the outstanding
Notes, by notice to the Trustee, may waive an existing Default or Event of
Default and its consequences, except a Default in the payment of principal of,
premium, if any, or interest on any Note as specified in clause (a) or (b) of
Section 6.01 or in respect of a covenant or provision of this Indenture which
cannot be modified or amended without the consent of the Holder of each
outstanding Note affected.  Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereto.

    SECTION 6.05.  Control by Majority.  The Holders of at least a majority in
                   -------------------                                        
aggregate principal amount of the outstanding Notes may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee; provided that the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders of Notes not joining in the giving of such direction; and provided
further that the Trustee may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes.

    SECTION 6.06.  Limitation on Suits.  A Holder may not institute any
                   -------------------                                 
proceeding, judicial or otherwise, with respect to this Indenture or the Notes,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:

     (i)    the Holder has previously given the Trustee written notice of a
    continuing Event of Default;

     (ii)   the Holders of at least 25% in aggregate principal amount of
    outstanding Notes shall have made a written request to the Trustee to pursue
    such remedy;

     (iii)  such Holder or Holders offer the Trustee indemnity reasonably
    satisfactory to the Trustee against any costs, liability or expense;
<PAGE>
 
                                      48

     (iv)   the Trustee does not comply with the request within 60 days after
    receipt of the request and the offer of indemnity; and

     (v)    during such 60-day period, the Holders of a majority in aggregate
    principal amount of the outstanding Notes do not give the Trustee a
    direction that is inconsistent with the request.

    For purposes of Section 6.05 of this Indenture and this Section 6.06, the
Trustee shall comply with TIA Section 316(a) in making any determination of
whether the Holders of the required aggregate principal amount of outstanding
Notes have concurred in any request or direction of the Trustee to pursue any
remedy available to the Trustee or the Holders with respect to this Indenture or
the Notes or otherwise under the law.

    A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.

    SECTION 6.07.  Rights of Holders to Receive Payment.  Notwithstanding any
                   ------------------------------------                      
other provision of this Indenture, the right of any Holder of a Note to receive
payment of the Accreted Value of, premium, if any, or interest on, such Note or
to bring suit for the enforcement of any such payment, on or after the due date
expressed in the Notes, shall not be impaired or affected without the consent of
such Holder.

    SECTION 6.08.  Collection Suit by Trustee.  If an Event of Default in
                   --------------------------                            
payment of principal, premium or interest specified in clause (a), (b) or (c) of
Section 6.01 occurs and is continuing, the Trustee may recover judgment in its
own name and as trustee of an express trust against the Company or any other
obligor of the Notes for the whole amount of principal, premium, if any, and
accrued interest remaining unpaid, together with interest on overdue principal,
premium, if any, and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate specified
in the Notes, and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.

    SECTION 6.09.  Trustee May File Proofs of Claim.  The Trustee may file such
                   --------------------------------                            
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section
7.07) and the Holders allowed in any judicial proceedings relative to the
Company (or any other obligor of the Notes), its creditors or its property and
shall be entitled and empowered to collect and receive any monies, securities or
other property payable or deliverable upon conversion or exchange of the Notes
or upon any such claims and to distribute the same, and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the 
<PAGE>
 
                                      49

event that the Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07. Nothing
herein contained shall be deemed to empower the Trustee to authorize or consent
to, or accept or adopt on behalf of any Holder, any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect of the claim of
any Holder in any such proceeding.

    SECTION 6.10.  Priorities.  If the Trustee collects any money pursuant to
                   ----------                                                
this Article Six, it shall pay out the money in the following order:

     First:  to the Trustee for all amounts due under Section 7.07;

     Second:  to Holders for amounts then due and unpaid for principal of,
   premium, if any, and interest on the Notes in respect of which or for the
   benefit of which such money has been collected, ratably, without preference
   or priority of any kind, according to the amounts due and payable on such
   Notes for principal, premium, if any, and interest, respectively; and

     Third:  to the Company or any other obligors of the Notes, as their
   interests may appear, or as a court of competent jurisdiction may direct.

   The Trustee, upon prior written notice to the Company, may fix a record date
and payment date for any payment to Holders pursuant to this Section 6.10.

    SECTION 6.11.  Undertaking for Costs.  In any suit for the enforcement of
                   ---------------------                                     
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court may require any party
litigant in such suit to file an undertaking to pay the costs of the suit, and
the court may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit having due regard to the merits and good
faith of the claims or defenses made by the party litigant.  This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07, or a suit by Holders of more than 10% in principal amount of the
outstanding Notes.

    SECTION 6.12.  Restoration of Rights and Remedies.  If the Trustee or any
                   ----------------------------------                        
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then, and in
every such case, subject to any determination in such proceeding, the Company,
the Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Company, Trustee and the Holders shall continue as though no such proceeding had
been instituted.
<PAGE>
 
                                      50

    SECTION 6.13.  Rights and Remedies Cumulative.  Except as otherwise provided
                   ------------------------------                               
with respect to the replacement or payment of mutilated, destroyed, lost or
wrongfully taken Notes in Section 2.06, no right or remedy herein conferred upon
or reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise.  The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.

    SECTION 6.14.  Delay or Omission Not Waiver.  No delay or omission of the
                   ----------------------------                              
Trustee or of any Holder to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein.  Every right and remedy given
by this Article Six or by law to the Trustee or to the Holders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.


                                 ARTICLE SEVEN
                                    TRUSTEE

    SECTION 7.01.  General.  The duties and responsibilities of the Trustee
                   -------                                                 
shall be as provided by the TIA and as set forth herein.  Notwithstanding the
foregoing, no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.  Whether or not herein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Article Seven.

    SECTION 7.02.  Certain Rights of Trustee.  Subject to TIA Sections 315(a)
                   -------------------------                                 
through (d):

     (i)    the Trustee may rely, and shall be protected in acting or refraining
    from acting, upon any resolution, certificate, statement, instrument,
    opinion, report, notice, request, direction, consent, order, bond,
    debenture, note, other evidence of indebtedness or other paper or document
    believed by it to be genuine and to have been signed or presented by the
    proper person. The Trustee need not investigate any fact or matter stated in
    the document and may in good faith conclusively rely as to the truth of the
    statements and the correctness of the opinions therein;

     (ii)   before the Trustee acts or refrains from acting, it may require an
    Officers' Certificate or an Opinion of Counsel, which shall conform to
    Section 10.04. The Trustee shall not be liable for any action it takes or
    omits to take in good faith in reliance on such certificate, opinion and/or 
    an accountant's certificate;
<PAGE>
 
                                      51

     (iii)  the Trustee may act through its attorneys and agents and shall not
    be responsible for the misconduct or negligence of any attorney or agent
    appointed with due care by it hereunder;

     (iv) the Trustee shall be under no obligation to exercise any of the rights
    or powers vested in it by this Indenture at the request or direction of any
    of the Holders, unless such Holders shall have offered to the Trustee
    security or indemnity reasonably satisfactory to it against the costs,
    expenses and liabilities that might be incurred by it in compliance with
    such request or direction;

     (v) the Trustee shall not be liable for any action it takes or omits to
    take in good faith that it believes to be authorized or within its rights or
    powers or for any action it takes or omits to take in accordance with the
    direction of the Holders of a majority in principal amount of the
    outstanding Securities relating to the time, method and place of conducting
    any proceeding for any remedy available to the Trustee, or exercising any
    trust or power conferred upon the Trustee, under this Indenture; provided
    that the Trustee's conduct does not constitute negligence or bad faith;

     (vi)   whenever in the administration of this Indenture the Trustee shall
    deem it desirable that a matter be proved or established prior to taking,
    suffering or omitting any action hereunder, the Trustee (unless other
    evidence be herein specifically prescribed) may, in the absence of bad faith
    on its part, rely upon an Officers' Certificate; 

     (vii)  the Trustee shall not be bound to make any investigation into the
    facts or matters stated in any resolution, certificate, statement,
    instrument, opinion, report, notice, request, direction, consent, order,
    bond, debenture, note, other evidence of indebtedness or other paper or
    document, but the Trustee, in its discretion, may make such further inquiry
    or investigation into such facts or matters as it may see fit, and, if the
    Trustee shall determine to make such further inquiry or investigation, it
    shall be entitled to examine the books, records and premises of the Company
    personally or by agent or attorney; and

     (viii) any request or direction of the Company mentioned herein shall be
    sufficiently evidenced by a Company Order and any resolution of the Board of
    Directors may be sufficiently evidenced by a Board Resolution.
        
    SECTION 7.03.  Individual Rights of Trustee.  The Trustee, in its individual
                   ----------------------------                                 
or any other capacity, may become the owner or pledgee of Notes and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not the Trustee.  Any Agent may do the same with like rights.
However, the Trustee is subject to TIA Sections 310(b) and 311.

    SECTION 7.04.  Trustee's Disclaimer.  The Trustee (i) makes no
                   --------------------                           
representation as to the validity or adequacy of this Indenture or the Notes,
(ii) shall not be accountable for the Company's use or application of the
proceeds from the Notes and (iii) shall not be responsible for any statement in
the Notes other than its certificate of authentication.

    SECTION 7.05.  Notice of Default.  If any Default or any Event of Default
                   -----------------                                         
occurs and is continuing and if such Default or Event of Default is known to the
Trustee, the Trustee shall mail to each Holder in the manner and to the extent
provided in TIA Section 313(c) notice of the Default or Event of Default within
45 days after it occurs, unless such Default or Event of Default has been cured;
provided, however, that, except in the case of a default in the payment of the
<PAGE>
 
                                      52

principal of, premium, if any, or interest on any Note, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interest of the Holders.

    SECTION 7.06.  Reports by Trustee to Holders.  Within 60 days after each
                   -----------------------------                            
April 15, beginning with April 15, 1999, the Trustee shall mail to each Holder
as provided in TIA Section 313(c) a brief report dated as of such April 15, if
required by TIA Section 313(a).

    A copy of each report at the time of its mailing to the Holders of
Securities shall be mailed to the Company and filed with the Commission and each
stock exchange on which the Securities are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Securities are
listed on any stock exchange or of any delisting thereof.

    SECTION 7.07.  Compensation and Indemnity.  The Company shall pay to the
                   --------------------------                               
Trustee such compensation as shall be agreed upon in writing for its services
hereunder.  The compensation of the Trustee shall not be limited by any law on
compensation of a trustee of an express trust.  The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by the Trustee without negligence or bad faith on its part.
Such expenses shall include the reasonable compensation and expenses of the
Trustee's agents and counsel.

    The Company shall indemnify the Trustee for, and hold it harmless against,
any loss or liability or expense incurred by it without negligence or bad faith
on its part in connection with the acceptance or administration of this
Indenture and its duties under this Indenture and the Notes, including, without
limitation, the costs and expenses of enforcing this Indenture against the
Company and of defending itself against any claim or liability and of complying
with any process served upon it or any of its officers in connection with the
exercise or performance of any of its powers or duties under this Indenture and
the Notes.

    To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust to pay principal of, premium, if any, and interest on particular
Notes.
<PAGE>
 
                                      53

    If the Trustee incurs expenses or renders services after the occurrence of
an Event of Default specified in clause (g) or (h) of Section 6.01, the expenses
and the compensation for the services will be intended to constitute expenses of
administration under Title 11 of the United States Bankruptcy Code or any
applicable federal or state law for the relief of debtors.

    The provisions of this Section 7.07 shall survive the termination of this
Indenture.

    The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the
extent applicable.

    SECTION 7.08.  Replacement of Trustee.  A resignation or removal of the
                   ----------------------                                  
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section
7.08.

    The Trustee may resign at any time by so notifying the Company in writing at
least 30 days prior to the date of the proposed resignation. The Holders of a
majority in principal amount at maturity of the outstanding Notes may remove the
Trustee by so notifying the Trustee in writing and may appoint a successor
Trustee with the consent of the Company. The Company may remove the Trustee by
Company Order given at least 30 days prior to the proposed date of removal if:
(i) the Trustee is no longer eligible under Section 7.10; (ii) the Trustee is
adjudged a bankrupt or an insolvent; (iii) a receiver or other public officer
takes charge of the Trustee or its property; or (iv) the Trustee becomes
incapable of acting.
 
    If the Trustee resigns or is removed, or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company. If
the successor Trustee does not deliver its written acceptance required by the
next succeeding paragraph of this Section 7.08 within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the Holders
of a majority in principal amount at maturity of the outstanding Notes may, at
the expense of the Company, petition any court of competent jurisdiction for the
appointment of a successor Trustee.

    A successor Trustee shall deliver a written acceptance of its appointment to
the retiring Trustee and to the Company.  Immediately after the delivery of such
written acceptance, subject to the lien provided in Section 7.07, (i) the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, (ii) the resignation or removal of the retiring Trustee shall
become effective and (iii) the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture.  A successor Trustee
shall mail notice of its succession to each Holder.  No successor Trustee shall
accept its appointment unless at the time of such acceptance such successor
Trustee shall be qualified and eligible under this Article.
<PAGE>
 
                                      54

    If the Trustee is no longer eligible under Section 7.10 or shall fail to
comply with TIA Section 310(b), any Holder who satisfies the requirements of TIA
Section 310(b) may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.   If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 7.08, the Trustee shall resign immediately in the manner and with the
effect provided in this Section.
 
    The Company shall give notice of any resignation and any removal of the
Trustee and each appointment of a successor Trustee to all Holders.  Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.

    Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligation under Section 7.07 shall continue indefinitely for the
benefit of the retiring Trustee.

    SECTION 7.09.  Successor Trustee by Merger, Etc.  If the Trustee
                   --------------------------------                 
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein, provided such corporation shall be otherwise qualified and eligible
under this Article.

    SECTION 7.10.  Eligibility.  This Indenture shall always have a Trustee who
                   -----------                                                 
satisfies the requirements of TIA Section 310(a)(1).  The Trustee shall have a
combined capital and surplus of at least $25 million as set forth in its most
recent published annual report of condition that is subject to the requirements
of applicable Federal or state supervising or examining authority.  If at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect specified in this Article.

    SECTION 7.11.  Money Held in Trust.  The Trustee shall not be liable for
                   -------------------                                      
interest on any money received by it except as the Trustee may agree with the
Company.  Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law and except for money held in trust
under Article Eight of this Indenture.


                                 ARTICLE EIGHT
                            DISCHARGE OF INDENTURE

    SECTION 8.01.  Termination of Company's Obligations.  Except as otherwise
                   ------------------------------------                      
provided in this Section 8.01, the Company may terminate its obligations under
the Notes and this Indenture if:
<PAGE>
 
                                      55

     (i)    all Notes previously authenticated and delivered (other than
    destroyed, lost or stolen Notes that have been replaced or Notes that are
    paid pursuant to Section 4.01 or Notes for whose payment money or securities
    have theretofore been held in trust and thereafter repaid to the Company, as
    provided in Section 8.05) have been delivered to the Trustee for
    cancellation and the Company has paid all sums payable by it hereunder; or

     (ii)   (A) the Notes mature within one year or all of them are to be called
    for redemption within one year under arrangements satisfactory to the
    Trustee for giving the notice of redemption, (B) the Company irrevocably
    deposits in trust with the Trustee during such one-year period, under the
    terms of an irrevocable trust agreement in form and substance satisfactory
    to the Trustee, as trust funds solely for the benefit of the Holders for
    that purpose, money or U.S. Government Obligations sufficient (in the
    opinion of a nationally recognized firm of independent public accountants
    expressed in a written certification thereof delivered to the Trustee),
    without consideration of any reinvestment of any interest thereon, to pay
    principal, premium, if, any, and interest on the Notes to maturity or
    redemption, as the case may be, and to pay all other sums payable by it
    hereunder, (C) no Default or Event of Default with respect to the Notes
    shall have occurred and be continuing on the date of such deposit, (D) such
    deposit will not result in a breach or violation of, or constitute a default
    under, this Indenture or any other agreement or instrument to which the
    Company is a party or by which it is bound and (E) the Company has delivered
    to the Trustee an Officers' Certificate and an Opinion of Counsel, in each
    case stating that all conditions precedent provided for herein relating to
    the satisfaction and discharge of this Indenture have been complied with.

    With respect to the foregoing clause (i), the Company's obligations under
Section 7.07 shall survive.  With respect to the foregoing clause (ii), the
Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.11, 4.01,
4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Notes are no
longer outstanding.  Thereafter, only the Company's obligations in Sections
7.07, 8.04, 8.05 and 8.06 shall survive.  After any such irrevocable deposit,
the Trustee upon request shall acknowledge in writing the discharge of the
Company's obligations under the Notes and this Indenture except for those
surviving obligations specified above.

    SECTION 8.02.  Defeasance and Discharge of Indenture.  The Company will be
                   -------------------------------------                      
deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the 123rd day after the date of the deposit referred to
in clause (A) of this Section 8.02, and the provisions of this Indenture will no
longer be in effect with respect to the Notes, and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same if:

     (A) with reference to this Section 8.02, the Company has irrevocably
    deposited or caused to be irrevocably deposited with the Trustee (or another
    trustee satisfying the requirements of Section 7.10) and conveyed all right,
    title and interest to the Trustee for the benefit of the Holders, under the
    terms of an irrevocable trust agreement in form and
<PAGE>
 
                                      56

    substance satisfactory to the Trustee as trust funds in trust, specifically
    pledged to the Trustee for the benefit of the Holders as security for
    payment of the principal of, premium, if any, and interest, if any, on the
    Notes, and dedicated solely to, the benefit of the Holders, in and to (1)
    money in an amount, (2) U.S. Government Obligations that, through the
    payment of interest, premium, if any, and principal in respect thereof in
    accordance with their terms, will provide, not later than one day before the
    due date of any payment referred to in this clause (A), money in an amount
    or (3) a combination thereof in an amount sufficient, in the opinion of a
    nationally recognized firm of independent public accountants expressed in a
    written certification thereof delivered to the Trustee, to pay and
    discharge, without consideration of the reinvestment of such interest and
    after payment of all federal, state and local taxes or other charges and
    assessments in respect thereof payable by the Trustee, the principal of,
    premium, if any, and interest on the outstanding Notes on the Stated
    Maturity of such principal or interest; provided that the Trustee shall have
    been irrevocably instructed to apply such money or the proceeds of such U.S.
    Government Obligations to the payment of such principal, premium, if any,
    and interest with respect to the Notes;

     (B) the Company has delivered to the Trustee (1) either (x) an Opinion of
    Counsel to the effect that Holders will not recognize income, gain or loss
    for federal income tax purposes as a result of the Company's exercise of its
    option under this Section 8.02 and will be subject to federal income tax on
    the same amount and in the same manner and at the same times as would have
    been the case if such option had not been exercised, which Opinion of
    Counsel shall be based upon (and accompanied by a copy of) a ruling of the
    Internal Revenue Service to the same effect unless there has been a change
    in applicable federal income tax law after the Closing Date such that a
    ruling is no longer required or (y) a ruling directed to the Trustee
    received from the Internal Revenue Service to the same effect as the
    aforementioned Opinion of Counsel and (2) an Opinion of Counsel to the
    effect that the creation of the defeasance trust does not violate the
    Investment Company Act of 1940 and that after the passage of 123 days
    following the deposit (except, with respect to any trust funds for the
    account of any Holder who may be deemed to be an "insider" for purposes of
    the United States Bankruptcy Code, after one year following the deposit),
    the trust funds will not be subject to the effect of Section 547 of the
    United States Bankruptcy Code or Section 15 of the New York Debtor and
    Creditor Law in a case commenced by or against the Company under either such
    statute, and either (I) the trust funds will no longer remain the property
    of the Company (and therefore will not be subject to the effect of any
    applicable bankruptcy, insolvency, reorganization or similar laws affecting
    creditors' rights generally) or (II) if a court were to rule under any such
    law in any case or proceeding that the trust funds remained property of the
    Company, (a) assuming such trust funds remained in the possession of the
    Trustee prior to such court ruling to the extent not paid to the Holders,
    the Trustee will hold, for the benefit of the Holders, a valid and perfected
    security interest in such trust funds that is not avoidable in bankruptcy or
    otherwise except for the effect of Section 552(b) of the United States
    Bankruptcy Code on interest on the trust funds accruing after the
    commencement of a case under such statute, (b) the Holders will be entitled
    to receive
<PAGE>
 
                                      57

    adequate protection of their interests in such trust funds if such trust
    funds are used in such case or proceeding and (c) no property, rights in
    property or other interests granted to the Trustee or the Holders in
    exchange for, or with respect to, such trust funds will subject to any prior
    rights of holders of other Indebtedness of the Company or any of its
    Subsidiaries;

     (C) immediately after giving effect to such deposit, on a pro forma basis,
    no Default or Event of Default shall have occurred and be continuing on the
    date of such deposit or during the period ending on the 123rd day after such
    date of such deposit, and such deposit shall not result in a breach or
    violation of, or constitute a default under, this Indenture or any other
    agreement or instrument to which the Company or any of its Subsidiaries is a
    party or by which the Company or any of its Subsidiaries is bound;

     (D) if the Notes are then listed on a national securities exchange, the
    Company has delivered to the Trustee an Opinion of Counsel to the effect
    that the Notes will not be delisted as a result of such deposit, defeasance
    and discharge; and

     (E) the Company has delivered to the Trustee an Officers' Certificate and
    an Opinion of Counsel, in each case stating that all conditions precedent
    provided for herein relating to the defeasance contemplated by this Section
    8.02 have been complied with.

    Notwithstanding the foregoing, prior to the end of the 123-day (or one year)
period referred to in clause (B)(2) of this Section 8.02, none of the Company's
obligations under this Indenture shall be discharged.  Subsequent to the end of
such 123-day (or one year) period with respect to this Section 8.02, the
Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.11, 4.01,
4.02, 8.04, 8.05, 8.06 and the rights, powers, trusts, duties and immunities of
the Trustee hereunder shall survive until the Notes are no longer outstanding.
Thereafter, only the Company's obligations in Sections 7.07, 8.04, 8.05 and 8.06
shall survive.  If and when a ruling from the Internal Revenue Service or an
Opinion of Counsel referred to in clause (B)(1) of this Section 8.02 is able to
be provided specifically without regard to, and not in reliance upon, the
continuance of the Company's obligations under Section 4.01, then the Company's
obligations under such Section 4.01 shall cease upon delivery to the Trustee of
such ruling or Opinion of Counsel and compliance with the other conditions
precedent provided for herein relating to the defeasance contemplated by this
Section 8.02.

    After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Notes and this Indenture except for those surviving obligations in the
immediately preceding paragraph.

    SECTION 8.03.  Defeasance of Certain Obligations.  The Company may omit to
                   ---------------------------------                          
comply with any term, provision or condition set forth in clauses (iii) and (iv)
of Section 5.01 and Sections 4.03 through 4.11 and clause (c) of Section 6.01
with respect to clauses (iii) and (iv) of Section 5.01, clause (d) of Section
6.01 with respect to Sections 4.01, 4.02 and 4.12 through 4.20 and clauses (e)
and (f) of Section 6.01 shall be deemed not to be Events of Default, in each
case with respect to the outstanding Notes if:
<PAGE>
 
                                      58

     (i)  with reference to this Section 8.03, the Company has irrevocably
   deposited or caused to be irrevocably deposited with the Trustee (or another
   trustee satisfying the requirements of Section 7.10) and conveyed all right,
   title and interest to the Trustee for the benefit of the Holders, under the
   terms of an irrevocable trust agreement in form and substance satisfactory to
   the Trustee as trust funds in trust, specifically pledged to the Trustee for
   the benefit of the Holders as security for payment of the principal of,
   premium, if any, and interest, if any, on the Notes, and dedicated solely to,
   the benefit of the Holders, in and to (A) money in an amount, (B) U.S.
   Government Obligations that, through the payment of interest, premium, if
   any, and principal in respect thereof in accordance with their terms, will
   provide, not later than one day before the due date of any payment referred
   to in this clause (i), money in an amount or (C) a combination thereof in an
   amount sufficient, in the opinion of a nationally recognized firm of
   independent public accountants expressed in a written certification thereof
   delivered to the Trustee, to pay and discharge, without consideration of the
   reinvestment of such interest and after payment of all federal, state and
   local taxes or other charges and assessments in respect thereof payable by
   the Trustee, the principal of, premium, if any, and interest on the
   outstanding Notes on the Stated Maturity of such principal or interest;
   provided that the Trustee shall have been irrevocably instructed to apply
   such money or the proceeds of such U.S. Government Obligations to the payment
   of such principal, premium, if any, and interest with respect to the Notes;

     (ii) the Company has delivered to the Trustee an Opinion of Counsel to the
   effect that (A) the creation of the defeasance trust does not violate the
   Investment Company Act of 1940, (B) after the passage of 123 days following
   the deposit (except, with respect to any trust funds for the account of any
   Holder who may be deemed to be an "insider" for purposes of the United States
   Bankruptcy Code, after one year following the deposit), the trust funds will
   not be subject to the effect of Section 547 of the United States Bankruptcy
   Code or Section 15 of the New York Debtor and Creditor Law in a case
   commenced by or against the Company under either such statute, and either (1)
   the trust funds will no longer remain the property of the Company (and
   therefore will not be subject to the effect of any applicable bankruptcy,
   insolvency, reorganization or similar laws affecting creditors' rights
   generally) or (2) if a court were to rule under any such law in any case or
   proceeding that the trust funds remained property of the Company, (x)
   assuming such trust funds remained in the possession of the Trustee prior to
   such court ruling to the extent not paid to the Holders, the Trustee will
   hold, for the benefit of the Holders, a valid and perfected security interest
   in such trust funds that is not avoidable in bankruptcy or otherwise (except
   for the effect of Section 552(b) of the United States Bankruptcy Code on
   interest on the trust funds accruing after the commencement of a case under
   such statute) and (y) the Holders will be entitled to receive adequate
   protection of their interests in such trust funds if such trust funds are
   used in such case or proceeding, (C) the Holders will not recognize income,
   gain or loss for federal income tax purposes as a result of such deposit and
   defeasance of certain covenants and Events of Default and will be subject to
   federal income tax on the same amount and in the same manner and at the same
   times as would have been the case if such deposit and 
<PAGE>
 
                                      59

   defeasance had not occurred and (D) the Trustee, for the benefit of the
   Holders, has a valid first-priority security interest in the trust funds;

     (iii)  immediately after giving effect to such deposit on a pro forma
   basis, no Default or Event of Default shall have occurred and be continuing
   on the date of such deposit or during the period ending on the 123rd day
   after such date of such deposit, and such deposit shall not result in a
   breach or violation of, or constitute a default under, this Indenture or any
   other agreement or instrument to which the Company or any of its Subsidiaries
   is a party or by which the Company or any of its Subsidiaries is bound;

     (iv)   if the Notes are then listed on a national securities exchange, the
   Company has delivered to the Trustee an Opinion of Counsel to the effect that
   the Notes will not be delisted as a result of such deposit, defeasance and
   discharge; and

     (v)    the Company has delivered to the Trustee an Officers' Certificate
   and an Opinion of Counsel, in each case stating that all conditions precedent
   provided for herein relating to the defeasance contemplated by this Section
   8.03 have been complied with.

   SECTION 8.04.  Application of Trust Money.  Subject to Section 8.06, the
                  --------------------------                               
Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the case may be,
and shall apply the deposited money and the money from U.S. Government
Obligations in accordance with the Notes and this Indenture to the payment of
principal of, premium, if any, and interest on the Notes; but such money need
not be segregated from other funds except to the extent required by law.

   SECTION 8.05.  Repayment to Company.  Subject to Sections 7.07, 8.01, 8.02
                  --------------------                                       
and 8.03, the Trustee and the Paying Agent shall promptly pay to the Company
upon request set forth in an Officers' Certificate any excess money held by them
at any time and thereupon shall be relieved from all liability with respect to
such money.  The Trustee and the Paying Agent shall pay to the Company upon
request any money held by them for the payment of principal, premium, if any, or
interest that remains unclaimed for two years; provided that the Trustee or
Paying Agent before being required to make any payment may cause to be published
at the expense of the Company once in a newspaper of general circulation in The
City of New York or mail to each Holder entitled to such money at such Holder's
address (as set forth in the Security Register) notice that such money remains
unclaimed and that after a date specified therein (which shall be at least 30
days from the date of such publication or mailing) any unclaimed balance of such
money then remaining will be repaid to the Company.  After payment to the
Company, Holders entitled to such money must look to the Company for payment as
general creditors unless an applicable law designates another Person, and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
<PAGE>
 
                                      60

     SECTION 8.06.  Reinstatement.  If the Trustee or Paying Agent is unable to
                    -------------                                              
apply any money or U.S. Government Obligations in accordance with Section 8.01,
8.02 or 8.03, as the case may be, by reason of any legal proceeding or by reason
of any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company's obligations
under this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.01, 8.02 or 8.03, as the case may be,
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or
8.03, as the case may be; provided that, if the Company has made any payment of
principal of, premium, if any, or interest on any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.


                                 ARTICLE NINE
                      AMENDMENTS, SUPPLEMENTS AND WAIVERS

     SECTION 9.01.  Without Consent of Holders.  The Company, when authorized by
                    --------------------------                                  
a resolution of its Board of Directors (as evidenced by a Board Resolution
delivered to the Trustee), and the Trustee may amend or supplement this
Indenture or the Notes without notice to or the consent of any Holder:

     (1) to cure any ambiguity, defect or inconsistency in this Indenture;
   provided that such amendments or supplements shall not, in the good faith
   opinion of the Board of Directors as evidenced by a Board Resolution,
   adversely affect the interests of the Holders in any material respect;

     (2) to comply with Article Five;

     (3) to comply with any requirements of the Commission in connection with
   the qualification of this Indenture under the TIA;

     (4) to evidence and provide for the acceptance of appointment hereunder by
   a successor Trustee;

     (5) to provide for uncertificated Notes in addition to or in place of
   certificated Notes;

     (6) to add one or more subsidiary guarantees on the terms required by this
   Indenture; or
<PAGE>
 
                                      61

     (7) to make any change that, in the good faith opinion of the Board of
   Directors as evidenced by a Board Resolution, does not materially and
   adversely affect the rights of any Holder.

   SECTION 9.02.  With Consent of Holders.  Subject to Sections 6.04 and 6.07
                  -----------------------                                    
and without prior notice to the Holders, the Company, when authorized by its
Board of Directors (as evidenced by a Board Resolution delivered to the
Trustee), and the Trustee may amend this Indenture and the Notes with the
written consent of the Holders of a majority in aggregate principal amount of
the Notes then outstanding, and the Holders of a majority in aggregate principal
amount of the Notes then outstanding by written notice to the Trustee may waive
future compliance by the Company with any provision of this Indenture or the
Notes.

   Notwithstanding the provisions of this Section 9.02, without the consent of
each Holder affected, an amendment or waiver, including a waiver pursuant to
Section 6.04, may not:

     (i)    change the Stated Maturity of the principal of, or any installment
   of interest on, any Note;

     (ii)   reduce the principal amount or Accreted Value of, premium, if any,
   or interest, on any Note;

     (iii)  change the place or currency of payment of principal of, or premium,
   if any, or interest on, any Note;
 
     (iv)   impair the right to institute suit for the enforcement of any
   payment on or after the Stated Maturity (or, in the case of redemption, on or
   after the Redemption Date) on any Note;

     (v)    reduce the above-stated percentage of outstanding Notes the consent
   of whose Holders is necessary to modify or amend this Indenture;

     (vi)   waive a default in the payment of principal of, premium, if any, or
   interest on, the Notes;

     (vii)  reduce the percentage or aggregate principal amount of outstanding
   Notes the consent of whose Holders is necessary for waiver of compliance with
   certain provisions of this Indenture or for waiver of certain defaults; or

     (viii) modify any of the provisions of this Section 9.02, except to
   increase any such percentage or to provide that certain other provisions of
   this Indenture cannot be modified or waived without the consent of the Holder
   of each outstanding Note affected thereby.
<PAGE>
 
                                      62

    It shall not be necessary for the consent of the Holders under this Section
9.02 to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.

    After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver.  The Company will mail
supplemental indentures to Holders upon request. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture or waiver.

    SECTION 9.03.  Revocation and Effect of Consent.  Until an amendment or
                   --------------------------------                        
waiver becomes effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the Note of the consenting Holder, even if notation
of the consent is not made on any Note.  However, any such Holder or subsequent
Holder may revoke the consent as to its Note or portion of its Note.  Such
revocation shall be effective only if the Trustee receives the notice of
revocation before the date the amendment, supplement or waiver becomes
effective.  An amendment, supplement or waiver shall become effective on receipt
by the Trustee of written consents from the Holders of the requisite percentage
in principal amount of the outstanding Notes.

    The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver.  If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those persons who were
Holders at such record date (or their duly designated proxies) and only those
persons shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be Holders after such record date.  No such consent shall be valid or effective
for more than 90 days after such record date.

    After an amendment, supplement or waiver becomes effective, it shall bind
every Holder unless it is of the type described in the second paragraph of
Section 9.02.  In case of an amendment or waiver of the type described in the
second paragraph of Section 9.02, the amendment or waiver shall bind each Holder
who has consented to it and every subsequent Holder of a Note that evidences the
same indebtedness as the Note of the consenting Holder.

    SECTION 9.04.  Notation on or Exchange of Notes.  If an amendment,
                   --------------------------------                   
supplement or waiver changes the terms of a Note, the Trustee may require the
Holder to deliver such Note to the Trustee.  At the Company's expense, the
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder and the Trustee may place an appropriate notation on
any Note thereafter authenticated.  Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate 
<PAGE>
 
                                      63

a new Note that reflects the changed terms. Failure to make the appropriate
notation, or issue a new Note, shall not affect the validity and effect of such
amendment, supplement or waiver.

    SECTION 9.05.  Trustee to Sign Amendments, Etc.  The Trustee shall be
                   -------------------------------                       
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture and that it will be valid and binding upon the Company.  Subject to
the preceding sentence, the Trustee shall sign such amendment, supplement or
waiver if the same does not adversely affect the rights, duties, liabilities or
immunities of the Trustee.  The Trustee may, but shall not be obligated to,
execute any such amendment, supplement or waiver that affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.

    SECTION 9.06.  Conformity with Trust Indenture Act.  Every supplemental
                   -----------------------------------                     
indenture executed pursuant to this Article Nine shall conform to the
requirements of the TIA as then in effect.


                                  ARTICLE TEN
                                 MISCELLANEOUS

    SECTION 10.01.  Trust Indenture Act of 1939.  This Indenture shall be
                    ---------------------------                          
subject to the provisions of the TIA that are required to be a part of this
Indenture and shall, to the extent applicable, be governed by such provisions.

    SECTION 10.02.  Notices.  Any notice or communication shall be sufficiently
                    -------                                                    
given if in writing and delivered in person, mailed by first-class mail or sent
by telecopier transmission addressed as follows:

    if to the Company:
    ----------------- 

        IPC Information Systems, Inc.   
        88 Pine Street                  
        New York, New York  10036       
        Telecopier No.:  (212) 509-7888
        Attention: Chief Financial Officer
<PAGE>
 
                                      64

   if to the Trustee:
   ----------------- 

     United States Trust Company of New York
     114 West 47/th/ Street
     New York, New York 10036
     Telecopier No.: (212) 852-1626
     Attention: Corporate Trust Department

   The Company or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.

   Any notice or communication mailed to a Holder shall be mailed to it at its
address as it appears on the Security Register by first-class mail and shall be
sufficiently given to him if so mailed within the time prescribed.  Any notice
or communication shall also be so mailed to any Person described in TIA Section
313(c), to the extent required by the TIA.  Copies of any such communication or
notice to a Holder shall also be mailed to the Trustee and each Agent at the
same time.

   Failure to mail notice or communication to a Holder as provided herein or any
defect in any such notice or communication shall not affect its sufficiency with
respect to other Holders.  Except for a notice to the Trustee, which is deemed
given only when received, and except as otherwise provided in this Indenture, if
a notice or communication is mailed in the manner provided in this Section
10.02, it is duly given, whether or not the addressee receives it.

   Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.

   In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.

   Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes.  The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA
Section 312(c).

   SECTION 10.03.  Certificate and Opinion as to Conditions Precedent.  Upon
                   --------------------------------------------------       
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
<PAGE>
 
                                      65

     (i)   an Officers' Certificate in form and substance satisfactory to the 
   Trustee stating that, in the opinion of the signers, all conditions
   precedent, if any, provided for in this Indenture relating to the proposed
   action have been complied with; and

     (ii)  an Opinion of Counsel in form and substance satisfactory to the 
   Trustee stating that, in the opinion of such Counsel, all such conditions
   precedent have been complied with; and

     (iii) where applicable, a certificate or opinion by an independent
   certified public accountant satisfactory to the Trustee and complies with TIA
   Section 314(c).

   SECTION 10.04.  Statements Required in Certificate or Opinion.  Each
                   ---------------------------------------------       
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:

     (i)   a statement that each person signing such certificate or opinion has
   read such covenant or condition and the definitions herein relating thereto;

     (ii)  a brief statement as to the nature and scope of the examination or
   investigation upon which the statement or opinion contained in such
   certificate or opinion is based;

     (iii) a statement that, in the opinion of each such person, he has made
   such examination or investigation as is necessary to enable him to express an
   informed opinion as to whether or not such covenant or condition has been
   complied with; and

     (iv)  a statement as to whether or not, in the opinion of each such person,
   such condition or covenant has been complied with; provided, however, that,
   with respect to matters of fact, an Opinion of Counsel may rely on an
   Officers' Certificate or certificates of public officials.

   SECTION 10.05.  Rules by Trustee, Paying Agent or Registrar.  The Trustee
                   -------------------------------------------              
may make reasonable rules for action by or at a meeting of Holders.  The Paying
Agent or Registrar may make reasonable rules for its functions.

   SECTION 10.06.  Payment Date Other Than a Business Day.  If an Interest
                   --------------------------------------                 
Payment Date, Redemption Date, Payment Date, Stated Maturity or date of maturity
of any Note shall not be a Business Day, then payment of principal of, premium,
if any, or interest on such Note, as the case may be, need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Payment Date or Redemption
Date, or at the Stated Maturity or date of maturity of such Note; provided that
no interest shall accrue for the period from and after such Interest Payment
Date, Payment Date, Redemption Date, Stated Maturity or date of maturity, as the
case may be.

   SECTION 10.07.  Governing Law.  This Indenture and the Notes shall be
                   -------------                                        
governed by the laws of the State of New York.  The Trustee, the Company and the
Holders agree to submit to the jurisdiction of the courts of the State of New
York in any action or proceeding arising out of or relating to this Indenture or
the Notes.
<PAGE>
 
                                      66

    SECTION 10.08.  No Adverse Interpretation of Other Agreements.  This
                    ---------------------------------------------       
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or any Subsidiary of the Company.  Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.

    SECTION 10.09.  No Recourse Against Others.  No recourse for the payment of
                    --------------------------                                 
the principal of, premium, if any, or interest on any of the Notes, or for any
claim based thereon or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Company contained in this
Indenture or in any of the Notes, or because of the creation of any Indebtedness
represented thereby, shall be had against any incorporator or against any past,
present or future partner, stockholder, other equity holder, officer, director,
employee or controlling person, as such, of the Company or of any successor
Person, either directly or through the Company or any successor Person, whether
by virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly understood that all
such liability is hereby expressly waived and released as a condition of, and as
a consideration for, the execution of this Indenture and the issue of the Notes.

    SECTION 10.10.  Successors.  All agreements of the Company in this Indenture
                    ----------                                                  
and the Notes shall bind its successors.  All agreements of the Trustee in this
Indenture shall bind its successor.

    SECTION 10.11.  Duplicate Originals.  The parties may sign any number of
                    -------------------                                     
copies of this Indenture.  Each signed copy shall be an original, but all of
them together represent the same agreement.

    SECTION 10.12.  Separability.  In case any provision in this Indenture or in
                    ------------                                                
the Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

    SECTION 10.13.  Table of Contents, Headings, Etc. The Table of Contents,
                    --------------------------------
Cross-Reference Table and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
and provisions hereof.
<PAGE>
 
                                   SIGNATURES

   IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed, all as of the date first written above.


                              IPC INFORMATION SYSTEMS, INC.


                              By:__________________________________________
                                  Name:
                                  Title:

                              UNITED STATES TRUST COMPANY OF NEW YORK


                              By:__________________________________________
                                  Name:
                                  Title:
<PAGE>
 
                                                                       EXHIBIT A
                                                                       ---------

                                [FACE OF NOTE]


          UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

          UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE REGISTERED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER
NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY.


                         IPC Information Systems, Inc.

                       __% Senior Discount Note due 2008

                                                              CUSIP [__________]


No. ____                                                              $_________

     The following information is supplied for purposes of Sections 1273 and
1275 of the Internal Revenue Code:

Issue Date:  [__________], 1998
 
Yield to maturity for period from Issue Date to [__________, 2008: [____]%,
compounded semi-annually on [__________ and _______], commencing [_________,
____](computed without giving effect to the additional payments of interest in
the event the issuer fails to commence the exchange offer or cause the
registration statement to be declared effective, each as described on the
reverse hereof)
<PAGE>
 
                                      A-2
Original issue discount under Section 1273 of the Internal Revenue Code (for
each $1,000 principal amount):   $[_______]

Issue Price (for each $1,000 principal amount):  $[_____]

     IPC Information Systems, Inc., a Delaware corporation (the "Company", which
term includes any successor under the Indenture hereinafter referred to), for
value received, promises to pay to _____________, or its registered assigns, the
principal sum of ____________ ($____) on [________], 2008.

     Interest Payment Dates:  [________] and [________], commencing [________],
2001.

     Regular Record Dates:    [________] and [________].

     Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
<PAGE>
 
                                      A-3

     IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.


Date:  ________, 1998             IPC Information Systems, Inc.


                                  By:______________________________________
                                     Name:
                                     Title:

                                  By:______________________________________
                                     Name:
                                     Title:
 
<PAGE>
 
                                      A-4

                   (Trustee's Certificate of Authentication)

    This is one of the [__]% Senior Discount Notes due 2008 described in the
within-mentioned Indenture.


                                  UNITED STATES TRUST COMPANY OF NEW YORK,
                                      as Trustee

                                  By:_______________________________________
                                     Authorized Signatory
<PAGE>
 
                                      A-5

                            [REVERSE SIDE OF NOTE]

                         IPC Information Systems, Inc.

                      [__]% Senior Discount Note due 2008



1.  Principal and Interest.
    ---------------------- 

     The Company will pay the principal of this Note on [________], 2008.

     The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate per annum
shown above.

     Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the [________] or [________] immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
[________], 2001 provided that no interest shall accrue on the principal amount
of this Note prior to [________, 2001

     Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from [________], 2001;
provided that, if there is no existing default in the payment of interest and
this Note is authenticated between a Regular Record Date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such Interest Payment Date.  Interest will be computed on the basis of a 360-day
year of twelve 30-day months.

     The Company shall pay interest on overdue principal and premium, if any,
and interest on overdue installments of interest, to the extent lawful, at a
rate per annum that is 2% in excess of the rate otherwise payable.

2.  Method of Payment.
    ----------------- 

     The Company will pay interest (except defaulted interest) on the principal
amount of the Notes as provided above on each [________] and [________],
commencing [________], 2001 to the persons who are Holders (as reflected in the
Security Register at the close of business on the [________] or [________]
immediately preceding the Interest Payment Date), in each case, even if the Note
is canceled on registration of transfer or registration of exchange after such
record date; provided that, with respect to the payment of principal, the
Company will make payment to the Holder that surrenders this Note to a Paying
Agent on or after [________,____].
<PAGE>
 
                                      A-6

     The Company will pay principal, premium, if any, and as provided above,
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts.  However, the Company may pay
principal, premium, if any, and interest by its check payable in such money.  It
may mail an interest check to a Holder's registered address (as reflected in the
Security Register).  If a payment date is a date other than a Business Day at a
place of payment, payment may be made at that place on the next succeeding day
that is a Business Day and no interest shall accrue for the intervening period.

3.  Paying Agent and Registrar.
    -------------------------- 

     Initially, the Trustee will act as authenticating agent, Paying Agent and
Registrar.  The Company may change any authenticating agent, Paying Agent or
Registrar without notice.  The Company, any Subsidiary or any Affiliate of any
of them may act as Paying Agent, Registrar or co-Registrar.

4.  Indenture; Limitations.
    ---------------------- 

     The Company issued the Notes under an Indenture dated as of April __, 1998
(the "Indenture"), between the Company and United States Trust Company of New
York, trustee (the "Trustee").  Capitalized terms herein are used as defined in
the Indenture unless otherwise indicated.  The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act.  The Notes are subject to all such terms, and Holders are
referred to the Indenture and the Trust Indenture Act for a statement of all
such terms. To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Note and the terms of the Indenture, the
terms of the Indenture shall control.

     The Notes are general unsecured obligations of the Company.

     The Company may, subject to Article Four of the Indenture and applicable
law, issue additional Notes under the Indenture.

5.  Optional Redemption.
    ------------------- 

     The Notes are redeemable, at the Company's option, in whole or in part, at
any time or from time to time, on or after [________], 2003 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address, as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount at maturity), plus accrued and unpaid interest to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date that is prior to the Redemption Date to receive interest due
on an Interest Payment Date), if redeemed during the 12-month period commencing
[_____] of the years set forth below:
<PAGE>
 
                                      A-7

          Year                     Redemption Price
          ----                     ----------------  
          2003                        [__.___]%
          2004                        [__.___]
          2005                        [__.___]
          2006 and thereafter           100.00%

     In addition, at any time and from time to time prior to [________], 2001,
the Company may redeem up to 35% of the principal amount at maturity of the
Notes with the proceeds of one or more Equity Offerings, at any time or from
time to time in part, at a Redemption Price (expressed as a percentage of
Accreted Value on the Redemption Date) of [___]%, plus accrued and unpaid
interest to the Redemption Date (subject to the rights of Holders of record on
the relevant Regular Record Date that is prior to the Redemption Date to receive
interest due on an Interest Payment Date); provided that (i) Notes representing
65% of the principal amount of notes initially issued remain outstanding after
each such redemption and (ii) notice of such redemption is mailed within 60 days
of the related Equity Offering.

     Notes in original denominations larger than $1,000 may be redeemed in part.
On and after the Redemption Date, interest ceases to accrue on Notes or portions
of Notes called for redemption, unless the Company defaults in the payment of
the Redemption Price.

6.  Repurchase upon Change of Control.
    --------------------------------- 

     Upon the occurrence of any Change of Control, each Holder shall have the
right to require the repurchase of its Notes by the Company in cash pursuant to
the offer described in the Indenture at a purchase price equal to 101% of the
Accreted Value thereof plus accrued and unpaid interest, if any, to the date of
purchase (the "Payment Date").

     A notice of such Change of Control will be mailed within 30 days after any
Change of Control occurs to each Holder at its last address as it appears in the
Security Register.  Notes in original denominations larger than $1,000 may be
sold to the Company in part.  On and after the Payment Date, interest ceases to
accrue and original issue discount ceases to accrete on Notes or portions of
Notes surrendered for purchase by the Company, unless the Company defaults in
the payment of the purchase price.

7.  Denominations; Transfer; Exchange.
    --------------------------------- 

     The Notes are in registered form without coupons in denominations of $1,000
of principal amount at maturity and multiples of $1,000 in excess thereof.  A
Holder may register the transfer or exchange of Notes in accordance with the
Indenture.  The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture.  The Registrar need not register
the transfer or exchange of any Notes selected for redemption.  Also, it need
not register the transfer
<PAGE>
 
                                      A-8

or exchange of any Notes for a period of 15 days before the day of mailing of a
notice of redemption of Notes selected for redemption.

8.  Persons Deemed Owners.
    --------------------- 

     A Holder shall be treated as the owner of a Note for all purposes.

9.  Unclaimed Money.
    --------------- 

     If money for the payment of principal, premium, if any, or interest remains
unclaimed for two years, the Trustee and the Paying Agent will pay the money
back to the Company at its request.  After that, Holders entitled to the money
must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.

10. Discharge Prior to Redemption or Maturity.
    ----------------------------------------- 

     If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to redemption or maturity, the
Company will be discharged from the Indenture and the Notes, except in certain
circumstances for certain provisions thereof, and (b) to the Stated Maturity,
the Company will be discharged from certain covenants set forth in the
Indenture.

11. Amendment; Supplement; Waiver.
    ----------------------------- 

     Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding, and any existing default or compliance
with any provision may be waived with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding. Without notice to or
the consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency and make any change that does not materially and adversely affect
the rights of any Holder.

12. Restrictive Covenants.
    --------------------- 

     The Indenture imposes certain limitations on the ability of the Company and
its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, suffer to exist restrictions on the
ability of Restricted Subsidiaries to make certain payments to the Company,
issue Capital Stock of Restricted Subsidiaries, Guarantee Indebtedness of the
Company, engage in transactions with Affiliates, suffer to exist or incur Liens,
enter into sale-leaseback transactions, use the proceeds from Asset Sales, or
merge, consolidate or transfer substantially all of its assets.  Within 45 days
after the end of each fiscal quarter (90 days after the end of the last
<PAGE>
 
                                      A-9

fiscal quarter of each year), the Company shall deliver to the Trustee an
Officers' Certificate stating whether or not the signers thereof know of any
Default or Event of Default under such restrictive covenants.

13. Successor Persons.
    ----------------- 

     When a successor person or other entity assumes all the obligations of its
predecessor under the Notes and the Indenture, the predecessor person will be
released from those obligations.

14. Defaults and Remedies.
    --------------------- 

     Any of the following events constitutes an "Event of Default" under the
Indenture:  (a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) default in the payment of interest on any Note when
the same becomes due and payable, and such default continues for a period of 30
days; (c) default in the performance or breach of the provisions of Article Five
or the failure to make or consummate an Offer to Purchase in accordance with
Section 4.11 or  Section 4.12; (d) the Company defaults in the performance of or
breaches any other covenant or agreement of the Company in this Indenture or
under the Notes (other than a default specified in clause (a), (b) or (c) above)
and such default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or the Holders of 25% or more in aggregate
principal amount of the Notes; (e) there occurs with respect to any issue or
issues of Indebtedness of the Company or any Significant Subsidiary having an
outstanding principal amount of $5 million or more in the aggregate for all such
issues of all such Persons, whether such Indebtedness now exists or shall
hereafter be created, (I) an event of default that has caused the holder thereof
to declare such Indebtedness to be due and payable prior to its Stated Maturity
and such Indebtedness has not been discharged in full or such acceleration has
not been rescinded or annulled within 30 days of such acceleration and/or (II)
the failure to make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or extended
within 30 days of such payment default; (f) any final judgment or order (not
covered by insurance) for the payment of money in excess of $5 million in the
aggregate for all such final judgments or orders against all such Persons
(treating any deductibles, self-insurance or retention as not so covered) shall
be rendered against the Company or any Significant Subsidiary and shall not be
paid or discharged, and there shall be any period of 30 consecutive days
following entry of the final judgment or order that causes the aggregate amount
for all such final judgments or orders outstanding and not paid or discharged
against all such Persons to exceed $5 million during which a stay of enforcement
of such final judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; (g) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, (B) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Company or any Significant Subsidiary or for all or
<PAGE>
 
                                     A-10

substantially all of the property and assets of the Company or any Significant
Subsidiary or (C) the winding up or liquidation of the affairs of the Company or
any Significant Subsidiary and, in each case, such decree or order shall remain
unstayed and in effect for a period of 60 consecutive days; or (h) the Company
or any Significant Subsidiary (A) commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary case
under any such law, (B) consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any Significant
Subsidiary or (C) effects any general assignment for the benefit of creditors.

     If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee may, and at the direction of the Holders of at least 25%
in aggregate principal amount of the Notes then outstanding shall, declare all
the Notes to be due and payable.  If a bankruptcy or insolvency default with
respect to the Company occurs and is continuing, the Notes automatically become
due and payable.  Holders may not enforce the Indenture or the Notes except as
provided in the Indenture.  The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Notes.  Subject to certain limitations,
Holders of at least a majority in principal amount of the Notes then outstanding
may direct the Trustee in its exercise of any trust or power.

15. Trustee Dealings with the Company.
    --------------------------------- 

     The Trustee under the Indenture, in its individual or any other capacity,
may make loans to, accept deposits from and perform services for the Company or
its Affiliates and may otherwise deal with the Company or its Affiliates as if
it were not the Trustee.

16. No Recourse Against Others.
    -------------------------- 

     No incorporator or any past, present or future partner, stockholder, other
equity holder, officer, director, employee or controlling person, as such, of
the Company or of any successor Person shall have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability.  The
waiver and release are part of the consideration for the issuance of the Notes.

17. Authentication.
    -------------- 

     This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.

18.  Abbreviations.
     ------------- 
<PAGE>
 
                                     A-11

     Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).

     The Company will furnish a copy of the Indenture to any Holder upon written
request and without charge.  Requests may be made to IPC Information Systems,
Inc., 88 Pine Street, New York, New York  10005; Attention: Chief Financial
Officer.
<PAGE>
 
                                     A-12

                                ASSIGNMENT FORM


I or we assign and transfer this Note to:
- ---------------------------------------- 


Please insert social security or other identifying number of assignee
- ---------------------------------------------------------------------


________________________________

________________________________


Print or type name, address and zip code of assignee and irrevocably appoint
_______________________________________, as agent, to transfer this Note on the
books of the Company.

The agent may substitute another to act for him.

Dated _______________________________________________________

 Signed ___________________________________________________________
(Sign exactly as name appears on the other side of this Note)


Signature Guarantee __________________________________
<PAGE>
 
                                     A-13

                      OPTION OF HOLDER TO ELECT PURCHASE

          If you wish to have this Note purchased by the Company pursuant to
Section 4.11 or Section 4.12 of the Indenture, as applicable, check the Box: [_]

          If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.11 or Section 4.12 of the Indenture, as applicable, state
the amount to be purchased (in principal amount at maturity):


                     $______________________________________________.


Date:  ____________________________________________


 Signed ___________________________________________________________
(Sign exactly as name appears on the other side of this Note)


Signature Guarantee _________________________________________

<PAGE>
 
                                                                     EXHIBIT 4.2



                          FORM OF SENIOR DISCOUNT NOTE
                                        

                                 [FACE OF NOTE]


          UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

          UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE REGISTERED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER
NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY.


                         IPC Information Systems, Inc.

                       __% Senior Discount Note due 2008

                                                              CUSIP [__________]


No. ____                                                             $_________

     The following information is supplied for purposes of Sections 1273 and
1275 of the Internal Revenue Code:

Issue Date:  [__________],1998                    be declared effective, each 
                                                  as described on the reverse 
                                                  hereof)
Yield to maturity for period from Issue
Date to [__________,2008:  [____]%,
compounded semi-annually on [__________
and _______], commencing [_________,
____](computed without giving effect to the
additional payments of interest in the event
the issuer fails to commence the exchange
offer or cause the registration statement to

<PAGE>
 
Original issue discount under 
Section 1273 of the Internal 
Revenue Code (for each $1,000
principal amount):   $[_______]

Issue Price (for each $1,000 
principal amount):  $[_____]

     IPC Information Systems, Inc., a Delaware corporation (the "Company", which
term includes any successor under the Indenture hereinafter referred to), for
value received, promises to pay to _____________, or its registered assigns, the
principal sum of ____________ ($____) on [________], 2008.

     Interest Payment Dates:  [________] and [________], commencing [________],
2001.

     Regular Record Dates:    [________] and [________].

     Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
<PAGE>
 
     IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.


Date:  ________,1998                  IPC Information Systems, Inc.


                                      By: _______________________________
                                          Name:
                                          Title:



                                      IPC Information Systems, Inc.


                                      By: _______________________________
                                          Name:
                                          Title:
<PAGE>
 
                   (Trustee's Certificate of Authentication)

This is one of the [__]% Senior Discount Notes due 2008 described in the within-
mentioned Indenture.


                                  UNITED STATES TRUST COMPANY OF        
                                      NEW YORK,
                                      as Trustee

                                  By: _________________________________
                                            Authorized Signatory
<PAGE>
 
                             [REVERSE SIDE OF NOTE]

                         IPC Information Systems, Inc.

                      [__]% Senior Discount Note due 2008



1.  Principal and Interest.
    ---------------------- 

     The Company will pay the principal of this Note on [________], 2008.

     The Company promises to pay interest on the principal amount of this Note
on each Interest Payment Date, as set forth below, at the rate per annum shown
above.

     Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the [________] or [________] immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
[________], 2001 provided that no interest shall accrue on the principal amount
of this Note prior to [________, 2001

     Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from [________], 2001;
provided that, if there is no existing default in the payment of interest and
this Note is authenticated between a Regular Record Date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such Interest Payment Date.  Interest will be computed on the basis of a 360-day
year of twelve 30-day months.

     The Company shall pay interest on overdue principal and premium, if any,
and interest on overdue installments of interest, to the extent lawful, at a
rate per annum that is 2% in excess of the rate otherwise payable.

2.  Method of Payment.
    ----------------- 

     The Company will pay interest (except defaulted interest) on the principal
amount of the Notes as provided above on each [________] and [________],
commencing [________], 2001 to the persons who are Holders (as reflected in the
Security Register at the close of business on the [________] or [________]
immediately preceding the Interest Payment Date), in each case, even if the Note
is canceled on registration of transfer or registration of exchange after such
record date; provided that, with respect to the payment of principal, the
Company will make payment to the Holder that surrenders this Note to a Paying
Agent on or after [________,____].

     The Company will pay principal, premium, if any, and as provided above,
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts.  However, the Company may pay
principal, premium, if any, and interest 
<PAGE>
 
by its check payable in such money. It may mail an interest check to a Holder's
registered address (as reflected in the Security Register). If a payment date is
a date other than a Business Day at a place of payment, payment may be made at
that place on the next succeeding day that is a Business Day and no interest
shall accrue for the intervening period.

3.  Paying Agent and Registrar.
    -------------------------- 

     Initially, the Trustee will act as authenticating agent, Paying Agent and
Registrar.  The Company may change any authenticating agent, Paying Agent or
Registrar without notice. The Company, any Subsidiary or any Affiliate of any of
them may act as Paying Agent, Registrar or co-Registrar.

4.  Indenture; Limitations.
    ---------------------- 

     The Company issued the Notes under an Indenture dated as of April __, 1998
(the "Indenture"), between the Company and United States Trust Company of New
York, trustee (the "Trustee").  Capitalized terms herein are used as defined in
the Indenture unless otherwise indicated.  The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act.  The Notes are subject to all such terms, and Holders are
referred to the Indenture and the Trust Indenture Act for a statement of all
such terms.  To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Note and the terms of the Indenture, the
terms of the Indenture shall control.

     The Notes are general unsecured obligations of the Company.

     The Company may, subject to Article Four of the Indenture and applicable
law, issue additional Notes under the Indenture.

5.  Optional Redemption.
    ------------------- 

     The Notes are redeemable, at the Company's option, in whole or in part, at
any time or from time to time, on or after [________], 2003 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address, as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount at maturity), plus accrued and unpaid interest to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date that is prior to the Redemption Date to receive interest due
on an Interest Payment Date), if redeemed during the 12-month period commencing
[_____] of the years set forth below:


           Year                     Redemption Price 
           ----                     ---------------- 
      2003.................            [__.___]%        
      2004.................            [__.___]         
      2005.................            [__.___]         

<PAGE>
 
       2006 and thereafter..            100.00%           

     In addition, at any time and from time to time prior to [________], 2001,
the Company may redeem up to 35% of the principal amount at maturity of the
Notes with the proceeds of one or more Equity Offerings, at any time or from
time to time in part, at a Redemption Price (expressed as a percentage of
Accreted Value on the Redemption Date) of [___]%, plus accrued and unpaid
interest to the Redemption Date (subject to the rights of Holders of record on
the relevant Regular Record Date that is prior to the Redemption Date to receive
interest due on an Interest Payment Date); provided that (i) Notes representing
65% of the principal amount of notes initially issued remain outstanding after
each such redemption and (ii) notice of such redemption is mailed within 60 days
of the related Equity Offering.

     Notes in original denominations larger than $1,000 may be redeemed in part.
On and after the Redemption Date, interest ceases to accrue on Notes or portions
of Notes called for redemption, unless the Company defaults in the payment of
the Redemption Price.

6.  Repurchase upon Change of Control.
    --------------------------------- 

     Upon the occurrence of any Change of Control, each Holder shall have the
right to require the repurchase of its Notes by the Company in cash pursuant to
the offer described in the Indenture at a purchase price equal to 101% of the
Accreted Value thereof plus accrued and unpaid interest, if any, to the date of
purchase (the "Payment Date").

     A notice of such Change of Control will be mailed within 30 days after any
Change of Control occurs to each Holder at its last address as it appears in the
Security Register.  Notes in original denominations larger than $1,000 may be
sold to the Company in part.  On and after the Payment Date, interest ceases to
accrue and original issue discount ceases to accrete on Notes or portions of
Notes surrendered for purchase by the Company, unless the Company defaults in
the payment of the purchase price.

7.  Denominations; Transfer; Exchange.
    --------------------------------- 

     The Notes are in registered form without coupons in denominations of $1,000
of principal amount at maturity and multiples of $1,000 in excess thereof.  A
Holder may register the transfer or exchange of Notes in accordance with the
Indenture.  The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture.  The Registrar need not register
the transfer or exchange of any Notes selected for redemption.  Also, it need
not register the transfer or exchange of any Notes for a period of 15 days
before the day of mailing of a notice of redemption of Notes selected for
redemption.
<PAGE>
 
8.  Persons Deemed Owners.
    --------------------- 

     A Holder shall be treated as the owner of a Note for all purposes.

9.  Unclaimed Money.
    --------------- 

     If money for the payment of principal, premium, if any, or interest remains
unclaimed for two years, the Trustee and the Paying Agent will pay the money
back to the Company at its request.  After that, Holders entitled to the money
must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.

10. Discharge Prior to Redemption or Maturity.
    ----------------------------------------- 

     If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to redemption or maturity, the
Company will be discharged from the Indenture and the Notes, except in certain
circumstances for certain provisions thereof, and (b) to the Stated Maturity,
the Company will be discharged from certain covenants set forth in the
Indenture.

11. Amendment; Supplement; Waiver.
    ----------------------------- 

     Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding, and any existing default or compliance
with any provision may be waived with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding.  Without notice to
or the consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency and make any change that does not materially and adversely affect
the rights of any Holder.

12. Restrictive Covenants.
    --------------------- 

     The Indenture imposes certain limitations on the ability of the Company and
its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, suffer to exist restrictions on the
ability of Restricted Subsidiaries to make certain payments to the Company,
issue Capital Stock of Restricted Subsidiaries, Guarantee Indebtedness of the
Company, engage in transactions with Affiliates, suffer to exist or incur Liens,
enter into sale-leaseback transactions, use the proceeds from Asset Sales, or
merge, consolidate or transfer substantially all of its assets.  Within 45 days
after the end of each fiscal quarter (90 days after the end of the last fiscal
quarter of each year), the Company shall deliver to the Trustee an Officers'
Certificate stating whether or not the signers thereof know of any Default or
Event of Default under such restrictive covenants.
<PAGE>
 
13. Successor Persons.
    ----------------- 

     When a successor person or other entity assumes all the obligations of its
predecessor under the Notes and the Indenture, the predecessor person will be
released from those obligations.

14. Defaults and Remedies.
    --------------------- 

     Any of the following events constitutes an "Event of Default" under the
Indenture:  (a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) default in the payment of interest on any Note when
the same becomes due and payable, and such default continues for a period of 30
days; (c) default in the performance or breach of the provisions of Article Five
or the failure to make or consummate an Offer to Purchase in accordance with
Section 4.11 or  Section 4.12; (d) the Company defaults in the performance of or
breaches any other covenant or agreement of the Company in this Indenture or
under the Notes (other than a default specified in clause (a), (b) or (c) above)
and such default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or the Holders of 25% or more in aggregate
principal amount of the Notes; (e) there occurs with respect to any issue or
issues of Indebtedness of the Company or any Significant Subsidiary having an
outstanding principal amount of $5 million or more in the aggregate for all such
issues of all such Persons, whether such Indebtedness now exists or shall
hereafter be created, (I) an event of default that has caused the holder thereof
to declare such Indebtedness to be due and payable prior to its Stated Maturity
and such Indebtedness has not been discharged in full or such acceleration has
not been rescinded or annulled within 30 days of such acceleration and/or (II)
the failure to make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or extended
within 30 days of such payment default; (f) any final judgment or order (not
covered by insurance) for the payment of money in excess of $5 million in the
aggregate for all such final judgments or orders against all such Persons
(treating any deductibles, self-insurance or retention as not so covered) shall
be rendered against the Company or any Significant Subsidiary and shall not be
paid or discharged, and there shall be any period of 30 consecutive days
following entry of the final judgment or order that causes the aggregate amount
for all such final judgments or orders outstanding and not paid or discharged
against all such Persons to exceed $5 million during which a stay of enforcement
of such final judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; (g) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, (B) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Company or any Significant Subsidiary or for all or substantially all of the
property and assets of the Company or any Significant Subsidiary or (C) the
winding up or liquidation of the affairs of the Company or any Significant
Subsidiary and, in each case, such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or (h) the Company or any
Significant Subsidiary (A) commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or 
<PAGE>
 
hereafter in effect, or consents to the entry of an order for relief in an
involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the benefit of
creditors.

     If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee may, and at the direction of the Holders of at least 25%
in aggregate principal amount of the Notes then outstanding shall, declare all
the Notes to be due and payable.  If a bankruptcy or insolvency default with
respect to the Company occurs and is continuing, the Notes automatically become
due and payable.  Holders may not enforce the Indenture or the Notes except as
provided in the Indenture.  The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Notes.  Subject to certain limitations,
Holders of at least a majority in principal amount of the Notes then outstanding
may direct the Trustee in its exercise of any trust or power.

15. Trustee Dealings with the Company.
    --------------------------------- 

     The Trustee under the Indenture, in its individual or any other capacity,
may make loans to, accept deposits from and perform services for the Company or
its Affiliates and may otherwise deal with the Company or its Affiliates as if
it were not the Trustee.

16. No Recourse Against Others.
    -------------------------- 

     No incorporator or any past, present or future partner, stockholder, other
equity holder, officer, director, employee or controlling person, as such, of
the Company or of any successor Person shall have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability.  The
waiver and release are part of the consideration for the issuance of the Notes.

17. Authentication.
    -------------- 

     This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.

18. Abbreviations.
    ------------- 

     Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).
<PAGE>
 
     The Company will furnish a copy of the Indenture to any Holder upon written
request and without charge.  Requests may be made to IPC Information Systems,
Inc., 88 Pine Street, New York, New York  10005; Attention: Chief Financial
Officer.
<PAGE>
 
                                ASSIGNMENT FORM


I or we assign and transfer this Note to:
- ---------------------------------------- 


Please insert social security or other identifying number of assignee
- ---------------------------------------------------------------------


_____________________________________

_____________________________________


Print or type name, address and zip code of assignee and irrevocably appoint
_______________________________________, as agent, to transfer this Note on the
books of the Company.

The agent may substitute another to act for him.

Dated _______________________________

 Signed __________________________________________________________
(Sign exactly as name appears on the other side of this Note)


Signature Guarantee _________________
<PAGE>
 
                      OPTION OF HOLDER TO ELECT PURCHASE


          If you wish to have this Note purchased by the Company pursuant to
Section 4.11 or Section 4.12 of the Indenture, as applicable, check the Box: [_]

          If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.11 or Section 4.12 of the Indenture, as applicable, state
the amount to be purchased (in principal amount at maturity):


                       $______________________________.


Date:  ________________________


 Signed _____________________________________________________
(Sign exactly as name appears on the other side of this Note)


Signature Guarantee _________________


<PAGE>
 
                                                                       EXHIBIT 5




                                                                   ________,1998


IPC Information Systems, Inc.
Wall Street Plaza 
88 Pine Street
New York, New York 10005


Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036


Goldman, Sachs & Co.
One New York Plaza
New York, New York 10004


        Re:     IPC Information Systems, Inc.
                Senior Discount Notes due 2008
                Registration Statement on Form S-3
                ----------------------------------

Ladies and Gentlemen:

        We have acted as counsel for IPC Information Systems, Inc., a Delaware 
corporation (the "Company"), in connection with the preparation and filing by 
the Company with the Securities and Exchange Commission (the "Commission") of a 
Registration Statement on form S-3 (the "Registration Statement") under the 
Securities Act of 1933, as amended (the "Securities Act"), relating to the 
issuance by the Company of $___________ aggregate principal amount at maturity 
($180,000,000 initial accreted value) of its Senior Discount Notes due 2008 
(the "Notes"). The Notes are issuable under the Indenture, dated as of 
April _____, 1998 (the "Indenture"), between the Company and United States Trust
Company of New York, as indenture trustee (the "Indenture Trustee"). The 
Indenture is substantially in the form filed as an Exhibit to the Registration 
Statement. The Notes will be purchased pursuant to an Underwriting Agreement 
dated as of April ____, 1998 (the "Underwriting Agreement") between the Company 
and certain underwriters named therein (the "Underwriters"). The Underwriting 
Agreement is substantially in the form filed as an Exhibit to the Registration 
Statement. This opinion is rendered pursuant to Item 601(S) of Regulation S-K 
promulgated by the Securities and Exchange Commission.

        In connection with rendering this opinion letter, we have examined the 
Indenture and the Underwriting Agreement, each as set forth as an Exhibit to the
Registration Statement, the Registration Statement and such other documents as 
we have deemed necessary. As to matters of fact, we have examined and relied 
upon representations or certifications of officers of the Company or public 
officials. We have
<PAGE>
 
IPC Information Systems, Inc.
April   , 1998                                                           Page 2.


assumed the legal capacity of all natural persons and the genuineness of all 
signatures. We have assumed the authenticity of all documents submitted to us as
originals and the conformity to the originals of all documents submitted to us 
as copies. We have assumed that all parties, other than the Company, had the 
corporate power and authority to enter into and perform all obligations 
thereunder. As to such parties, we have also assumed the due authorization by 
all requisite corporate action, the due execution and delivery and the validity,
binding effect and enforceability of such documents.

        In rendering this opinion letter, we express no opinion as to the laws 
of any jurisdiction other than the federal laws of the United States, the laws 
of the State of New York, and the corporate laws of the State of Delaware, nor 
do we express any opinion on any issue not expressly addressed below.

        Based upon and subject to the foregoing, we are of the opinion that the
Notes have been duly authorized and, when executed and authenticated in
accordance with the provisions of the Indenture and delivered to and paid for by
the Underwriters in accordance with the terms of the Underwriting Agreement,
will be entitled to the benefits of the Indenture under the laws of the State of
New York and will be valid and binding obligations of the Company, enforceable
in accordance with their terms, subject to the effects of bankruptcy,
insolvency, receivership, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.

        We hereby consent to the filing of this opinion letter as an Exhibit to 
the Registration Statement, and to the use of our name in the prospectus 
included in the Registration Statement under the heading "Legal Matters."

                                          Very truly yours,


                                          THACHER PROFFITT & WOOD

<PAGE>
 
                                                                      EXHIBIT 10

                                                                       S&S DRAFT
                                                                         4/17/98



                                  $75,000,000



                                CREDIT AGREEMENT



                           Dated as of April __, 1998



                                     Among



                         IPC INFORMATION SYSTEMS, INC.



                               as Parent Borrower
                               -- ---------------



                                      and



                               IPC FUNDING CORP.



                                as Sub Borrower
                                -- --- --------



                                      and



                THE INITIAL LENDERS AND THE INITIAL ISSUING BANK

                                  NAMED HEREIN



                  as Initial Lenders and Initial Issuing Bank
                  -- ------- ------- --- ------- ------- ----



                                      and



                      MORGAN STANLEY SENIOR FUNDING, INC.



            as Administrative Agent, Syndication Agent and Arranger
            -- -------------- -----  ----------- ----- --- --------



                                      and



                       GOLDMAN SACHS CREDIT PARTNERS L.P.



                             as Documentation Agent
                             -- ------------- -----
<PAGE>

                               T A B L E   O F   C O N T E N T S

<TABLE>
<CAPTION>

        Section                                                                           Page
<S>                                                                                       <C> 
                                          ARTICLE I

                               DEFINITIONS AND ACCOUNTING TERMS

        1.01.  Certain Defined Terms.........................................................2
        1.02.  Computation of Time Periods..................................................25
        1.03.  Accounting Terms.............................................................25

                                          ARTICLE II

                                AMOUNTS AND TERMS OF THE ADVANCES
                                   AND THE LETTERS OF CREDIT

        2.01.  The Advances and Letters of Credit...........................................25
        2.02.  Making the Advances..........................................................26
        2.03.  Issuance of and Drawings and Reimbursement Under Letters of Credit...........27
        2.04.  Repayment of Advances........................................................28
        2.05.  Termination or Reduction of the Commitments..................................29
        2.06.  Prepayments..................................................................30
        2.07.  Interest.....................................................................31
        2.08.  Fees.........................................................................32
        2.09.  Conversion of Advances.......................................................33
        2.10.  Increased Costs, Etc.........................................................33
        2.11.  Payments and Computations....................................................35
        2.12.  Taxes........................................................................36
        2.13.  Sharing of Payments, Etc.....................................................38
        2.14.  Use of Proceeds..............................................................38
        2.15.  Defaulting Lenders...........................................................38

                                         ARTICLE III

                                    CONDITIONS OF LENDING

        3.01.  Conditions Precedent to Initial Extension of Credit..........................41
        3.02.  Conditions Precedent to Each Borrowing and Issuance..........................47
        3.03.  Determinations Under Section 3.01............................................48

                                          ARTICLE IV

                                REPRESENTATIONS AND WARRANTIES

        4.01.  Representations and Warranties of the Borrowers..............................48
</TABLE>
<PAGE>
 
                                      ii

<TABLE>
<CAPTION>
        Section                                                                           Page
<S>                                                                                       <C> 
                                          ARTICLE V

                                  COVENANTS OF THE BORROWERS

        5.01.  Affirmative Covenants........................................................54
        5.02.  Negative Covenants...........................................................61
        5.03.  Reporting Requirements.......................................................68
        5.04.  Financial Covenants..........................................................72

                                          ARTICLE VI

                                      EVENTS OF DEFAULT

        6.01.  Events of Default............................................................73
        6.02.  Actions in Respect of the Letters of Credit upon Default.....................75

                                         ARTICLE VII

                                          THE AGENTS

        7.01.  Authorization and Action.....................................................76
        7.02.  Agents' Reliance, Etc........................................................76
        7.03.  Goldman Sachs, MSSF and Affiliates...........................................77
        7.04.  Lender Party Credit Decision.................................................77
        7.05.  Indemnification..............................................................77
        7.06.  Successor Administrative Agents..............................................78

                                         ARTICLE VIII

                                        MISCELLANEOUS

        8.01.  Amendments, Etc..............................................................79
        8.02.  Notices, Etc.................................................................80
        8.03.  No Waiver; Remedies..........................................................80
        8.04.  Costs and Expenses...........................................................80
        8.05.  Right of Setoff..............................................................82
        8.06.  Binding Effect...............................................................82
        8.07.  Assignments and Participations...............................................82
        8.08.  Execution in Counterparts....................................................85
        8.09.  No Liability of the Issuing Bank.............................................85
        8.10.  Confidentiality..............................................................85
        8.11.  Release of Collateral........................................................86
        8.12.  Jurisdiction, Etc............................................................86
        8.13.  Governing Law................................................................87
        8.14.  Waiver of Jury Trial.........................................................88
</TABLE>
<PAGE>
 
SCHEDULES
- ---------

Schedule I            -   Commitments and Applicable Lending Offices
Schedule II           -   Guarantors
Schedule III          -   Excluded Subsidiaries
Schedule 4.01(a)      -   Stock Ownership
Schedule 4.01(b)      -   Subsidiaries
Schedule 4.01(d)      -   Approvals
Schedule 4.01(m)      -   Plans
Schedule 4.01(z)      -   Open Years
Schedule 4.01(aa)     -   Income Tax Adjustments
Schedule 4.01(ff)     -   Existing Debt
Schedule 4.01(gg)     -   Surviving Debt
Schedule 4.01(hh)     -   Owned Real Property
Schedule 4.01(ii)     -   Material Contracts
Schedule 4.01(jj)     -   Investments
Schedule 4.01(kk)     -   Intellectual Property
Schedule 5.02(a)      -   Existing Liens
Schedule 5.02(g)      -   Sales of Stock to Equity Investors


EXHIBITS
- --------

Exhibit A-1           -   Form of Working Capital Note of Parent Borrower
Exhibit A-2           -   Form of Working Capital Note of Sub Borrower
Exhibit B             -   Form of Notice of Borrowing
Exhibit C             -   Form of Assignment and Acceptance
Exhibit D             -   Form of Security Agreement
Exhibit E-1           -   Form of Domestic Guaranty
Exhibit E-2           -   Form of Foreign Guaranty
Exhibit F             -   Form of Opinion of Counsel to the Loan Parties
Exhibit G-1           -   Form of Solvency Certificate
Exhibit G-2           -   Form of Solvency Opinion
Exhibit H             -   Form of Borrowing Base Certificate
Exhibit I-1           -   Form of U.K. Intercompany Note
Exhibit I-2           -   Form of Loan Party Intercompany Note
Exhibit J             -   Form of Administrative Agency Agreement
<PAGE>
 
                                CREDIT AGREEMENT



     CREDIT AGREEMENT dated as of April __, 1998 among IPC INFORMATION SYSTEMS,
INC., a Delaware corporation (the "Parent Borrower"), IPC FUNDING CORP., a
                                   ---------------                        
Delaware corporation (the "Sub Borrower" and, together with the Parent Borrower,
                           ------------                                         
the "Borrowers"), the banks, financial institutions and other institutional
     ---------                                                             
lenders listed on the signature pages hereof as the initial lenders (the
"Initial Lenders"), [____________________________], as the initial issuing bank
- ----------------                                                               
(the "Initial Issuing Bank"), MORGAN STANLEY SENIOR FUNDING, INC. ("MSSF"), as
      --------------------                                          ----      
syndication agent and arranger (together with any successor appointed pursuant
to Article VII, the "Syndication Agent"), GOLDMAN SACHS CREDIT PARTNERS L.P.
                     -----------------                                      
("Goldman Sachs"), as documentation agent (together with any successor appointed
- ---------------                                                                 
pursuant to Article VII, the "Documentation Agent"), and MSSF, as administrative
                              -------------------                               
agent (together with any successor appointed pursuant to Article VII, the
"Administrative Agent", and, together with the Syndication Agent and the
- ---------------------                                                   
Documentation Agent, the "Agents") for the Lender Parties (as hereinafter
                          ------                                         
defined).



PRELIMINARY STATEMENTS:

     (1) Pursuant to an Amended and Restated Agreement and Plan of Merger dated
as of December 18, 1997 (as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms, to the extent permitted
in accordance with the Loan Documents (as hereinafter defined), the "Merger
                                                                     ------
Agreement") between the Parent Borrower and Arizona Acquisition Corp., a
- ---------                                                               
Delaware corporation ("AAC"), AAC is merging into the Parent Borrower (the
                       ---                                                
"Merger").
- -------   

     (2) Simultaneously in connection therewith and to finance the Merger in
part, the Parent Borrower is issuing up to $180,000,000 in principal amount of
___% senior unsecured notes (as the same may be amended, supplemented or
otherwise modified from time to time, to the extent permitted in accordance with
the Loan Documents, the "Senior Notes") pursuant to the Senior Notes Indenture
                         ------------                                         
(as hereinafter defined).

     (3) In connection with the Merger, [Citicorp Venture Capital, Ltd., a New
York corporation ("CVC"), Cable Systems International, Inc., a Delaware
                   ---                                                 
corporation ("CSI"), and Lawrence, Smith & Horey III, L.P. ("LSH" and, together
              ---                                            ---               
with CVC and CSI, the "Equity Investors") are making a common equity
                       ----------------                             
contribution to AAC of at least $43,200,000 and up to $72,000,000 in exchange
for between 2,057,143 and 3,428,572 shares of common stock of the Parent
Borrower (the "Equity Investment")].
               -----------------    

     (4) Concurrently with the consummation of the Merger, the Parent Borrower
will acquire all of the shares of common stock of International Exchange
Networks, Inc., a Delaware corporation ("IXnet"), not already owned by the
                                         -----                            
Parent Borrower in exchange for common stock of the Parent Borrower (the "Share
                                                                          -----
Exchange" and, together with the Merger, the Equity Investment, the issuance of
- --------                                                                       
the Senior Notes and the other transactions contemplated by the Loan Documents
and the Related Documents (as hereinafter defined), the "Transaction") pursuant
                                                         -----------           
to the Share Exchange and Termination Agreement (as hereinafter defined).

     (5) The Borrowers have requested that the Lender Parties make available a
$75,000,000 five-year secured revolving credit facility, which will be used (i)
to refinance Existing Debt (as hereinafter defined) of the Parent Borrower and
(ii) for other general corporate purposes of the Parent Borrower and its
Subsidiaries (as hereinafter defined).  The Lender Parties have indicated their
willingness to agree to lend such amounts on the terms and conditions of this
Agreement.
<PAGE>
 
                                       2


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

                                   ARTICLE I

                       DEFINITIONS AND ACCOUNTING TERMS

     SECTION  1.01.  Certain Defined Terms.  As used in this Agreement, the
                     ---------------------                                 
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):

          "AAC" has the meaning specified in the Preliminary Statements.
           ---                                                          

          "Administrative Agency Agreement" has the meaning specified in Section
           -------------------------------                                      
     3.01(m)(ix).

          "Administrative Agent" has the meaning specified in the recital of
           --------------------                                             
     parties to this Agreement.

          "Administrative Agent's Account" means the account of the
           ------------------------------                          
     Administrative Agent maintained by the Administrative Agent with [____] at
     its office at ____________________, New York, New York _____, Account No.
     __________, Attention:  _______________.

          "Administrative Agent's Fee Letter" means a letter dated April ___,
           ---------------------------------                                 
     1998 from the Administrative Agent to the Parent Borrower regarding, among
     other things, the fees to be paid by the Parent Borrower to the
     Administrative Agent in connection with the rendering of services by the
     Administrative Agent pursuant to this Agreement, as such letter may be
     amended, supplemented or otherwise modified from time to time.

          "Advance" means a Working Capital Advance or a Letter of Credit
           -------                                                       
     Advance.

          "Affiliate" means, as to any Person, any other Person that, directly
           ---------                                                          
     or indirectly, controls, is controlled by or is under common control with
     such Person or is a director or officer of such Person.  For purposes of
     this definition, the term "control" (including the terms "controlled by"
     and "under common control with") of a Person means the possession, direct
     or indirect, of the power to vote 10% or more of the Voting Stock of such
     Person or to direct or cause the direction of the management and policies
     of such Person, whether through the ownership of Voting Stock, by contract
     or otherwise.

          "Agents" has the meaning specified in the recital of parties to this
           ------                                                             
     Agreement.





          "Agreement Value" means, for any Hedge Agreement on any date of
           ---------------                                               
     determination, an amount equal to the greater of (a) the amount, if any,
     that would be payable by any Loan Party or any of its Subsidiaries in
     respect of "agreement value" as though such Hedge Agreement were terminated
     on such date, calculated as provided in the International Swap Dealers
     Association Inc. Code of Standard Wording, Assumptions and Provisions for
     Swaps, 1992 Edition, and (b) mark-to-market, in which the unrealized gain
     (or loss) on such Hedge Agreement is calculated as the amount by which the
     present value of the future cash flows to be received exceeds (or is less
     than) the present value of the future cash flows to be paid pursuant to
     such Hedge Agreement.
<PAGE>
 
                                       3

          "Applicable Lending Office" means, with respect to each Lender Party,
           -------------------------                                           
     such Lender Party's Domestic Lending Office in the case of a Base Rate
     Advance and such Lender Party's Eurodollar Lending Office in the case of a
     Eurodollar Rate Advance.

          "Applicable Margin" means (a) during the period from the date hereof
           -----------------                                                  
     until the date that is 6 months after the date hereof, 1.50% per annum for
     Base Rate Advances and 2.50% per annum for Eurodollar Rate Advances, and
     (b) thereafter, a percentage per annum determined by reference to the
     Leverage Ratio as follows:


<TABLE>
<CAPTION>
   Level     Base Rate Advances   Eurodollar Rate Advances
- ----------------------------------------------------------
<S>          <C>                  <C>
Level I            1.50%                      2.50%
- ---------------------------------------------------------- 
Level II           1.50%                      2.25%
- ---------------------------------------------------------- 
Level III          1.50%                      2.00%
- ---------------------------------------------------------- 
Level IV           1.50%                      1.75%
- ---------------------------------------------------------- 
Level V            1.50%                      1.50%
- ---------------------------------------------------------- 
</TABLE>


     The Applicable Margin for each Base Rate Advance shall be determined by
     reference to the Leverage Ratio in effect from time to time and the
     Applicable Margin for each Eurodollar Rate Advance shall be determined by
     reference to the Leverage Ratio in effect on the first day of each Interest
     Period for such Advance; provided, however, that (A) (x) no change in the
                              --------  -------                               
     Applicable Margin shall be effective until three Business Days after the
     date on which the Administrative Agent receives the financial statements
     required to be delivered pursuant to Section 5.03(b) or (c) and a
     certificate of the chief financial officer of the Parent Borrower
     demonstrating such ratio and (y) not more than one decrease in the
     Applicable Margin shall occur in any three-month period and (B) the
     Applicable Margin shall be at Level I for so long as the Parent Borrower
     has not submitted to the Administrative Agent the information described in
     clause (A)(x) of this proviso as and when required under Section 5.03(b) or
     (c), as the case may be.

          "Assignment and Acceptance" means an assignment and acceptance entered
           -------------------------                                            
     into by a Lender Party and an Eligible Assignee, and accepted by the
     Administrative Agent, in accordance with Section 8.07 and in substantially
     the form of Exhibit C hereto.

          "Available Amount" of any Letter of Credit means, at any time, the
           ----------------                                                 
     maximum amount available to be drawn under such Letter of Credit at such
     time (assuming compliance at such time with all conditions to drawing).

          "Base Rate" means a fluctuating interest rate per annum in effect from
           ---------                                                            
     time to time, which rate per annum shall at all times be equal to the
     higher of:

               (a) the rate of interest announced publicly by Citibank at its
     head office in New York, from time to time, as the base rate of Citibank;
     and

               (b) 1/2 of 1% per annum above the Federal Funds Rate.

          "Base Rate Advance" means an Advance that bears interest as provided
           -----------------                                                  
     in Section 2.07(a)(i).
<PAGE>
 
                                       4


          "BBA" means the British Bankers Association.
           ---                                        

          "Borrowers" has the meaning specified in the recital of parties to
           ---------                                                        
     this Agreement.

          "Borrowing" means a borrowing consisting of simultaneous Advances of
           ---------                                                          
     the same Type made by the Lenders.

          "Borrowing Base Certificate" means a certificate in substantially the
           --------------------------                                          
     form of Exhibit H hereto, duly certified by the chief financial officer of
     the Parent Borrower.

          "Business Day" means a day of the year on which banks are not required
           ------------                                                         
     or authorized by law to close in New York City and, if the applicable
     Business Day relates to any Eurodollar Rate Advances, on which dealings are
     carried on in the London interbank market.

          "Capital Expenditures" means, for any Person for any period, the sum
           --------------------                                               
     of (a) all expenditures made, directly or indirectly, by such Person or any
     of its Subsidiaries during such period for equipment, fixed assets, real
     property or improvements, or for replacements or substitutions therefor or
     additions thereto, that have been or should be, in accordance with GAAP,
     reflected as additions to property, plant or equipment on a Consolidated
     balance sheet of such Person or have a useful life of more than one year
     plus (b) the aggregate principal amount of all Debt (including Obligations
     ----                                                                      
     under Capitalized Leases) assumed or incurred in connection with any such
     expenditures.

          "Capitalized Leases" means all leases that have been or should be, in
           ------------------                                                  
     accordance with GAAP, recorded as capitalized leases.

          "Cash Equivalents" means any of the following, to the extent owned by
           ----------------                                                    
     the Parent Borrower or any of its Subsidiaries free and clear of all Liens
     other than Liens created under the Collateral Documents and having a
     maturity of not greater than 90 days from the date of issuance thereof:
     (a) readily marketable direct obligations of the Government of the United
     States or any agency or instrumentality thereof or obligations
     unconditionally guaranteed by the full faith and credit of the Government
     of the United States, (b) insured certificates of deposit of or time
     deposits with any commercial bank that is a Lender Party or a member of the
     Federal Reserve System, issues (or the parent of which issues) commercial
     paper rated as described in clause (c), is organized under the laws of the
     United States or any State thereof and has combined capital and surplus of
     at least $1,000,000,000 or (c) commercial paper issued by any corporation
     organized under the laws of any State of the United States and rated at
     least "Prime-1" (or the then equivalent grade) by Moody's Investors
     Service, Inc. or "A-1" (or the then equivalent grade) by Standard & Poor's,
     a division of The McGraw-Hill Companies, Inc.

          "CERCLA" means the Comprehensive Environmental Response, Compensation
           ------                                                              
     and Liability Act of 1980, as amended from time to time.

          "CERCLIS" means the Comprehensive Environmental Response, Compensation
           -------                                                              
     and Liability Information System maintained by the U.S. Environmental
     Protection Agency.

          "Citibank" means Citibank, N.A., a national banking association.
           --------                                                       

          "Collateral" means all "Collateral" referred to in the Collateral
           ----------                                                      
     Documents and all other property that is or is intended to be subject to
     any Lien in favor of the Administrative Agent for the benefit of the
     Secured Parties.
<PAGE>
 
                                       5


          "Collateral Documents" means the Security Agreement, the Intercompany
           --------------------                                                
     Notes, the Foreign Security Documents, the Debenture, and any other
     agreement that creates or purports to create a Lien in favor of the
     Administrative Agent for the benefit of the Secured Parties.

          "Commitment" means a Working Capital Commitment or a Letter of Credit
           ----------                                                          
     Commitment.

          "Consolidated" refers to the consolidation of accounts in accordance
           ------------                                                       
     with GAAP.

          "Conversion", "Convert" and "Converted" each refer to a conversion of
           ----------    -------       ---------                               
     Advances of one Type into Advances of the other Type pursuant to Section
     2.09 or 2.10.

          "Corporate Opportunity Agreement" means the Amended and Restated
           -------------------------------                                
     Corporate Opportunity Agreement dated as of December 18, 1997 among
     Kleinknecht Electric Company, Inc. (NY), Kleinknecht Electric Company, Inc.
     (NJ) and IPC Information Systems, Inc., as amended, supplemented or
     otherwise modified from time to time in accordance with its terms, to the
     extent permitted in accordance with the Loan Documents.

          "CSI" has the meaning specified in the Preliminary Statements.
           ---                                                          

          "CVC" has the meaning specified in the Preliminary Statements.
           ---                                                          

          "Debenture" means the debenture dated as of April 30, 1998 made by the
           ---------                                                            
     U.K. Subsidiaries in favor of the Administrative Agent, as amended,
     supplemented or otherwise modified from time to time in accordance with its
     terms, to the extent permitted in accordance with the Loan Documents.

          "Debt" of any Person means, without duplication for purposes of
           ----                                                          
     calculating financial ratios, (a) all indebtedness of such Person for
     borrowed money, (b) all Obligations of such Person for the deferred
     purchase price of property or services (other than trade payables not
     overdue by more than 60 days incurred in the ordinary course of such
     Person's business), (c) all Obligations of such Person evidenced by notes,
     bonds, debentures or other similar instruments, (d) all Obligations of such
     Person 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 of such Person as lessee under Capitalized
     Leases, (f) all Obligations, contingent or otherwise, of such Person under
     acceptance, letter of credit or similar facilities, (g) all Obligations,
     contingent or otherwise, of such Person to purchase, redeem, retire,
     defease or otherwise make any payment in respect of any capital stock of or
     other ownership or profit interest in such Person or any other Person or
     any warrants, rights or options to acquire such capital stock, valued, in
     the case of Redeemable Preferred Stock, at the greater of its voluntary or
     involuntary liquidation preference plus accrued and unpaid dividends, (h)
     all Obligations of such Person in respect of Hedge Agreements, (i) all Debt
     of others referred to in clauses (a) through (h) above or clause (j) below
     guaranteed directly or indirectly in any manner by such Person, or in
     effect guaranteed directly or indirectly by such Person through an
     agreement (i) to pay or purchase such Debt or to advance or supply funds
     for the payment or purchase of such Debt, (ii) to purchase, sell or lease
     (as lessee or lessor) property, or to purchase or sell services, primarily
     for the purpose of enabling the debtor to make payment of such Debt or to
     assure the holder of such Debt against loss, (iii) to supply funds to or in
     any other manner invest in the debtor (including any agreement to pay for
     property or services irrespective of whether such property is received or
     such services are rendered) or (iv) otherwise to assure a creditor against
     loss, and (j) all Debt referred to in clauses (a) through (i) above of
     another Person secured by (or for which the holder of such Debt has an
     existing right, contingent or otherwise, to be secured by) any Lien on
     property (including, without limitation, 
<PAGE>
 
                                       6

     accounts and contract rights) owned by such Person, even though such Person
     has not assumed or become liable for the payment of such Debt.

          "Default" means any Event of Default or any event that would
           -------                                                    
     constitute an Event of Default but for the requirement that notice be given
     or time elapse or both.

          "Defaulted Advance" means, with respect to any Lender Party at any
           -----------------                                                
     time, the portion of any Advance required to be made by such Lender Party
     to either Borrower pursuant to Section 2.01 or 2.02 at or prior to such
     time which has not been made by such Lender Party or by the Administrative
     Agent for the account of such Lender Party pursuant to Section 2.02(d) as
     of such time.  In the event that a portion of a Defaulted Advance shall be
     deemed made pursuant to Section 2.15(a), the remaining portion of such
     Defaulted Advance shall be considered a Defaulted Advance originally
     required to be made pursuant to Section 2.01 on the same date as the
     Defaulted Advance so deemed made in part.

          "Defaulted Amount" means, with respect to any Lender Party at any
           ----------------                                                
     time, any amount required to be paid by such Lender Party to any Agent or
     any other Lender Party hereunder or under any other Loan Document at or
     prior to such time which has not been so paid as of such time, including,
     without limitation, any amount required to be paid by such Lender Party to
     (a) the Issuing Bank pursuant to Section 2.03(c) to purchase a portion of a
     Letter of Credit Advance made by the Issuing Bank, (b) the Administrative
     Agent pursuant to Section 2.02(d) to reimburse the Administrative Agent for
     the amount of any Advance made by the Administrative Agent for the account
     of such Lender Party, (c) any other Lender Party pursuant to Section 2.13
     to purchase any participation in Advances owing to such other Lender Party
     and (d) any Agent or the Issuing Bank pursuant to Section 7.05 to reimburse
     such Agent or the Issuing Bank for such Lender Party's ratable share of any
     amount required to be paid by the Lender Parties to such Agent or the
     Issuing Bank as provided therein. In the event that a portion of a
     Defaulted Amount shall be deemed paid pursuant to Section 2.15(b), the
     remaining portion of such Defaulted Amount shall be considered a Defaulted
     Amount originally required to be paid hereunder or under any other Loan
     Document on the same date as the Defaulted Amount so deemed paid in part.

          "Defaulting Lender" means, at any time, any Lender Party that, at such
           -----------------                                                    
     time, (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall take
     any action or be the subject of any action or proceeding of a type
     described in Section 6.01(f).

          "Documentation Agent" has the meaning specified in the recital of
           -------------------                                             
     parties to this Agreement.

          "Domestic Guarantors" means each of the Subsidiaries of the Parent
           -------------------                                              
     Borrower listed on Part A of Schedule II hereto and all Domestic
     Subsidiaries that shall be required to deliver a Domestic Guaranty pursuant
     to Section 5.01(o).

          "Domestic Guaranty" has the meaning specified in Section 3.01(m)(x).
           -----------------                                                  

          "Domestic Lending Office" means, with respect to any Lender Party, the
           -----------------------                                              
     office of such Lender Party specified as its "Domestic Lending Office"
     opposite its name on Schedule I hereto or in the Assignment and Acceptance
     pursuant to which it became a Lender Party, as the case may be, or such
     other office of such Lender Party as such Lender Party may from time to
     time specify to the Borrowers and the Administrative Agent.
<PAGE>
 
                                       7


          "Domestic Subsidiaries" means each of the Subsidiaries of the Parent
           ---------------------                                              
     Borrower that are incorporated or organized under the laws of any State of
     the United States of America or the District of Columbia.

          "EBITDA" means, for any period, the sum, determined on a Consolidated
           ------                                                              
     basis, of (a) net income (or net loss), (b) interest expense, (c) income
     tax expense, (d) depreciation expense and (e) amortization expense and (f)
     all other non-cash items reducing net income (other than items that will
     require cash payments and for which an accrual or reserve is, or is
     required by GAAP to be, made), less all non-cash items increasing net
     income, in each case of the Parent Borrower and its Subsidiaries,
     determined in accordance with GAAP for such period; provided, however, that
                                                         --------  -------      
     for purposes of calculating EBITDA, such calculation shall be made without
     giving effect to (i) the amortization or write-off of any expense incurred
     in connection with the Transaction and (ii) [except as otherwise provided,]
     the amortization of any amounts required or permitted by Account Principles
     Board Opinion Nos. 16 and 17.

          "Effective Date" means the first date on which the conditions set
           --------------                                                  
     forth in Article III shall have been satisfied.

          "Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender;
           -----------------                                                   
     and (c) a commercial bank, insurance company, financial institution, fund
     or other Person that regularly purchases interests in loans or extensions
     of credit of the types made pursuant to this Agreement, any other Person
     that would constitute a "qualified institutional buyer" within the meaning
     of Rule 144A under the Securities Act of 1933 as in effect on the date of
     the Initial Extension of Credit or other "accredited investor" (as defined
     in Regulation D of the Securities Act of 1933, as amended), in each case,
     which bank, insurance company, financial institution, fund or other Person
     is approved by the Agents and, so long as no Default shall have occurred
     and be continuing at the time any assignment is effected pursuant to
     Section 8.07, the Parent Borrower, such approval not to be unreasonably
     withheld or delayed; provided, however, that neither any Loan Party nor any
                          --------  -------                                     
     Affiliate of a Loan Party shall qualify as an Eligible Assignee under this
     definition.

          "Eligible Inventory" means only such Inventory of the Parent Borrower,
           ------------------                                                   
     the Domestic Guarantors and the U.K. Subsidiaries as the Administrative
     Agent, in its reasonable business judgment on the basis of standards
     customarily applied by lenders in transactions of the type contemplated by
     the Loan Documents, shall from time to time elect to consider Eligible
     Inventory for purposes of this Agreement.  The value of such Inventory
     shall be determined by the Administrative Agent in its reasonable
     discretion taking into consideration, among other factors, the lower of its
     cost and its book value determined in accordance with GAAP.  By way of
     example only, and without limiting the discretion of the Administrative
     Agent as set forth above to consider any Inventory not to be Eligible
     Inventory, the Administrative Agent may consider any of the following
     classes of Inventory not to be Eligible Inventory:

               (a) Inventory located on leaseholds as to which the lessor has
     not entered into a consent and agreement providing the Administrative Agent
     with the right to receive notice of default, the right to repossess such
     Inventory at any time and such other rights as may be acceptable to the
     Administrative Agent;

               (b) Inventory that is obsolete, unusable or otherwise unavailable
     for sale;

               (c) Inventory with respect to which the representations and
     warranties set forth in Section 9 of the Security Agreement applicable to
     Inventory are not true and correct;
<PAGE>
 
                                       8

               (d) Inventory consisting of promotional, marketing, packaging or
          shipping materials and supplies;

               (e) Inventory that fails to meet all standards imposed by any
          governmental agency, or department or division thereof, having
          regulatory authority over such Inventory or its use or sale;

               (f) Inventory that is subject to any licensing, patent, royalty,
          trademark, trade name or copyright agreement with any third party from
          whom the Parent Borrower, any Domestic Guarantor or any U.K.
          Subsidiary has received notice of a dispute in respect of any such
          agreement;

               (g) Inventory located outside the United States and outside the
     United Kingdom;

               (h) Inventory that is not in the possession of or under the sole
     control of the Parent Borrower, any Domestic Guarantor or any U.K.
     Subsidiary;

               (i) Inventory consisting of work in process; and

               (j) Inventory in respect of which the Security Agreement, after
     giving effect to the related filings of financing statements and the filing
     of the Debenture in the Companies House that have then been made, if any,
     does not or has ceased to create a valid and perfected first priority lien
     or security interest in favor of the Secured Parties securing the Secured
     Obligations.

          "Eligible Receivables" means only such Receivables of the Parent
           --------------------                                           
     Borrower, the Domestic Guarantors and the U.K. Subsidiaries, as the
     Administrative Agent, in its reasonable business judgment on the basis of
     standards customarily applied by lenders in transactions of the type
     contemplated by the Loan Documents, shall from time to time elect to
     consider Eligible Receivables for purposes of this Agreement.  The value of
     such Receivables shall be determined by the Administrative Agent in its
     reasonable discretion taking into consideration, among other factors, their
     book value determined in accordance with GAAP.  By way of example only, and
     without limiting the discretion of the Administrative Agent as set forth
     above to consider any Receivables not to be Eligible Receivables, the
     Administrative Agent may consider any of the following classes of
     Receivables not to be Eligible Receivables:

               (a) Receivables that do not arise out of sales of goods or
     rendering of services in the ordinary course of the business of the
     Borrowers, the Domestic Guarantors and the U.K. Subsidiaries;

               (b) Receivables on terms other than those normal or customary in
     the business of the Borrowers, the Domestic Guarantors and the U.K.
     Subsidiaries;

               (c) Receivables owing from any Person that is an Affiliate of the
     Parent Borrower, any Domestic Guarantor or any U.K. Subsidiary or any of
     their respective Subsidiaries other than Citibank and its Affiliates and
     Kleinknecht Electric Company, Inc. to the extent that the aggregate amount
     of Receivables owing from all such Affiliates do not exceed __% of Eligible
     Receivables;

               (d) Receivables more than [120] days past original invoice date
     or more than 60 days past the date due;
<PAGE>
 
                                       9


               (e) Receivables owing from any Person from which an aggregate
     amount of more than 20% of the Receivables owing is more than 60 days past
     due;

               (f) Receivables owing from any Person that (i) has disputed
     liability for any Receivable owing from such Person or (ii) has otherwise
     asserted any claim, demand or liability, whether by action, suit,
     counterclaim or otherwise;

               (g) Receivables owing from any Person that shall take or be the
     subject of any action or proceeding of a type described in Section 6.01(f);

               (h) Receivables (i) owing from any Person that is also a supplier
     to or creditor of the Parent Borrower, any Domestic Guarantor or any U.K.
     Subsidiary or (ii) representing any manufacturer's or supplier's credits,
     discounts, incentive plans or similar arrangements entitling the Parent
     Borrower, any Domestic Guarantor or any U.K. Subsidiary to discounts on
     future purchase therefrom except to the extent that the value of such
     Receivables exceeds the amount owing to the Parent Borrower, such Domestic
     Guarantor or such U.K. Subsidiary, as applicable, or the value of such
     credits, discounts, incentive plans or other arrangements, as the case may
     be;

               (i) Receivables arising out of sales to account debtors located
     outside the United States and outside the United Kingdom;

               (j) Receivables arising out of sales on a bill-and-hold,
     guaranteed sale, sale-or-return, sale on approval or consignment basis or
     subject to any right of return, setoff or charge-back;

               (k) Receivables owing from an account debtor that is an agency,
     department or instrumentality of the United States or any State thereof
     unless the Borrower, such Domestic Guarantor or such U.K. Subsidiary, as
     the case may be, shall have satisfied the requirements of the Assignment of
     Claims Act of 1940, as amended, and any similar State legislation and the
     Administrative Agent is satisfied as to the absence of setoffs,
     counterclaims and other defenses on the part of such account debtor;;

               (l) Receivables the full and timely payment of which the
     Administrative Agent in its sole discretion believes to be doubtful; and

               (m) Receivables in respect of which the Security Agreement, after
     giving effect to the related filings of financing statements and the filing
     of the Debenture in the Companies House that have then been made, if any,
     does not or has ceased to create a valid and perfected first priority lien
     or security interest in favor of the Secured Parties securing the Secured
     Obligations.

          "Environmental Action" means any action, suit, demand, demand letter,
           --------------------                                                
     claim, notice of non-compliance or violation, notice of liability or
     potential liability, investigation, proceeding, consent order or consent
     agreement relating in any way to any Environmental Law, any Environmental
     Permit or Hazardous Material or arising from alleged injury or threat to
     health, safety or the environment, including, without limitation, (a) by
     any governmental or regulatory authority for enforcement, cleanup, removal,
     response, remedial or other actions or damages and (b) by any governmental
     or regulatory authority or third party for damages, contribution,
     indemnification, cost recovery, compensation or injunctive relief.

          "Environmental Law" means any federal, state, local or foreign
           -----------------                                            
     statute, law, ordinance, rule, regulation, code, order, writ, judgment,
     injunction, decree or judicial or agency interpretation, policy or 
<PAGE>
 
                                       10

     guidance having the full force and effect of law relating to pollution or
     protection of the environment, health, safety or natural resources,
     including, without limitation, those relating to the use, handling,
     transportation, treatment, storage, disposal, release or discharge of
     Hazardous Materials.

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

          "Equity Investment" has the meaning specified in the Preliminary
           -----------------                                              
     Statements.

          "Equity Investors" has the meaning specified in the Preliminary
           ----------------                                              
     Statements.

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

          "ERISA Affiliate" means any Person that for purposes of Title IV of
           ---------------                                                   
     ERISA is a member of the controlled group of any Loan Party, or under
     common control with any Loan Party, within the meaning of Section 414 of
     the Internal Revenue Code.

          "ERISA Event" means (a) (i) the occurrence of a reportable event,
           -----------                                                     
     within the meaning of Section 4043 of ERISA, with respect to any Plan
     unless the 30-day notice requirement with respect to such event has been
     waived by the PBGC, or (ii) the requirements of subsection (1) of Section
     4043(b) of ERISA (without regard to subsection (2) of such Section) are met
     with respect to a contributing sponsor, as defined in Section 4001(a)(13)
     of ERISA, of a Plan, and an event described in paragraph (9), (10), (11),
     (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur
     with respect to such Plan within the following 30 days; (b) the application
     for a minimum funding waiver with respect to a Plan; (c) the provision by
     the administrator of any Plan of a notice of intent to terminate such Plan,
     pursuant to Section 4041(a)(2) of ERISA (including any such notice with
     respect to a plan amendment referred to in Section 4041(e) of ERISA); (d)
     the cessation of operations at a facility of any Loan Party or any ERISA
     Affiliate in the circumstances described in Section 4062(e) of ERISA; (e)
     the withdrawal by any Loan Party or any ERISA Affiliate from a Multiple
     Employer Plan during a plan year for which it was a substantial employer,
     as defined in Section 4001(a)(2) of ERISA; (f) the conditions for
     imposition of a lien under Section 302(f) of ERISA shall have been met with
     respect to any Plan; (g) the adoption of an amendment to a Plan requiring
     the provision of security to such Plan pursuant to Section 307 of ERISA; or
     (h) the institution by the PBGC of proceedings to terminate a Plan pursuant
     to Section 4042 of ERISA, or the occurrence of any event or condition
     described in Section 4042 of ERISA that constitutes grounds for the
     termination of, or the appointment of a trustee to administer, such Plan.

          "Eurocurrency Liabilities" has the meaning specified in Regulation D
           ------------------------                                           
     of the Board of Governors of the Federal Reserve System, as in effect from
     time to time.

          "Eurodollar Lending Office" means, with respect to any Lender Party,
           -------------------------                                          
     the office of such Lender Party specified as its "Eurodollar Lending
     Office" opposite its name on Schedule I hereto or in the Assignment and
     Acceptance pursuant to which it became a Lender Party (or, if no such
     office is specified, its Domestic Lending Office), or such other office of
     such Lender Party as such Lender Party may from time to time specify to the
     Borrowers and the Administrative Agent.

          "Eurodollar Rate" means, for any Interest Period for each Eurodollar
           ---------------                                                    
     Rate Advance comprising part of the same Borrowing, an interest rate per
     annum obtained by dividing (a) the BBA Interest Settlement Rate per annum
     at which deposits in U.S. dollars are offered in London, England to prime
     banks in the London interbank market for such Interest Period as displayed
     on Telerate Screen page 3750 as of 11:00 a.m. (London 
<PAGE>
 
                                       11

     time) two Business Days before the first day of such Interest Period in an
     amount substantially equal to such Eurodollar Rate Advances comprising part
     of such Borrowing to be outstanding during such Interest Period by (b) a
     percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for
     such Interest Period. Telerate Screen page 3750 means the display
     designated as page 3750 on the Dow Jones Telerate Service (or such other
     page as may replace page 3750 on that service or such other service as may
     be nominated by the BBA as the information vendor for the purpose of
     displaying BBA Interest Settlement Rates for U.S. dollars). If such rate
     does not appear on Telerate Screen page 3750 on any relevant date for the
     determination of the Eurodollar Rate, the Eurodollar Rate shall be an
     interest rate equal to the rate per annum obtained by dividing (i) the
     average (rounded upward to the nearest whole multiple of 1/16 of 1% per
     annum, if such average is not such a multiple) of the rate per annum at
     which deposits in U.S. dollars are offered by the principal office of
     Citibank in London, England to prime banks in the London interbank market
     at 11:00 A.M. (London time) two Business Days before the first day of such
     Interest Period in an amount substantially equal to MSSF's Eurodollar Rate
     Advance comprising part of such Borrowing to be outstanding during such
     Interest Period (or, if MSSF shall not have such a Eurodollar Rate Advance,
     $1,000,000) and for a period equal to such Interest Period by (b) a
     percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for
     such Interest Period.

          "Eurodollar Rate Advance" means an Advance that bears interest as
           -----------------------                                         
     provided in Section 2.07(a)(ii).

          "Eurodollar Rate Reserve Percentage" for any Interest Period for all
           ----------------------------------                                 
     Eurodollar Rate Advances comprising part of the same Borrowing means the
     reserve percentage applicable two Business Days before the first day of
     such Interest Period under regulations issued from time to time by the
     Board of Governors of the Federal Reserve System (or any successor) for
     determining the maximum reserve requirement (including, without limitation,
     any emergency, supplemental or other marginal reserve requirement) for a
     member bank of the Federal Reserve System in New York City with respect to
     liabilities or assets consisting of or including Eurocurrency Liabilities
     (or with respect to any other category of liabilities that includes
     deposits by reference to which the interest rate on Eurodollar Rate
     Advances is determined) having a term equal to such Interest Period.

          "Events of Default" has the meaning specified in Section 6.01.
           -----------------                                            

          "Excluded Subsidiary" means each Subsidiary of the Parent Borrower
           -------------------                                              
     listed on Schedule III hereto, but excluding any such Subsidiary that is a
     Loan Party.

          "Existing Debt" has the meaning specified in Section 4.01(ff) hereof.
           -------------                                                       

          "Extraordinary Receipt" means any cash received by or paid to or for
           ---------------------                                              
     the account of any Person not in the ordinary course of business,
     including, without limitation, tax refunds, pension plan reversions,
     proceeds of insurance (other than proceeds of business interruption
     insurance to the extent such proceeds constitute compensation for lost
     earnings), condemnation awards (and payments in lieu thereof), indemnity
     payments and any purchase price adjustment received in connection with any
     purchase agreement.

          "Facility" means the Working Capital Facility or the Letter of Credit
           --------                                                            
     Facility.

          "Federal Funds Rate" means, for any period, a fluctuating interest
           ------------------                                               
     rate per annum equal for each day during such period to the weighted
     average of the rates on overnight Federal funds transactions with members
     of the Federal Reserve System arranged by Federal funds brokers, as
     published for such day (or, if such day is not a Business Day, for the next
     preceding Business Day) by the Federal Reserve Bank of New York, or, if
     such rate is not so published for any day that is a Business Day, the
     average of the quotations 
<PAGE>
 
                                       12

     for such day for such transactions received by the Administrative Agent
     from three Federal funds brokers of recognized standing selected by it.

          "Fiscal Year" means a fiscal year of the Parent Borrower and its
           -----------                                                    
     Consolidated Subsidiaries ending on September 30 in any calendar year.

          "Foreign Guarantors" means each of the Subsidiaries of the Parent
           ------------------                                              
     Borrower listed on Part B of Schedule II hereto and all Foreign
     Subsidiaries that shall be required to deliver a Foreign Guaranty pursuant
     to Section 5.01(o).

          "Foreign Guaranty" has the meaning specified in Section 3.01(m)(x).
           ----------------                                                  

          "Foreign Security Documents" has the meaning specified in Section
           --------------------------                                      
     3.01(m)(ix).

          "Foreign Subsidiaries" means each of the Subsidiaries of the Parent
           --------------------                                              
     Borrower other than the Domestic Subsidiaries.

          "Funded Debt" of any Person means Debt in respect of the Advances
           -----------                                                     
     owing by either Borrower, in the case of such Borrower, and all other Debt
     of such Person that by its terms matures more than one year after the date
     of its creation or matures within one year from such date but is renewable
     or extendible, at the option of such Person, to a date more than one year
     after such date or arises under a revolving credit or similar agreement
     that obligates the lender or lenders to extend credit during a period of
     more than one year after such date, including, without limitation, all
     amounts of Funded Debt of such Person required to be paid or prepaid within
     one year after the date of its determination.

          "GAAP" has the meaning specified in Section 1.03.
           ----                                            

          "Goldman Sachs" has the meaning specified in the recital of parties to
           -------------                                                        
     this Agreement.

          "Guaranties" means the Domestic Guaranty and the Foreign Guaranty.
           ----------                                                       

          "Guarantors" means the Domestic Guarantors and the Foreign Guarantors.
           ----------                                                           

          "Hazardous Materials" means (a) petroleum or petroleum products,
           -------------------                                            
     petroleum by-products or petroleum breakdown products, radioactive
     materials, asbestos-containing materials, polychlorinated biphenyls and
     radon gas and (b) any other chemicals, materials or substances designated,
     classified or regulated as hazardous or toxic or as a pollutant or
     contaminant under any Environmental Law.

          "Hedge Agreements" means interest rate swap, cap or collar agreements,
           ----------------                                                     
     interest rate future or option contracts, currency swap agreements,
     currency future or option contracts and other similar agreements.

          "Hedge Bank" means any Lender Party or an Affiliate of a Lender Party
           ----------                                                          
     in its capacity as a party to a Secured Hedge Agreement.

          "Indemnified Party" has the meaning specified in Section 8.04(b).
           -----------------                                               

          "Initial Extension of Credit" means the earlier to occur of the
           ---------------------------                                   
     initial Borrowing and the initial issuance of a Letter of Credit hereunder.
<PAGE>
 
                                       13


          "Initial Issuing Bank" has the meaning specified in the recital of
           --------------------                                             
     parties to this Agreement.

          "Initial Lenders" has the meaning specified in the recital of parties
           ---------------                                                     
     to this Agreement.

          "Insufficiency" means, with respect to any Plan, the amount, if any,
           -------------                                                      
     of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
     ERISA.

          "Intercompany Notes" means the U.K. Intercompany Notes and the Loan
           ------------------                                                
     Party Intercompany Notes.

          "Interest Period" means, for each Eurodollar Rate Advance comprising
           ---------------                                                    
     part of the same Borrowing, the period commencing on the date of such
     Eurodollar Rate Advance or the date of the Conversion of any Base Rate
     Advance into such Eurodollar Rate Advance, and ending on the last day of
     the period selected by the applicable Borrower pursuant to the provisions
     below and, thereafter, each subsequent period commencing on the last day of
     the immediately preceding Interest Period and ending on the last day of the
     period selected by such Borrower pursuant to the provisions below.  The
     duration of each such Interest Period shall be one, three, six, nine or
     twelve months (so long as an Interest Period of any such duration is
     available to all of the Lenders), as the applicable Borrower may, upon
     notice received by the Administrative Agent not later than 11:00 A.M. (New
     York City time) on the third Business Day prior to the first day of such
     Interest Period, select; provided, however, that:
                              --------  -------       

               (a) neither Borrower may select any Interest Period that ends
     after the Termination Date;

               (b) Interest Periods commencing on the same date for Eurodollar
     Rate Advances comprising part of the same Borrowing shall be of the same
     duration;

               (c) whenever the last day of any Interest Period would otherwise
     occur on a day other than a Business Day, the last day of such Interest
     Period shall be extended to occur on the next succeeding Business Day;
     provided, however, that, if such extension would cause the last day of such
     --------  -------                                                          
     Interest Period to occur in the next following calendar month, the last day
     of such Interest Period shall occur on the next preceding Business Day; and

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

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

          "Inventory" means all Inventory referred to in Section 1(b) of the
           ---------                                                        
     Security Agreement.

          "Investment" in any Person means any loan or advance to such Person,
           ----------                                                         
     any purchase or other acquisition of any capital stock or other ownership
     or profit interest, warrants, rights, options, obligations or other
     securities or the assets comprising a substantial part or all of the
     business of such Person, any capital contribution to such Person or any
     other direct or indirect investment in such Person, including, without
     limitation, any acquisition by way of a merger or consolidation and any
     arrangement pursuant to 
<PAGE>
 
                                       14

     which the investor incurs Debt of the types referred to in clause (i) or
     (j) of the definition of "Debt" in respect of such Person.
                               ----               

          "Investors Agreement" means the Investors Agreement dated as of
           -------------------                                           
     December 18, 1997 among IPC Information Systems, Inc., Cable Systems
     Holding, LLC and certain other Persons named therein, as amended,
     supplemented or otherwise modified from time to time in accordance with its
     terms, to the extent permitted in accordance with the Loan Documents.

          "Issuing Bank" means the Initial Issuing Bank and each Eligible
           ------------                                                  
     Assignee to which the Letter of Credit Commitment hereunder has been
     assigned pursuant to Section 8.07.

          "IXnet" has the meaning specified in the Preliminary Statements.
           -----                                                          

          "IXnet France" means International Exchange Networks, SAS, a
           ------------                                               
     corporation organized under the laws of France and an indirect wholly owned
     Subsidiary of the Parent Borrower.

          "IXnet Germany" means International Exchange Networks, GmbH, a
           -------------                                                
     corporation organized under the laws of Germany and an indirect wholly
     owned Subsidiary of the Parent Borrower.

          "Labor Pool Agreements" means the Amended and Restated Labor Pool
           ---------------------                                           
     Agreement dated as of December 18, 1997 among Kleinknecht Electric Company,
     Inc. (NY) and IPC Information Systems, Inc., as amended, supplemented or
     otherwise modified from time to time in accordance with its terms, to the
     extent permitted in accordance with the Loan Documents, and the Amended
     and Restated Labor Pool Agreement dated as of December 18, 1997 among
     Kleinknecht Electric Company, Inc. (NJ) and IPC Information Systems, Inc.,
     as amended, supplemented or otherwise modified from time to time in
     accordance with its terms, to the extent permitted in accordance with the
     Loan Documents.
                   -

          "L/C Cash Collateral Account" has the meaning specified in the
           ---------------------------                                  
     Security Agreement.

          "L/C Related Documents" has the meaning specified in Section
           ---------------------                                      
     2.04(b)(ii)(A).

          "Lender Party" means any Lender or the Issuing Bank.
           ------------                                       

          "Lenders" means the Initial Lenders and each Person that shall become
           -------                                                             
     a Lender hereunder pursuant to Section 8.07.

          "Letter of Credit Advance" means an advance made by the Issuing Bank
           ------------------------                                           
     or any Lender pursuant to Section 2.03(c).

          "Letter of Credit Agreement" has the meaning specified in Section
           --------------------------                                      
     2.03(a).

          "Letter of Credit Commitment" means, with respect to any Lender at any
           ---------------------------                                          
     time, the amount set forth opposite such Lender's name on Schedule I hereto
     under the caption "Letter of Credit Commitment" or, if such Lender has
     entered into one or more Assignments and Acceptances, set forth for such
     Lender in the Register maintained by the Administrative Agent pursuant to
     Section 8.07(d) as such Lender's "Letter of Credit Commitment", as such
     amount may be reduced at or prior to such time pursuant to Section 2.05.

          "Letter of Credit Facility" means, at any time, the amount of the
           -------------------------                                       
     Issuing Bank's Letter of Credit Commitment at such time, as such amount may
     be reduced at or prior to such time pursuant to Section 2.05.
<PAGE>
 
                                       15


          "Letter of Credit Fee Rate" means (a) during the period from the date
           -------------------------                                           
     hereof until the date that is 6 months after the date hereof, 2.25% per
     annum and (b) thereafter, a percentage per annum determined by reference to
     the Leverage Ratio as follows:

<TABLE>
<CAPTION>
   Level     Letter of Credit Fee Rate
- --------------------------------------
<S>          <C>
Level I                2.25%
- -------------------------------------- 
Level II               2.00%
- -------------------------------------- 
Level III              1.75%
- -------------------------------------- 
Level IV               1.50%
- -------------------------------------- 
Level V                1.25%
- -------------------------------------- 
</TABLE>

provided, however, that (A) (x) no change in the Letter of Credit Fee Rate shall
- --------  -------                                                               
be effective until three Business Days after the date on which the
Administrative Agent receives the financial statements required to be delivered
pursuant to Section 5.03(b) or (c) and a certificate of the chief financial
officer of the Parent Borrower demonstrating such ratio and (y) not more than
one decrease in the Letter of Credit Fee Rate shall occur in any three-month
period and (B) the Letter of Credit Fee Rate shall be at Level I for so long as
the Parent Borrower has not submitted to the Administrative Agent the
information described in clause (A)(x) of this proviso as and when required
under Section 5.03(b) or (c), as the case may be.

          "Letters of Credit" has the meaning specified in Section 2.01(b).
           -----------------                                               

          "Level I" means a Leverage Ratio of 5.5:1.0 or greater.
           -------                                               

          "Level II" means a Leverage Ratio of 5.0:1.0 or greater, but less than
           --------                                                             
     5.5:1.0.

          "Level III" means a Leverage Ratio of 4.5:1.0 or greater, but less
           ---------                                                        
     than 5.0:1.0.

          "Level IV" means a Leverage Ratio of 4.0:1.0 or greater, but less than
           --------                                                             
4.5:1.0.

          "Level V" means a Leverage Ratio of less than 4.0:1.0.
           -------                                              

          "Leverage Ratio" means, at any time of determination, the ratio of the
           --------------                                                       
     aggregate amount of Consolidated Debt of the Parent Borrower and its
     Subsidiaries as of the end of the most recently ended fiscal quarter of the
     Parent Borrower and its Subsidiaries for which financial statements are
     required to be delivered to the Lender Parties pursuant to Section 5.03(b)
     or (c), as the case may be, to Consolidated EBITDA of the Parent Borrower
     and its Subsidiaries for such fiscal quarter and for the preceding three
     fiscal quarters of the Parent Borrower.

          "Lien" means any lien, security interest or other charge or
           ----                                                      
     encumbrance of any kind, or any other type of preferential arrangement,
     including, without limitation, the lien or retained security title of a
     conditional vendor and any easement, right of way or other encumbrance on
     title to real property.

          "Loan Documents" means (a) for purposes of this Agreement and the
           --------------                                                  
     Notes and any amendment, supplement or modification hereof or thereof and
     for all other purposes other than for purposes of the 
<PAGE>
 
                                       16

     Foreign Guaranty, the U.K. Intercompany Notes, the Administrative Agency
     Agreement, the Security Agreement (solely with respect to the Foreign
     Subsidiaries and their Obligations thereunder) and the Foreign Security
     Documents and any amendment, supplement or modification thereof, (i) this
     Agreement, (ii) the Notes, (iii) each Guaranty, (iv) the Collateral
     Documents, (v) each Letter of Credit Agreement, (vi) the Administrative
     Agent's Fee Letter, (vii) the Administrative Agency Agreement and (viii)
     each Secured Hedge Agreement and (b) for purposes of the Foreign Guaranty,
     the U.K. Intercompany Notes, the Administrative Agency Agreement, the
     Security Agreement (solely with respect to the Foreign Subsidiaries and
     their Obligations thereunder) and the Foreign Security Documents, and any
     amendment, supplement or modification thereof, (i) the Foreign Guaranty,
     (ii) each U.K. Intercompany Note, (iii) the Administrative Agency
     Agreement, (iv) the Security Agreement (solely with respect to the Foreign
     Subsidiaries and their Obligations thereunder), and (iv) each Foreign
     Security Document, in each case as amended, supplemented or otherwise
     modified from time to time.

          "Loan Parties" means (a) for purposes of this Agreement and the Notes
           ------------                                                        
     and any amendment, supplement or modification hereof or thereof and for all
     other purposes other than for purposes of the Foreign Guaranty, the U.K.
     Intercompany Notes, the Administrative Agency Agreement, the Security
     Agreement (solely with respect to the Foreign Subsidiaries and their
     Obligations thereunder) and the Foreign Security Documents and any
     amendment, supplement or modification thereof, (i) each Borrower and (ii)
     each Guarantor and (b) for purposes of the Foreign Guaranty, the U.K.
     Intercompany Notes, the Administrative Agency Agreement, the Security
     Agreement (solely with respect to the Foreign Subsidiaries and their
     Obligations thereunder) and the Foreign Security Documents, and any
     amendment, supplement or modification thereof, (i) each U.K. Subsidiary and
     (ii) each Foreign Guarantor.

          "Loan Party Intercompany Note" means a promissory note of a Loan Party
           ----------------------------                                         
     payable to the order of any other Loan Party, in substantially the form of
     Exhibit I-2 hereto, evidencing the aggregate intercompany indebtedness of
     such Loan Party to such other Loan Party, as amended, supplemented or
     otherwise modified from time to time, but excluding, in any event, the U.K.
     Intercompany Notes.

          "Loan Value" means an amount equal to the sum of:  (a) with respect to
           ----------                                                           
     Eligible Inventory, [25]% of the value thereof; and (b) with respect to
     Eligible Receivables, 80% of the value thereof.

          "LSH" has the meaning specified in the Preliminary Statements.
           ---                                                          

          "Margin Stock" has the meaning specified in Regulation U.
           ------------                                            

          "Material Adverse Change" means any material adverse change in the
           -----------------------                                          
     business, condition (financial or otherwise), operations, performance,
     assets, nature of assets, liabilities (including, without limitation, tax,
     ERISA and environmental liabilities) or prospects of the Parent Borrower
     and its Subsidiaries, taken as a whole.

          "Material Adverse Effect" means a material adverse effect on (a) the
           -----------------------                                            
     business, condition (financial or otherwise), operations, performance,
     assets, nature of assets, liabilities (including, without limitation, tax,
     ERISA and environmental liabilities) or prospects of the Parent Borrower
     and its Subsidiaries, taken as a whole, (b) the rights and remedies of any
     Agent or any Lender Party under any Loan Document or Related Document or
     (c) the ability of any Significant Loan Party to perform its Obligations
     under any Loan Document or Related Document to which it is or is to be a
     party.

          "Material Contract" means, with respect to any Person, each contract
           -----------------                                                  
     to which such Person is a party involving aggregate consideration payable
     to or by such Person of $15,000,000 or more or otherwise material 
<PAGE>
 
                                       17

     to the business, condition (financial or otherwise), operations,
     performance, assets, nature of assets, liabilities (including, without
     limitation, tax, ERISA and environmental liabilities) or prospects of such
     Person, but shall not include the Related Documents.

          "Merger" has the meaning specified in the Preliminary Statements.
           ------                                                          

          "Merger Agreement" has the meaning specified in the Preliminary
           ----------------                                              
     Statements.

          "Mortgage Policies" has the meaning specified in Section
           -----------------                                      
     5.01(q)(ii)(B).

          "Mortgages" has the meaning specified in Section 5.01(q)(ii).
           ---------                                                   

          "MSSF" has the meaning specified in the recital of parties to this
           ----                                                             
     Agreement.

          "Multiemployer Plan" means a multiemployer plan, as defined in Section
           ------------------                                                   
     4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is
     making or accruing an obligation to make contributions, or has within any
     of the preceding five plan years made or accrued an obligation to make
     contributions.

          "Multiple Employer Plan" means a single employer plan, as defined in
           ----------------------                                             
     Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
     Loan Party or any ERISA Affiliate and at least one Person other than the
     Loan Parties and the ERISA Affiliates or (b) was so maintained and in
     respect of which any Loan Party or any ERISA Affiliate could have liability
     under Section 4064 or 4069 of ERISA in the event such plan has been or were
     to be terminated.

          "MXnet" means MXnet Inc., a Delaware corporation.
           -----                                           

          "Net Cash Proceeds" means, with respect to any sale, lease, transfer
           -----------------                                                  
     or other disposition of any asset or the sale or issuance of any Debt or
     capital stock or other ownership or profit interest, any securities
     convertible into or exchangeable for capital stock or other ownership or
     profit interest or any warrants, rights, options or other securities to
     acquire capital stock or other ownership or profit interest by any Person,
     or any Extraordinary Receipt received by or paid to or for the account of
     any Person, the aggregate amount of cash received from time to time
     (whether as initial consideration or through payment or disposition of
     deferred consideration) by or on behalf of such Person in connection with
     such transaction after deducting therefrom only (without duplication) (a)
     reasonable and customary brokerage commissions, underwriting fees and
     discounts, legal fees, finder's fees and other similar fees and
     commissions, (b) the amount of taxes payable in connection with or as a
     result of such transaction and (c) the amount of any Debt secured by a Lien
     on such asset that, by the terms of the instrument evidencing such Debt, is
     required to be repaid upon such disposition, in each case to the extent,
     but only to the extent, that the amounts so deducted are, at the time of
     receipt of such cash, actually paid to a Person that is not an Affiliate of
     such Person or any Loan Party or any Affiliate of any Loan Party and are
     properly attributable to such transaction or to the asset that is the
     subject thereof.

          "Non-hostile Acquisition" means any acquisition by the Parent Borrower
           -----------------------                                              
     or any of its Subsidiaries of a Person, so long as (a) the board of
     directors (or other governing body) of such Person shall have approved such
     acquisition at the time such acquisition is first publicly announced, (b)
     if such Person shall have been soliciting bids for its acquisition, the
     board of directors (or other governing body) of such Person shall not have
     determined either to accept no offer or to accept an offer other than an
     offer by the Parent Borrower or any of its Subsidiaries or (c) such Person
     shall not have been soliciting bids for its acquisition or if the board of
     directors (or other governing body) of such Person shall have solicited
     bids for its 
<PAGE>
 
                                       18

     acquisition but shall have initially determined either to accept no offer
     or to accept an offer other than an offer by the Parent Borrower or any of
     its Subsidiaries, in each case the existence, amount and availability for
     the acquisition of such Person of the Commitments hereunder shall not have
     been disclosed, orally or in writing, until after such time as the board of
     directors (or other governing body) of such Person shall have approved such
     acquisition by the Parent Borrower or any of its Subsidiaries and so long
     as, in any case, such acquisition is otherwise permitted hereunder.

          "Note" means a promissory note of either Borrower payable to the order
           ----                                                                 
     of any Lender, in substantially the form of Exhibit A hereto, evidencing
     the aggregate indebtedness of such Borrower to such Lender resulting from
     the Working Capital Advances made by such Lender, as amended, supplemented
     or otherwise modified from time to time.

          "Notice of Borrowing" has the meaning specified in Section 2.02(a).
           -------------------                                               

          "Notice of Issuance" has the meaning specified in Section 2.03(a).
           ------------------                                               

          "NPL" means the National Priorities List under CERCLA.
           ---                                                  

          "Obligation" means, with respect to any Person, any payment,
           ----------                                                 
     performance or other obligation of such Person of any kind, including,
     without limitation, any liability of such Person on any claim, whether or
     not the right of any creditor to payment in respect of such claim is
     reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
     disputed, undisputed, legal, equitable, secured or unsecured, and whether
     or not such claim is discharged, stayed or otherwise affected by any
     proceeding referred to in Section 6.01(f).  Without limiting the generality
     of the foregoing, the Obligations of any Loan Party under the Loan
     Documents include (a) the obligation to pay principal, interest, Letter of
     Credit commissions, charges, expenses, fees, attorneys' fees and
     disbursements, indemnities and other amounts payable by such Loan Party
     under any Loan Document and (b) the obligation of such Loan Party to
     reimburse any amount in respect of any of the foregoing that any Lender
     Party, in its sole discretion, may elect to pay or advance on behalf of
     such Loan Party.

          "OECD" means the Organization for Economic Cooperation and
           ----                                                     
     Development.

          "Open Year" has the meaning specified in Section 4.01(z).
           ---------                                               

          "Other Taxes" has the meaning specified in Section 2.12(b).
           -----------                                               

          "Parent Borrower" has the meaning specified in the recital of parties
           ---------------                                                     
     to this Agreement.

          "Parent Borrower's Account" means the account of the Parent Borrower
           -------------------------                                          
     maintained by the Parent Borrower with The Bank of New York at its office
     at ____________________, New York, New York _____, Account No. __________,
     Attention: ____________.

          "PBGC" means the Pension Benefit Guaranty Corporation (or any
           ----                                                        
     successor).

          "Permitted Encumbrances" has the meaning specified in the Mortgages.
           ----------------------                                             

          "Permitted Liens" means such of the following as to which no
           ---------------                                            
     enforcement, collection, execution, levy or foreclosure proceeding shall
     have been commenced:  (a) Liens for taxes, assessments and governmental
     charges or levies to the extent not required to be paid under Section
     5.01(b); (b) Liens imposed 
<PAGE>
 
                                       19

     by law (whether statutory or common law), such as landlords',
     materialmen's, mechanics', carriers', workmen's and repairmen's Liens and
     other similar Liens arising in the ordinary course of business securing
     obligations that are not overdue for a period of more than 30 days; (c)
     pledges or deposits to secure obligations under workers' compensation laws
     or similar legislation or to secure public or statutory obligations; and
     (d) easements, rights of way and other encumbrances on title to real
     property that do not render title to the property encumbered thereby
     unmarketable or materially adversely affect the use of such property for
     its current present purposes.

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

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

          "Preferred Stock" means, with respect to any corporation, capital
           ---------------                                                 
     stock issued by such corporation that is entitled to a preference or
     priority over any other capital stock issued by such corporation upon any
     distribution of such corporation's assets, whether by dividend or upon
     liquidation.

          "Pro Rata Share" of any amount means, with respect to any Lender at
           --------------                                                    
     any time, the product of such amount times a fraction the numerator of
                                          -----                            
     which is the amount of such Lender's Working Capital Commitment at such
     time (or, if the Commitments shall have been terminated pursuant to Section
     2.05 or 6.01, such Lender's Working Capital Commitment as in effect
     immediately prior to such termination) and the denominator of which is the
     Working Capital Facility at such time (or, if the Commitments shall have
     been terminated pursuant to Section 2.05 or 6.01, the Working Capital
     Facility as in effect immediately prior to such termination).

          "Receivables" means all Receivables referred to in Section 1(c) of the
           -----------                                                          
     Security Agreement.

          "Redeemable" means, with respect to any capital stock or other
           ----------                                                   
     ownership or profit interest, Debt or other right or Obligation, any such
     right or Obligation that (a) the issuer has undertaken to redeem at a fixed
     or determinable date or dates, whether by operation of a sinking fund or
     otherwise, or upon the occurrence of a condition not solely within the
     control of the issuer or (b) is redeemable at the option of the holder.

          "Reduction Amount" has the meaning specified in Section 2.06(b)(iv).
           ----------------                                                   

          "Register" has the meaning specified in Section 8.07(d).
           --------                                               

          "Regulation U" means Regulation U of the Board of Governors of the
           ------------                                                     
     Federal Reserve System, as in effect from time to time.

          "Related Documents" means the Merger Agreement, the Senior Notes, the
           -----------------                                                   
     Senior Notes Indenture, the Share Exchange and Termination Agreement, the
     Tax Agreement, the Stock Option Plan, the Investors Agreement, the Labor
     Pool Agreements and the Corporate Opportunity Agreement.

          "Required Lenders" means, at any time, Lenders owed or holding at
           ----------------                                                
     least a majority in interest of the sum of (a) the aggregate principal
     amount of the Advances outstanding at such time and (b) the aggregate
     Available Amount of all Letters of Credit outstanding at such time, or, if
     no such principal amount and no Letters of Credit are outstanding at such
     time, Lenders holding at least a majority in interest of the aggregate 
<PAGE>
 
                                       20

     of the Working Capital Commitments; provided, however, that if any Lender
                                         --------  -------    
     shall be a Defaulting Lender at such time, there shall be excluded from the
     determination of Required Lenders at such time (A) the aggregate principal
     amount of the Advances owing to such Lender (in its capacity as a Lender)
     and outstanding at such time, (B) such Lender's Pro Rata Share of the
     aggregate Available Amount of all Letters of Credit outstanding at such
     time and (C) the aggregate Unused Working Capital Commitments of such
     Lender at such time.  For purposes of this definition, the aggregate
     principal amount of Letter of Credit Advances owing to the Issuing Bank and
     the Available Amount of each Letter of Credit shall be considered to be
     owed to the Lenders ratably in accordance with their respective Working
     Capital Commitments.

          "Responsible Officer" means any executive officer of any Loan Party or
           -------------------                                                  
     any of its Subsidiaries.

          "Secured Hedge Agreement" means any Hedge Agreement required or
           -----------------------                                       
     permitted under Article V that is entered into by and between the Parent
     Borrower and any Hedge Bank.

          "Secured Obligations" has the meaning specified in Section 2 of the
           -------------------                                               
     Security Agreement.

          "Secured Parties" means (a) for purposes of this Agreement and the
           ---------------                                                  
     Notes and any amendment, supplement or modification hereof or thereof and
     for all other purposes other than for purposes of the Foreign Guaranty, the
     U.K. Intercompany Notes, the Administrative Agency Agreement, the Security
     Agreement (solely with respect to the Foreign Subsidiaries and their
     Obligations thereunder) and the Foreign Security Documents and any
     amendment, supplement or modification thereof, (i) the Agents, (ii) the
     Lender Parties and (iii) the Hedge Banks and (b) for purposes of the
     Foreign Guaranty, the U.K. Intercompany Notes, the Administrative Agency
     Agreement, the Security Agreement (solely with respect to the Foreign
     Subsidiaries and their Obligations thereunder) and the Foreign Security
     Documents, and any amendment, supplement or modification thereof, the
     Administrative Agent; provided, however, that solely for purposes of the
                           --------  -------                                 
     granting of Liens by the Foreign Guarantors to the Administrative Agent for
     the benefit of the Sub Borrower as required by Section 5.02(b)(ii)(A) and
     the administrative agency appointment by the Sub Borrower pursuant to the
     Administrative Agency Agreement, the term "Secured Parties" shall include
     the Sub Borrower; provided further, however, that notwithstanding the
                       -------- -------  -------                          
     immediately preceding proviso, the Sub Borrower shall have no voting or
     other rights or remedies as a Secured Party under the Loan Documents.

          "Security Agreement" has the meaning specified in Section
           ------------------                                      
     3.01(m)(viii).

          "Senior Notes" has the meaning specified in the Preliminary
           ------------                                              
     Statements.

          "Senior Notes Indenture" means the Indenture dated as of April __,
           ----------------------                                           
     1998, between the Parent Borrower, as issuer, and ________, as trustee,
     pursuant to which the Senior Notes were issued, as such Indenture may be
     amended, supplemented or otherwise modified from time to time in accordance
     with its terms, to the extent permitted in accordance with the Loan
     Documents.

          "Share Exchange" has the meaning specified in the Preliminary
           --------------                                              
     Statements.

          "Share Exchange and Termination Agreement" means the Share Exchange
           ----------------------------------------                          
     and Termination Agreement dated as of December 18, 1997 among the Parent
     Borrower, IXnet and certain other parties thereto, as such Agreement may be
     amended, supplemented or otherwise modified from time to time in accordance
     with its terms, to the extent permitted in accordance with the Loan
     Documents.

          "Significant Loan Party" means, at any time of determination, each
           ----------------------                                           
     Borrower and each other Loan Party other than any Subsidiary listed on
     Schedule III hereto that does not have assets, revenues or net 
<PAGE>
 
                                       21

     income in excess of $[10,000] at such time and that does not engage in any
     business of any kind[, other than the holding of licenses] at such time.

          "Single Employer Plan" means a single employer plan, as defined in
           --------------------                                             
     Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any
     Loan Party or any ERISA Affiliate and no Person other than the Loan Parties
     and the ERISA Affiliates or (b) was so maintained and in respect of which
     any Loan Party or any ERISA Affiliate could have liability under Section
     4069 of ERISA in the event such plan has been or were to be terminated.

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

          "Standby Letter of Credit" means any Letter of Credit issued under the
           ------------------------                                             
     Letter of Credit Facility, other than a Trade Letter of Credit.

          "Stock Option Plan" means the IPC Information Systems, Inc. Stock
           -----------------                                               
     Option Plan, a copy of which has been furnished to the Lender Parties prior
     to the Effective Date, as amended, supplemented or otherwise modified from
     time to time in accordance with its terms, to the extent permitted in
     accordance with the Loan Documents.

          "Sub Borrower" has the meaning specified in the recital of parties to
           ------------                                                        
     this Agreement.

          "Sub Borrower's Account" means the account of the Sub Borrower
           ----------------------                                       
     maintained by the Sub Borrower with The Bank of New York at its office at
     ____________________, New York, New York _____, Account No. __________,
     Attention: ____________.

          "Subordinated Debt" means any Debt of either Borrower that is
           -----------------                                           
     subordinated to the Obligations of such Borrower under the Loan Documents
     on, and that otherwise contains, terms and conditions satisfactory to the
     Required Lenders.

          "Subsidiary" of any Person means any corporation, partnership, joint
           ----------                                                         
     venture, limited liability company, trust or estate of which (or in which)
     more than 50% of (a) the issued and outstanding capital stock having
     ordinary voting power to elect a majority of the Board of Directors of such
     corporation (irrespective of whether at the time capital stock of any other
     class or classes of such corporation shall or might have voting power upon
     the occurrence of any contingency), (b) the interest in the capital or
     profits of such partnership, joint venture or limited liability company or
     (c) the beneficial interest in such trust or estate is at the time directly
     or indirectly owned or controlled by such Person, by such Person and one or
     more of its other Subsidiaries or by one or more of such Person's other
     Subsidiaries.

          "Surviving Debt" has the meaning specified in Section 3.01(g).
           --------------                                               
<PAGE>
 
                                       22

          "Syndication Agent" has the meaning specified in the recital of
           -----------------                                             
     parties to this Agreement.

          ["Tax Agreement" means the [Tax Agreement dated as of ________, ____
            -------------                                                     
     among the Loan Parties and __________], as amended, supplemented or
     otherwise modified from time to time in accordance with its terms, to the
     extent permitted in accordance with the Loan  Documents.]

          "Tax Certificate" has the meaning specified in Section 5.03(o).
           ---------------                                               

          "Taxes" has the meaning specified in Section 2.12(a).
           -----                                               

          "Termination Date" means the earlier of April __, 2003 and the date of
           ----------------                                                     
     termination in whole of the Letter of Credit Commitment and the Working
     Capital Commitments pursuant to Section 2.05 or 6.01.

          "Trade Letter of Credit" means any Letter of Credit that is issued
           ----------------------                                           
     under the Letter of Credit Facility for the benefit of a supplier of
     Inventory to the Parent Borrower or any of its Subsidiaries to effect
     payment for such Inventory, the conditions to drawing under which include
     the presentation to the Issuing Bank of negotiable bills of lading,
     invoices and related documents sufficient, in the judgment of the Issuing
     Bank, to create a valid and perfected lien on or security interest in such
     Inventory, bills of lading, invoices and related documents in favor of the
     Issuing Bank.

          "Transaction" has the meaning specified in the Preliminary Statements.
           -----------                                                          

          "Type" refers to the distinction between Advances bearing interest at
           ----                                                                
     the Base Rate and Advances bearing interest at the Eurodollar Rate.

          "U.K. Intercompany Note" means a promissory note of a U.K. Subsidiary
           ----------------------                                              
     payable to the order of the Sub Borrower, in substantially the form of
     Exhibit I-1 hereto, evidencing the aggregate intercompany indebtedness of
     such U.K. Subsidiary to the Sub Borrower, as amended, supplemented or
     otherwise modified from time to time.

          "U.K. Sublimit" means $25,000,000, as such amount may be reduced
           -------------                                                  
     pursuant to Section 2.05.

          "U.K. Subsidiaries" means IXnet [(U.K.)], Ltd., [(formerly known as
           -----------------                                                 
     IXnet, Ltd.] and IPC Information Systems, each a corporation organized
     under the laws of England and each a wholly owned Subsidiary of the Parent
     Borrower.

          "Unused Working Capital Commitment" means, with respect to any Lender
           ---------------------------------                                   
     at any time, (a) such Lender's Working Capital Commitment at such time
                                                                           
     minus (b) the sum of (i) the aggregate principal amount of all Working
     -----                                                                 
     Capital Advances and Letter of Credit Advances made by such Lender (in its
     capacity as a Lender) and outstanding at such time plus (ii) such Lender's
                                                        ----                   
     Pro Rata Share of (A) the aggregate Available Amount of all Letters of
     Credit outstanding at such time and (B) the aggregate principal amount of
     all Letter of Credit Advances made by the Issuing Bank pursuant to Section
     2.03(c) and outstanding at such time.

          "Voting Stock" means capital stock issued by a corporation, or
           ------------                                                 
     equivalent interests in any other Person, the holders of which are
     ordinarily, in the absence of contingencies, entitled to vote for the
     election of directors (or persons performing similar functions) of such
     Person, even if the right so to vote has been suspended by the happening of
     such a contingency.
<PAGE>
 
                                       23


          "Welfare Plan" means a welfare plan, as defined in Section 3(1) of
           ------------                                                     
     ERISA, that is maintained for employees of any Loan Party or in respect of
     which any Loan Party could have liability.

          "Withdrawal Liability" has the meaning specified in Part I of Subtitle
           --------------------                                                 
     E of Title IV of ERISA.

          "Working Capital Advance" has the meaning specified in Section
           -----------------------                                      
     2.01(a).

          "Working Capital Commitment" means, with respect to any Lender at any
           --------------------------                                          
     time, the amount set forth opposite such Lender's name on Schedule I hereto
     under the caption "Working Capital Commitment" or, if such Lender has
     entered into one or more Assignments and Acceptances, set forth for such
     Lender in the Register maintained by the Administrative Agent pursuant to
     Section 8.07(d) as such Lender's "Working Capital Commitment", as such
     amount may be reduced at or prior to such time pursuant to Section 2.05.

          "Working Capital Facility" means, at any time, the aggregate amount of
           ------------------------                                             
     the Lenders' Working Capital Commitments at such time.

          SECTION  1.02.  Computation of Time Periods.  In this Agreement in the
                          ---------------------------                           
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".

          SECTION  1.03.  Accounting Terms.  All accounting terms not
                          ----------------                           
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(f) ("GAAP").
                                                             ----   

                                  ARTICLE II

                       AMOUNTS AND TERMS OF THE ADVANCES
                           AND THE LETTERS OF CREDIT

          SECTION  2.01.  The Advances and Letters of Credit.  (a)  The Working
                          ----------------------------------        -----------
Capital Advances.  Each Lender severally agrees, on the terms and conditions
- ----------------                                                            
hereinafter set forth, to make advances (each a "Working Capital Advance") to
                                                 -----------------------     
either Borrower from time to time on any Business Day during the period from the
Effective Date until the Termination Date in an amount for each such Advance not
to exceed (i) in the case of the Parent Borrower, such Lender's Unused Working
Capital Commitment at such time, and (ii) in the case of the Sub Borrower, the
lesser of (x) such Lender's Unused Working Capital Commitment at such time and
(y) the U.K. Sublimit in effect at such time.  Each Borrowing shall be in an
aggregate amount of $100,000 or an integral multiple of $1,000,000 in excess
thereof and shall consist of Working Capital Advances made simultaneously by the
Lenders ratably according to their Working Capital Commitments.  Within the
limits of each Lender's Unused Working Capital Commitment in effect from time to
time, the Borrowers may borrow under this Section 2.01(a), prepay pursuant to
Section 2.06(a) and reborrow under this Section 2.01(a).

          (b) Letters of Credit.  The Issuing Bank agrees, on the terms and
              -----------------                                            
conditions hereinafter set forth, to issue letters of credit (the "Letters of
                                                                   ----------
Credit") for the account of the Parent Borrower from time to time on any
- ------                                                                  
Business Day during the period from the Effective Date until 60 days before the
Termination Date (i) in an aggregate Available Amount for all Letters of Credit
not to exceed at any time the Issuing Bank's Letter of Credit Commitment at such
time and (ii) in an Available Amount for each such Letter of Credit not to
exceed the Unused Working Capital Commitments of the Lenders at such time.  No
Letter of Credit shall have an expiration date (including all rights of the
Parent Borrower or the beneficiary to require renewal) later than the earlier of
30 days 
<PAGE>
 
                                       24

before the Termination Date and (A) in the case of Standby Letters of Credit,
one year after the date of issuance thereof and (B) in the case of a Trade
Letter of Credit, 60 days after the date of issuance thereof. Within the limits
of the Letter of Credit Facility, and subject to the limits referred to above,
the Parent Borrower may request the issuance of Letters of Credit under this
Section 2.01(b), repay any Letter of Credit Advances resulting from drawings
thereunder pursuant to Section 2.03(c) and request the issuance of additional
Letters of Credit under this Section 2.01(b).

          SECTION  2.02.  Making the Advances.  (a)  Except as otherwise
                          -------------------                           
provided in Section 2.03, each Borrowing shall be made on notice, given not
later than 11:00 A.M. (New York City time) on the third Business Day prior to
the date of the proposed Borrowing in the case of a Borrowing consisting of
Eurodollar Rate Advances, or the first Business Day prior to the date of the
proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances,
by the applicable Borrower to the Administrative Agent, which shall give to each
Lender prompt notice thereof by telex or telecopier. Each such notice of a
Borrowing (a "Notice of Borrowing") shall be by telephone, confirmed immediately
              ---------
in writing, or telex or telecopier, in substantially the form of Exhibit B
hereto, specifying therein the requested (i) date of such Borrowing, (ii) Type
of Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing
and (iv) in the case of a Borrowing consisting of Eurodollar Rate Advances,
initial Interest Period for each such Advance. Each Lender shall, before 11:00
A.M. (New York City time) on the date of such Borrowing, make available for the
account of its Applicable Lending Office to the Administrative Agent at the
Administrative Agent's Account, in same day funds, such Lender's ratable portion
of such Borrowing in accordance with the respective Working Capital Commitments
of such Lender and the other Lenders. After the Administrative Agent's receipt
of such funds and upon fulfillment of the applicable conditions set forth in
Article III, the Administrative Agent shall make such funds available to such
Borrower by crediting the Parent Borrower's Account or the Sub Borrower's
Account, as applicable; provided, however, that the Administrative Agent shall
                        --------  -------      
first make a portion of such funds equal to the aggregate principal amount of
any Letter of Credit Advances made by the Issuing Bank and by any other Lender
and outstanding on the date of such Borrowing, plus interest accrued and unpaid
thereon to and as of such date, available to the Issuing Bank and such other
Lenders for repayment of such Letter of Credit Advances.

          (b) Anything in subsection (a) of this Section 2.02 to the contrary
notwithstanding, (i) neither Borrower may select Eurodollar Rate Advances for
any Borrowing if the aggregate amount of such Borrowing is less than $3,000,000
or if the obligation of the Lenders to make Eurodollar Rate Advances shall then
be suspended pursuant to Section 2.09 or 2.10 and (ii) the Working Capital
Advances may not be outstanding as part of more than 12 separate Borrowings.
[S&S TO PREPARE BREAKAGE INDEMNITY LETTER]

          (c) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower giving such Notice of Borrowing.  In the case of any Borrowing that the
related Notice of Borrowing specifies is to be comprised of Eurodollar Rate
Advances, the applicable Borrower shall indemnify each Lender against any loss,
cost or expense incurred by such Lender as a result of any failure to fulfill on
or before the date specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Article III, including, without limitation,
any loss (including loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund the Advance to be made by such Lender as part of such
Borrowing when such Advance, as a result of such failure, is not made on such
date.

          (d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.02 and the Administrative Agent
may, in reliance upon such assumption, make available to the applicable Borrower
on such date a corresponding amount.  If and to the extent that such Lender
shall not have so made such ratable portion available to the Administrative
Agent, such Lender and such Borrower severally agree to repay or pay to the
Administrative 
<PAGE>
 
                                       25

Agent forthwith on demand such corresponding amount and to pay interest thereon,
for each day from the date such amount is made available to such Borrower until
the date such amount is repaid or paid to the Administrative Agent, at (i) in
the case of such Borrower, the interest rate applicable at such time under
Section 2.07 to Advances comprising such Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate. If such Lender shall pay to the Administrative
Agent such corresponding amount, such amount so paid shall constitute such
Lender's Advance as part of such Borrowing for all purposes.

          (e) The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation, if
any, hereunder to make its Advance on the date of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on the date of any Borrowing.

          SECTION  2.03.  Issuance of and Drawings and Reimbursement Under
                          ------------------------------------------------
Letters of Credit. (a)  Request for Issuance.  Each Letter of Credit shall be
- -----------------       --------------------                                 
issued upon notice, given not later than 11:00 A.M. (New York City time) on the
fifth Business Day prior to the date of the proposed issuance of such Letter of
Credit, by the Parent Borrower to the Issuing Bank, which shall give to the
Administrative Agent and each Lender prompt notice thereof by telex or
telecopier.  Each such notice of issuance of a Letter of Credit (a "Notice of
                                                                    ---------
Issuance") shall be by telephone, confirmed immediately in writing, or telex or
- --------                                                                       
telecopier, specifying therein the requested (A) date of such issuance (which
shall be a Business Day), (B) Available Amount of such Letter of Credit, (C)
expiration date of such Letter of Credit, (D) name and address of the
beneficiary of such Letter of Credit and (E) form of such Letter of Credit, and
shall be accompanied by such application and agreement for letter of credit as
the Issuing Bank may specify to the Parent Borrower for use in connection with
such requested Letter of Credit (a "Letter of Credit Agreement").  If (x) the
                                    --------------------------               
requested form of such Letter of Credit is acceptable to the Issuing Bank in its
sole discretion and (y) it has not received notice from the Administrative Agent
or the Required Lenders that the conditions to issuing such Letter of Credit
have not been satisfied or duly waived, the Issuing Bank shall, upon fulfillment
of the applicable conditions set forth in Article III, make such Letter of
Credit available to the Parent Borrower at its office referred to in Section
8.02 or as otherwise agreed with the Parent Borrower in connection with such
issuance.  In the event and to the extent that the provisions of any Letter of
Credit Agreement shall conflict with this Agreement, the provisions of this
Agreement shall govern.  At the Parent Borrower's request, the Issuing Bank
shall provide the Parent Borrower with a copy of the form of Letter of Credit to
be issued for the Parent Borrower's review and approval prior to issuance.

          (b) Letter of Credit Reports.  The Issuing Bank shall furnish (A) to
              ------------------------                                        
the Administrative Agent on the first Business Day of each week a written report
summarizing issuance and expiration dates of Letters of Credit issued during the
previous week and drawings during such week under all Letters of Credit, (B) to
each Lender on the first Business Day of each month a written report summarizing
issuance and expiration dates of Letters of Credit issued during the preceding
month and drawings during such month under all Letters of Credit and (C) to the
Administrative Agent and each Lender on the first Business Day of each calendar
quarter a written report setting forth the average daily aggregate Available
Amount during the preceding calendar quarter of all Letters of Credit.

          (c) Drawing and Reimbursement.  The payment by the Issuing Bank of a
              -------------------------                                       
draft drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the Issuing Bank of a Letter of Credit Advance, which
shall be a Base Rate Advance, in the amount of such draft. Upon written demand
by the Issuing Bank, with a copy of such demand to the Administrative Agent,
each Lender shall purchase from the Issuing Bank, and the Issuing Bank shall
sell and assign to each such Lender, such Lender's Pro Rata Share of such
outstanding Letter of Credit Advance as of the date of such purchase, by making
available for the account of its Applicable Lending Office to the Administrative
Agent for the account of the Issuing Bank, by deposit to the Administrative
Agent's Account, in same day funds, an amount equal to the portion of the
outstanding principal amount of such Letter of Credit Advance to be purchased by
such Lender. Promptly after receipt thereof, the Administrative Agent shall
transfer such funds to the Issuing Bank. The Parent Borrower hereby agrees to
each such sale and assignment. Each Lender
<PAGE>
 
                                       26

agrees to purchase its Pro Rata Share of an outstanding Letter of Credit Advance
on (i) the Business Day on which demand therefor is made by the Issuing Bank;
provided that notice of such demand is given not later than 11:00 A.M. (New York
- --------                                                                        
City time) on such Business Day or (ii) the first Business Day next succeeding
such demand if notice of such demand is given after such time.  Upon any such
assignment by the Issuing Bank to any Lender of a portion of a Letter of Credit
Advance, the Issuing Bank represents and warrants to such other Lender that the
Issuing Bank is the legal and beneficial owner of such interest being assigned
by it, free and clear of any Liens, but makes no other representation or
warranty and assumes no responsibility with respect to such Letter of Credit
Advance, the Loan Documents or any Loan Party.  If and to the extent that any
Lender shall not have so made the amount of such Letter of Credit Advance
available to the Administrative Agent, such Lender agrees to pay to the
Administrative Agent forthwith on demand such amount together with interest
thereon, for each day from the date of demand by the Issuing Bank until the date
such amount is paid to the Administrative Agent, at the Federal Funds Rate for
its account or the account of the Issuing Bank, as applicable.  If such Lender
shall pay to the Administrative Agent such amount for the account of the Issuing
Bank on any Business Day, such amount so paid in respect of principal shall
constitute a Letter of Credit Advance made by such Lender on such Business Day
for purposes of this Agreement, and the outstanding principal amount of the
Letter of Credit Advance made by the Issuing Bank shall be reduced by such
amount on such Business Day.

          (d) Failure to Make Letter of Credit Advances.  The failure of any
              -----------------------------------------                     
Lender to make the Letter of Credit Advance to be made by it on the date
specified in Section 2.03(c) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Letter of Credit Advance to be made by such other Lender on such date.

          SECTION  2.04.  Repayment of Advances.  (a)  Working Capital Advances.
                          ---------------------        ------------------------
Each Borrower shall repay to the Administrative Agent for the ratable account of
the Lenders on the Termination Date the aggregate outstanding principal amount
of the Working Capital Advances then outstanding and owing by such Borrower.

          (b) Letter of Credit Advances.  (i)  The Parent Borrower shall repay
              -------------------------                                       
to the Administrative Agent for the account of the Issuing Bank and each other
Lender that has made a Letter of Credit Advance on the earlier of demand and the
Termination Date the outstanding principal amount of each Letter of Credit
Advance made by each of them.

          (ii) The Obligations of the Parent Borrower under this Agreement, any
Letter of Credit Agreement and any other agreement or instrument relating to any
Letter of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement, such Letter of Credit
Agreement and such other agreement or instrument under all circumstances,
including, without limitation, the following circumstances (it being understood
that any such payment by the Parent Borrower is without prejudice to, and does
not constitute a waiver of, any rights that the Parent Borrower might have or
might acquire as a result of the payment by the Issuing Bank of any draft or the
reimbursement by the Parent Borrower thereof):

          (A) any lack of validity or enforceability of any Loan Document, any
     Letter of Credit Agreement, any Letter of Credit or any other agreement or
     instrument relating thereto (all of the foregoing being, collectively, the
     "L/C Related Documents");
      ---------------------   

          (B) any change in the time, manner or place of payment of, or in any
     other term of, all or any of the Obligations of the Parent Borrower in
     respect of any L/C Related Document or any other amendment or waiver of or
     any consent to departure from all or any of the L/C Related Documents;

          (C) the existence of any claim, setoff, defense or other right that
     the Parent Borrower may have at any time against any beneficiary or any
     transferee of a Letter of Credit (or any Persons for whom 
<PAGE>
 
                                       27

     any such beneficiary or any such transferee may be acting), the Issuing
     Bank or any other Person, whether in connection with the transactions
     contemplated by the L/C Related Documents or any unrelated transaction;

          (D) any statement or any other document presented under a Letter of
     Credit proving to be forged, fraudulent, invalid or insufficient in any
     respect or any statement therein being untrue or inaccurate in any respect;

          (E) payment by the Issuing Bank under a Letter of Credit against
     presentation of a draft or certificate that does not strictly comply with
     the terms of such Letter of Credit;

          (F) any exchange, release or non-perfection of any Collateral or other
     collateral, or any release or amendment or waiver of or consent to
     departure from the Domestic Guaranty or any other guarantee, for all or any
     of the Obligations of the Parent Borrower in respect of the L/C Related
     Documents; or

          (G) any other circumstance or happening whatsoever, whether or not
     similar to any of the foregoing, including, without limitation, any other
     circumstance that might otherwise constitute a defense available to, or a
     discharge of, the Parent Borrower or a Domestic Guarantor or any other
     guarantor.

          SECTION  2.05.  Termination or Reduction of the Commitments.  (a)
                          -------------------------------------------       
Optional.  The Parent Borrower may, upon at least five Business Days' notice to
- --------                                                                       
the Administrative Agent, terminate in whole or reduce in part the unused
portions of the Letter of Credit Facility and the Unused Working Capital
Commitments; provided, however, that each partial reduction of a Facility or a
             --------  -------                                                
Commitment (i) shall be in an aggregate amount of $1,000,000 or an integral
multiple of $100,000 in excess thereof and (ii) shall be made ratably among the
Lenders in accordance with their Commitments with respect to such Facility or
such Commitments.

          (b) Mandatory.  (i)  The Working Capital Facility shall be
              ---------                                             
automatically and permanently reduced on a pro rata basis on each date on which
prepayment thereof is required to be made pursuant to Section 2.06(b)(i) in an
amount equal to the applicable Reduction Amount; provided that each such
                                                 --------               
reduction of the Working Capital Facility shall be made ratably among the
Lenders in accordance with their Working Capital Commitments; provided further,
                                                              -------- ------- 
however, that notwithstanding the foregoing and Section 2.06(b)(iv), in no event
- -------                                                                         
shall the Working Capital Facility be reduced, pursuant to this Section
2.05(b)(i), to less than $40,000,000.

          (ii)  The Letter of Credit Facility shall be permanently reduced from
time to time on the date of each reduction in the Working Capital Facility by
the amount, if any, by which the amount of the Letter of Credit Facility exceeds
the Working Capital Facility after giving effect to such reduction of the
Working Capital Facility.

          (iii)     The U.K. Sublimit shall be permanently reduced from time to
time on the date of each reduction in the Working Capital Facility by the
amount, if any, by which the amount of the U.K. Sublimit exceeds the Working
Capital Facility after giving effect to such reduction of the Working Capital
Facility.

          SECTION  2.06.  Prepayments.  (a)  Optional.  Either Borrower may,
                          -----------        --------                       
upon at least five Business Days' notice to the Administrative Agent stating the
proposed date and aggregate principal amount of the prepayment, and if such
notice is given such Borrower shall, prepay the outstanding aggregate principal
amount of the Advances comprising part of the same Borrowing and owing by such
Borrower in whole or ratably in part, together with accrued interest to the date
of such prepayment on the aggregate principal amount prepaid; provided, however,
                                                              --------  ------- 
that (x) each partial prepayment shall be in an aggregate principal amount of
$1,000,000 or an integral multiple of $100,000 in excess thereof and (y) no such
prepayment of a Eurodollar Rate Advance shall be made other than on the last day
of an Interest Period therefor.
<PAGE>
 
                                       28


          (b) Mandatory.  (i)  The Parent Borrower shall, on the date of receipt
              ---------                                                         
of the Net Cash Proceeds by any Loan Party or any of their respective
Subsidiaries from (A) the sale, lease, transfer or other disposition of any
assets of any Loan Party or any of their respective Subsidiaries (other than any
sale, lease, transfer or other disposition of assets pursuant to clause (i),
(ii) or (iv) of Section 5.02(e)), (B) the incurrence or issuance by any Loan
Party or any of their respective Subsidiaries of any Debt (other than Debt
incurred or issued pursuant to clause (i), (ii) or (iii) of Section 5.02(b)
(other than pursuant to subclause (iii)(C)(2) thereof)), and (C) the sale or
issuance by any Loan Party or any of their respective Subsidiaries of any
capital stock or other ownership or profit interest, any securities convertible
into or exchangeable for capital stock or other ownership or profit interest or
any warrants, rights or options to acquire capital stock or other ownership or
profit interest (other than any such sale or issuance permitted under Section
5.02(g)), prepay an aggregate principal amount of the Advances comprising part
of the same Borrowings and deposit in the L/C Cash Collateral Account an amount
equal to the amount of such Net Cash Proceeds.  Each such prepayment shall be
applied to the Working Capital Facility as set forth in clause (iv) of this
Section 2.06(b).

          (ii) The Sub Borrower shall (or, if there shall be no Advances owing
by the Sub Borrower at such time, the Parent Borrower shall), on each Business
Day, prepay an aggregate principal amount of the Working Capital Advances
comprising part of the same Borrowings and the Letter of Credit Advances and
deposit in the L/C Cash Collateral Account an amount equal to the amount by
which (A) the sum of the aggregate principal amount of (x) the Working Capital
Advances and (y) the Letter of Credit Advances then outstanding plus the
                                                                ----    
aggregate Available Amount of all Letters of Credit then outstanding exceeds (B)
the lesser of the Working Capital Facility and the Loan Value of Eligible
Collateral on such Business Day.

          (iii)  The Parent Borrower shall, on each Business Day, pay to the
Administrative Agent for deposit in the L/C Cash Collateral Account an amount
sufficient to cause the aggregate amount on deposit in such Account to equal the
amount by which the aggregate Available Amount of all Letters of Credit then
outstanding exceeds the Letter of Credit Facility on such Business Day.

          (iv) Prepayments of the Working Capital Facility made pursuant to
clause (i) or (ii) of this Section 2.06(b) shall be first applied to prepay
                                                    -----                  
Letter of Credit Advances then outstanding until such Advances are paid in full,
second applied to prepay Working Capital Advances then outstanding comprising
- ------                                                                       
part of the same Borrowings until such Advances are paid in full and third
                                                                     -----
deposited in the L/C Cash Collateral Account to cash collateralize 100% of the
Available Amount of the Letters of Credit then outstanding; and, in the case of
prepayments of the Working Capital Facility required pursuant to clause (i)
above, the amount remaining (if any) after the prepayment in full of the
Advances then outstanding and the 100% cash collateralization of the aggregate
Available Amount of Letters of Credit then outstanding (the sum of such
prepayment amounts, cash collateralization amounts and remaining amount being
referred to herein as the "Reduction Amount") may be retained by the Parent
                           ----------------                                
Borrower and the Working Capital Facility shall be permanently reduced as set
forth in Section 2.05(b)(i).  Upon the drawing of any Letter of Credit for which
funds are on deposit in the L/C Cash Collateral Account, such funds shall be
applied to reimburse the relevant Issuing Bank or Lenders, as applicable.

          (v) All prepayments under this subsection (b) shall be made together
with accrued interest to the date of such prepayment on the principal amount
prepaid.

          SECTION  2.07.  Interest.  (a)  Scheduled Interest.  Each Borrower
                          --------        ------------------                
shall pay interest on the unpaid principal amount of each Advance owing by such
Borrower to each Lender from the date of such Advance until such principal
amount shall be paid in full, at the following rates per annum:

          (i) Base Rate Advances.  During such periods as such Advance is a Base
              ------------------                                                
     Rate Advance, a rate per annum equal at all times to the sum of (A) the
     Base Rate in effect from time to time plus (B) the Applicable Margin in
                                           ----                             
     effect from time to time, payable in arrears quarterly on the last day of
     each March, June, 
<PAGE>
 
                                       29

     September and December during such periods and on the date such Base Rate
     Advance shall be Converted or paid in full.

          (ii) Eurodollar Rate Advances.  During such periods as such Advance is
               ------------------------                                         
     a Eurodollar Rate Advance, a rate per annum equal at all times during each
     Interest Period for such Advance to the sum of (A) the Eurodollar Rate for
     such Interest Period for such Advance plus (B) the Applicable Margin in
                                           ----                             
     effect on the first day of such Interest Period, payable in arrears on the
     last day of such Interest Period and, if such Interest Period has a
     duration of more than three months, on each day that occurs during such
     Interest Period every three months from the first day of such Interest
     Period and on the date such Eurodollar Rate Advance shall be Converted or
     paid in full.

          (b) Default Interest.  Upon the occurrence and during the continuance
              ----------------                                                 
of an Event of Default, each Borrower shall pay interest on (i) the unpaid
principal amount of each Advance owing by such Borrower to each Lender, payable
in arrears on the dates referred to in clause (a)(i) or (a)(ii) of this Section
2.07 and on demand, at a rate per annum equal at all times to 2% per annum above
the rate per annum required to be paid on such Advance pursuant to clause (a)(i)
or (a)(ii) of this Section 2.07 and (ii) to the fullest extent permitted by law,
the amount of any interest, fee or other amount payable hereunder that is not
paid when due, from the date such amount shall be due until such amount shall be
paid in full, payable in arrears on the date such amount shall be paid in full
and on demand, at a rate per annum equal at all times to 2% per annum above the
rate per annum required to be paid, in the case of interest, on the Type of
Advance on which such interest has accrued pursuant to clause (a)(i) or (a)(ii)
of this Section 2.07, and, in all other cases, on Base Rate Advances pursuant to
clause (a)(i) of this Section 2.07.

          (c) Notice of Interest Rate.  Promptly after receipt of a Notice of
              -----------------------                                         
Borrowing pursuant to Section 2.02(a), the Administrative Agent shall give
notice to the Borrower giving such Notice of Borrowing and each Lender of the
applicable interest rate determined by the Administrative Agent for purposes of
Section 2.07(a)(i) or 2.07(a)(ii).

          SECTION  2.08.  Fees.  (a)  Commitment Fee.  The Parent Borrower shall
                          ----        --------------                            
pay to the Administrative Agent for the account of the Lenders a commitment fee,
from the date hereof in the case of each Initial Lender and from the effective
date specified in the Assignment and Acceptance pursuant to which it became a
Lender in the case of each other Lender until the Termination Date, payable in
arrears on the date of the initial Borrowing hereunder, and thereafter quarterly
on the last Business Day of each March, June, September and December, commencing
June 30, 1998, and on the Termination Date, at the rate of 0.50% per annum on
the daily aggregate Unused Working Capital Commitment of such Lender; provided,
                                                                      -------- 
however, that any commitment fee accrued with respect to any of the Commitments
- -------                                                                        
of a Defaulting Lender during the period prior to the time such Lender became a
Defaulting Lender and unpaid at such time shall not be payable by the Parent
Borrower so long as such Lender shall be a Defaulting Lender except to the
extent that such commitment fee shall otherwise have been due and payable by the
Parent Borrower prior to such time; and provided further that no commitment fee
                                        -------- -------                       
shall accrue on any of the Commitments of a Defaulting Lender so long as such
Lender shall be a Defaulting Lender.

          (b) Letter of Credit Fees, Etc.  (i)  The Parent Borrower shall pay to
              --------------------------                                        
the Administrative Agent for the account of each Lender a commission, payable in
arrears quarterly on the last Business Day of each March, June, September and
December, commencing June 30, 1998, and on the earliest to occur of the full
drawing, expiration, termination or cancellation of any Letter of Credit and on
the Termination Date, on such Lender's Pro Rata Share of the average daily
aggregate Available Amount during such quarter of all Letters of Credit
outstanding from time to time at the Letter of Credit Fee Rate in effect from
time to time.

          (ii) The Parent Borrower shall pay to the Issuing Bank, for its own
account, (A) a fronting fee for each Letter of Credit in an amount equal to
0.25% of the Available Amount of such Letter of Credit on the date of 
<PAGE>
 
                                       30

issuance of such Letter of Credit, payable on such date and (B) such
commissions, issuance fees, transfer fees and other fees and charges in
connection with the issuance or administration of each Letter of Credit as the
Parent Borrower and the Issuing Bank shall agree.

          (c) Agents' Fees.  The Parent Borrower shall pay to the Administrative
              ------------                                                      
Agent for its account the fees described in the Administrative Agent's Fee
Letter.

          SECTION  2.09.  Conversion of Advances.  (a)  Optional.  Either
                          ----------------------        --------         
Borrower may on any Business Day, upon notice given to the Administrative Agent
not later than 11:00 A.M. (New York City time) on the third Business Day prior
to the date of the proposed Conversion and subject to the provisions of Sections
2.07 and 2.10, Convert all or any portion of the Advances of one Type comprising
the same Borrowing and owing by such Borrower into Advances of the other Type;
provided, however, that any Conversion of Eurodollar Rate Advances into Base
- --------  -------                                                           
Rate Advances shall be made only on the last day of an Interest Period for such
Eurodollar Rate Advances, any Conversion of Base Rate Advances into Eurodollar
Rate Advances shall be in an amount not less than the minimum amount specified
in Section 2.02(b), no Conversion of any Advances shall result in more separate
Borrowings than permitted under Section 2.02(b) and each Conversion of Advances
comprising part of the same Borrowing shall be made ratably among the Lenders in
accordance with their Working Capital Commitments. Each such notice of
Conversion shall, within the restrictions specified above, specify (i) the date
of such Conversion, (ii) the Advances to be Converted and (iii) if such
Conversion is into Eurodollar Rate Advances, the duration of the initial
Interest Period for such Advances. Each notice of Conversion shall be
irrevocable and binding on the Borrower giving such notice of Conversion.

          (b) Mandatory.  (i)  On the date on which the aggregate unpaid
              ---------                                                 
principal amount of Eurodollar Rate Advances comprising any Borrowing shall be
reduced, by payment or prepayment or otherwise, to less than $3,000,000, such
Advances shall automatically Convert into Base Rate Advances.

          (ii) If the applicable Borrower shall fail to select the duration of
any Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent shall forthwith so notify such Borrower and the Lenders,
whereupon each such Eurodollar Rate Advance will automatically, on the last day
of the then existing Interest Period therefor, Convert into a Base Rate Advance.

          (iii)  Upon the occurrence and during the continuance of any Event of
Default, (x) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(y) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.

          SECTION  2.10.  Increased Costs, Etc.  (a)  If, due to either (i) the
                          --------------------                                 
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender Party of agreeing to make
or of making, funding or maintaining Eurodollar Rate Advances or of agreeing to
issue or of issuing or maintaining Letters of Credit or of agreeing to make or
of making or maintaining Letter of Credit Advances (excluding, for purposes of
this Section 2.10, any such increased costs resulting from (x) Taxes or Other
Taxes (as to which Section 2.12 shall govern) and (y) changes in the basis of
taxation of overall net income or overall gross income by the United States or
by the foreign jurisdiction or state under the laws of which such Lender Party
is organized or has its Applicable Lending Office or any political subdivision
thereof), then each Borrower hereby jointly and severally agrees from time to
time, upon demand by such Lender Party (with a copy of such demand to the
Administrative Agent), to pay to the Administrative Agent for the account of
such Lender Party additional amounts sufficient to compensate such Lender Party
for such increased cost.  A certificate as to the 
<PAGE>
 
                                       31

amount of such increased cost, submitted to the Borrowers by such Lender Party,
shall be conclusive and binding for all purposes, absent manifest error.

          (b) If any Lender Party determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender Party or any corporation controlling such Lender Party and that the
amount of such capital is increased by or based upon the existence of such
Lender Party's commitment to lend or to issue Letters of Credit hereunder and
other commitments of such type or the issuance or maintenance of the Letters of
Credit (or similar contingent obligations), then each Borrower hereby jointly
and severally agrees, upon demand by such Lender Party (with a copy of such
demand to the Administrative Agent), to pay to the Administrative Agent for the
account of such Lender Party, from time to time as specified by such Lender
Party, additional amounts sufficient to compensate such Lender Party in the
light of such circumstances, to the extent that such Lender Party reasonably
determines such increase in capital to be allocable to the existence of such
Lender Party's commitment to lend or to issue Letters of Credit hereunder or to
the issuance or maintenance of any Letters of Credit. A certificate as to such
amounts submitted to the Borrowers by such Lender Party shall be conclusive and
binding for all purposes, absent manifest error. Each Lender Party shall use its
reasonable efforts to notify the Borrowers as to the existence of any change of
circumstance described in this Section 2.10(b) as promptly as practicable after
gaining knowledge thereof, but the failure to give notice required hereby shall
not affect the right of any Lender Party to any payment to which it would
otherwise be entitled hereunder.

          (c) If, with respect to any Eurodollar Rate Advances, the Required
Lenders notify the Administrative Agent that the Eurodollar Rate for any
Interest Period for such Advances will not adequately reflect the cost to such
Lenders of making, funding or maintaining their Eurodollar Rate Advances for
such Interest Period, the Administrative Agent shall forthwith so notify the
Borrowers and the Lenders, whereupon (i) each such Eurodollar Rate Advance shall
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make,
or to Convert Advances into, Eurodollar Rate Advances shall be suspended until
the Administrative Agent shall notify the Borrowers that such Lenders have
determined that the circumstances causing such suspension no longer exist.

          (d) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender or its Eurodollar
Lending Office to perform its obligations hereunder to make Eurodollar Rate
Advances or to continue to fund or maintain Eurodollar Rate Advances hereunder,
then, on notice thereof and demand therefor by such Lender to each Borrower
through the Administrative Agent, (i) each Eurodollar Rate Advance shall
automatically, upon such demand, Convert into a Base Rate Advance and (ii) the
obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrowers that such Lender has determined that the circumstances causing such
suspension no longer exist.

          (e) Any Lender Party claiming any additional amounts payable pursuant
to clause (a), (b) or (c) of this Section 2.10 agrees to use its reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Applicable Lending Office if the making
of such a designation would avoid the need for, or reduce the amount of, such
increased costs or additional amounts that may thereafter accrue and would not,
in the sole judgment of such Lender Party, be otherwise disadvantageous to such
Lender Party.

          SECTION  2.11.  Payments and Computations.  (a) Each Borrower shall
                          -------------------------                          
make each payment hereunder and under the Notes issued by such Borrower,
irrespective of any right of counterclaim or setoff (except as otherwise
provided in Section 2.15), not later than 11:00 A.M. (New York City time) on the
day when due in U.S. dollars to the Administrative Agent at the Administrative
Agent's Account in same day funds.  The Administrative Agent shall 
<PAGE>
 
                                       32

promptly thereafter cause like funds to be distributed (i) if such payment by
either Borrower is in respect of principal, interest, commitment fees or any
other Obligation then payable hereunder and under the Notes issued by such
Borrower to more than one Lender Party, to such Lender Parties for the account
of their respective Applicable Lending Offices ratably in accordance with the
amounts of such respective Obligations then payable to such Lender Parties and
(ii) if such payment by either Borrower is in respect of any Obligation then
payable hereunder to one Lender Party, to such Lender Party for the account of
its Applicable Lending Office, in each case to be applied in accordance with the
terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to
Section 8.07(d), from and after the effective date of such Assignment and
Acceptance, the Administrative Agent shall make all payments hereunder and under
the Notes in respect of the interest assigned thereby to the Lender Party
assignee thereunder, and the parties to such Assignment and Acceptance shall
make all appropriate adjustments in such payments for periods prior to such
effective date directly between themselves.

          (b) Each Borrower hereby authorizes each Lender Party, if and to the
extent payment owed to such Lender Party is not made when due hereunder or, in
the case of a Lender, under the Note issued by such Borrower and held by such
Lender, to charge from time to time against any or all of such Borrower's
accounts with such Lender Party any amount so due.

          (c) The computation of interest on Base Rate Advances using an
interest rate determined pursuant to clause (a) of the definition of "Base Rate"
and the computation of the fees payable pursuant to Section 2.08(a) shall each
be made by the Administrative Agent on the basis of a year of 365 days or 366
days, as the case may be, in each case for the actual number of days (including
the first but excluding the last day) occurring in the period for which such
interest or commissions are payable.  All other computations of interest, fees
and commissions shall be made by the Administrative Agent on the basis of a year
of 360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest,
fees or commissions are payable. Each determination by the Administrative Agent
of an interest rate, fee or commission hereunder shall be conclusive and binding
for all purposes, absent manifest error.

          (d) Whenever any payment hereunder or under the Notes shall be stated
to be 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 in such case be
included in the computation of payment of interest or commitment fee, as the
case may be; provided, however, that, if such extension would cause payment of
             --------  -------                                                
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.

          (e) Unless the Administrative Agent shall have received notice from
the applicable Borrower prior to the date on which any payment is due to any
Lender Party hereunder that such Borrower will not make such payment in full,
the Administrative Agent may assume that such Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent may,
in reliance upon such assumption, cause to be distributed to each such Lender
Party on such due date an amount equal to the amount then due such Lender Party.
If and to the extent such Borrower shall not have so made such payment in full
to the Administrative Agent, each such Lender Party shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Lender
Party together with interest thereon, for each day from the date such amount is
distributed to such Lender Party until the date such Lender Party repays such
amount to the Administrative Agent, at the Federal Funds Rate.

          SECTION  2.12.  Taxes.  (a)  Any and all payments by either Borrower
                          -----                                               
hereunder or under the Notes issued by such Borrower shall be made, in
accordance with Section 2.11, 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, in the case
                                                        ---------
of each Lender Party and each Agent, taxes that are imposed on its net income by
the
<PAGE>
 
                                       33

United States and taxes that are imposed on its net income (and franchise taxes
imposed in lieu thereof) by the state or foreign jurisdiction under the laws of
which such Lender Party or such Agent (as the case may be) is organized or any
political subdivision thereof and, in the case of each Lender Party, taxes that
are imposed on its overall net income (and franchise taxes imposed in lieu
thereof) by the state or foreign jurisdiction of such Lender Party's Applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities in
respect of payments hereunder or under the Notes being hereinafter referred to 
as "Taxes").  If either Borrower shall be required by law to deduct any Taxes 
    -----                                         
from or in respect of any sum payable hereunder or under any Note issued by such
Borrower to any Lender Party or any Agent, (i) the sum payable by such Borrower
shall be increased as may be necessary so that after such Borrower and the
Administrative Agent have made all required deductions (including deductions
applicable to additional sums payable under this Section 2.12) such Lender Party
or such Agent (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) such Borrower shall make
all such deductions and (iii) such Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law.

          (b) In addition, each Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Notes issued by such Borrower or
from the execution, delivery or registration of, performance under, or otherwise
with respect to, this Agreement or the Notes issued by such Borrower
(hereinafter referred to as "Other Taxes").
                             -----------   

          (c) The Borrowers shall jointly and severally indemnify each Lender
Party and each Agent for and hold them harmless against the full amount of Taxes
and Other Taxes, and for the full amount of taxes of any kind imposed by any
jurisdiction on amounts payable under this Section 2.12, imposed on or paid by
such Lender Party or such Agent (as the case may be) and any liability
(including penalties, additions to tax, interest and expenses) arising therefrom
or with respect thereto.  This indemnification shall be made within 30 days from
the date such Lender Party or such Agent (as the case may be) makes written
demand therefor.

          (d) Within 30 days after the date of any payment of Taxes, the
applicable Borrower shall furnish to the Administrative Agent, at its address
referred to in Section 8.02, the original or a certified copy of a receipt
evidencing such payment.

          (e) Each Lender Party organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of this Agreement in the case of each Initial Lender or Initial Issuing
Bank, as the case may be, and on the date of the Assignment and Acceptance
pursuant to which it becomes a Lender Party in the case of each other Lender
Party, and from time to time thereafter as requested in writing by either
Borrower (but only so long thereafter as such Lender Party remains lawfully able
to do so), provide each of the Administrative Agent and such Borrower with two
original Internal Revenue Service forms 1001 or 4224 or (in the case of a Lender
that has certified in writing to the Administrative Agent and such Borrower that
it is not a "bank" as defined in Section 881(c)(3)(A) of the Internal Revenue
Code) form W-8 (and, if such Lender delivers a form W-8, a certificate
representing that such Lender is not a "bank" for purposes of Section 881(c) of
the Internal Revenue Code, is not a 10-percent shareholder (within the meaning
of Section 871(h)(3)(B) of the Internal Revenue Code) of such Borrower and is
not a controlled foreign corporation related to such Borrower (within the
meaning of Section 864(d)(4) of the Internal Revenue Code)), as appropriate, or
any successor or other form prescribed by the Internal Revenue Service,
certifying that such Lender Party is exempt from or entitled to a reduced rate
of United States withholding tax on payments pursuant to this Agreement or the
Notes issued by such Borrower or, in the case of a Lender providing a form W-8,
certifying that such Lender is a foreign corporation, partnership estate or
trust. If the forms provided by a Lender Party at the time such Lender Party
first becomes a party to this Agreement indicate a United States interest
withholding tax rate in excess of zero, withholding tax at such rate shall be
considered excluded from Taxes unless and until such Lender Party provides the
appropriate forms certifying that a lesser rate applies, whereupon withholding
tax at such lesser rate only shall be considered excluded from Taxes for periods
governed
<PAGE>
 
                                       34

by such forms; provided, however, that, if, at the date of the Assignment and 
               --------  -------
Acceptance pursuant to which a Lender Party becomes a party to this Agreement,
the Lender Party assignor was entitled to payments under subsection (a) of this
Section 2.12 in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender Party assignee on such date. For purposes
of this subsection (e) and subsection (f) of this Section 2.12, the terms 
"United States" and "United States person" shall have the meanings specified in 
 -------------       --------------------
Section 7701 of the Internal Revenue Code.

          (f) For any period with respect to which a Lender Party has failed to
provide the applicable Borrower with the appropriate form described in
subsection (e) above (other than if such failure is due to a change in law
                      ----- ----                                          
enacted or promulgated after the date on which a form originally was required to
be provided or if such form otherwise is not required under subsection (e) of
this Section 2.12), such Lender Party shall not be entitled to indemnification
under subsection (a) or (c) of this Section 2.12 with respect to Taxes imposed
by the United States by reason of such failure; provided, however, that should a
                                                --------  -------               
Lender Party become subject to Taxes because of its failure to deliver a form
required hereunder, such Borrower shall take such steps as such Lender Party
shall reasonably request to assist such Lender Party to recover such Taxes.

          (g) In the event that a Lender Party determines in its reasonable
discretion, that it has actually and finally realized a refund of or credit for
taxes withheld or paid pursuant to this Section 2.12, which credit or refund is
identifiable by such Lender Party as being a result of taxes withheld in
connection with sums payable hereunder or under any other Loan Document, such
Lender Party shall promptly notify the Administrative Agent and the Parent
Borrower and shall remit to the Parent Borrower or the Sub Borrower, as
applicable, the amount of such refund or credit allocable to payments made
hereunder or under the other Loan Documents.

          SECTION  2.13.  Sharing of Payments, Etc.  If any Lender Party shall
                          ------------------------                            
obtain at any time any payment (whether voluntary, involuntary, through the
exercise of any right of setoff, or otherwise) (a) on account of Obligations due
and payable to such Lender Party hereunder and under the Notes at such time in
excess of its ratable share (according to the proportion of (i) the amount of
such Obligations due and payable to such Lender Party at such time to (ii) the
aggregate amount of the Obligations due and payable to all Lender Parties
hereunder and under the Notes at such time) of payments on account of the
Obligations due and payable to all Lender Parties hereunder and under the Notes
at such time obtained by all the Lender Parties at such time or (b) on account
of Obligations owing (but not due and payable) to such Lender Party hereunder
and under the Notes at such time in excess of its ratable share (according to
the proportion of (i) the amount of such Obligations owing to such Lender Party
at such time to (ii) the aggregate amount of the Obligations owing (but not due
and payable) to all Lender Parties hereunder and under the Notes at such time)
of payments on account of the Obligations owing (but not due and payable) to all
Lender Parties hereunder and under the Notes at such time obtained by all of the
Lender Parties at such time, such Lender Party shall forthwith purchase from the
other Lender Parties such participations in the Obligations due and payable or
owing to them, as the case may be, as shall be necessary to cause such
purchasing Lender Party 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 Party, such purchase from each
other Lender Party shall be rescinded and such other Lender Party shall repay to
the purchasing Lender Party the purchase price to the extent of such Lender
Party's ratable share (according to the proportion of (i) the purchase price
paid to such Lender Party to (ii) the aggregate purchase price paid to all
Lender Parties) of such recovery together with an amount equal to such Lender
Party's ratable share (according to the proportion of (i) the amount of such
other Lender Party's required repayment to (ii) the total amount so recovered
from the purchasing Lender Party) of any interest or other amount paid or
payable by the purchasing Lender Party in respect of the total amount so
recovered. Each Borrower agrees that any Lender Party so purchasing a
participation from another Lender Party pursuant to this Section 2.13 may, to
the fullest extent permitted by law, exercise all its rights of payment
(including the right of setoff) with respect to such 
<PAGE>
 
                                       35

participation as fully as if such Lender Party were the direct creditor of such
Borrower in the amount of such participation.

          SECTION  2.14.  Use of Proceeds.  The proceeds of the Advances and
                          ---------------                                   
issuances of Letters of Credit to the Parent Borrower shall be available (and
the Parent Borrower agrees that it shall use such proceeds and Letters of
Credit) solely to pay fees and expenses related to the Transaction, refinance
certain Existing Debt of the Parent Borrower and to finance ongoing working
capital requirements and for other general corporate purposes, including,
without limitation, Non-hostile Acquisitions, of the Parent Borrower and its
Subsidiaries.  The proceeds of the Advances to the Sub Borrower shall be
available (and the Sub Borrower agrees that it shall use such proceeds) solely
to be lent to the U.K. Subsidiaries and to be used by the U.K. Subsidiaries
solely to finance ongoing working capital requirements and for other general
corporate purposes of the U.K. Subsidiaries.

          SECTION  2.15.  Defaulting Lenders.  (a)  In the event that, at any
                          ------------------                                 
one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such
Defaulting Lender shall owe a Defaulted Advance to either Borrower and (iii)
such Borrower shall be required to make any payment hereunder or under any other
Loan Document to or for the account of such Defaulting Lender, then such
Borrower may, so long as no Default shall occur or be continuing at such time
and to the fullest extent permitted by applicable law, set off and otherwise
apply the Obligation of such Borrower to make such payment to or for the account
of such Defaulting Lender against the obligation of such Defaulting Lender to
make such Defaulted Advance.  In the event that, on any date, such Borrower
shall so set off and otherwise apply its Obligation to make any such payment
against the obligation of such Defaulting Lender to make any such Defaulted
Advance on or prior to such date, the amount so set off and otherwise applied by
such Borrower shall constitute for all purposes of this Agreement and the other
Loan Documents an Advance by such Defaulting Lender made on the date under the
Facility pursuant to which such Defaulted Advance was originally required to
have been made pursuant to Section 2.01.  Such Advance shall be a Base Rate
Advance and shall be considered, for all purposes of this Agreement, to comprise
part of the Borrowing in connection with which such Defaulted Advance was
originally required to have been made pursuant to Section 2.01, even if the
other Advances comprising such Borrowing shall be Eurodollar Rate Advances on
the date such Advance is deemed to be made pursuant to this subsection (a). Each
Borrower shall notify the Administrative Agent at any time such Borrower
exercises its right of setoff pursuant to this subsection (a) and shall set
forth in such notice (A) the name of the Defaulting Lender and the Defaulted
Advance required to be made by such Defaulting Lender and (B) the amount set off
and otherwise applied in respect of such Defaulted Advance pursuant to this
subsection (a). Any portion of such payment otherwise required to be made by
such Borrower to or for the account of such Defaulting Lender which is paid by
such Borrower, after giving effect to the amount set off and otherwise applied
by such Borrower pursuant to this subsection (a), shall be applied by the
Administrative Agent as specified in subsection (b) or (c) of this Section 2.15.

          (b) In the event that, at any one time, (i) any Lender Party shall be
a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to
any Agent or any of the other Lender Parties and (iii) either Borrower shall
make any payment hereunder or under any other Loan Document to the
Administrative Agent for the account of such Defaulting Lender, then the
Administrative Agent may, on its behalf or on behalf of such other Agents or
such other Lender Parties and to the fullest extent permitted by applicable law,
apply at such time the amount so paid by such Borrower to or for the account of
such Defaulting Lender to the payment of each such Defaulted Amount to the
extent required to pay such Defaulted Amount.  In the event that the
Administrative Agent shall so apply any such amount to the payment of any such
Defaulted Amount on any date, the amount so applied by the Administrative Agent
shall constitute for all purposes of this Agreement and the other Loan Documents
payment, to such extent, of such Defaulted Amount on such date.  Any such amount
so applied by the Administrative Agent shall be retained by the Administrative
Agent or distributed by the Administrative Agent to such other Agents or such
other Lender Parties, ratably in accordance with the respective portions of such
Defaulted Amounts payable at such time to the Administrative Agent, such other
Agents and such other Lender Parties and, if the amount of such 
<PAGE>
 
                                       36

payment made by such Borrower shall at such time be insufficient to pay all
Defaulted Amounts owing at such time to the Administrative Agent, the other
Agents and the other Lender Parties, in the following order of priority:

          (i) first, to the Administrative Agent for any Defaulted Amount then
              -----                                                           
     owing to the Administrative Agent;

          (ii) second, to any other Agents for any Defaulted Amounts then owing
               ------                                                          
     to such other Agents, ratably in accordance with such respective Defaulted
     Amounts then owing to such other Agents; and

          (iii)  third, to any other Lender Parties for any Defaulted Amounts
                 -----                                                       
     then owing to such other Lender Parties, ratably in accordance with such
     respective Defaulted Amounts then owing to such other Lender Parties.

Any portion of such amount paid by such Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.15.

          (c) In the event that, at any one time, (i) any Lender Party shall be
a Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted
Advance or a Defaulted Amount and (iii) either Borrower, any Agent or any other
Lender Party shall be required to pay or distribute any amount hereunder or
under any other Loan Document to or for the account of such Defaulting Lender,
then such Borrower, such Agent or such other Lender Party shall pay such amount
to the Administrative Agent to be held by the Administrative Agent, to the
fullest extent permitted by applicable law, in escrow or the Administrative
Agent shall, to the fullest extent permitted by applicable law, hold in escrow
such amount otherwise held by it. Any funds held by the Administrative Agent in
escrow under this subsection (c) shall be deposited by the Administrative Agent
in an account with [____], in the name and under the control of the
Administrative Agent, but subject to the provisions of this subsection (c). The
terms applicable to such account, including the rate of interest payable with
respect to the credit balance of such account from time to time, shall be
[____]'s standard terms applicable to escrow accounts maintained with it. Any
interest credited to such account from time to time shall be held by the
Administrative Agent in escrow under, and applied by the Administrative Agent
from time to time in accordance with the provisions of, this subsection (c). The
Administrative Agent shall, to the fullest extent permitted by applicable law,
apply all funds so held in escrow from time to time to the extent necessary to
make any Advances required to be made by such Defaulting Lender and to pay any
amount payable by such Defaulting Lender hereunder and under the other Loan
Documents to the Administrative Agent, any other Agents or any other Lender
Party, as and when such Advances or amounts are required to be made or paid and,
if the amount so held in escrow shall at any time be insufficient to make and
pay all such Advances and amounts required to be made or paid at such time, in
the following order of priority:

          (i) first, to the Administrative Agent for any amount then due and
              -----                                                         
     payable by such Defaulting Lender to the Administrative Agent hereunder;

          (ii) second, to any other Agents for any amount then due and payable
               ------                                                         
     by such Defaulting Lender to such other Agents hereunder, ratably in
     accordance with such respective amounts then due and payable to such other
     Agents;

          (iii)  third, to any other Lender Parties for any amount then due and
                 -----                                                         
     payable by such Defaulting Lender to such other Lender Parties hereunder,
     ratably in accordance with such respective amounts then due and payable to
     such other Lender Parties; and
<PAGE>
 
                                       37

          (iv) fourth, to the applicable Borrower for any Advance then required
               ------                                                          
     to be made to such Borrower by such Defaulting Lender pursuant to a
     Commitment of such Defaulting Lender.

In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Administrative
Agent in escrow at such time with respect to such Lender Party shall be
distributed by the Administrative Agent to such Lender Party and applied by such
Lender Party to the Obligations owing to such Lender Party at such time under
this Agreement and the other Loan Documents ratably in accordance with the
respective amounts of such Obligations outstanding at such time.

          (d) The rights and remedies against a Defaulting Lender under this
Section 2.15 are in addition to other rights and remedies that the Borrowers may
have against such Defaulting Lender with respect to any Defaulted Advance and
that the Administrative Agent, any Agent or any Lender Party may have against
such Defaulting Lender with respect to any Defaulted Amount.


                                  ARTICLE III

                             CONDITIONS OF LENDING

          SECTION  3.01.  Conditions Precedent to Initial Extension of Credit.
                          ---------------------------------------------------  
The obligation of each Lender to make an Advance or of the Issuing Bank to issue
a Letter of Credit on the occasion of the Initial Extension of Credit hereunder
is subject to the satisfaction of the following conditions precedent before or
concurrently with the Initial Extension of Credit:

          (a) The Transaction, including all of the terms and conditions
     thereof, shall have been duly approved by the board of directors and (if
     required by applicable law) the shareholders of the parties thereto, and
     all Related Documents shall have been duly executed and delivered by the
     parties thereto and shall be in full force and effect.  The representations
     and warranties set forth in the Related Documents shall be true and correct
     in all material respects as if made on and as of the date of the Initial
     Extension of Credit, except to the extent that such representations and
     warranties are stated to relate to a specific earlier date, in which case
     such representations and warranties shall be true and correct in all
     material respects as of such earlier date.

          (b) The Merger shall have been consummated strictly in accordance with
     the terms of the Merger Agreement, and the Share Exchange shall have been
     consummated strictly in accordance with the terms of the Share Exchange and
     Termination Agreement, in each case without any waiver or amendment not
     consented to by the Agents and the Lender Parties of any material term,
     provision or condition set forth therein, and in compliance with all
     applicable laws.

          (c) The Agents and the Lender Parties shall be satisfied with the
     corporate and legal structure, ownership and capitalization of each Loan
     Party and each of its Subsidiaries, including the terms and conditions of
     the charter, bylaws and each class of capital stock of each Loan Party and
     each such Subsidiary and of each agreement or instrument relating to such
     structure, ownership or capitalization.

          (d) The Parent Borrower shall have received at least $149,935,000
     (exclusive of any over funding amount) in Net Cash Proceeds from the
     issuance of the Senior Notes.

          (e) The Parent Borrower shall have received Net Cash Proceeds from the
     issuance of common stock to the Equity Investors in an amount at least
     equal to the product of $80,000,000 and the percentage 
<PAGE>
 
                                       38

     of common stock of the Parent Borrower to be owned, directly or indirectly,
     by the Equity Investors after giving effect to the Transaction, all on
     terms and conditions satisfactory to the Agents and the Lender Parties.

          (f) No Borrowings shall be required or made on the Effective Date in
     connection with the consummation of the Transaction.

          (g) The Agents and the Lender Parties shall be satisfied that all
     Existing Debt, other than the Debt identified on Schedule 4.01(gg) hereto
     (the "Surviving Debt"), has been prepaid, redeemed or defeased in full or
           --------------                                                     
     otherwise satisfied and extinguished and that all such Surviving Debt shall
     be on terms and conditions satisfactory to the Agents and the Lender
     Parties.

          (h) Before giving effect to the Transaction, there shall have occurred
     no Material Adverse Change since September 30, 1997.

          (i) There shall exist no action, suit, investigation, litigation or
     proceeding affecting any Loan Party or any of its Subsidiaries pending or,
     to the best of either Borrower's knowledge, threatened before any court,
     governmental agency or arbitrator that (i) could be reasonably likely to
     have a Material Adverse Effect or (ii) purports to affect the legality,
     validity or enforceability of the Transaction, any Loan Document, any
     Related Document or the consummation of the Transaction.

          (j) Nothing shall have come to the attention of the Lender Parties
     during the course of their due diligence investigation to lead them to
     believe (i) that the information relating to the Loan Parties furnished to
     the Lender Parties prior to the Effective Date was or has become
     misleading, incorrect or incomplete in any material respect, (ii) that,
     following the consummation of the Transaction, the Parent Borrower and its
     Subsidiaries would not have good and marketable title to all material
     assets of the Parent Borrower and its Subsidiaries reflected in the
     information relating to the Loan Parties furnished to the Lender Parties
     prior to the Effective Date and (iii) that the Transaction will have a
     Material Adverse Effect; without limiting the generality of the foregoing,
     the Lender Parties shall have been given such access to the management,
     records, books of account, contracts and properties of the Parent Borrower
     and its Subsidiaries as they shall have requested.

          (k) All accrued costs, fees and expenses of the Agents and the Lender
     Parties to the extent due shall have been paid (including the accrued
     costs, fees and expenses of counsel to the Agents and local counsel to the
     Lender Parties).

          (l) The Agents and the Lender Parties shall be satisfied that (i) all
     requisite governmental and other third party licenses, permits, approvals
     and consents necessary in connection with the Initial Extension of Credit
     and for the consummation of the Transaction shall have been obtained
     (without the imposition of any conditions that are not acceptable to the
     Agents and the Lender Parties) and remain in effect, and all applicable
     appeal periods and all applicable waiting periods (including, without
     limitation, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
     amended) in connection with the Transaction shall have expired without any
     action being taken by any competent authority, and no law or regulation
     shall be applicable in the judgment of the Lender Parties, in each case,
     that restrains, prevents or imposes adverse conditions upon the
     consummation of the Transaction or the rights of the Loan Parties or their
     Subsidiaries freely to the transfer or otherwise dispose of, or to create
     any Lien on, any properties now owned or hereafter acquired by any of them
     and (ii) the Initial Extension of Credit, and all other financing for the
     Transaction (including, without limitation, the issuance of common stock of
     the Parent Borrower to AAC and the issuance of the Senior Notes) shall be
     in full compliance with all legal and regulatory requirements, 
<PAGE>
 
                                       39

     including, without limitation, Regulations G, T, U and X of the Board of
     Governors of the Federal Reserve System.

          (m) The Administrative Agent shall have received on or before the date
     of the Initial Extension of Credit the following, each dated such day
     (unless otherwise specified), in form and substance satisfactory to the
     Agents and the Lender Parties (unless otherwise specified) and (except for
     the Notes) in sufficient copies for each Lender Party:

               (i) The Notes payable to the order of the Lenders.

               (ii) Certified copies of (A) the resolutions of the Board of
     Directors (or persons performing similar functions) of each Loan Party
     approving the Transaction, each Loan Document and each Related Document to
     which it is or is to be a party, and (B) all documents evidencing other
     necessary corporate action and governmental and other third party approvals
     and consents, if any, with respect to the Transaction, each Loan Document
     and each Related Document to which it is or is to be a party.

               (iii)  A copy of a certificate of the Secretary of State or other
     appropriate governmental official of the jurisdiction of incorporation of
     each Loan Party, dated reasonably near the date of the Initial Extension of
     Credit, certifying, where applicable, (A) as to a true and correct copy of
     the charter or other constitutive document of such Loan Party and each
     amendment thereto on file in that office and (B) that (1) such amendments
     are the only amendments to such Loan Party's charter or other constitutive
     document on file in that office, (2) such Loan Party has paid all franchise
     taxes to the date of such certificate and (3) such Loan Party is duly
     incorporated and in good standing or presently subsisting under the laws of
     the jurisdiction of its incorporation.

               (iv) A copy of a certificate of the Secretary of State of the
     States of Connecticut, New York and _________________ and, where
     applicable, a certificate of such other appropriate governmental official
     in all other appropriate jurisdictions, in each case, dated reasonably near
     the date of the Initial Extension of Credit, stating that each Loan Party
     is duly qualified and in good standing as a foreign corporation in such
     State or other jurisdiction and has filed all annual reports required to be
     filed to the date of such certificate.

               (v) Certified copies of a certificate of merger or other
     confirmation from the Secretary of State of the State of Delaware
     satisfactory to the Agents and the Lender Parties of the consummation of
     the Merger.

               (vi) A certificate of each Loan Party, signed on behalf of such
     Loan Party by its President or any Vice President and its Secretary or any
     Assistant Secretary, dated the date of the Initial Extension of Credit (the
     statements made in which certificate shall be true on and as of the date of
     the Initial Extension of Credit), certifying as to (A) the absence of any
     amendments to the charter of such Loan Party since the date of the
     Secretary of State's certificate referred to in Section 3.01(m)(iii), (B) a
     true and correct copy of the bylaws of such Loan Party as in effect on the
     date on which the resolutions referred to in Section 3.01(m)(ii) were
     adopted and on the date of the Initial Extension of Credit, (C) the due
     incorporation and good standing or valid existence of such Loan Party as a
     corporation organized under the laws of the jurisdiction of its
     incorporation, and the absence of any proceeding for the dissolution or
     liquidation of such Loan Party, (D) the truth of the representations and
     warranties contained in the Loan Documents and the Related Documents as
     though made on and as of the date of the Initial Extension of Credit and
     (E) the 
<PAGE>
 
                                       40

     absence of any event occurring and continuing, or resulting from the
     Initial Extension of Credit, that constitutes a Default.

               (vii)  A certificate of the Secretary or an Assistant Secretary
     of each Loan Party certifying the names and true signatures of the officers
     of such Loan Party authorized to sign each Loan Document and each Related
     Document to which it is or is to be a party and the other documents to be
     delivered hereunder and thereunder.

               (viii)    A security agreement in substantially the form of
     Exhibit D hereto (together with each other security agreement and security
     agreement supplement delivered pursuant to Section 5.01(o), in each case as
     amended, supplemented or otherwise modified from time to time in accordance
     with its terms, the "Security Agreement"), duly executed by each Loan
                          ------------------                              
     Party, together with:

               (A) certificates representing the Pledged Shares referred to
     therein accompanied by undated stock powers executed in blank and
     instruments, including, without limitation, the Intercompany Notes,
     evidencing the Pledged Debt referred to therein indorsed in blank,

               (B) acknowledgment copies or stamped receipt copies of proper
     financing statements, duly filed on or before the date of the Initial
     Extension of Credit under the Uniform Commercial Code of all jurisdictions
     that the Administrative Agent may deem necessary or desirable in order to
     perfect and protect the first priority liens and security interests created
     under the Security Agreement, covering the Collateral described in the
     Security Agreement,

               (C) completed requests for information, dated on or before the
     date of the Initial Extension of Credit, listing the financing statements
     referred to in clause (B) above and all other effective financing
     statements filed in the jurisdictions referred to in clause (B) above that
     name any Loan Party as debtor, together with copies of such other financing
     statements,

                    (D) evidence of the completion of all recordings and filings
          of or with respect to the Intellectual Property Collateral referred to
          in the Security Agreement that the Administrative Agent may deem
          necessary or desirable in order to perfect and protect the Liens
          created hereunder.

               (E) evidence of the completion of all other recordings and
     filings of or with respect to the Security Agreement that the
     Administrative Agent may deem necessary or desirable in order to perfect
     and protect the Liens created thereby, including, without limitation,

               (F) evidence of the insurance required by the terms of the
     Security Agreement,

               (G) copies of the Assigned Agreements referred to in the Security
     Agreement, together with a consent to such assignment, in substantially the
     form of Exhibit B to the Security Agreement, duly executed by each party to
     such Assigned Agreements other than the Loan Parties,
<PAGE>
 
                                       41

               (H) the Pledged Account Letters referred to in the Security
     Agreement, duly executed by each Pledged Account Bank referred to in the
     Security Agreement, and

               (I) evidence that all other action that the Administrative Agent
     may deem necessary or desirable in order to perfect and protect the first
     priority liens and security interests created under the Security Agreement
     has been taken (including, without limitation, such pledge, charge or other
     similar agreements as the Administrative Agent may request pursuant to
     which a Domestic Subsidiary pledges stock or other ownership interest in a
     Foreign Subsidiary to the Administrative Agent).

               (ix) Such security agreements, pledges, mortgages, assignments,
     charges and other agreements and documents (in each case, as amended,
     supplemented or otherwise modified in accordance with its terms, the
     "Foreign Security Documents"), in each case in form and substance
     ---------------------------                                      
     satisfactory to the Administrative Agent, as the Administrative Agent may
     request to secure payment of all Obligations of the U.K. Subsidiaries and
     the other Foreign Guarantors under the Loan Documents, duly executed by the
     applicable Foreign Guarantor, together with:

                    (A) an administrative agency agreement in substantially the
               form of Exhibit J hereto (as amended, supplemented or otherwise
               modified from time to time in accordance with its terms, the
               "Administrative Agency Agreement"), duly executed by the Sub
               --------------------------------                            
               Borrower and the Administrative Agent, and

                    (B) evidence that all actions that may be necessary or, in
               the sole discretion of the Administrative Agent, desirable in
               order to perfect and protect the first priority liens, security
               interests, pledges and charges created by the Foreign Security
               Documents under the laws of the jurisdiction of the applicable
               Foreign Guarantor, have been taken.

               (x) A guaranty in substantially the form of Exhibit E-1 hereto
     (together with each other guaranty and guaranty supplement delivered by a
     Domestic Guarantor pursuant to Section 5.01(o), in each case as amended,
     supplemented or otherwise modified from time to time in accordance with its
     terms, the "Domestic Guaranty"), duly executed by each Domestic Guarantor,
                 -----------------                                             
     and a guaranty in substantially the form of Exhibit E-2 hereto (together
     with each other guaranty and guaranty supplement delivered by a Foreign
     Guarantor pursuant to Section 5.01(o), in each case as amended,
     supplemented or otherwise modified from time to time in accordance with its
     terms, the "Foreign Guaranty"), duly executed by each Foreign Guarantor.
                 ----------------                                            

               (xi) Certified copies of each of the Related Documents duly
     executed by each of the parties thereto and in form and substance
     satisfactory to the Agents and the Lender Parties, together with all
     agreements, instruments and other documents delivered in connection
     therewith.

               (xii)  Such financial, business and other information regarding
     each Loan Party and each of its Subsidiaries as the Lender Parties shall
     have requested, including, without limitation, information as to possible
     contingent liabilities, tax matters, environmental matters, obligations
     under Plans, Multiemployer Plans and Welfare Plans, collective bargaining
     agreements and other arrangements with employees, audited annual financial
     statements dated September 30, 1997, interim financial statements dated the
     end of the most recent fiscal quarter for which financial statements are
     available (or, in the event the Lender Parties' due diligence review
     reveals material changes since such financial statements, as of a later
     date within 45 days of the day of the Initial Extension of Credit), pro
     forma financial statements as to the Parent Borrower and forecasts 
<PAGE>
 
                                       42

     prepared by management of the Parent Borrower, in form and substance
     satisfactory to the Agents and the Lender Parties, of balance sheets,
     income statements and cash flow statements on a monthly basis for the first
     year following the day of the Initial Extension of Credit and on an annual
     basis for each year thereafter until the Termination Date.

               (xiii)    Certificates and letters, in substantially the form of
     Exhibits G-1 and G-2 hereto, attesting to the Solvency of each Loan Party
     after giving effect to the Transaction, from its chief financial officer
     and Houlihan Lokey Howard & Zukin.

               (xiv)  An environmental assessment report, in form and substance
     satisfactory to the Agents and the Lender Parties, from an environmental
     consulting firm acceptable to the Administrative Agent, as to any hazards,
     costs or liabilities under Environmental Laws to which any Loan Party or
     any of its Subsidiaries may be subject, the amount and nature of which and
     the Parent Borrower's plans with respect to which shall be acceptable to
     the Agents and the Lender Parties, together with evidence, in form and
     substance satisfactory to the Agents and the Lender Parties, that all
     applicable Environmental Laws shall have been complied with, except for
     such non-compliance that is not reasonably likely to result in a Material
     Adverse Effect.  To the extent either the report or any other information
     that may become available to the Agents and the Lender Parties shall
     disclose any hazards, costs or liabilities under Environmental Laws or
     otherwise that the Agents or the Lender Parties deem material, the Agents
     and the Lender Parties shall be satisfied that such hazards, costs or
     liabilities were adequately reflected in the Parent Borrower's financial
     reserves shown on the financial statements furnished to the Lender Parties
     prior to the Effective Date or that, to the extent not so reflected, the
     Parent Borrower has made adequate provision for such hazards, costs or
     liabilities.

               (xv) Evidence of insurance naming the Administrative Agent as
     additional insured and loss payee with such responsible and reputable
     insurance companies or associations, and in such amounts and covering such
     risks, as is reasonably satisfactory to the Agents.

               (xvi)  Certified copies of each employment agreement and other
     compensation arrangement with each executive officer of each Loan Party and
     each of its Subsidiaries as the Administrative Agent may request.

               (xvii)    Certified copies of all Material Contracts of each Loan
     Party and each of its Subsidiaries as the Administrative Agent may request.

               (xviii)   A Borrowing Base Certificate.

               (xix)  A favorable opinion of Morgan, Lewis & Bockius LLP,
     counsel for the Borrowers and the Domestic Guarantors, in substantially the
     form of Exhibit F hereto and as to such other matters as any Lender Party
     through the Administrative Agent may reasonably request.

               (xx) A favorable opinion of _______________, Morgan, Lewis &
     Bockius LLP, Jones, Day, Reavis & Pogue and Osler, Hoskin & Harcourt, local
     counsel to the Lender Parties in Connecticut, the United Kingdom, Hong Kong
     and Canada, respectively, in form and substance satisfactory to the Lender
     Parties and as to such other matters as any Lender Party through the
     Administrative Agent may reasonably request.
<PAGE>
 
                                       43

               (xxi)  A favorable opinion of Shearman & Sterling, counsel for
     the Administrative Agent and the Syndication Agent, in form and substance
     reasonably satisfactory to the Administrative Agent and the Syndication
     Agent.

          SECTION  3.02.  Conditions Precedent to Each Borrowing and Issuance.
                          ---------------------------------------------------  
The obligation of each Lender to make an Advance (other than a Letter of Credit
Advance made by the Issuing Bank or a Lender pursuant to Section 2.03(c)) on the
occasion of each Borrowing (including the Initial Extension of Credit), and the
obligation of the Issuing Bank to issue a Letter of Credit (including the
initial issuance), shall be subject to the further conditions precedent that on
the date of such Borrowing or issuance (a) the following statements shall be
true and each of the giving of the applicable Notice of Borrowing or Notice of
Issuance and the acceptance by the applicable Borrower of the proceeds of such
Borrowing or of such Letter of Credit shall constitute a representation and
warranty by such Borrower that both on the date of such notice and on the date
of such Borrowing or issuance such statements are true:

          (i) the representations and warranties contained in each Loan Document
     are true and correct on and as of such date, before and after giving effect
     to such Borrowing or issuance and to the application of the proceeds
     therefrom, as though made on and as of such date other than any such
     representations or warranties that, by their terms, refer to a specific
     date other than the date of such Borrowing or issuance, in which case as of
     such specific date;

          (ii) no event has occurred and is continuing, or would result from
     such Borrowing or issuance or from the application of the proceeds
     therefrom, that constitutes a Default; and

          (iii)  the sum of the Loan Values of the Eligible Collateral exceeds
     the aggregate principal amount of the Working Capital Advances plus Letter
                                                                    ----       
     of Credit Advances to be outstanding plus the aggregate Available Amount of
                                          ----                                  
     all Letters of Credit to be outstanding after giving effect to such Advance
     or issuance, respectively;

and (b) the Administrative Agent shall have received such other approvals,
opinions or documents as any Lender Party through the Administrative Agent may
reasonably request.

          SECTION  3.03.  Determinations Under Section 3.01.  For purposes of
                          ---------------------------------                  
determining compliance with the conditions specified in Section 3.01, each
Lender Party shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lender Parties unless an
officer of the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from such Lender
Party prior to the Initial Extension of Credit specifying its objection thereto
and if the Initial Extension of Credit consists of a Borrowing, such Lender
Party shall not have made available to the Administrative Agent such Lender
Party's ratable portion of such Borrowing.

                                  ARTICLE IV

                        REPRESENTATIONS AND WARRANTIES


          SECTION  4.01.  Representations and Warranties of the Borrowers.  Each
                          -----------------------------------------------       
Borrower represents and warrants as follows:

          (a) Each Loan Party (other than the U.K. Subsidiaries) and each of its
     Subsidiaries (i) is a corporation duly organized, validly existing and in
     good standing under the laws of the jurisdiction of its 
<PAGE>
 
                                       44

     incorporation and (ii) is duly qualified and in good standing as a foreign
     corporation in each other jurisdiction in which it owns or leases property
     or in which the conduct of its business requires it to so qualify or be
     licensed except where the failure to so qualify or be licensed could not
     have a Material Adverse Effect, and each U.K. Subsidiary is a limited
     liability company incorporated under the laws of England. Each Loan Party
     and each of its Subsidiaries has all requisite corporate power and
     authority (including, without limitation, all governmental licenses,
     permits and other approvals) to own or lease and operate its properties and
     to carry on its business as now conducted and as proposed to be conducted.
     All of the outstanding capital stock of each Loan Party has been validly
     issued, is fully paid and non-assessable and is owned by those Persons
     listed on Schedule 4.01(a) hereto in the amounts specified thereon free and
     clear of all Liens, except those created under the Collateral Documents.

          (b) Set forth on Schedule 4.01(b) hereto is a complete and accurate
     list of all Subsidiaries of each Loan Party, showing as of the date hereof
     (as to each such Subsidiary) the jurisdiction of its incorporation, the
     number of shares of each class of capital stock authorized, and the number
     outstanding, on the date hereof and the percentage of the outstanding
     shares of each such class owned (directly or indirectly) by such Loan Party
     and the number of shares covered by all outstanding options, warrants,
     rights of conversion or purchase and similar rights at the date hereof.
     All of the outstanding capital stock of all of such Subsidiaries has been
     validly issued, is fully paid and non-assessable and is owned by such Loan
     Party or one or more of its Subsidiaries free and clear of all Liens,
     except those created under the Loan Documents.

          (c) The execution, delivery and performance by each Loan Party of each
     Loan Document and each Related Document to which it is or is to be a party,
     and the consummation of the Transaction, are within such Loan Party's
     corporate powers, have been duly authorized by all necessary corporate
     action, and do not (i) contravene such Loan Party's memorandum and articles
     of association, in the case of the U.K. Subsidiaries, or charter or bylaws,
     in each case of each other Loan Party, (ii) violate any law (including,
     without limitation, the Securities Exchange Act of 1934 and the Racketeer
     Influenced and Corrupt Organizations Chapter of the Organized Crime Control
     Act of 1970), rule, regulation (including, without limitation, Regulation X
     of the Board of Governors of the Federal Reserve System), order, writ,
     judgment, injunction, decree, determination or award, (iii) conflict with
     or result in the breach of, or constitute a default under, any loan
     agreement, indenture, mortgage, deed of trust or other instrument or
     material contract or material lease binding on or affecting any Loan Party,
     any of its Subsidiaries or any of their respective properties or (iv)
     except for the Liens created under the Loan Documents, result in or require
     the creation or imposition of any Lien upon or with respect to any of the
     properties of any Loan Party or any of its Subsidiaries. No Loan Party nor
     any of its Subsidiaries is in violation of any such law, rule, regulation,
     order, writ, judgment, injunction, decree, determination or award or in
     breach of any such contract, loan agreement, indenture, mortgage, deed of
     trust, lease or other instrument, the violation or breach of which could
     have a Material Adverse Effect.

          (d) No authorization or approval or other action by, and no notice to
     or filing with, any governmental authority or regulatory body or any other
     third party is required for (i) the due execution, delivery, recordation,
     filing or performance by any Loan Party of any Loan Document or any Related
     Document to which it is or is to be a party, or for the consummation of the
     Transaction, (ii) the grant by any Loan Party of the Liens granted by it
     pursuant to the Collateral Documents, (iii) the perfection or maintenance
     of the Liens created by the Collateral Documents (including the first
     priority nature thereof) or (iv) the exercise by any of the Agents or any
     of the Lender Parties of its rights under the Loan Documents or the
     remedies in respect of the Collateral pursuant to the Collateral Documents,
     except for the authorizations, approvals, actions, notices and filings
     listed on Schedule 4.01(d) hereto, all of which have been duly obtained,
     taken, given or made and are in full force and effect.  All applicable
     waiting periods in connection with the Transaction have expired without any
     action having been taken by any competent 
<PAGE>
 
                                       45

     authority restraining, preventing or imposing materially adverse conditions
     upon the Transaction or the rights of the Loan Parties or their
     Subsidiaries freely to transfer or otherwise dispose of, or to create any
     Lien on, any properties now owned or hereafter acquired by any of them.

          (e) This Agreement has been, and each of the Notes, each other Loan
     Document and each Related Document when delivered hereunder will have been,
     duly executed and delivered by each Loan Party thereto.  This Agreement is,
     and each of the Notes, each other Loan Document and each Related Document
     when delivered hereunder will be, the legal, valid and binding obligation
     of each Loan Party thereto, enforceable against such Loan Party in
     accordance with its terms.

          (f) The Consolidated and consolidating balance sheets of the Parent
     Borrower and its Subsidiaries as at September 30, 1997, and the related
     Consolidated and consolidating statements of income and Consolidated
     statement of cash flows of the Parent Borrower and its Subsidiaries for the
     fiscal year then ended, accompanied by an unqualified opinion of Coopers &
     Lybrand L.L.P., independent public accountants, and the Consolidated and
     consolidating balance sheets of the Parent Borrower and its Subsidiaries as
     at December 31, 1997, and the related Consolidated and consolidating
     statements of income and Consolidated statement of cash flows of the Parent
     Borrower and its Subsidiaries for the three months then ended, duly
     certified by the chief financial officer of the Parent Borrower, copies of
     which have been furnished to each Lender Party, fairly present, subject, in
     the case of said balance sheets as at December 31, 1997, and said
     statements of income and cash flows for the three months then ended, to
     year-end audit adjustments, the Consolidated and consolidating financial
     condition of the Parent Borrower and its Subsidiaries as at such dates and
     the Consolidated and consolidating results of the operations of the Parent
     Borrower and its Subsidiaries for the periods ended on such dates, all in
     accordance with generally accepted accounting principles applied on a
     consistent basis, and since September 30, 1997, there has been no Material
     Adverse Change.

          (g) The Consolidated pro forma balance sheet of the Parent Borrower
     and its Subsidiaries as at March 31, 1998, and the related Consolidated pro
     forma statements of income and cash flows of the Parent Borrower and its
     Subsidiaries for the six months then ended, certified by the chief
     financial officer of the Parent Borrower, copies of which have been
     furnished to each Lender Party, fairly present the Consolidated pro forma
     financial condition of the Parent Borrower and its Subsidiaries as at such
     date and the Consolidated pro forma results of operations of the Parent
     Borrower and its Subsidiaries for the period ended on such date, in each
     case after giving effect to the Transaction, all in accordance with GAAP.

          (h) The Consolidated forecasted balance sheets, income statements and
     cash flows statements of the Parent Borrower and its Subsidiaries delivered
     to the Lender Parties pursuant to Section 3.01(m)(xii) or 5.03 were
     prepared in good faith on the basis of the assumptions stated therein,
     which assumptions were fair in the light of conditions existing at the time
     of delivery of such forecasts, and represented, at the time of delivery,
     the Parent Borrower's best estimate of its future financial performance.

          (i) None of the information, exhibits or reports furnished by or on
     behalf of any Loan Party to any Agent or any Lender Party in connection
     with the negotiation of the Loan Documents or pursuant to the terms of the
     Loan Documents contained any untrue statement of a material fact or omitted
     to state a material fact necessary to make the statements made therein not
     misleading.

          (j) There is no action, suit, investigation, litigation or proceeding
     affecting any Loan Party or any of its Subsidiaries, including any
     Environmental Action, pending or, to the best of either Borrower's
     knowledge, threatened before any court, governmental agency or arbitrator
     that (i) could be reasonably likely to have a Material Adverse Effect or
     (ii) purports to affect the legality, validity or enforceability of the
<PAGE>
 
                                       46

     Transaction, this Agreement, any Note, any other Loan Document or any
     Related Document or the consummation of the Transaction.

          (k) No proceeds of any Advance or drawings under any Letter of Credit
     will be used to acquire any equity security of a class that is registered
     pursuant to Section 12 of the Securities Exchange Act of 1934 (other than,
     to the extent applicable, in connection with (i) the transactions
     contemplated by the Merger Agreement or (ii) a Non-hostile Acquisition).

          (l) Neither Borrower is engaged in the business of extending credit
     for the purpose of purchasing or carrying Margin Stock, no proceeds of any
     Advance made to the Sub Borrower 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, and following application of the proceeds of
     each Advance or drawing under each Letter of Credit, not more than 25
     percent of the value of the assets (either of the Parent Borrower only or
     of the Parent Borrower and its Subsidiaries on a Consolidated basis)
     subject to the provisions of Section 5.02(a) or 5.02(e) or subject to any
     restriction contained in any agreement or instrument between the Parent
     Borrower and any Lender Party or any Affiliate of any Lender Party relating
     to Debt within the scope of Section 6.01(e) will be Margin Stock.

          (m) Set forth on Schedule 4.01(m) hereto is a complete and accurate
     list of all Plans and Multiemployer Plans.

          (n) No ERISA Event has occurred or is reasonably expected to occur
     with respect to any Plan.

          (o) Schedule B (Actuarial Information) to the most recent annual
     report (Form 5500 Series) for each Plan, copies of which have been filed
     with the Internal Revenue Service and furnished to the Agents and the
     Lender Parties, is complete and accurate and fairly presents the funding
     status of such Plan, and since the date of such Schedule B there has been
     no material adverse change in such funding status.

          (p) Neither any Loan Party nor any ERISA Affiliate has incurred or is
     reasonably expected to incur any Withdrawal Liability to any Multiemployer
     Plan.

          (q) Neither any Loan Party nor any ERISA Affiliate has been notified
     by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
     reorganization or has been terminated, within the meaning of Title IV of
     ERISA, and no such Multiemployer Plan is reasonably expected to be in
     reorganization or to be terminated, within the meaning of Title IV of
     ERISA.

          (r) Except as set forth in the financial statements referred to in
     this Section 4.01 and in Section 5.03, the Loan Parties and their
     respective Subsidiaries have no material liability with respect to
     "expected post retirement benefit obligations" within the meaning of
     Statement of Financial Accounting Standards No. 106.

          (s) Neither the business nor the properties of any Loan Party or any
     of its Subsidiaries are affected by any fire, explosion, accident, strike,
     lockout or other labor dispute, drought, storm, hail, earthquake, embargo,
     act of God or of the public enemy or other casualty (whether or not covered
     by insurance) that could be reasonably likely to have a Material Adverse
     Effect.

          (t) The operations and properties of each Loan Party and each of its
     Subsidiaries comply in all material respects with all applicable
     Environmental Laws and Environmental Permits, except for any non-compliance
     that is not reasonably likely to have a Material Adverse Effect, all past
     non-compliance with such 
<PAGE>
 
                                       47

     Environmental Laws and Environmental Permits has been resolved without
     material ongoing obligations or costs, and no circumstances exist that
     would be reasonably likely to (i) form the basis of an Environmental Action
     against any Loan Party or any of its Subsidiaries or any of their
     properties that could be reasonably likely to have a Material Adverse
     Effect or (ii) cause any such property to be subject to any material
     restrictions on ownership, occupancy, use or transferability under any
     Environmental Law.

          (u) None of the properties currently or formerly owned or operated by
     any Loan Party or any of its Subsidiaries is listed or, to the knowledge of
     any Loan Party, proposed for listing on the NPL or on the CERCLIS or any
     analogous foreign, state or local list; there are no and never have been
     any underground or aboveground storage tanks or any surface impoundments,
     septic tanks, pits, sumps or lagoons in which Hazardous Materials are being
     or have been treated, stored or disposed on any property currently owned or
     operated by any Loan Party or any of its Subsidiaries or, to the best of
     its knowledge, on any property formerly owned or operated by any Loan Party
     or any of its Subsidiaries which could be reasonably likely to have a
     Material Adverse Effect; there is no asbestos or asbestos-containing
     material on any property currently owned or operated by any Loan Party or
     any of its Subsidiaries which could be reasonably likely to have a Material
     Adverse Effect; and Hazardous Materials have not been released, discharged
     or disposed of on any property currently or formerly owned or operated by
     any Loan Party or any of its Subsidiaries in a manner that could be
     reasonably likely to result in a Material Adverse Effect.

          (v) Neither any Loan Party nor any of its Subsidiaries is undertaking
     or has completed, either individually or together with other potentially
     responsible parties, any investigation or assessment or remedial or
     response action relating to any actual or threatened release, discharge or
     disposal of Hazardous Materials at any site, location or operation, either
     voluntarily or pursuant to the order of any governmental or regulatory
     authority or the requirements of any Environmental Law which could be
     reasonably likely to have a Material Adverse Effect; and all Hazardous
     Materials generated, used, treated, handled or stored at, or transported to
     or from, any property currently or formerly owned or operated by any Loan
     Party or any of its Subsidiaries have been disposed of in a manner not
     reasonably expected to result in a Material Adverse Effect.

          (w) Neither any Loan Party nor any of its Subsidiaries is a party to
     any indenture, loan or credit agreement or any lease or other agreement or
     instrument or subject to any charter or corporate restriction that could be
     reasonably likely to have a Material Adverse Effect.

          (x) The Collateral Documents create a valid and perfected first
     priority security interest in the Collateral, securing the payment of the
     Secured Obligations, and all filings and other actions necessary or
     desirable to perfect and protect such security interest have been duly
     taken.  The Loan Parties are the legal and beneficial owners of the
     Collateral free and clear of any Lien, except for the Liens and security
     interests created or permitted under the Loan Documents.

          (y) Each Loan Party and each of its Subsidiaries and Affiliates has
     filed, has caused to be filed or has been included in all tax returns
     (Federal, state, local and foreign) required to be filed and has paid all
     taxes shown thereon to be due, together with applicable interest and
     penalties.

          (z)  [intentionally omitted].

          (aa) There are no pending audits, examinations, investigations or
     other proceedings in respect of Federal, state, local or foreign taxes
     relating to any Loan Party or any of its Subsidiaries which, if determined
     adversely to such Loan Party or such Subsidiary could reasonably be
     expected, individually or in the aggregate, to have a Material Adverse
     Effect.
<PAGE>
 
                                       48

          (bb) There are no deficiencies or claims in respect of Federal, state,
     local or foreign taxes relating to any Loan Party or any of its Subsidiary
     which, if such deficiencies or claims were resolved against such Loan Party
     or such Subsidiary could reasonably be expected, individually or in the
     aggregate, to have a Material Adverse Effect.

          (cc) The Merger will not be taxable to the Parent Borrower or any of
     its Subsidiaries.

          (dd) Neither any Loan Party nor any of its Subsidiaries is an
     "investment company," or an "affiliated person" of, or "promoter" or
     "principal underwriter" for, an "investment company", as such terms are
     defined in the Investment Company Act of 1940, as amended. Neither the
     making of any Advances, nor the issuance of any Letters of Credit, nor the
     application of the proceeds or repayment thereof by either Borrower, nor
     the consummation of the other transactions contemplated hereby, will
     violate any provision of such Act or any rule, regulation or order of the
     Securities and Exchange Commission thereunder.

          (ee) Each Loan Party [(other than ______, _______ and _______)] is,
     individually and together with its Subsidiaries, Solvent.

          (ff) Set forth on Schedule 4.01(ff) hereto is a complete and accurate
     list of all Debt (other than Surviving Debt) of the Parent Borrower and its
     Subsidiaries (the "Existing Debt"), showing as of the date hereof the
                        -------------                                     
     principal amount outstanding thereunder.

          (gg) Set forth on Schedule 4.01(gg) hereto is a complete and accurate
     list of all Surviving Debt, showing as of the date hereof the principal
     amount outstanding thereunder, the maturity date thereof and the
     amortization schedule therefor.

          (hh) Set forth on Schedule 4.01(hh) hereto is a complete and accurate
     list of all real property owned by any Loan Party or any of its
     Subsidiaries, showing as of the date hereof the street address, county or
     other relevant jurisdiction, State, record owner and book and fair value
     thereof.  Each Loan Party or such Subsidiary has good, marketable and
     insurable fee simple title to such real property, free and clear of all
     Liens, other than Liens created or permitted by the Loan Documents.

          (ii) Set forth on Schedule 4.01(ii) hereto is a complete and accurate
     list of all Material Contracts of each Loan Party and each of its
     Subsidiaries, showing as of the date hereof the parties, subject matter and
     term thereof.  Each such Material Contract has been duly authorized,
     executed and delivered by all parties thereto, has not been amended or
     otherwise modified, is in full force and effect and is binding upon and
     enforceable against all parties thereto in accordance with its terms, and
     there exists no default under any Material Contract by any party thereto.

          (jj) Set forth on Schedule 4.01(jj) hereto is a complete and accurate
     list of all Investments (other than equity Investments in Subsidiaries)
     held by any Loan Party or any of its Subsidiaries, showing as of the date
     hereof the amount, obligor or issuer and maturity, if any, thereof.

          (kk) Set forth on Schedule 4.01(kk) hereto is a complete and accurate
     list of all trade names and all registered patents, trademarks, service
     marks and copyrights, and all applications therefor and licenses thereof of
     each Loan Party and each of its Subsidiaries, showing as of the date hereof
     the jurisdiction in which registered, the registration number, the date of
     registration and the expiration date.

          (ll) No Excluded Subsidiary holds assets in excess of $[10,000] or has
     revenues or net income in excess of $[10,000] and the aggregate amount of
     assets, revenues or net income of all Excluded Subsidiaries 
<PAGE>
 
                                       49

     does not exceed $[_____]. No Excluded Subsidiary is engaged in any business
     of any kind[, other than the holding of licenses].

                                   ARTICLE V

                          COVENANTS OF THE BORROWERS


          SECTION  5.01.  Affirmative Covenants.  So long as any Advance shall
                          ---------------------                               
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, each Borrower shall:

          (a) Compliance with Laws, Etc.  Comply, and cause each of its
              -------------------------                                
     Subsidiaries to comply, in all material respects, with all applicable laws,
     rules, regulations and orders, such compliance to include, without
     limitation, compliance with ERISA, Federal, state, local and foreign tax
     laws, rules, regulations and orders, and the Racketeer Influenced and
     Corrupt Organizations Chapter of the Organized Crime Control Act of 1970.

          (b) Payment of Taxes, Etc.  Pay and discharge, and cause each of its
              ---------------------                                           
     Subsidiaries to pay and discharge, before the same shall become delinquent,
     (i) all taxes, assessments and governmental charges or levies imposed upon
     it or upon its property and (ii) all lawful claims in excess of $________
     in the aggregate that, if unpaid, might by law become a Lien upon its
     property; provided, however, that neither the Parent Borrower nor any of
               --------  -------                                             
     its Subsidiaries shall be required to pay or discharge any such tax,
     assessment, charge or claim that is being contested in good faith and by
     proper proceedings and as to which appropriate reserves are being
     maintained, unless and until any Lien resulting therefrom attaches to its
     property and becomes enforceable against its other creditors.

          (c) Compliance with Environmental Laws.  Comply, and cause each of its
              ----------------------------------                                
     Subsidiaries and all lessees and other Persons operating or occupying its
     properties to comply, in all material respects, with all applicable
     Environmental Laws and Environmental Permits; obtain and renew and cause
     each of its Subsidiaries to obtain and renew all Environmental Permits
     necessary for its operations and properties; and conduct, and cause each of
     its Subsidiaries to conduct, any investigation, study, sampling and
     testing, and undertake any cleanup, removal, remedial or other action
     necessary to remove and clean up all Hazardous Materials from any of its
     properties, to the extent required by Environmental Laws; provided,
                                                               -------- 
     however, that neither the Parent Borrower nor any of its Subsidiaries shall
     -------                                                                    
     be required to undertake any such cleanup, removal, remedial or other
     action to the extent that its obligation to do so is being contested in
     good faith and by proper proceedings and appropriate reserves are being
     maintained with respect to such circumstances.

          (d) Maintenance of Insurance.  Maintain, and cause each of its
              ------------------------                                  
     Subsidiaries to maintain, insurance with responsible and reputable
     insurance companies or associations in such amounts and covering such risks
     as is usually carried by companies engaged in similar businesses and owning
     similar properties in the same general areas in which the Parent Borrower
     or such Subsidiary operates.

          (e) Preservation of Corporate Existence, Etc.  Preserve and maintain,
              ----------------------------------------                         
     and cause each of its Subsidiaries to preserve and maintain, its existence,
     legal structure, legal name, rights (charter and statutory), permits,
     licenses, approvals, privileges and franchises; provided, however, that the
                                                     --------  -------          
     Parent Borrower may consummate the Merger and the Parent Borrower and its
     Subsidiaries may consummate any other merger or consolidation permitted
     under Section 5.02(d) and the Parent Borrower and its Subsidiaries may sell
     or otherwise dispose of assets to the extent permitted under Section
     5.02(e); and provided further that neither the Parent Borrower nor any of
                  -------- -------                                            
     its Subsidiaries shall be required to preserve any right, permit, 
<PAGE>
 
                                       50


     license, approval, privilege or franchise if the Board of Directors of the
     Parent Borrower or such Subsidiary shall determine that the preservation
     thereof is no longer desirable in the conduct of the business of the Parent
     Borrower or such Subsidiary, as the case may be, and that the loss thereof
     is not disadvantageous in any material respect to the Parent Borrower, such
     Subsidiary or the Lender Parties.

          (f) Visitation Rights.  Upon reasonable notice and during regular
              -----------------                                            
     business hours, from time to time, permit any of the Agents or any of the
     Lender Parties or any agents or representatives thereof, to examine and
     make copies of and abstracts from the records and books of account of, and
     visit the properties of, the Parent Borrower and any of its Subsidiaries,
     and to discuss the affairs, finances and accounts of the Parent Borrower
     and any of its Subsidiaries with any of their officers or directors and
     with their independent certified public accountants.

          (g) Preparation of Environmental Reports.  At the request of the
              ------------------------------------                        
     Required Lenders from time to time (i) upon the occurrence and during the
     continuance of a Default, (ii) in the case of the Parent Borrower's or any
     of its Subsidiaries' acquisition of real property that could be reasonably
     likely to result in a Material Adverse Effect, and (iii) at any time when
     any Lender believes after reasonably inquiry that a condition or event
     exists or has occurred on any real property owned or operated by the Parent
     Borrower or any of its Subsidiaries that could be reasonably likely to
     result in a Material Adverse Effect, the Parent Borrower or such Subsidiary
     shall provide to the Agents and the Lender Parties within 60 days after
     such request, at the expense of the Parent Borrower or such Subsidiary, an
     environmental site assessment report for any of its or its Subsidiaries'
     properties described in such request, prepared by an environmental
     consulting firm acceptable to the Required Lenders, indicating the presence
     or absence of Hazardous Materials and the estimated cost of any compliance,
     removal or remedial action in connection with any Hazardous Materials on
     such properties; without limiting the generality of the foregoing, if the
     Required Lenders determine at any time that a material risk exists that any
     such report will not be provided within the time referred to above and the
     Required Lenders will be materially prejudiced by any such delay, the
     Required Lenders may retain an environmental consulting firm to prepare
     such report at the expense of the Parent Borrower, and the Parent Borrower
     hereby grants and agrees to cause any Subsidiary that owns any property
     described in such request to grant at the time of such request, to the
     Agents, the Lender Parties, such firm and any agents or representatives
     thereof subject to the rights of tenants, access to enter onto their
     respective properties to undertake such an assessment; provided, however,
                                                            --------  ------- 
     that no such Persons shall unreasonably interfere with the operations
     conducted at such property and the Parent Borrower shall be given at least
     2 Business Days' notice prior to such undertaking.

          (h) Keeping of Books.  Keep, and cause each of its Subsidiaries to
              ----------------                                              
     keep, proper books of record and account, in which full and correct entries
     shall be made of all financial transactions and the assets and business of
     the Parent Borrower and each such Subsidiary in accordance with generally
     accepted accounting principles in effect from time to time.

          (i) Maintenance of Properties, Etc.  Maintain and preserve, and cause
              ------------------------------                                   
     each of its Subsidiaries to maintain and preserve, all of its properties
     that are used or useful in the conduct of its business in good working
     order and condition, ordinary wear and tear excepted.

          (j) Compliance with Terms of Leaseholds.  Make all payments and
              -----------------------------------                        
     otherwise perform all obligations in respect of all leases of real property
     to which the Parent Borrower or any of its Subsidiaries is a party, keep
     such leases in full force and effect and not allow such leases to lapse or
     be terminated or any rights to renew such leases to be forfeited or
     canceled, notify the Administrative Agent of any default by any party with
     respect to such leases and cooperate with the Administrative Agent in all
     respects to cure any 
<PAGE>
 
                                       51

     such default, and cause each of its Subsidiaries to do so, except, in any
     case, where the failure to do so, either individually or in the aggregate,
     could not be reasonably expected to have a Material Adverse Effect.

          (k) Performance of Related Documents.  Perform and observe all of the
              --------------------------------                                 
     terms and provisions of each Related Document to be performed or observed
     by it, maintain each such Related Document in full force and effect,
     enforce such Related Document in accordance with its terms, take all such
     action to such end as may be from time to time requested by the
     Administrative Agent and, upon request of the Administrative Agent, make to
     each other party to each such Related Document such demands and requests
     for information and reports or for action as any Loan Party is entitled to
     make under such Related Document, except, in any case, where the failure to
     do so, either individually or in the aggregate, could not be reasonably
     expected to have a Material Adverse Effect.

          (l) Performance of Material Contracts.  Perform and observe all of the
              ---------------------------------                                 
     terms and provisions of each Material Contract to be performed or observed
     by it, maintain each such Material Contract in full force and effect,
     enforce each such Material Contract in accordance with its terms, take all
     such action to such end as may be from time to time requested by the
     Administrative Agent and, upon request of the Administrative Agent, make to
     each other party to each such Material Contract such demands and requests
     for information and reports or for action as either Borrower is entitled to
     make under such Material Contract, and cause each of its Subsidiaries to do
     so, except, in any case, where the failure to do so, either individually or
     in the aggregate, could not be reasonably expected to have a Material
     Adverse Effect.

          (m) Transactions with Affiliates.  Conduct, and cause each of its
              ----------------------------                                 
     Subsidiaries to conduct, all transactions otherwise permitted under the
     Loan Documents with any of their Affiliates on terms that are fair and
     reasonable and no less favorable to the applicable Borrower or such
     Subsidiary than it would otherwise obtain in a comparable arm's-length
     transaction with a Person not an Affiliate.

          (n) Cash Concentration Accounts.  Maintain, and cause each of its
              ---------------------------                                  
     Domestic Subsidiaries to maintain (to the extent such Domestic Subsidiaries
     maintain any deposit accounts), cash concentration accounts with The Bank
     of New York and Pledged Accounts (as defined in the Security Agreement)
     into which all proceeds of Collateral are paid with The Bank of New York or
     one or more banks acceptable to the Administrative Agent that have accepted
     the assignment of such accounts to the Administrative Agent pursuant to the
     Security Agreement.

          (o) Covenant to Guarantee Obligations and Give Security.  Upon (w) the
              ---------------------------------------------------               
     request of the Administrative Agent following the occurrence and during the
     continuance of a Default, (x) the formation or acquisition of any new
     direct or indirect Subsidiaries by any Loan Party, (y) the acquisition of
     any personal property by any Loan Party, and such property, in the
     reasonable opinion of the Administrative Agent, shall not be subject to a
     perfected first priority security interest in favor of the Administrative
     Agent for the benefit of the Secured Parties, or (z) the request of the
     Administrative Agent at any time with respect to any or all of the real
     property listed on Schedule 4.01(hh) hereto or any other real or personal
     property owned or leased by any Loan Party or any of its Subsidiaries from
     time to time, then each Loan Party shall, in each case at such Loan Party's
     expense:

               (i) in connection with the formation or acquisition of a
          Subsidiary, within 10 days after such request, formation or
          acquisition, cause each such Subsidiary, and cause each direct and
          indirect parent of such Subsidiary (if it has not already done so), to
          duly execute and deliver to the Administrative Agent, if such
          Subsidiary is a Domestic Subsidiary, a Domestic Guaranty guaranteeing
          the Obligations of the Borrowers and the other Loan Parties under the
          Loan Documents and, if such Subsidiary is Foreign Subsidiary, a
          Foreign Guaranty guaranteeing the 
<PAGE>
 
                                       52

          Obligations of the U.K. Subsidiaries and the other Foreign
          Subsidiaries under the Loan Documents, in each case, in substantially
          the form of Exhibit E-1 or Exhibit E-2 hereto, as applicable, or
          otherwise in form and substance satisfactory to the Administrative
          Agent (except to the extent that any such Guaranty by a Subsidiary of
          any Loan Party would result in adverse tax consequences to such Loan
          Party or any of its Subsidiaries),

               (ii) within 10 days after such request, formation or acquisition,
          furnish to the Administrative Agent a description of the real and
          personal properties of such Loan Party and its Subsidiaries in detail
          satisfactory to the Administrative Agent,

               (iii)  within 15 days after such request, formation or
          acquisition, duly execute and deliver, and cause each such Subsidiary
          and each direct and indirect parent of such Subsidiary (if it has not
          already done so) to duly execute and deliver, to the Administrative
          Agent mortgages, pledges, assignments and other security agreements,
          as specified by and in form and substance satisfactory to the
          Administrative Agent, securing payment of all the obligations of the
          applicable Loan Party, such Subsidiary or such parent, as the case may
          be, under the Loan Documents and constituting Liens on all such
          properties (except to the extent that any pledge of the stock of a
          non-U.S. Subsidiary of a Loan Party would result in adverse tax
          consequences to such Loan Party or any of its Subsidiaries),

               (iv) within 30 days after such request, formation or acquisition,
          take, and cause such Subsidiary or such parent to take, whatever
          action (including, without limitation, the recording of mortgages, the
          filing of Uniform Commercial Code financing statements, the giving of
          notices and the endorsement of notices on title documents) that may be
          necessary or advisable in the opinion of the Administrative Agent to
          vest in the Administrative Agent (or in any representative of the
          Administrative Agent designated by it) valid and perfected Liens on
          the properties purported to be subject to the mortgages, pledges,
          assignments and security agreements delivered pursuant to this Section
          5.01(o)(iv), enforceable against all third parties in accordance with
          their terms,

               (v) within 60 days after such request, formation or acquisition,
          deliver to the Administrative Agent, upon the request of the
          Administrative Agent in its sole discretion, a signed copy of a
          favorable opinion, addressed to the Agents and the other Secured
          Parties, of counsel for the Loan Parties acceptable to the
          Administrative Agent as to the matters contained in clauses (i), (ii)
          and (iii) above, as to such guaranties, mortgages, pledges,
          assignments and security agreements being legal, valid and binding
          obligations of each party thereto enforceable in accordance with their
          terms, as to the matters contained in clause (iv) above, as to such
          recordings, filings, notices, endorsements and other actions being
          sufficient to create valid and perfected Liens on such properties and
          as to such other matters as the Administrative Agent may reasonably
          request,

               (vi) as promptly as practicable after such request, formation or
          acquisition, deliver, upon the request of the Administrative Agent in
          its sole discretion, to the Administrative Agent with respect to each
          parcel of real property owned or held by the entity that is the
          subject of such request, formation or acquisition surveys and
          engineering, soils and other reports, and environmental assessment
          reports,  title reports, each in scope, form and substance
          satisfactory to the Administrative Agent; provided, however, that to
                                                    --------  -------         
          the extent that any Loan Party or any of its Subsidiaries shall have
          otherwise received any of the foregoing items with respect to such
          real property, such items shall promptly after the receipt thereof be
          delivered to the Administrative Agent,
<PAGE>
 
                                       53


               (vii)  upon the occurrence and during the continuance of a
          Default, promptly cause to be deposited any and all cash dividends
          paid or payable to it or any of its Subsidiaries from any of its
          Subsidiaries from time to time into the L/C Cash Collateral Account,
          and with respect to all other dividends paid or payable to it or any
          of its Subsidiaries from time to time, promptly execute and deliver,
          or cause such Subsidiary to promptly execute and deliver, as the case
          may be, any and all further instruments and take or cause such
          Subsidiary to take, as the case may be, all such other action as the
          Administrative Agent may deem necessary or desirable in order to
          obtain and maintain from and after the time such dividend is paid or
          payable a perfected, first priority lien on and security interest in
          such dividends, and

               (viii)  at any time and from time to time, promptly execute and
          deliver any and all further instruments and documents and take all
          such other action as the Administrative Agent may deem necessary or
          desirable in obtaining the full benefits of, or in perfecting and
          preserving the Liens of, such guaranties, mortgages, pledges,
          assignments and security agreements.

          (p) Further Assurances.  (i)  Promptly upon request by the
              ------------------                                    
     Administrative Agent, or by any Lender Party through the Administrative
     Agent, correct any material defect or error that may be discovered in any
     Loan Document or in the execution, acknowledgment, filing or recordation
     thereof, and

          (ii) Promptly upon request by the Administrative Agent, or by any
     Lender Party through the Administrative Agent, do, execute, acknowledge,
     deliver, record, re-record, file, re-file, register and re-register any and
     all such further acts, deeds, conveyances, pledge agreements, mortgages,
     deeds of trust, trust deeds, assignments, financing statements and
     continuations thereof, termination statements, notices of assignment,
     transfers, certificates, assurances and other instruments as the
     Administrative Agent, or any Lender Party through the Administrative Agent,
     may reasonably require from time to time in order to (A) carry out more
     effectively the purposes of this Agreement, the Notes or any other Loan
     Document, (B) to the fullest extent permitted by applicable law, subject
     any Loan Party's or any of its Subsidiaries' properties, assets, rights or
     interests to the Liens now or hereafter intended to be covered by any of
     the Collateral Documents, (C) perfect and maintain the validity,
     effectiveness and priority of any of the Collateral Documents and any of
     the Liens intended to be created thereunder and (D) assure, convey, grant,
     assign, transfer, preserve, protect and confirm more effectively unto the
     Agents and the Lender Parties the rights granted or now or hereafter
     intended to be granted to the Agents and the Lender Parties under any Loan
     Document or under any other instrument executed in connection with any Loan
     Document to which any Loan Party or any of its Subsidiaries is or is to be
     a party.

          (q) Conditions Subsequent.  (i)  Within __ days after the Initial
              ---------------------                                        
     Extension of Credit, all filings and other actions necessary or desirable
     under the laws of any jurisdiction (other than any State of the United
     States) to perfect and protect the security interest created under the
     Collateral Documents shall have been taken, and the Administrative Agent
     shall have received evidence that all such filings and other actions have
     been taken;

          (ii) Within __ days after the Initial Extension of Credit, the
     Administrative Agent shall have received, in form and substance
     satisfactory to the Agents and in sufficient copies for each Lender Party,
     deeds of trust, trust deeds, mortgages, leasehold mortgages and leasehold
     deeds of trust and covering the properties listed on Part I of Schedule
     4.01(hh) hereto (together with the Assignments of Leases and Rents referred
     to therein and each other mortgage delivered pursuant to Section 5.01(o),
     in each case as amended, supplemented or otherwise modified from time to
     time in accordance with their terms, the "Mortgages"), duly executed by the
                                               ---------                        
     appropriate Loan Party, together with:
<PAGE>
 
                                       54


               (A) evidence that counterparts of the Mortgages have been duly
          recorded in all filing or recording offices that the Administrative
          Agent may deem necessary or desirable in order to create a valid first
          and subsisting Lien on the property described therein in favor of the
          Secured Parties and that all filing and recording taxes and fees have
          been paid,

               (B) fully paid American Land Title Association Lender's Extended
          Coverage title insurance policies (the "Mortgage Policies") in form
                                                  -----------------          
          and substance, with endorsements and in amount acceptable to the
          Administrative Agent, issued, coinsured and reinsured by title
          insurers acceptable to the Administrative Agent, insuring the
          Mortgages to be valid first and subsisting Liens on the property
          described therein, free and clear of all defects (including, but not
          limited to, mechanics' and materialmen's Liens) and encumbrances,
          excepting only Permitted Encumbrances, and providing for such other
          affirmative insurance (including endorsements for future advances
          under the Loan Documents and for mechanics' and materialmen's Liens)
          and such coinsurance and direct access reinsurance as the
          Administrative Agent may deem necessary or desirable,

               (C) American Land Title Association form surveys, dated no more
          than __ days after the date of the Initial Extension of Credit,
          certified to the Administrative Agent and the issuer of the Mortgage
          Policies in a manner satisfactory to the Administrative Agent by a
          land surveyor duly registered and licensed in the States in which the
          property described in such surveys is located and acceptable to the
          Administrative Agent, showing all buildings and other improvements,
          any off-site improvements, the location of any easements, parking
          spaces, rights of way, building set-back lines and other dimensional
          regulations and the absence of encroachments, either by such
          improvements or onto such property, and other defects, other than
          encroachments and other defects acceptable to the Administrative
          Agent,

               (D) an appraisal of each of the properties described in the
          Mortgages complying with the requirements of the Federal Financial
          Institutions Reform, Recovery and Enforcement Act of 1989, which
          appraisals shall be from a Person acceptable to the Administrative
          Agent and otherwise in form and substance satisfactory to the Agents
          and the Lender Parties,

               (E) engineering, soils and other reports as to the properties
          described in the Mortgages, in form and substance and from
          professional firms acceptable to the Administrative Agent,

               (F) the Assignments of Leases and Rents referred to in the
          Mortgages, duly executed by the appropriate Loan Party,

               (G) such consents and agreements of lessors and other third
          parties, and such estoppel letters and other confirmations, as the
          Administrative Agent may deem necessary or desirable,

               (H) evidence of the insurance required by the terms of the
          Mortgages, and

               (I) evidence that all other action that the Administrative Agent
          may deem necessary or desirable in order to create valid first and
          subsisting Liens on the property described in the Mortgages has been
          taken; and
<PAGE>
 
                                       55


          (iii)  Within __ days after the Initial Extension of Credit, the
     Existing Debt described on Part I of Schedule 4.01(ff) hereto [FIRST UNION
     MORTGAGE] shall have been paid in full, and all Liens securing such
     Existing Debt shall have been released.

          SECTION  5.02.  Negative Covenants.  So long as any Advance shall
                          ------------------                               
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, neither Borrower shall, at any time:

          (a) Liens, Etc.  Create, incur, assume or suffer to exist, or permit
              ----------                                                      
     any of its Subsidiaries to create, incur, assume or suffer to exist, any
     Lien on or with respect to any of its properties of any character
     (including, without limitation, accounts) whether now owned or hereafter
     acquired, or sign or file or suffer to exist, or permit any of its
     Subsidiaries to sign or file or suffer to exist, under the Uniform
     Commercial Code of any jurisdiction, a financing statement that names the
     Parent Borrower or any of its Subsidiaries as debtor, or sign or suffer to
     exist, or permit any of its Subsidiaries to sign or suffer to exist, any
     security agreement authorizing any secured party thereunder to file such
     financing statement, or assign, or permit any of its Subsidiaries to
     assign, any accounts or other right to receive income; excluding, however,
                                                            ---------  -------
     from the operation of the foregoing restrictions the following:

               (i) Liens created under the Loan Documents;

               (ii) Permitted Liens;

               (iii)  purchase money Liens upon equipment acquired or held by
     the Parent Borrower or any of its Subsidiaries (other than the Sub
     Borrower) in the ordinary course of business to secure the purchase price
     of such equipment or to secure Debt incurred solely for the purpose of
     financing the acquisition of any such equipment to be subject to such
     Liens, or Liens existing on any such equipment at the time of acquisition
     (other than any such Liens created in contemplation of such acquisition
     that do not secure the purchase price), or extensions, renewals or
     replacements of any of the foregoing for the same or a lesser amount;
     provided, however, that no such Lien shall extend to or cover any property
     --------  -------                                                         
     other than the equipment being acquired, and no such extension, renewal or
     replacement shall extend to or cover any property not theretofore subject
     to the Lien being extended, renewed or replaced; and provided further that
                                                          -------- -------     
     the aggregate principal amount of the Debt secured by Liens permitted by
     this clause (iii) shall not exceed the amount permitted under Section
     5.02(b)(iii)(B) at any time outstanding and that any such Debt shall not
     otherwise be prohibited by the terms of the Loan Documents;

               (iv) Liens arising in connection with Capitalized Leases
     permitted under Section 5.02(b)(iii)(C); provided that no such Lien shall
                                              --------                        
     extend to or cover any Collateral or assets other than the assets subject
     to such Capitalized Leases;

               (v) Liens existing on the date hereof and described on Schedule
     5.02(a) hereto; and

               (vi) the replacement, extension or renewal of any Lien permitted
     by clause (v) above upon or in the same property theretofore subject
     thereto or the replacement, extension or renewal (without increase in the
     amount or change in any direct or contingent obligor) of the Debt secured
     thereby.

          (b) Debt.  Create, incur, assume or suffer to exist, or permit any of
              ----                                                             
     its Subsidiaries to create, incur, assume or suffer to exist, any Debt
     other than:
<PAGE>
 
                                       56


               (i) in the case of the Parent Borrower,

                    (A) Debt in respect of Hedge Agreements with one or more
               Secured Parties designed to hedge against fluctuations in
               interest rates or foreign exchange rates incurred in the ordinary
               course of business and consistent with prudent business practice
               with the aggregate Agreement Value thereof not to exceed
               $__________ at any time outstanding,

                    (B) Subordinated Debt in an aggregate amount not to exceed
               $__________ at any time outstanding issued or incurred to
               finance, in whole or in part, any acquisition under Section
               5.02(f)(viii) which Debt has been issued to the seller of the
               company or business being acquired at the time of such
               acquisition; provided, however, that such Debt shall be
                            --------  -------                         
               subordinated to the Obligations of the Loan Parties under the
               Loan Documents on terms and conditions satisfactory to the
               Administrative Agent,

                    (C) Debt owed to a wholly owned Subsidiary of the Parent
               Borrower (other than the Sub Borrower), so long as no Default
               shall have occurred and be continuing at the time of issuance or
               incurrence of such Debt or would result therefrom and which Debt
               (x) shall constitute Pledged Debt, (y) shall be on terms
               acceptable to the Administrative Agent and (z) shall be evidenced
               by promissory notes in form and substance satisfactory to the
               Administrative Agent and such promissory notes shall be pledged
               as security for the Obligations under the Loan Documents of the
               holder thereof and delivered to the Administrative Agent pursuant
               to the terms of the Security Agreement,

                    (D) Debt under the Senior Notes Indenture in an aggregate
               principal amount not to exceed $180,000,000 in original issue
               amount, and

                    (E) unsecured Debt incurred in the ordinary course of
               business and aggregating not more than $5,000,000 at any one time
               outstanding,

               (ii) in the case of the Parent Borrower's Subsidiaries,

                         (A) in the case of the U.K. Subsidiaries, Debt owed to
                    the Sub Borrower; provided that, in each case, such Debt (w)
                                      --------                                  
                    shall constitute Pledged Debt (as defined in the Security
                    Agreement), (x) shall be on terms acceptable to the
                    Administrative Agent, (y) shall be evidenced by promissory
                    notes in substantially the form of Exhibit I-1 hereto, such
                    promissory notes shall be secured by the personal property,
                    and such other property as the Administrative shall require
                    from time to time, of the makers thereof and such promissory
                    notes shall be pledged as security for the Obligations under
                    the Loan Documents to which the holder thereof is a party
                    and delivered to the Administrative Agent pursuant to the
                    terms of the Security Agreement and Section 5.01(o) and (z)
                    the Obligations of the U.K. Subsidiaries under such
                    promissory notes shall be guaranteed by the Foreign
                    Guarantors pursuant to the Foreign Guaranty, and

                         (B) in the case of any of the Subsidiaries of the
                    Parent Borrower (other than the Sub Borrower and any
                    Excluded Subsidiary), Debt owed to the Parent Borrower or to
                    a wholly-owned Subsidiary of the Parent Borrower (other than
                    the Sub Borrower and any Excluded Subsidiary); provided
                                                                   --------
                    that, in each case, such Debt (x) shall constitute Pledged
                    Debt (as defined in the Security Agreement),
<PAGE>
 
                                       57

                    (y) shall be on terms acceptable to the Administrative Agent
                    and (z) shall be evidenced by promissory notes in
                    substantially the form of Exhibit I-2 hereto and such
                    promissory notes shall be pledged as security for the
                    Obligations under the Loan Documents to which the holder
                    thereof is a party and delivered to the Administrative Agent
                    pursuant to the terms of the Security Agreement and Section
                    5.01(o),

               (iii)  in the case of the Parent Borrower and its Subsidiaries
     (other than the Sub Borrower and the Excluded Subsidiaries),

                    (A)  Debt under the Loan Documents,

                    (B)  Debt secured by Liens permitted by Section 5.02(a)(iii)
               not to exceed in the aggregate $5,000,000 at any time
               outstanding,

                    (C) Debt consisting of Capitalized Leases not to exceed in
               the aggregate at any time outstanding the sum of (1) $5,000,000
               and (2) an amount equal to the amount by which the aggregate
               Working Capital Commitments in effect immediately prior to giving
               effect to the incurrence of such Debt pursuant to this subclause
               (2) exceeds $40,000,000, provided, however, that immediately upon
                                        --------  -------                       
               the incurrence of any Debt pursuant to this subclause (2), an
               amount equal to the amount of such Debt shall be applied to
               prepay the Advances pursuant to Section 2.06(b)(i) and the
               Facilities shall be permanently reduced by the amount of such
               Debt pursuant to Section 2.05(b)(i),

               (D) the Surviving Debt, and any Debt extending the maturity of,
     or refunding or refinancing, in whole or in part, any Surviving Debt;
     provided that the terms of any such extending, refunding or refinancing
     --------                                                               
     Debt, and of any agreement entered into and of any instrument issued in
     connection therewith, are on substantially the same terms as the Debt being
     extended, refunded or refinanced otherwise permitted by the Loan Documents;
     and provided further that the principal amount of such Surviving Debt shall
         -------- -------                                                       
     not be increased above the principal amount thereof outstanding immediately
     prior to such extension, refunding or refinancing, and the direct and
     contingent obligors therefor shall not be changed, as a result of or in
     connection with such extension, refunding or refinancing, and

               (E) indorsement of negotiable instruments for deposit or
     collection or similar transactions in the ordinary course of business, and

               (iv)  in the case of the Sub Borrower,

                    (A) Debt under the Loan Documents, and

               (B) indorsement of negotiable instruments for deposit or
     collection or similar transactions in the ordinary course of business.

          (c) Lease Obligations.  Create, incur, assume or suffer to exist, or
              -----------------                                               
     permit any of its Subsidiaries to create, incur, assume or suffer to exist,
     any obligations as lessee (i) for the rental or hire of real or personal
     property in connection with any sale and leaseback transaction, or (ii) for
     the rental or hire of other real or personal property of any kind under
     leases or agreements to lease, including Capitalized Leases, having an
<PAGE>
 
                                       58

     original term of one year or more other than, in the case of the Parent
     Borrower and its Subsidiaries (other than the Sub Borrower), such
     obligations as would not cause the direct and contingent liabilities of the
     Parent Borrower and its Subsidiaries, on a Consolidated basis, in respect
     of all such obligations to exceed $[5],000,000 payable in any period of 12
     consecutive months.

          (d) Mergers, Etc.  Merge into or consolidate with any Person or permit
              ------------                                                      
     any Person to merge into it, or permit any of its Subsidiaries to do so,
     except that (i) the Parent Borrower may consummate the Merger, (ii) any
     Subsidiary of the Parent Borrower (other than the Sub Borrower) may merge
     into or consolidate with any other Subsidiary of the Parent Borrower (other
     than the Sub Borrower) and (iii) IXnet Germany and IXnet France may merge
     into or consolidate with the Parent Borrower; provided that, in the case of
                                                   --------                     
     any such merger or consolidation, the Person formed by such merger or
     consolidation (A) shall be a wholly-owned Subsidiary of the Parent Borrower
     and (B) shall, if either Subsidiary party to such merger or consolidation
     is a Guarantor, be a Guarantor; and provided further that in each case,
                                         -------- -------                   
     immediately after giving effect thereto, no event shall occur and be
     continuing that constitutes a Default.

          (e) Sales, Etc., of Assets.  Sell, lease, transfer or otherwise
              ----------------------                                     
     dispose of, or permit any of its Subsidiaries to sell, lease, transfer or
     otherwise dispose of, any of its assets, or grant any option or other right
     to purchase, lease or otherwise acquire any Collateral other than Inventory
     to be sold in the ordinary course of its business, except, with respect to
                                                        ------                 
     the Parent Borrower and its Subsidiaries (other than the Sub Borrower):

               (i) sales of Inventory in the ordinary course of its business;

               (ii) in a transaction authorized by subsection (d) of this
          Section 5.02;

               (iii)  sales of assets for cash and for fair value in an
          aggregate amount not to exceed $__________ in any Fiscal Year; and

               (iv) sales of assets for cash and for fair value in an aggregate
          amount not to exceed $10,000,000 in any Fiscal Year; provided that the
                                                               --------         
          proceeds of such sale shall be reinvested within 180 days after such
          sale in like assets.

          (f) Investments in Other Persons.  Make or hold, or permit any of its
              ----------------------------                                     
     Subsidiaries to make or hold, any Investment in any Person other than:

               (i) Investments by the Parent Borrower and its Subsidiaries
     (other than the Sub Borrower) in their respective Subsidiaries outstanding
     on the date hereof and additional Investments in their respective wholly-
     owned Subsidiaries (other than the Excluded Subsidiaries) in an aggregate
     amount invested from the date hereof not to exceed $2,000,000;

               (ii) loans and advances to employees of the Parent Borrower and
     its Subsidiaries (other than the Sub Borrower) in the ordinary course of
     the business as presently conducted in an aggregate principal amount not to
     exceed $2,000,000 at any time outstanding;

               (iii)  Investments by the Parent Borrower and its Subsidiaries
     (other than the Sub Borrower) in Cash Equivalents;

               (iv) Investments consisting of intercompany Debt permitted under
          Section 5.02(b)(ii);
<PAGE>
 
                                       59


               (v) Investments existing on the date hereof and described on
          Schedule 4.01(jj) hereto;

               (vi) Investments by the Parent Borrower in Hedge Agreements
          permitted under Section 5.02(b)(i)(A); and

               (vii)  Investments by the Parent Borrower in IXnet and MXnet
          outstanding on the date hereof and additional Investments in an
          aggregate amount invested from the date hereof not to exceed (x) in
          the case of IXnet, $_________ and (y) in the case of MXnet,
          $_________; and

               (viii)    other Investments by the Parent Borrower and its
     Subsidiaries (other than the Sub Borrower) in an aggregate amount invested
     not to exceed $25,000,000; provided that with respect to Investments made
                                --------                                      
     under this clause (viii): (1) any newly acquired or created Subsidiary of
     the Parent Borrower or any of its Subsidiaries shall be a wholly owned
     Subsidiary thereof; (2) immediately before and after giving effect thereto,
     no Default shall have occurred and be continuing or would result therefrom;
     (3) any company or business acquired or invested in pursuant to this clause
     (viii) shall be in the same line of business as the business of the
     Borrower or any of its Subsidiaries; and (4) immediately before and after
     giving effect to the acquisition of a company or business pursuant to this
     clause (viii), the Parent Borrower shall be in pro forma compliance with
     the covenants contained in Section 5.04, calculated based on the financial
     statements most recently delivered to the Lender Parties pursuant to
     Section 5.03, as though such acquisition had occurred at the beginning of
     the four quarter period covered thereby, as evidenced by a certificate of
     the chief financial officer of the Parent Borrower furnished to the Lender
     Parties demonstrating such compliance.

          (g) Dividends, Etc.  Declare or pay any dividends, purchase, redeem,
              --------------                                                  
     retire, defease or otherwise acquire for value any of its capital stock or
     any warrants, rights or options to acquire such capital stock, now or
     hereafter outstanding, return any capital to its stockholders as such, make
     any distribution of assets, capital stock, warrants, rights, options,
     obligations or securities to its stockholders as such or issue or sell any
     capital stock or any warrants, rights or options to acquire such capital
     stock, or permit any of its Subsidiaries to do any of the foregoing or
     permit any of its Subsidiaries to purchase, redeem, retire, defease or
     otherwise acquire for value any capital stock of either Borrower or any
     warrants, rights or options to acquire such capital stock or to issue or
     sell any capital stock or any warrants, rights or options to acquire such
     capital stock; except that, so long as no Default shall have occurred and
                    ------                                                    
     be continuing at the time of any action described in clauses (i) and (ii)
     below or would result therefrom, (i) the Parent Borrower may (A) declare
     and pay dividends and distributions payable only in common stock of the
     Parent Borrower, (B) issue and sell shares of its capital stock to the
     Equity Investors in the amounts and for the prices set forth on Schedule
     5.02(g), (C) the Parent Borrower may issue and sell [shares of its common
     stock] to its management and employees pursuant to and in accordance with
     the terms of the Stock Option Plan, and (D) except to the extent the Net
     Cash Proceeds thereof are required to be applied to the prepayment of the
     Advances pursuant to Section 2.06(b)(i), purchase, redeem, retire, defease
     or otherwise acquire shares of its capital stock with the proceeds received
     from the issue of new shares of its capital stock with equal or inferior
     voting powers, designations, preferences and rights, and (ii) in the case
     of the Parent Borrower's Subsidiaries (other than the Sub Borrower), (A)
     any Subsidiary of the Parent Borrower may declare and pay cash dividends to
     its parent or the Parent Borrower and (B) IXnet Germany and IXnet France
     may be liquidated.

          (h) Change in Nature of Business.  Make, or permit any of its
              ----------------------------                             
     Subsidiaries to make, any material change in the nature of its business as
     carried on at the date hereof.  In the case of the Sub Borrower, engage 
<PAGE>
 
                                       60

     in any business other than the making of loans to the U.K. Subsidiaries
     from time to time to the extent permitted by Section 5.02(f)(iv).

          (i) Charter Amendments.  Amend, or permit any of its Subsidiaries to
              ------------------                                              
     amend, its certificate of incorporation or bylaws in any manner that would
     in any material respect impair the ability of any Loan Party to perform its
     obligations under the Loan Documents or that would impair in any material
     respect the rights or interests of any of the Agents or any of the Lender
     Parties.

          (j) Accounting Changes.  Make or permit, or permit any of its
              ------------------                                       
     Subsidiaries to make or permit, any change in (i) its accounting policies
     or reporting practices, except as required by generally accepted accounting
     principles or (ii) its Fiscal Year.

          (k) Prepayments, Etc., of Debt.  Prepay, redeem, purchase, defease or
              --------------------------                                       
     otherwise satisfy prior to the scheduled maturity thereof in any manner, or
     make any payment in violation of any subordination terms of, any Debt,
     other than (i) the prepayment of the Advances in accordance with the terms
     of this Agreement and (ii) regularly scheduled or required repayments or
     redemptions of Surviving Debt, or amend, modify or change in any manner any
     term or condition of any Surviving Debt or Subordinated Debt, or permit any
     of its Subsidiaries to do any of the foregoing other than to prepay any
     Debt payable to either Borrower.

          (l) Amendment, Etc., of Related Documents.  Cancel or terminate any
              -------------------------------------                          
     Related Document or consent to or accept any cancellation or termination
     thereof, amend, modify or change in any manner any term or condition of any
     Related Document or give any consent, waiver or approval thereunder, waive
     any default under or any breach of any term or condition of any Related
     Document, agree in any manner to any other amendment, modification or
     change of any term or condition of any Related Document or take any other
     action in connection with any Related Document that would impair in any
     material respect the value of the interest or rights of the Parent Borrower
     thereunder or that would impair in any material respect the ability of any
     Loan Party to perform its obligations under the Loan Documents or that
     would impair in any material respect the rights or interests any of the
     Agents or any of the Lender Parties, or permit any of its Subsidiaries to
     do any of the foregoing.

          (m) Amendment, Etc., of Material Contracts.  Without the consent of
              --------------------------------------                         
     the Required Lenders, cancel or terminate any Material Contract or consent
     to or accept any cancellation or termination thereof, amend or otherwise
     modify any Material Contract or give any consent, waiver or approval
     thereunder, waive any default under or breach of any Material Contract,
     agree in any manner to any other amendment, modification or change of any
     term or condition of any Material Contract or take any other action in
     connection with any Material Contract that would impair in any material
     respect the value of the interest or rights of either Borrower thereunder
     or that would impair in any material respect the ability of any Loan Party
     to perform its obligations under the Loan Documents or that would impair in
     any material respect the interest or rights of any of the Agents or any of
     the Lender Parties, or permit any of its Subsidiaries to do any of the
     foregoing.

          (n) Ownership Change.  Take, or permit any of its Subsidiaries to
              ----------------                                             
     take, any action that would result in an "ownership change" (as defined in
     Section 382 of the Internal Revenue Code) with respect to the Parent
     Borrower or any of its Subsidiaries or the application of the "separate
     return limitation year" or "consolidated return change of ownership"
     limitations under the Federal income tax consolidated return regulations
     with respect to the Parent Borrower or any of its Subsidiaries.
<PAGE>
 
                                       61

          (o) Negative Pledge.  Enter into or suffer to exist, or permit any of
              ---------------                                                  
     its Subsidiaries to enter into or suffer to exist, any agreement
     prohibiting or conditioning the creation or assumption of any Lien upon any
     of its property or assets other than (i) in favor of the Secured Parties or
     (ii) in connection with any Surviving Debt.

          (p) Partnerships, Etc.  Become a general partner in any general or
              -----------------                                             
     limited partnership or joint venture, or permit any of its Subsidiaries to
     do so.

          (q) Speculative Transactions.  Engage, or permit any of its
              ------------------------                               
     Subsidiaries to engage, in any transaction involving commodity options or
     futures contracts or any similar speculative transactions other than Hedge
     Agreements permitted under Section 5.02(b).

          (r) Capital Expenditures.  Make, or permit any of its Subsidiaries to
              --------------------                                             
     make, any Capital Expenditures other than, in the case of the Parent
     Borrower and its Subsidiaries (other than the Sub Borrower), such Capital
     Expenditures as would not cause the aggregate of all such Capital
     Expenditures made by the Parent Borrower and its Subsidiaries in any period
     set forth below to exceed the amount set forth below for such period:


                FISCAL YEAR ENDING              AMOUNT      
                                                            
                September 30, 1998            $35,000,000   
                                                            
                September 30, 1999            $35,000,000   
                                                            
                September 30, 2000            $35,000,000   
                                                            
                September 30, 2001            $35,000,000   
                                                            
                September 30, 2002            $35,000,000   
                                                            
                and thereafter                               


          (s) Excluded Subsidiaries.  Permit any Excluded Subsidiary to
              ---------------------                                    
     individually hold assets in excess of $[10,000] or collectively with all
     other Excluded Subsidiaries hold assets in excess of $[_______] or engage
     in any business of any kind[, other than the holding of licenses].

          SECTION  5.03.  Reporting Requirements.  So long as any Advance shall
                          ----------------------                               
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, the Parent Borrower shall furnish to the
Lender Parties and the Agents:

          (a) Default Notice.  As soon as possible and in any event within two
              --------------                                                  
     days after any Responsible Officer knows or should know of any Default or
     any event, development or occurrence reasonably likely to have a Material
     Adverse Effect continuing on the date of such statement, a statement of a
     Responsible Officer of the Parent Borrower setting forth the details of
     such Default and the action that the Parent Borrower has taken and proposes
     to take with respect thereto.

          (b) Quarterly Financials.  As soon as available and in any event
              --------------------                                        
     within 45 days after the end of each of the first three quarters of each
     Fiscal Year, Consolidated and consolidating balance sheets of the Parent
     Borrower and its Subsidiaries as of the end of such quarter and
     Consolidated and consolidating statements of income and a Consolidated
     statement of cash flows of the Parent Borrower and its Subsidiaries for the
     period commencing at the end of the previous fiscal quarter and ending with
     the end 
<PAGE>
 
                                       62

     of such fiscal quarter and Consolidated and consolidating statements of
     income and a Consolidated statement of cash flows of the Parent Borrower
     and its Subsidiaries for the period commencing at the end of the previous
     Fiscal Year and ending with the end of such quarter, setting forth in each
     case in comparative form the corresponding figures for the corresponding
     period of the preceding Fiscal Year, all in reasonable detail and duly
     certified (subject to year-end audit adjustments) by the chief financial
     officer of the Parent Borrower as having been prepared in accordance with
     GAAP, together with (i) a certificate of said officer stating that no
     Default has occurred and is continuing or, if a Default has occurred and is
     continuing, a statement as to the nature thereof and the action that the
     Parent Borrower has taken and proposes to take with respect thereto and
     (ii) a schedule in form satisfactory to the Administrative Agent of the
     computations used by the Parent Borrower in determining compliance with the
     covenants contained in Section 5.04; provided that in the event of any 
                                          --------                 
     change in GAAP used in the preparation of such financial statements, the
     Parent Borrower shall also provide, if necessary for the determination of
     compliance with Section 5.04, a statement of reconciliation conforming such
     financial statements to GAAP.

          (c) Annual Financials.  As soon as available and in any event within
              -----------------                                               
     90 days after the end of each Fiscal Year, a copy of the annual audit
     report for such year for the Parent Borrower and its Subsidiaries,
     including therein Consolidated and consolidating balance sheets of the
     Parent Borrower and its Subsidiaries as of the end of such Fiscal Year and
     Consolidated and consolidating statements of income and a Consolidated
     statement of cash flows of the Parent Borrower and its Subsidiaries for
     such Fiscal Year, in each case accompanied by an opinion acceptable to the
     Required Lenders of Coopers & Lybrand L.L.P. or other independent public
     accountants of recognized standing acceptable to the Required Lenders,
     together with (i) a certificate of such accounting firm to the Agents and
     the Lender Parties stating that in the course of the regular audit of the
     business of the Parent Borrower and its Subsidiaries, which audit was
     conducted by such accounting firm in accordance with generally accepted
     auditing standards, such accounting firm has obtained no knowledge that a
     Default has occurred and is continuing, or if, in the opinion of such
     accounting firm, a Default has occurred and is continuing, a statement as
     to the nature thereof, (ii) a schedule in form satisfactory to the
     Administrative Agent of the computations used by such accountants in
     determining, as of the end of such Fiscal Year, compliance with the
     covenants contained in Section 5.04; provided that in the event of any
                                          --------                         
     change in GAAP used in the preparation of such financial statements, the
     Parent Borrower shall also provide, if necessary for the determination of
     compliance with Section 5.04, a statement of reconciliation conforming such
     financial statements to GAAP and (iii) a certificate of the chief financial
     officer of the Parent Borrower stating that no Default has occurred and is
     continuing or, if a Default has occurred and is continuing, a statement as
     to the nature thereof and the action that the Parent Borrower has taken and
     proposes to take with respect thereto.

          (d) Annual Forecasts.  As soon as available and in any event no later
              ----------------                                                 
     than 15 days before the end of each Fiscal Year, forecasts prepared by
     management of the Parent Borrower, in form satisfactory to the Agents and
     the Lender Parties, of balance sheets, income statements and cash flow
     statements on a monthly basis for the Fiscal Year following such Fiscal
     Year and on an annual basis for each Fiscal Year thereafter until the
     Termination Date.

          (e) ERISA Events and ERISA Reports.  (i)  Promptly and in any event
              ------------------------------                                 
     within 10 days after any Loan Party or any ERISA Affiliate knows or has
     reason to know that any ERISA Event has occurred, a statement of the chief
     financial officer of the Parent Borrower describing such ERISA Event and
     the action, if any, that such Loan Party or such ERISA Affiliate has taken
     and proposes to take with respect thereto and (ii) on the date any records,
     documents or other information must be furnished to the PBGC with respect
     to any Plan pursuant to Section 4010 of ERISA, a copy of such records,
     documents and information.
<PAGE>
 
                                       63


          (f) Plan Terminations.  Promptly and in any event within two Business
              -----------------                                                
     Days after receipt thereof by any Loan Party or any ERISA Affiliate, copies
     of each notice from the PBGC stating its intention to terminate any Plan or
     to have a trustee appointed to administer any Plan.

          (g) Actuarial Reports.  Promptly upon receipt thereof by any Loan
              -----------------                                            
     Party or any ERISA Affiliate, a copy of the annual actuarial valuation
     report for each Plan the funded current liability percentage (as defined in
     Section 302(d)(8) of ERISA) of which is less than 90% or the unfunded
     current liability of which exceeds $________.

          (h) Plan Annual Reports.  Upon the request of any Lender Party, copies
              -------------------                                               
     of each Schedule B (Actuarial Information) to the annual report (Form 5500
     Series) with respect to each Plan.

          (i) Multiemployer Plan Notices.  Promptly and in any event within five
              --------------------------                                        
     Business Days after receipt thereof by any Loan Party or any ERISA
     Affiliate from the sponsor of a Multiemployer Plan, copies of each notice
     concerning (i) the imposition of Withdrawal Liability by any such
     Multiemployer Plan, (ii) the reorganization or termination, within the
     meaning of Title IV of ERISA, of any such Multiemployer Plan or (iii) the
     amount of liability incurred, or that may be incurred, by such Loan Party
     or any ERISA Affiliate in connection with any event described in clause (i)
     or (ii) of this Section 5.03(j).

          (j) Litigation.  Promptly after the commencement thereof, notice of
              ----------                                                     
     all actions, suits, investigations, litigation and proceedings before any
     court or governmental department, commission, board, bureau, agency or
     instrumentality, domestic or foreign, affecting any Loan Party or any of
     its Subsidiaries of the type described in Section 4.01(j).

          (k) Securities Reports.  Promptly after the sending or filing thereof,
              ------------------                                                
     copies of all proxy statements, financial statements and reports that any
     Loan Party or any of its Subsidiaries sends to its stockholders, and copies
     of all regular, periodic and special reports, and all registration
     statements, that any Loan Party or any of its Subsidiaries files with the
     Securities and Exchange Commission or any governmental authority that may
     be substituted therefor, or with any national securities exchange.

          (l) Creditor Reports.  Promptly after the furnishing thereof, copies
              ----------------                                                
     of any statement or report furnished generally to other holders of the
     securities of any Loan Party or of any of its Subsidiaries pursuant to the
     terms of any indenture, loan or credit or similar agreement and not
     otherwise required to be furnished to the Lender Parties pursuant to any
     other subsection of this Section 5.03.

          (m) Agreement Notice, Etc..  Promptly upon receipt thereof, copies of
              ----------------------                                           
     all notices, requests and other documents received by any Loan Party or any
     of its Subsidiaries under or pursuant to any Related Document or Material
     Contract or indenture, loan or credit or similar agreement regarding or
     related to any breach or default by any party thereto or any other event
     that could impair in any material respect the value of the interests or the
     rights of any Loan Party or that otherwise could be reasonably likely to
     have a Material Adverse Effect and copies of any amendment, modification or
     waiver of any provision of any Related Document or Material Contract or
     indenture, loan or credit or similar agreement and of any amendment to the
     certificate of incorporation or bylaws of any Loan Party and, from time to
     time upon request by the Administrative Agent, such information and reports
     regarding the Related Documents and the Material Contracts as the
     Administrative Agent may reasonably request.

          (n) Revenue Agent Reports.  Within 10 days after receipt, copies of
              ---------------------                                          
     all Revenue Agent Reports (Internal Revenue Service Form 886), or other
     written proposals of the Internal Revenue
     Service, that propose, determine or otherwise set forth positive
     adjustments to the Federal income tax liability of the 
<PAGE>
 
                                       64

     affiliated group (within the meaning of Section 1504(a)(1) of the Internal
     Revenue Code) of which the Parent Borrower is a member aggregating $500,000
     or more.

          (o) Tax Certificates.  Promptly, and in any event within five Business
              ----------------                                                  
     Days after the due date (with extensions) for filing the final Federal
     income tax return in respect of each taxable year, a certificate (a "Tax
                                                                          ---
     Certificate"), signed by the President or the chief financial officer of
     -----------                                                             
     the Parent Borrower, stating that the Parent Borrower has paid to the
     Internal Revenue Service or other taxing authority, or to the Parent
     Borrower, the full amount that such affiliated group is required to pay in
     respect of Federal income tax for such year and that the Parent Borrower
     and its Subsidiaries have received any amounts payable to them, and have
     not paid amounts in respect of taxes (Federal, state, local or foreign) in
     excess of the amount they are required to pay, under the Tax Agreement in
     respect of such taxable year.

          (p) Environmental Conditions.  Promptly after the assertion or
              ------------------------                                  
     occurrence thereof, notice of any Environmental Action against or of any
     noncompliance by any Loan Party or any of its Subsidiaries with any
     Environmental Law or Environmental Permit that could (i) reasonably be
     expected to have a Material Adverse Effect or (ii) cause any real property
     owned or leased by any Loan Party or any of its Subsidiaries to be subject
     to any material restrictions on ownership, occupancy, use or
     transferability under any Environmental Law.

          (q) Real Property.  As soon as available and in any event within 30
              -------------                                                  
     days after the end of each Fiscal Year, a report supplementing Schedules
     4.01(hh) hereto, including an identification of all real and leased
     property disposed of by the Parent Borrower or any of its Subsidiaries
     during such Fiscal Year, a list and description (including the street
     address, county or other relevant jurisdiction, State, record owner, book
     value thereof, and in the case of leases of property, lessor, lessee,
     expiration date and annual rental cost thereof) of all real property
     acquired or leased during such Fiscal Year and a description of such other
     changes in the information included in such Schedules as may be necessary
     for such Schedules to be accurate and complete.

          (r) Insurance.  As soon as available and in any event within 30 days
              ---------                                                       
     after the end of each Fiscal Year, a report summarizing the insurance
     coverage (specifying type, amount and carrier) in effect for each Loan
     Party and each of its Subsidiaries and containing such additional
     information as any Lender Party, through the Administrative Agent, may
     reasonably specify.

          (s) Borrowing Base Certificate.  As soon as available and in any event
              --------------------------                                        
     within 20 days after the end of each month, a Borrowing Base Certificate,
     as at the end of the previous month, certified by the chief financial
     officer, the chief accounting officer, the controller or the treasurer of
     the Parent Borrower.

          (t) Other Information.  Such other information respecting the
              -----------------                                        
     business, condition (financial or otherwise), operations, performance,
     assets, nature of assets, liabilities (including, without limitation, tax,
     ERISA and environmental liabilities) or prospects of any Loan Party or any
     of its Subsidiaries as any Lender Party, through the Administrative Agent,
     may from time to time reasonably request.

          SECTION  5.04.  Financial Covenants.  So long as any Advance shall
                          -------------------                               
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, the Parent Borrower shall:

          (a) Minimum EBITDA.  Maintain at the end of each fiscal quarter of the
              --------------                                                    
     Parent Borrower) EBITDA of not less than the amount set forth below for
     each four consecutive fiscal quarter period set forth below:
<PAGE>
 
                                       65

        FOUR FISCAL QUARTERS ENDING                   RATIO       
        ---------------------------                   -----       
                                                                  
        September 30, 1998                         $ 24,000,000   
        December 31, 1998                          $ 28,900,000   
                                                                  
        March 31, 1999                             $ 31,500,000   
        June 30, 1999                              $ 34,000,000   
        September 30, 1999                         $ 36,000,000   
        December 31, 1999                          $ 39,600,000   
                                                                  
        March 31, 2000                             $ 44,000,000   
        June 30, 2000                              $ 49,000,000   
        September 30, 2000                         $ 54,000,000   
        December 31, 2000                          $ 60,000,000   
                                                                  
        March 31, 2001                             $ 63,000,000   
        June 30, 2001                              $ 67,000,000   
        September 30, 2001                         $ 71,000,000   
        December 31, 2001                          $ 75,000,000   
                                                                  
        March 31, 2002                             $ 81,000,000   
        June 30, 2002                              $ 87,000,000   
        September 30, 2002                         $ 93,000,000   
        December 31, 2002                          $100,000,000   
        March 31, 2003                                            
           and thereafter                          $107,000,000    

          (b) Interest Coverage Ratio.  Maintain at the end of each fiscal
              -----------------------                                     
     quarter of the Parent Borrower a ratio of Consolidated EBITDA to cash
     interest payable on all Debt of the Parent Borrower and its Subsidiaries,
     in each case for the four quarter period then ending, of not less than
     4.00:1.00.


                                  ARTICLE VI

                               EVENTS OF DEFAULT



          SECTION  6.01.  Events of Default.  If any of the following events 
                          -----------------            
("Events of Default") shall occur and be continuing:
  -----------------                                 

          (a) (i) either Borrower shall fail to pay any principal of any Advance
     when the same shall become due and payable or (ii) either Borrower shall
     fail to pay any interest on any Advance, or any Loan Party shall fail to
     make any other payment under any Loan Document, in each case under this
     clause (ii) within 5 Business Days after the same becomes due and payable;
     or

          (b) any representation or warranty made by any Loan Party (or any of
     its officers) under or in connection with any Loan Document shall prove to
     have been incorrect in any material respect when made; or
<PAGE>
 
                                       66


          (c) either Borrower shall fail to perform or observe any term,
     covenant or agreement contained in Section 2.14, 5.01(e), (f), (m), (o) or
     (q), 5.02, 5.03 or 5.04; or

          (d) any Loan Party shall fail to perform or observe any other term,
     covenant or agreement contained in any Loan Document on its part to be
     performed or observed if such failure shall remain unremedied for 15 days
     after the earlier of the date on which (A) a Responsible Officer becomes
     aware of such failure or (B) written notice thereof shall have been given
     to the Parent Borrower by any of the Agents or any of the Lender Parties;
     or

          (e) any Loan Party or any of its Subsidiaries shall fail to pay any
     principal of, premium or interest on or any other amount payable in respect
     of any Debt that is outstanding in a principal or notional amount of at
     least $5,000,000 either individually or in the aggregate (but excluding
     Debt outstanding hereunder) of such Loan Party or such Subsidiary (as the
     case may be), when the same becomes due and payable (whether by scheduled
     maturity, required prepayment, acceleration, demand or otherwise), and such
     failure shall continue after the applicable grace period, if any, specified
     in the agreement or instrument relating to such Debt; or any other event
     shall occur or condition shall exist under any agreement or instrument
     relating to any such Debt and shall continue after the applicable grace
     period, if any, specified in such agreement or instrument, if the effect of
     such event or condition is to accelerate, or to permit the acceleration of,
     the maturity of such Debt or otherwise to cause, or to permit the holder
     thereof to cause, such Debt to mature; or any such Debt shall be declared
     to be due and payable or required to be prepaid or redeemed (other than by
     a regularly scheduled required prepayment or redemption), purchased or
     defeased, or an offer to prepay, redeem, purchase or defease such Debt
     shall be required to be made, in each case prior to the stated maturity
     thereof; or

          (f) any Loan Party or any of its Subsidiaries shall generally not pay
     its debts as such debts become due, or shall admit in writing its inability
     to pay its debts generally, or shall make a general assignment for the
     benefit of creditors; or any proceeding shall be instituted by or against
     any Loan Party or any of its Subsidiaries seeking to adjudicate it a
     bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
     arrangement, adjustment, protection, relief, or composition of it or its
     debts under any law relating to bankruptcy, insolvency or reorganization
     or relief of debtors, or seeking the entry of an order for relief or the
     appointment of a receiver, trustee, or other similar official for it or for
     any substantial part of its property and, in the case of any such
     proceeding instituted against it (but not instituted by it) that is being
     diligently contested by it in good faith, either such proceeding shall
     remain undismissed or unstayed for a period of 30 days or any of the
     actions sought in such proceeding (including, without limitation, the entry
     of an order for relief against, or the appointment of a receiver, trustee,
     custodian or other similar official for, it or any substantial part of its
     property) shall occur; or any Loan Party or any of its Subsidiaries shall
     take any corporate action to authorize any of the actions set forth above
     in this subsection (f); or

          (g) any judgment or order for the payment of money in excess of
     $5,000,000 shall be rendered against any Loan Party or any of its
     Subsidiaries and either (i) enforcement proceedings shall have been
     commenced by any creditor upon such judgment or order or (ii) there shall
     be any period of 15 consecutive days during which a stay of enforcement of
     such judgment or order, by reason of a pending appeal or otherwise, shall
     not be in effect; or

          (h) any non-monetary judgment or order shall be rendered against any
     Loan Party or any of its Subsidiaries that could be reasonably expected to
     have a Material Adverse Effect, and there shall be any period of 15
     consecutive days during which a stay of enforcement of such judgment or
     order, by reason of a pending appeal or otherwise, shall not be in effect;
     or
<PAGE>
 
                                       67


          (i) any provision of any Loan Document after delivery thereof pursuant
     to Section 3.01 or 5.01(o) shall for any reason cease to be valid and
     binding on or enforceable against any Loan Party party to it, or any such
     Loan Party shall so state in writing; or

          (j) any Collateral Document after delivery thereof pursuant to Section
     3.01 or 5.01(o) shall for any reason (other than pursuant to the terms
     thereof) cease to create a valid and perfected first priority Lien on and
     security interest in the Collateral purported to be covered thereby; or

          (k) [(i) the Equity Investors, collectively, shall cease to
     beneficially own and control at least 50% of the Voting Stock of the Parent
     Borrower; or (ii) any Person or two or more Persons acting in concert other
     than the Equity Investors shall have acquired beneficial ownership (within
     the meaning of Rule 13d-3 of the Securities and Exchange Commission under
     the Securities Exchange Act of 1934), directly or indirectly, of Voting
     Stock of the Parent Borrower (or other securities convertible into such
     Voting Stock) representing 20% or more of the combined voting power of all
     Voting Stock of the Parent Borrower; or (iii) during any period of up to 24
     consecutive months, commencing after the date of this Agreement,
     individuals who at the beginning of such 24-month period were directors of
     the Parent Borrower shall cease for any reason to constitute a majority of
     the board of directors of the Parent Borrower; or (iv) any Person or two or
     more Persons acting in concert other than the Equity Investors shall have
     acquired by contract or otherwise, or shall have entered into a contract or
     arrangement that, upon consummation, will result in its or their
     acquisition of control over Voting Stock of the Parent Borrower (or other
     securities convertible into such securities) representing 20% or more of
     the combined voting power of all Voting Stock of the Parent Borrower;] or

          (l) any ERISA Event shall have occurred with respect to a Plan and the
     sum (determined as of the date of occurrence of such ERISA Event) of the
     Insufficiency of such Plan and the Insufficiency of any and all other Plans
     with respect to which an ERISA Event shall have occurred and then exist (or
     the liability of the Loan Parties and the ERISA Affiliates related to such
     ERISA Event) exceeds $5,000,000; or

          (m) any Loan Party or any ERISA Affiliate shall have been notified by
     the sponsor of a Multiemployer Plan that it has incurred Withdrawal
     Liability to such Multiemployer Plan in an amount that, when aggregated
     with all other amounts required to be paid to Multiemployer Plans by the
     Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined
     as of the date of such notification), exceeds $5,000,000 or requires
     payments exceeding $1,000,000 per annum; or

          (n) any Loan Party or any ERISA Affiliate shall have been notified by
     the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
     reorganization or is being terminated, within the meaning of Title IV of
     ERISA, and as a result of such reorganization or termination the aggregate
     annual contributions of the Loan Parties and the ERISA Affiliates to all
     Multiemployer Plans that are then in reorganization or being terminated
     have been or will be increased over the amounts contributed to such
     Multiemployer Plans for the plan years of such Multiemployer Plans
     immediately preceding the plan year in which such reorganization or
     termination occurs by an amount exceeding $1,000,000; or

          (o) there shall occur in the judgment of the Required Lenders any
     Material Adverse Change;

then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrowers,
declare the obligation of each Lender to make Advances (other than Letter of
Credit Advances by the Issuing Bank or a Lender pursuant to Section 2.03(c)) and
of the Issuing Bank to issue Letters of Credit to be terminated, whereupon the
same shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrowers, declare the Notes,
all interest thereon and all other 
<PAGE>
 
                                       68

amounts payable under this Agreement and the other Loan Documents to be
forthwith due and payable, whereupon the Notes, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby 
expressly waived by each Borrower; provided, however, that in the event of an 
                                   --------  -------      
actual or deemed entry of an order for relief with respect to any Loan Party or
any of its Subsidiaries under the Federal Bankruptcy Code, (x) the obligation of
each Lender to make Advances (other than Letter of Credit Advances by the
Issuing Bank or a Lender pursuant to Section 2.03(c)) and of the Issuing Bank to
issue Letters of Credit shall automatically be terminated and (y) the Notes, all
such interest and all such amounts shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by each Borrower.

          SECTION  6.02.  Actions in Respect of the Letters of Credit upon
                          ------------------------------------------------
Default.  If any Event of Default shall have occurred and be continuing, the
- -------                                                                     
Administrative Agent may, or shall at the request of the Required Lenders,
irrespective of whether it is taking any of the actions described in Section
6.01 or otherwise, make demand upon the Parent Borrower to, and forthwith upon
such demand the Parent Borrower shall, pay to the Administrative Agent on behalf
of the Lender Parties in same day funds at the Administrative Agent's office
designated in such demand, for deposit in the L/C Cash Collateral Account, an
amount equal to the aggregate Available Amount of all Letters of Credit then
outstanding. If at any time the Administrative Agent determines that any funds
held in the L/C Cash Collateral Account are subject to any right or claim of any
Person other than the Administrative Agent and the Lender Parties or that the
total amount of such funds is less than the aggregate Available Amount of all
Letters of Credit, the Parent Borrower shall, forthwith upon demand by the
Administrative Agent, pay to the Administrative Agent, as additional funds to be
deposited and held in the L/C Cash Collateral Account, an amount equal to the
excess of (a) such aggregate Available Amount over (b) the total amount of
funds, if any, then held in the L/C Cash Collateral Account that the
Administrative Agent determines to be free and clear of any such right and
claim.


                                  ARTICLE VII

                                  THE AGENTS

          SECTION  7.01.  Authorization and Action.  Each Lender Party (in its
                          ------------------------                            
capacities as a Lender, the Issuing Bank (if applicable) and a potential Hedge
Bank) hereby appoints and authorizes each Agent to take such action as agents on
its behalf and to exercise such powers and discretion under this Agreement and
the other Loan Documents as are delegated to such Agent by the terms hereof and
thereof, together with such powers and discretion as are reasonably incidental
thereto.  As to any matters not expressly provided for by the Loan Documents
(including, without limitation, enforcement or collection of the Notes), no
Agent shall be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such instructions shall be binding upon all Lender Parties and all holders
of Notes; provided, however, that no Agent shall be required to take any action
          --------  -------                                                    
that exposes the Administrative Agent to personal liability or that is contrary
to this Agreement or applicable law.  The Administrative Agent agrees to give to
each Lender Party prompt notice of each notice given to it by either Borrower
pursuant to the terms of this Agreement.

          SECTION  7.02.  Agents' Reliance, Etc.  Neither any Agent nor any of
                          ---------------------                               
their respective directors, officers, agents or employees shall be liable for
any action taken or omitted to be taken by it or them under or in connection
with the Loan Documents, except for its or their own gross negligence or willful
misconduct.  Without limiting the generality of the foregoing, each Agent:  (a)
may treat the payee of any Note as the holder thereof until, in the case of the
Administrative Agent, the Administrative Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee of such
Note, as assignor, and an Eligible Assignee, as assignee, or, in the case of the
Syndication Agent and the Documentation Agent, such Agent has received notice
from the Administrative Agent that 
<PAGE>
 
                                       69

it has received and accepted such Assignment and Acceptance, in each case as
provided in Section 8.07; (b) may consult with legal counsel (including counsel
for any Loan Party), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts; (c) make no warranty or representation to any Lender Party and shall
not be responsible to any Lender Party for any statements, warranties or
representations (whether written or oral) made in or in connection with the Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of any
Loan Document on the part of any Loan Party or to inspect the property
(including the books and records) of any Loan Party; (e) shall not be
responsible to any Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any Lien or security interest created or purported to be created
under or in connection with, any Loan Document or any other instrument or
document furnished pursuant thereto; and (f) shall incur no liability under or
in respect of any Loan Document by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telegram, telecopy or telex)
believed by it to be genuine and signed or sent by the proper party or parties.

          SECTION  7.03.  Goldman Sachs, MSSF and Affiliates.  With respect to
                          ----------------------------------                  
its Commitments, the Advances made by it and the Notes issued to it, Goldman
Sachs and MSSF shall have the same rights and powers under the Loan Documents as
any other Lender Party and may exercise the same as though it were not the
Documentation Agent or the Administrative Agent and the Syndication Agent, as
the case may be; and the term "Lender Party" or "Lenders Parties" shall, unless
otherwise expressly indicated, include Goldman Sachs and MSSF in their
respective individual capacities.  Goldman Sachs and MSSF and their respective
Affiliates may accept deposits from, lend money to, act as trustee under
indentures of, accept investment banking engagements from and generally engage
in any kind of business with, any Loan Party, any of its Subsidiaries and any
Person who may do business with or own securities of any Loan Party or any such
Subsidiary, all as if Goldman Sachs and MSSF were not the Documentation Agent or
the Administrative Agent and the Syndication Agent, as the case may be, and
without any duty to account therefor to the Lender Parties.

          SECTION  7.04.  Lender Party Credit Decision.  Each Lender Party
                          ----------------------------                    
acknowledges that it has, independently and without reliance upon any of the
Agents or any of the other Lender Parties and based on the financial statements
referred to in Section 4.01 and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement.  Each Lender Party also acknowledges that it will, independently and
without reliance upon any of the Agents or any of the other Lender Parties 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.

          SECTION  7.05.  Indemnification.  (a)  Each Lender Party severally
                          ---------------                                   
agrees to indemnify each Agent (to the extent not promptly reimbursed by the
Borrowers) from and against such Lender Party's ratable share (determined as
provided below) of any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against such Agent in any way relating to or arising out of the Loan Documents
or any action taken or omitted by such Agent under the Loan Documents; provided,
                                                                       -------- 
however, that no Lender Party shall be liable for any portion of such
- -------                                                              
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct.  Without limiting the foregoing, each Lender Party agrees to
reimburse each Agent promptly upon demand for its ratable share of any costs and
expenses (including, without limitation, fees and expenses of counsel) payable
by either Borrower under Section 8.04, to the extent that such Agent is not
promptly reimbursed for such costs and expenses by such Borrower.  For purposes
of this subsection (a), the Lender Parties' respective ratable shares of any
amount shall be determined, at any time, according to the sum of (a) the
aggregate principal amount of the Advances outstanding at such time and owing to
the respective Lender Parties, (b) their respective Pro Rata Shares of the
aggregate Available Amount of all 
<PAGE>
 
                                       70

Letters of Credit outstanding at such time and (c) their respective Unused
Working Capital Commitments at such time; provided that the aggregate principal 
                                          --------
amount of Letter of Credit Advances owing to the Issuing Bank shall be
considered to be owed to the Lenders ratably in accordance with their respective
Working Capital Commitments. In the event that any Defaulted Advance shall be
owing by any Defaulting Lender at any time, such Lender Party's Commitment with
respect to the Facility under which such Defaulted Advance was required to have
been made shall be considered to be unused for purposes of this subsection (a)
to the extent of the amount of such Defaulted Advance. The failure of any Lender
Party to reimburse an Agent promptly upon demand for its ratable share of any
amount required to be paid by the Lender Party to such Agent as provided herein
shall not relieve any other Lender Party of its obligation hereunder to
reimburse such Agent for its ratable share of such amount, but no Lender Party
shall be responsible for the failure of any other Lender Party to reimburse such
Agent for such other Lender Party's ratable share of such amount.

          (b) Each Lender Party severally agrees to indemnify the Issuing Bank
(to the extent not promptly reimbursed by the Borrowers) from and against such
Lender Party's ratable share (determined as provided below) of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Issuing Bank in any way
relating to or arising out of the Loan Documents or any action taken or omitted
by the Issuing Bank under the Loan Documents; provided, however, that no Lender
                                              --------  -------                
Party shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Issuing Bank's gross negligence or willful misconduct.
Without limiting the foregoing, each Lender Party agrees to reimburse the
Issuing Bank promptly upon demand for its ratable share of any costs and
expenses (including, without limitation, fees and expenses of counsel) payable
by either Borrower under Section 8.04, to the extent that the Issuing Bank is
not promptly reimbursed for such costs and expenses by such Borrower.  For
purposes of this subsection (b), the Lender Parties' respective ratable shares
of any amount shall be determined, at any time, according to the sum of (a) the
aggregate principal amount of the Advances outstanding at such time and owing to
the respective Lender Parties, (b) their respective Pro Rata Shares of the
aggregate Available Amount of all Letters of Credit outstanding at such time and
(c) their respective Unused Working Capital Commitments at such time; provided
                                                                      --------
that the aggregate principal amount of Letter of Credit Advances owing to the
Issuing Bank shall be considered to be owed to the Lenders ratably in accordance
with their respective Working Capital Commitments.  In the event that any
Defaulted Advance shall be owing by any Defaulting Lender at any time, such
Lender Party's Commitment with respect to the Facility under which such
Defaulted Advance was required to have been made shall be considered to be
unused for purposes of this subsection (b) to the extent of the amount of such
Defaulted Advance.  The failure of any Lender Party to reimburse the Issuing
Bank promptly upon demand for its ratable share of any amount required to be
paid by the Lender Parties to the Issuing Bank as provided herein shall not
relieve any other Lender Party of its obligation hereunder to reimburse the
Issuing Bank for its ratable share of such amount, but no Lender Party shall be
responsible for the failure of any other Lender Party to reimburse the Issuing
Bank for such other Lender Party's ratable share of such amount.

          (c) Without prejudice to the survival of any other agreement of any
Lender Party hereunder, the agreement and obligations of each Lender Party
contained in this Section 7.05 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the other Loan
Documents.

          SECTION  7.06.  Successor Administrative Agents.  Any Agent may resign
                          -------------------------------                       
at any time and, if at any time the Administrative Agent shall cease to be a
Lender, the Administrative Agent shall promptly thereafter resign by giving
written notice thereof to the Lender Parties and the Borrowers and 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, subject, so long as no Default shall have occurred and be
continuing, to the consent of the Parent Borrower, such consent not to be
unreasonably withheld or delayed. If no successor Agent shall have been so
appointed by the Required Lenders, and shall have accepted such appointment,
within 30 days after the 
<PAGE>
 
                                       71

retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lender Parties, appoint a successor Agent, which shall be, in the case of the
Administrative Agent, a commercial bank organized under the laws of the United
States or of any State thereof and having a combined capital and surplus of at
least $250,000,000. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent and upon the execution and filing or recording of such
financing statements, or amendments thereto and such other instruments or
notices, as may be necessary or desirable, or as the Required Lenders may
request, in order to continue the perfection of the Liens granted or purported
to be granted by the Collateral Documents, such successor Agent shall succeed to
and become vested with all the rights, powers, discretion, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under the Loan Documents. After any retiring Agent's
resignation or removal hereunder as an Agent, the provisions of this Article VII
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was an Agent under this Agreement.


                                 ARTICLE VIII

                                 MISCELLANEOUS

          SECTION  8.01.  Amendments, Etc.  No amendment or waiver of any
                          ---------------                                
provision of this Agreement or the Notes or any other Loan Document, nor consent
to any departure by any Loan Party therefrom, shall in any event be effective
unless the same shall be in writing and signed (or, in the case of the
Collateral Documents, consented to) by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
                                  --------  -------                           
or consent shall, unless in writing and signed by all of the Lenders (other than
any Lender Party that is, at such time, a Defaulting Lender), do any of the
following at any time: (i) waive any of the conditions specified in Section 3.02
or, in the case of the Initial Extension of Credit, Section 3.01, (ii) change
the number of Lenders or the percentage of (x) the Commitments, (y) the
aggregate unpaid principal amount of the Advances or (z) the aggregate Available
Amount of outstanding Letters of Credit that, in each case, shall be required
for the Lenders or any of them to take any action hereunder, (iii) to the extent
that a Guarantor has not been fully released from the Guaranty issued by such
Guarantor pursuant to Section 14 of such Guaranty, reduce or limit the
obligations of such Guarantor under Section 1 of the Guaranty issued by it or
otherwise limit the liability of such Guarantor with respect to the Obligations
owing to the Agents and the Lender Parties, (iv) release any material portion of
the Collateral in any transaction or series of related transactions or permit
the creation, incurrence, assumption or existence of any Lien on any material
portion of the Collateral in any transaction or series of related transactions
to secure any Obligations other than Obligations owing to the Secured Parties
under the Loan Documents, (v) amend this Section 8.01, (vi) increase the
Commitments of the Lenders or subject the Lenders to any additional obligations,
(vii) reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, (viii) postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder or amend Section 2.06, or (ix) limit the liability of any Loan Party
under any of the Loan Documents; provided further that no amendment, waiver or
                                 -------- -------                             
consent shall, unless in writing and signed by the Issuing Bank in addition to
the Lenders required above to take such action, affect the rights or obligations
of the Issuing Bank under this Agreement; and provided further that no
                                              -------- -------
amendment, waiver or consent shall, unless in writing and signed by each of the
Agents in addition to the Lenders required above to take such action, affect the
rights or duties of the Agents under this Agreement.

          SECTION  8.02.  Notices, Etc.  All notices and other communications
                          ------------                                       
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) and mailed, telegraphed, telecopied, telexed or delivered,
if to either Borrower, at its address at Wall Street Plaza, 15th Floor, 88 Pine
Street, New York, New York 10005, facsimile number:  212-344-5106, Attention:
Chief Financial Officer with a copy to General Counsel; if to any Initial Lender
or the Initial Issuing Bank, at its Domestic Lending Office specified opposite
its name on Schedule I hereto; if 
<PAGE>
 
                                       72

to any other Lender Party, at its Domestic Lending Office specified in the
Assignment and Acceptance pursuant to which it became a Lender Party; if to the
Administrative Agent or the Syndication Agent, at its address at 1585 Broadway,
New York, New York 10036, Attention: __________; and, if to the Documentation
Agent, at its address at One New York Plaza, New York, New York 10004,
Attention: ____________; or, as to either Borrower or the Administrative Agent,
at such other address as shall be designated by such party in a written notice
to the other parties and, as to each other party, at such other address as shall
be designated by such party in a written notice to the Borrowers and the
Administrative Agent. All such notices and communications shall, when mailed,
telegraphed, telecopied or telexed, be effective when deposited in the mails,
delivered to the telegraph company, transmitted by telecopier or confirmed by
telex answerback, respectively, except that notices and communications to any
Agent pursuant to Article II, III or VII shall not be effective until received
by such Agent. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement or the Notes or of any
Exhibit hereto to be executed and delivered hereunder shall be effective as
delivery of a manually executed counterpart thereof.

          SECTION  8.03.  No Waiver; Remedies.  No failure on the part of any
                          -------------------                                
Lender Party or any Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right.  The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

          SECTION  8.04.  Costs and Expenses.  (a)  Each Borrower agrees jointly
                          ------------------                                    
and severally to pay on demand (i) all reasonable out-of-pocket costs and
expenses of the Agents in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents (including,
without limitation, (A) all due diligence, collateral review, syndication,
transportation, computer, duplication, appraisal, audit, insurance, consultant,
search, filing and recording fees and expenses and (B) the reasonable fees and
expenses of counsel for the Agents with respect thereto, with respect to
advising the Agents as to their respective rights and responsibilities, or the
perfection, protection or preservation of rights or interests, under the Loan
Documents, with respect to negotiations with any Loan Party or with other
creditors of any Loan Party or any of its Subsidiaries arising out of any
Default or any events or circumstances that may give rise to a Default and with
respect to presenting claims in or otherwise participating in or monitoring any
bankruptcy, insolvency or other similar proceeding involving creditors' rights
generally and any proceeding ancillary thereto) and (ii) all costs and expenses
of the Agents and the Lender Parties in connection with the enforcement of the
Loan Documents, whether in any action, suit or litigation, any bankruptcy,
insolvency or other similar proceeding affecting creditors' rights generally
(including, without limitation, the reasonable fees and expenses of counsel for
the Agents and each Lender Party with respect thereto).

          (b) Each Borrower agrees jointly and severally to indemnify and hold
harmless each Agent, each Lender Party and each of their respective Affiliates
and their respective officers, directors, employees, agents and advisors (each,
an "Indemnified Party") from and against any and all claims, damages, losses,
    -----------------                                                        
liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of (including, without limitation, in connection with any investigation,
litigation or proceeding or preparation of a defense in connection therewith)
(i) the Facilities, the actual or proposed use of the proceeds of the Advances
or the Letters of Credit, the Loan Documents or any of the transactions
contemplated thereby, including, without limitation, any acquisition or proposed
acquisition (including, without limitation, the Transaction) by the Equity
Investors or any of their respective Subsidiaries or Affiliates of all or any
portion of the stock or substantially all the assets of the Parent Borrower or
any of its Subsidiaries or by the Parent Borrower or any of its Subsidiaries or
Affiliates or (ii) the actual or alleged presence of Hazardous Materials on any
property of any Loan Party or any of its Subsidiaries or any Environmental
Action relating in any way to any Loan Party or any of its Subsidiaries, except
to the extent such claim, damage, loss, liability or expense is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted directly and primarily from such Indemnified Party's bad faith, gross
negligence or willful misconduct.  
<PAGE>
 
                                       73

In the case of an investigation, litigation or other proceeding to which the
indemnity in this subsection (b) applies, such indemnity shall be effective
whether or not such investigation, litigation or proceeding is brought by any
Loan Party, its directors, shareholders or creditors or an Indemnified Party or
any Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated. Each Borrower also agrees not
to assert any claim against any Agent, any Lender Party or any of their
Affiliates, or any of their respective officers, directors, employees, attorneys
or agents, on any theory of liability, for special, indirect, consequential or
punitive damages arising out of or otherwise relating to the Facilities, the
actual or proposed use of the proceeds of the Advances or the Letters of Credit,
the Loan Documents or any of the transactions contemplated thereby.

          (c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made by either Borrower to or for the account of a Lender Party
other than on the last day of the Interest Period for such Advance, as a result
of a payment or Conversion pursuant to Section 2.09(b)(i) or 2.10(d),
acceleration of the maturity of the Notes pursuant to Section 6.01 or for any
other reason, or by an Eligible Assignee to a Lender Party other than on the
last day of the Interest Period for such Advance upon an assignment of rights
and obligations under this Agreement pursuant to Section 8.07 as a result of a
demand by the Parent Borrower pursuant to Section 8.07(a), such Borrower shall,
upon demand by such Lender Party (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of such
Lender Party any amounts required to compensate such Lender Party for any
additional losses, costs or expenses that it may reasonably incur as a result of
such payment, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender Party to fund or
maintain such Advance.

          (d) If any Loan Party fails to pay when due any costs, expenses or
other amounts payable by it under any Loan Document, including, without
limitation, fees and expenses of counsel and indemnities, such amount may be
paid on behalf of such Loan Party by the Administrative Agent or any Lender
Party, in its sole discretion.

          (e) Without prejudice to the survival of any other agreement of any
Loan Party hereunder or under any other Loan Document, the agreements and
obligations of the Borrowers contained in Sections 2.10 and 2.12 and this
Section 8.04 shall survive the payment in full of principal, interest and all
other amounts payable hereunder and under any of the other Loan Documents.

          SECTION  8.05.  Right of Setoff.  Upon (a) the occurrence and during
                          ---------------                                     
the continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender Party and each of its Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and otherwise apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender Party or such Affiliate to or for
the credit or the account of either Borrower against any and all of the
Obligations of such Borrower now or hereafter existing under this Agreement and
the Note or Notes (if any) held by such Lender Party, irrespective of whether
such Lender Party shall have made any demand under this Agreement or such Note
or Notes and although such obligations may be unmatured.  Each Lender Party
agrees promptly to notify the applicable Borrower after any such setoff and
application; provided, however, that the failure to give such notice shall not
             --------  -------                                                
affect the validity of such setoff and application.  The rights of each Lender
Party and its respective Affiliates under this Section 8.05 are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) that such Lender Party and its Affiliates may have.

          SECTION  8.06.  Binding Effect.  This Agreement shall become effective
                          --------------                                        
when it shall have been executed by each Borrower, the Administrative Agent, the
Documentation Agent and the Syndication Agent and when 
<PAGE>
 
                                       74

the Administrative Agent shall have been notified by each Initial Lender and the
Initial Issuing Bank that such Initial Lender and the Initial Issuing Bank has
executed it and thereafter shall be binding upon and inure to the benefit of
each Borrower, each Agent and each Lender Party and their respective successors
and assigns, except that neither Borrower shall have the right to assign its
rights hereunder or any interest herein without the prior written consent of the
Lender Parties.

          SECTION  8.07.  Assignments and Participations.  (a)  Each Lender may
                          ------------------------------                       
and, so long as no Default shall have occurred and be continuing, if demanded by
the Parent Borrower (following a demand by such Lender pursuant to Section 2.10)
upon at least five Business Days' notice to such Lender and the Administrative
Agent, will assign to one or more Eligible Assignees all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment or Commitments, the Advances owing to it and the
Note or Notes held by it); provided, however, that (i) each such assignment
                           --------  -------                               
shall be of a uniform, and not a varying, percentage of all rights and
obligations under and in respect of all of the Facilities, (ii) except in the
case of an assignment of all of a Lender's rights and obligations under this
Agreement, the amount of the Commitment of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall in no event be less than
$5,000,000, (iii) each such assignment shall be to an Eligible Assignee, (iv)
each such assignment made as a result of a demand by the Parent Borrower
pursuant to this Section 8.07(a) shall be arranged by the Parent Borrower after
consultation with the Administrative Agent and shall be either an assignment of
all of the rights and obligations of the assigning Lender under this Agreement
or an assignment of a portion of such rights and obligations made concurrently
with another such assignment or other such assignments that together cover all
of the rights and obligations of the assigning Lender under this Agreement, (v)
no Lender shall be obligated to make any such assignment as a result of a demand
by the Parent Borrower pursuant to this Section 8.07(a) unless and until such
Lender shall have received one or more payments from either the Parent Borrower
or one or more Eligible Assignees in an aggregate amount at least equal to the
aggregate outstanding principal amount of the Advances owing to such Lender,
together with accrued interest thereon to the date of payment of such principal
amount and all other amounts payable to such Lender under this Agreement, (vi)
no such assignments shall be permitted without the consent of the Syndication
Agent until the Syndication Agent shall have notified the Lender Parties that
syndication of the Commitments hereunder has been completed, and (vii) the
parties to each such assignment shall execute and deliver to the Administrative
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance, together with any Note or Notes subject to such assignment and a
processing and recordation fee of (A) $1,500 if such assignment is to an
existing Lender Party, (B) $0 if such assignment is to an Affiliate of the
assigning Lender Party and (C) $3,000 in all other cases.

          (b) Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in such Assignment and Acceptance, (x) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender or Issuing Bank, as the
case may be, hereunder and (y) the Lender or Issuing Bank assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's or Issuing Bank's rights and obligations under this Agreement, such
Lender or Issuing Bank shall cease to be a party hereto).

          (c) By executing and delivering an Assignment and Acceptance, the
Lender Party assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows:  (i) other than
as provided in such Assignment and Acceptance, such assigning Lender Party makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any Lien or security 
<PAGE>
 
                                       75

interest created or purported to be created under or in connection with, this
Agreement or any other Loan Document or any other instrument or document
furnished pursuant hereto or thereto; (ii) such assigning Lender Party makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of either Borrower or any other Loan Party or the
performance or observance by any Loan Party of any of its obligations under any
Loan Document or any other instrument or document furnished pursuant thereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Section 4.01 and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon the Agents,
such assigning Lender Party or any other Lender Party 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; (v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes each Agent to take such action as agents on its
behalf and to exercise such powers and discretion under the Loan Documents as
are delegated to such Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Lender or
Issuing Bank, as the case may be.

          (d) The Administrative Agent, acting for this purpose (but only for
this purpose) as the agent of the Borrowers, shall maintain at its address
referred to in Section 8.02 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Lender Parties and the Commitment of, and principal amount of
the Advances owing to, each Lender Party from time to time (the "Register").
                                                                 --------    
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrowers, the Agents and the Lender Parties
shall treat each Person whose name is recorded in the Register as a Lender Party
hereunder for all purposes of this Agreement.  The Register shall be available
for inspection by either Borrower or any Lender Party at any reasonable time and
from time to time upon reasonable prior notice.

          (e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee, together with any Note or Notes subject
to such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit C
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrowers, the Documentation Agent and the Syndication Agent.  In the case of
any assignment by a Lender, within five Business Days after its receipt of such
notice, each Borrower, at its own expense, shall execute and deliver to the
Administrative Agent in exchange for the surrendered Note or Notes a new Note to
the order of such Eligible Assignee in an amount equal to the Commitment assumed
by it pursuant to such Assignment and Acceptance and, if the assigning Lender
has retained a Commitment hereunder, a new Note to the order of the assigning
Lender in an amount equal to the Commitment retained by it hereunder.  Such new
Note or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes, shall be dated the effective
date of such Assignment and Acceptance and shall otherwise be in substantially
the form of Exhibit A hereto.

          (f) The Issuing Bank may assign to an Eligible Assignee all of its
rights and obligations under its Letter of Credit Commitment at any time;
provided, however, that  (i) each such assignment shall be to an Eligible
- --------  -------                                                        
Assignee and (ii) the parties to each such assignment shall execute and deliver
to the Administrative Agent, for its acceptance and recording in the Register,
an Assignment and Acceptance, together with a processing and recordation fee of
(A) $1,500 if such assignment is to an existing Lender Party, (B) $0 if such
assignment is to an Affiliate of the assigning Lender Party and (C) $3,000 in
all other cases.

          (g) Each Lender Party may sell participations to one or more Persons
(other than any Loan Party or any of its Affiliates) in or to all or a portion
of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Note or Notes (if any) held 
<PAGE>
 
                                       76

by it); provided, however, that (i) such Lender Party's obligations under this
        --------  -------                      
Agreement (including, without limitation, its Commitments) shall remain
unchanged, (ii) such Lender Party shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) such Lender Party
shall remain the holder of any such Note for all purposes of this Agreement,
(iv) the Borrowers, the Agents and the other Lender Parties shall continue to
deal solely and directly with such Lender Party in connection with such Lender
Party's rights and obligations under this Agreement and (v) no participant under
any such participation shall have any right to approve any amendment or waiver
of any provision of any Loan Document, or any consent to any departure by any
Loan Party therefrom, except to the extent that such amendment, waiver or
consent would reduce the principal of, or interest on, the Notes or any fees or
other amounts payable hereunder, in each case to the extent subject to such
participation, postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation, or release all or
substantially all of the Collateral.

          (h) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to either Borrower furnished to such
Lender Party by or on behalf of such Borrower; provided, however, that, prior to
                                               --------  -------                
any such disclosure, the assignee or participant or proposed assignee or
participant shall agree to preserve in accordance with Section 8.10 the
confidentiality of any confidential information relating to any Loan Party
received by it from such Lender Party.

          (i) Notwithstanding any other provision set forth in this Agreement,
any Lender Party may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.

          SECTION  8.08.  Execution in Counterparts.  This Agreement may be
                          -------------------------                        
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.  Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.

          SECTION  8.09.  No Liability of the Issuing Bank.  The Parent Borrower
                          --------------------------------                      
assumes all risks of the acts or omissions of any beneficiary or transferee of
any Letter of Credit with respect to its use of such Letter of Credit.  Neither
the Issuing Bank nor any of its officers or directors shall be liable or
responsible for:  (a) the use that may be made of any Letter of Credit or any
acts or omissions of any beneficiary or transferee in connection therewith; (b)
the validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by the Issuing Bank
against presentation of documents that do not comply with the terms of a Letter
of Credit, including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under any Letter of Credit; except that the
                                                              ------         
Parent Borrower shall have a claim against the Issuing Bank, and the Issuing
Bank shall be liable to the Parent Borrower, to the extent of any direct, but
not consequential, damages suffered by the Parent Borrower that the Parent
Borrower proves were caused by (i) the  Issuing Bank's willful misconduct or
gross negligence in determining whether documents presented under any Letter of
Credit comply with the terms of the Letter of Credit or (ii) the Issuing Bank's
willful failure to make lawful payment under a Letter of Credit after the
presentation to it of a draft and certificates strictly complying with the terms
and conditions of the Letter of Credit. In furtherance and not in limitation of
the foregoing, the Issuing Bank may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary.
<PAGE>
 
                                       77


          SECTION  8.10.  Confidentiality.  Each of the Lender Parties and each
                          ---------------                                      
of the Agents understands that some of the information furnished to it pursuant
to this Agreement may be received by it prior to the time that such information
shall have been made public, and each of the Lender Parties and each of the
Agents hereby agrees that it will keep, and will direct its officers and
employees to keep, all the information provided to it pursuant to this Agreement
confidential prior to its becoming public (through publication other than as a
result of action by one of the Lender Parties or the Agents in violation of this
Section 8.10), subject, however, to (a) disclosure to officers, directors,
employees, representatives, agents, auditors, consultants, advisors, lawyers and
Affiliates of such Lender Party or such Agent, as the case may be, in the
ordinary course of business, (b) disclosure to such officers, directors,
employees, representatives, agents and lawyers of a prospective assignee or
participant on a need-to-know basis in connection with the evaluation of a
possible assignment of, or participation in, the Advances hereunder (who will be
informed of the confidential nature of the material); (c) the obligations of the
Lender Parties or the Agents or a participant under applicable law, or pursuant
to subpoenas or other legal process, to make information available to
governmental agencies and examiners or to others and the right of the Lender
Parties and the Agents and participants to use such information in proceedings
to enforce their rights and remedies hereunder or under any other Loan Document
or in any proceeding against any Lender Party or any Agent or any participant in
connection with this Agreement or under any other Loan Document or the
transactions contemplated thereby; (d) disclosure to the extent such information
(i) becomes publicly available other than as a result of a breach of this
Agreement or (ii) becomes available to a Lender Party, an Agent or a participant
on a non-confidential basis, not, to the knowledge of such Lender Party, Agent
or participant, in breach of any agreement or other obligation to either
Borrower, from a source other than such Borrower; (e) disclosure to the extent
the applicable Borrower shall have consented to such disclosure in writing; or
(f) each Lender Party's or Agent's or participant's right to make information
available (i) to any corporation controlled by such Lender Party, Agent or
participant or under common control with such Lender Party, Agent or participant
in connection with an assignment or the sale of a participation by such Lender
Party or participant, or the assignment by such Agent of its rights and
obligations as an Agent, to such other corporation, provided that such 
                                                    --------
transferee agrees to be bound by confidentiality or (ii) in accordance with
Section 8.07(h).

          SECTION  8.11.  Release of Collateral.  Upon the sale, lease, transfer
                          ---------------------                                 
or other disposition of any item of Collateral of any Loan Party in accordance
with the terms of the Loan Documents, the Administrative Agent shall, at the
Parent Borrower's expense, execute and deliver to such Loan Party such documents
as such Loan Party may reasonably request to evidence the release of such item
of Collateral from the assignment and security interest granted under the
Collateral Documents in accordance with the terms of the Loan Documents.

          SECTION  8.12.  Jurisdiction, Etc.  (a)  Each of the parties hereto
                          -----------------                                  
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 any of the other Loan Documents to which it is a party, 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 any such New York State
court 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 any party may otherwise have to bring any action or
proceeding relating to this Agreement or any of the other Loan Documents in the
courts of any other jurisdiction.

          (b) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
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 any of the other Loan
Documents to which it is a party in any New York State or federal court. Each of
the parties hereto hereby irrevocably waives, to the fullest 
<PAGE>
 
                                       78

extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.

          SECTION  8.13.  Governing Law.  This Agreement and the Notes shall be
                          -------------                                        
governed by, and construed in accordance with, the laws of the State of New
York.
<PAGE>
 
                                       79

          SECTION  8.14.  Waiver of Jury Trial.  Each of the Borrowers, the
                          --------------------                             
Agents and the Lender Parties irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to any of the Loan Documents, the Advances
or the actions of any Agent or any Lender Party in the negotiation,
administration, performance or enforcement thereof.

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.

                        IPC INFORMATION SYSTEMS, INC.
                        
                        
                        
                        By
                           ------------------------------------- 
                           Name:
                           Title:
                        
                        
                        
                        IPC FUNDING CORP.
                        
                        
                        
                        By
                           ------------------------------------- 
                           Name:
                           Title:


                        MORGAN STANLEY SENIOR FUNDING, INC., as Administrative 
                          Agent, Syndication Agent and Arranger



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


                        GOLDMAN SACHS CREDIT PARTNERS L.P.,
                          as Documentation Agent



                        By
                           ------------------------------------- 
                           Name:
                           Title:
<PAGE>
 
                                       80

                                INITIAL LENDERS



                                        MORGAN STANLEY SENIOR FUNDING, INC.



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



                                        GOLDMAN SACHS CREDIT PARTNERS L.P.



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



                                        [GENERAL ELECTRIC CAPITAL CORPORATION]



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

<PAGE>
 
<TABLE> 
<CAPTION> 
                                                                                                                          Exhibit 12

                         IPC INFORMATION SYSTEMS, INC.

                      RATIO OF EARNINGS TO FIXED CHARGES
                         (Dollar amounts in thousands)
                                                                             Year Ended September 30,
                                                         --------------------------------------------------------------------
                                                                                                                      Pro          
                                                                                 Actual                              Forma         
                                                         --------------------------------------------------------  ----------
                                                            1993       1994       1995        1996        1997        1997          
                                                         ---------- ---------- ----------  ----------  ----------  ----------
<S>                                                      <C>        <C>        <C>         <C>         <C>         <C> 
Income (loss) from continuing operations before
provision for income taxes.............................. $  3,038   $ 15,676   $ 22,486    $ 20,121    $  8,114    $(14,350)
Less, minority interest benefit related to losses from
Ixnet included in income from continuing operations.....     --         --         (118)       (628)       (312)       --
                                                         --------   --------   --------    --------    --------    --------

                                                            3,038     15,676     22,368      19,493       7,802     (14,350)
                                                         --------   --------   --------    --------    --------    --------

Fixed charges:
Interest expense........................................    1,404      1,605        420       1,089       2,021      23,654
Assumed portion of rentals representative of
interest................................................      432        525        559         651         643         643
                                                         --------   --------   --------    --------    --------    --------

     Total fixed charges................................    1,836      2,130        979       1,740       2,664      24,297
                                                         --------   --------   --------    --------    --------    --------

Earnings from continuing operations before provision
for income taxes, minority interest benefit and fixed
charges................................................. $  4,874   $ 17,806   $ 23,347    $ 21,233    $ 10,466    $ 9,947 (1)
                                                         ========   ========   ========    ========    ========    ========

Ratio of earnings to fixed charges......................      2.7        8.4       23.9        12.2         3.9         0.4
                                                         ========   ========   ========    ========    ========    ========    
<CAPTION> 
                                                         Three Months Ended
                                                            December 31,
                                                         --------------------------------
                                                                                   Pro
                                                               Actual             Forma
                                                         --------------------- ----------
                                                            1996        1997       1997
                                                         ---------- ---------- ---------- 
<S>                                                      <C>        <C>        <C> 
Income (loss) from continuing operations before
provision for income taxes.............................. $  1,153    $  7,187   $  1,276
Less, minority interest benefit related to losses from
Ixnet included in income from continuing operations.....     (284)       --         --
                                                         --------    --------   --------

                                                              869       7,187      1,276
                                                         --------    --------   --------

Fixed charges:
Interest expense........................................      498         542      6,367
Assumed portion of rentals representative of
interest................................................      163         161        161
                                                         --------    --------   --------

     Total fixed charges................................      661         703      6,528
                                                         --------    --------   --------

Earnings from continuing operations before provision
for income taxes, minority interest benefit and fixed
charges.................................................    1,530    $  7,890   $  7,804
                                                         ========    ========   ========

Ratio of earnings to fixed charges......................      2.3        11.2        1.2
                                                         ========    ========   ========
</TABLE> 

(1)  On a pro forma basis, 1997 earnings are insufficient to cover fixed
     charges. The difference between the Company's 1997 pro forma earnings and
     fixed charges is $14.4 million. Cash interest on the Notes will not be
     payable until 2001.

<PAGE>
 
                                                                   EXHIBIT 23.1
 
                      CONSENT OF INDEPENDENT ACCOUNTANTS
   
  We consent to the inclusion in this Pre-Effective Amendment No. 2 to the
Registration Statement on Form S-3 of IPC Information Systems, Inc. (File No.
333-46229) of our report dated December 4, 1997, except for Note 13, for which
the date is December 19, 1997, on our audits of the consolidated financial
statements and financial statement schedule of IPC Information Systems, Inc.
We also consent to the reference to our firm under the caption "Experts."     
 
                                          Coopers & Lybrand L.L.P.
 
New York, New York
   
April 23, 1998     

<PAGE>
 
                                                                      EXHIBIT 25


                                   FORM T-1
                 ==============================================

                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                               __________________

                            STATEMENT OF ELIGIBILITY
                    UNDER THE TRUST INDENTURE ACT OF 1939 OF
                   A CORPORATION DESIGNATED TO ACT AS TRUSTEE
                               __________________

                      CHECK IF AN APPLICATION TO DETERMINE
                      ELIGIBILITY OF A TRUSTEE PURSUANT TO
                           SECTION 305(b)(2) _______
                               __________________

                    UNITED STATES TRUST COMPANY OF NEW YORK
              (Exact name of trustee as specified in its charter)


               New York                               13-3818954
     (Jurisdiction of incorporation                (I.R.S. employer
      if not a U.S. national bank)                 identification No.)

         114 West 47th Street                         10036-1532
            New York, NY                              (Zip Code)
         (Address of principal
          executive offices)

                               __________________

                         IPC INFORMATION SYSTEMS, INC.
              (Exact name of obligor as specified in its charter)

               Delaware                               58-1636502
   (State or other jurisdiction of                 (I.R.S. employer
    incorporation or organization)                 identification No.)

    Wall Street Plaza, 15th Floor
           88 Pine Street                               10005
         New York, New York                           (Zip Code)
(Address of principal executive offices)

                               __________________

                        % Senior Discount Notes due 2008
                      (Title of the indenture securities)

                 ==============================================
<PAGE>
 
                                     - 2 -


                                    GENERAL


1.  GENERAL INFORMATION
    -------------------

    Furnish the following information as to the trustee:

    (a)  Name and address of each examining or supervising authority to which it
         is subject.

           Federal Reserve Bank of New York (2nd District), New York, New York
                 (Board of Governors of the Federal Reserve System)
           Federal Deposit Insurance Corporation, Washington, D.C.
           New York State Banking Department, Albany, New York

    (b)  Whether it is authorized to exercise corporate trust powers.

         The trustee is authorized to exercise corporate trust powers.

2.  AFFILIATIONS WITH THE OBLIGOR
    -----------------------------

    If the obligor is an affiliate of the trustee, describe each such
    affiliation.

       None

3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:

    IPC Information Systems, Inc. currently is not in default under any of its
    outstanding securities for which United States Trust Company of New York is
    Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12,
    13, 14 and 15 of Form T-1 are not required under General Instruction B.


16. LIST OF EXHIBITS
    ----------------

    T-1.1  -- Organization Certificate, as amended, issued by the State of New
              York Banking Department to transact business as a Trust Company,
              is incorporated by reference to Exhibit T-1.1 to Form T-1 filed on
              September 15, 1995 with the Commission pursuant to the Trust
              Indenture Act of 1939, as amended by the Trust Indenture Reform
              Act of 1990 (Registration No. 33-97056).

    T-1.2  -- Included in Exhibit T-1.1.
    
    T-1.3  -- Included in Exhibit T-1.1.
<PAGE>
 
                                     - 3 -


16.  LIST OF EXHIBITS
     ----------------
     (cont'd)

     T-1.4  -- The By-Laws of United States Trust Company of New York, as
               amended, is incorporated by reference to Exhibit T-1.4 to Form T-
               1 filed on September 15, 1995 with the Commission pursuant to the
               Trust Indenture Act of 1939, as amended by the Trust Indenture
               Reform Act of 1990 (Registration No. 33-97056).

     T-1.6  -- The consent of the trustee required by Section 321(b) of the
               Trust Indenture Act of 1939, as amended by the Trust Indenture
               Reform Act of 1990.

     T-1.7  -- A copy of the latest report of condition of the trustee
               pursuant to law or the requirements of its supervising or
               examining authority.

NOTE
- ----

As of April 20, 1998, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation.  The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.

In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.

                               __________________

Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 21st day
of April, 1998.

UNITED STATES TRUST COMPANY
  OF NEW YORK, Trustee

By: /s/ Louis P. Young
    -----------------
    Louis P. Young
    Vice President
<PAGE>
 
                                                        Exhibit T-1.6
                                                        -------------

       The consent of the trustee required by Section 321(b) of the Act.

                    United States Trust Company of New York
                              114 West 47th Street
                              New York, NY  10036


January 7, 1997



Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC  20549

Gentlemen:

Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.



Very truly yours,


UNITED STATES TRUST COMPANY
  OF NEW YORK


    /s/Gerard F. Ganey
    ------------------
By: Gerard F. Ganey
    Senior Vice President
<PAGE>
 
                                                        EXHIBIT T-1.7

                    UNITED STATES TRUST COMPANY OF NEW YORK
                      CONSOLIDATED STATEMENT OF CONDITION
                               DECEMBER 31, 1997
                               -----------------
                                ($ IN THOUSANDS)
 
ASSETS
- ------

Cash and Due from Banks                     $   80,246
 
Short-Term Investments                         386,006
 
Securities, Available for Sale                 661,596
 
Loans                                        1,774,551
Less:  Allowance for Credit Losses              16,202
                                            ----------
     Net Loans                               1,758,349
Premises and Equipment                          61,477
Other Assets                                   124,499
                                            ----------
     Total Assets                           $3,072,173
                                            ==========
 
LIABILITIES
- -----------
Deposits:
     Non-Interest Bearing                   $  686,507
     Interest Bearing                        1,773,254
                                            ----------
         Total Deposits                      2,459,761
 
Short-Term Credit Facilities                   295,342
Accounts Payable and Accrued Liabilities       149,775
                                            ----------
     Total Liabilities                      $2,904,878
                                            ==========
 
STOCKHOLDER'S EQUITY
- --------------------
Common Stock                                    14,995
Capital Surplus                                 49,541
Retained Earnings                              100,235
Unrealized Gains on Securities
     Available for Sale (Net of Taxes)           2,524
                                            ----------
 
Total Stockholder's Equity                     167,295
                                            ----------
    Total Liabilities and
     STOCKHOLDER'S EQUITY                   $3,072,173
                                            ==========


I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.

Richard E. Brinkmann, SVP & Controller

February 9, 1998


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission