CLAIBORNE LIZ INC
THREE YEAR CREDIT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.X
<SEQUENCE>9
<FILENAME>0009.txt
<DESCRIPTION>THREE YEAR CREDIT AGREEMENT
<TEXT>

<PAGE>   1

                                                                   EXHIBIT 10(x)

[CHASE LOGO]

                           THREE-YEAR CREDIT AGREEMENT



                                   dated as of



                                November 16, 2000



                                      among



                               LIZ CLAIBORNE, INC.



                            The Lenders Party Hereto



                              FLEET NATIONAL BANK,
                              as Syndication Agent



                                  BANK ONE, NA,
                             as Documentation Agent



                                       and


                            THE CHASE MANHATTAN BANK,
                             as Administrative Agent


                $250,000,000 THREE-YEAR REVOLVING CREDIT FACILITY

<PAGE>   2

<TABLE>
                                TABLE OF CONTENTS

<CAPTION>
                                                                                Page
                                                                                ----
                                    ARTICLE I

<S>                                                                             <C>
Definitions.....................................................................   1

     SECTION 1.01.Defined Terms ................................................   1

     SECTION 1.02.Terms Generally ..............................................  15

     SECTION 1.03.Accounting Terms; GAAP .......................................  15
<CAPTION>

                                   ARTICLE II

<S>                                                                             <C>
The Credits.....................................................................  16

     SECTION 2.01.Commitments ..................................................  16

     SECTION 2.02.Loans and Borrowings .........................................  16

     SECTION 2.03.Requests for Borrowings ......................................  16

     SECTION 2.04.Funding of Borrowings ........................................  17

     SECTION 2.05.Interest Elections ...........................................  18

     SECTION 2.06.Termination and Reduction of Commitments .....................  19

     SECTION 2.07.Repayment of Loans; Evidence of Debt .........................  19

     SECTION 2.08.Prepayment of Loans ..........................................  20

     SECTION 2.09.Fees .........................................................  20

     SECTION 2.10.Interest .....................................................  21

     SECTION 2.11.Alternate Rate of Interest ...................................  21

     SECTION 2.12.Increased Costs ..............................................  22

     SECTION 2.13.Break Funding Payments .......................................  23

     SECTION 2.14.Taxes ........................................................  23

     SECTION 2.15.Payments Generally; Pro Rata Treatment; Sharing of Set-offs ..  24

     SECTION 2.16.Mitigation Obligations; Replacement of Lenders ...............  25

     SECTION 2.17.Source of Funds ..............................................  26
<CAPTION>

                                   ARTICLE III

<S>                                                                             <C>
Representations and Warranties..................................................  26

     SECTION 3.01.Organization; Powers .........................................  26

     SECTION 3.02.Authorization; Enforceability ................................  26

     SECTION 3.03.Governmental Approvals; No Conflicts .........................  27

     SECTION 3.04.Financial Condition; No Material Adverse Change ..............  27
</TABLE>

<PAGE>   3
<TABLE>
<S>                                                                             <C>
     SECTION 3.05.Properties; Liens ............................................  27

     SECTION 3.06.Litigation and Environmental Matters .........................  28

     SECTION 3.07.Compliance with Laws and Agreements ..........................  28

     SECTION 3.08.No Default ...................................................  28

     SECTION 3.09.Investment and Holding Company Status ........................  28

     SECTION 3.10.No Burdensome Restrictions ...................................  28

     SECTION 3.11.Taxes ........................................................  28

     SECTION 3.12.Federal Regulations ..........................................  29

     SECTION 3.13.Subsidiaries .................................................  29

     SECTION 3.14.ERISA ........................................................  29

     SECTION 3.15.Disclosure ...................................................  29
<CAPTION>

                                   ARTICLE IV

<S>                                                                             <C>
Conditions......................................................................  29

     SECTION 4.01.Effective Date ...............................................  29

     SECTION 4.02.Each Credit Event ............................................  31
<CAPTION>

                                    ARTICLE V

<S>                                                                             <C>
Affirmative Covenants...........................................................  31

     SECTION 5.01.Financial Statements .........................................  31

     SECTION 5.02.Certificates; Other Information ..............................  32

     SECTION 5.03.Notices of Material Events ...................................  32

     SECTION 5.04.Existence; Conduct of Business ...............................  33

     SECTION 5.05.Payment of Obligations .......................................  33

     SECTION 5.06.Maintenance of Properties and Trademarks; Insurance ..........  33

     SECTION 5.07.Books and Records; Inspection Rights .........................  33

     SECTION 5.08.Environmental Laws ...........................................  34

     SECTION 5.09.Compliance ...................................................  34

     SECTION 5.10.Additional Subsidiaries ......................................  34

     SECTION 5.11.Use of Proceeds ..............................................  34
<CAPTION>

                                    ARTICLE VI

<S>                                                                             <C>
Negative Covenants..............................................................  34

     SECTION 6.01.Financial Covenants ..........................................  34

     SECTION 6.02.Indebtedness .................................................  35

     SECTION 6.03.Liens ........................................................  36

     SECTION 6.04.Fundamental Changes ..........................................  37

     SECTION 6.05.Investments, Loans, Advances, Guarantees and Acquisitions;
                  Hedging Agreements ...........................................  38

     SECTION 6.06.Limitation on Sale of Assets .................................  39

     SECTION 6.07.Restricted Payments ..........................................  39
</TABLE>

<PAGE>   4

<TABLE>
<S>                                                                             <C>
     SECTION 6.08.Transactions with Affiliates .................................  39

     SECTION 6.09.Changes in Fiscal Periods ....................................  39

     SECTION 6.10.Lines of Business ............................................  40
<CAPTION>

                                   ARTICLE VII

<S>                                                                             <C>
Events of Default...............................................................  40
<CAPTION>

                                  ARTICLE VIII

<S>                                                                             <C>
The Administrative Agent........................................................  42
<CAPTION>

                                   ARTICLE IX

<S>                                                                             <C>
Miscellaneous...................................................................  44

     SECTION 9.01.Notices ......................................................  44

     SECTION 9.02.Waivers; Amendments ..........................................  44

     SECTION 9.03.Expenses; Indemnity; Damage Waiver ...........................  45

     SECTION 9.04.Successors and Assigns .......................................  46

     SECTION 9.05.Survival .....................................................  48

     SECTION 9.06.Counterparts; Integration; Effectiveness .....................  49

     SECTION 9.07.Severability .................................................  49

     SECTION 9.08.Right of Setoff ..............................................  49

     SECTION 9.09.Governing Law; Jurisdiction; Consent to Service of Process ...  49

     SECTION 9.10.WAIVER OF JURY TRIAL .........................................  50

     SECTION 9.11.Headings .....................................................  50

     SECTION 9.12.Confidentiality ..............................................  50
</TABLE>


SCHEDULES:

Schedule 2.01 - Commitments
Schedule 3.06 - Disclosed Matters
Schedule 3.13 - Subsidiaries
Schedule 6.02 - Existing Indebtedness
Schedule 6.03 - Existing Liens
Schedule 6.05(i) - Existing Investments
Schedule 6.05(ii) - Borrower's Investment Policy

EXHIBITS:

Exhibit A - Form of Assignment and Acceptance
Exhibit B - Form of Opinion of Borrower's Counsel
Exhibit C - Form of Subsidiary Guarantee

<PAGE>   5
     THREE-YEAR  CREDIT  AGREEMENT  dated as of  November  16,  2000,  among LIZ
CLAIBORNE,  INC., the LENDERS party hereto,  FLEET NATIONAL BANK, as Syndication
Agent,  BANK ONE, NA, as  Documentation  Agent and THE CHASE  MANHATTAN BANK, as
Administrative Agent.

     The parties hereto agree as follows:

                                   ARTICLE I

                                   Definitions

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

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

     "Administrative  Agent" means The Chase  Manhattan Bank, in its capacity as
administrative agent for the Lenders hereunder.

     "Administrative  Questionnaire" means an Administrative  Questionnaire in a
form supplied by the Administrative Agent.

     "Affiliate" means, with respect to a specified Person,  another Person that
directly,  or  indirectly  through  one or more  intermediaries,  Controls or is
Controlled by or is under common Control with the Person specified.

     "Agreement"   means  this   Three-Year   Credit   Agreement,   as  amended,
supplemented  or otherwise  modified  from time to time in  accordance  with its
terms.

     "Alternate  Base Rate"  means,  for any day, a rate per annum  equal to the
greatest  of (a) the Prime  Rate in effect on such day,  (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. Any change in the  Alternate  Base Rate due to a change
in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be
effective  from and  including  the  effective  date of such change in the Prime
Rate, the Base CD Rate or the Federal Funds Effective Rate, as applicable.

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

     "Applicable  Rate"  means,  for any day,  with  respect  to any  Eurodollar
Revolving Loan or ABR Revolving Loan, as the case may be, or with respect to the
facility fees payable  hereunder,  the applicable rate per annum set forth below
under the caption "Eurodollar Spread,"

<PAGE>   6
                                                                               2

"ABR Spread" or "Facility  Fee Rate," based upon the ratings by Moody's and S&P,
respectively, applicable on such date to the Index Debt:

<TABLE>
<CAPTION>
                                                 Eurodollar                        Facility Fee      Utilization
      Level            Index Debt Rating           Spread          ABR Spread          Rate           Fee Rate
--------------------------------------------------------------------------------------------------------------------
<S>                        <C>                   <C>                <C>             <C>              <C>
        I                  >= A-/A3                0.325%             0.00%           0.125%           0.125%
        II                 BBB+/Baa1               0.475%             0.00%            0.15%           0.125%
       III                 BBB/Baa2                0.575%             0.00%           0.175%           0.125%
        IV                 BBB-/Baa3               0.75%              0.00%            0.25%            0.25%
        V                  <= BB+/Ba1              1.025%            0.025%            0.30%            0.25%
</TABLE>

     For purposes of the foregoing,  (i) if the ratings established or deemed to
have been  established  by Moody's  and S&P for the Index Debt shall fall within
different  Levels,  the Applicable  Rate shall be based on the higher of the two
ratings  (i.e.,  the lower Level number) unless one of the two ratings is two or
more Levels  lower than the other,  in which case the  Applicable  Rate shall be
determined  by  reference  to the Level next below that of the higher of the two
Levels;  and (ii) if the ratings  established or deemed to have been established
by Moody's  and S&P for the Index Debt shall be changed  (other than as a result
of a change in the  rating  system of  Moody's  or S&P),  such  change  shall be
effective as of the date on which it is first announced by the applicable rating
agency.  Each  change in the  Applicable  Rate  shall  apply  during  the period
commencing  on the  effective  date  of  such  change  and  ending  on the  date
immediately  preceding the effective date of the next such change. If the rating
system of Moody's or S&P shall  change,  or if either such rating  agency  shall
cease to be in the business of rating corporate debt  obligations,  the Borrower
and the  Lenders  shall  negotiate  in good  faith to amend this  definition  to
reflect such changed  rating system or the  unavailability  of ratings from such
rating  agency  and,  pending  the  effectiveness  of any  such  amendment,  the
Applicable  Rate shall be determined by reference to the rating most recently in
effect  prior to such  change or  cessation.  If, on any date,  the  outstanding
principal  amount of the Loans or the "Loans" under the 364-Day Credit Agreement
exceeds 50% of the  aggregate  amount of the  Commitments  or the  "Commitments"
under the 364-Day Credit  Agreement,  as the case may be (or,  during the period
after  the  Commitments  or  such  "Commitments",  as  the  case  may  be,  have
terminated,   50%  of  the  aggregate   amount  of  the   Commitments   or  such
"Commitments",  as the case may be, immediately prior to such termination),  the
Eurodollar  Spread  or ABR  Spread,  as the case may be,  for  such  date  shall
increase  by  the  amount  set  forth  in  the  above  grid  under  the  caption
"Utilization Fee Rate," based upon the ratings by Moody's and S&P, respectively,
applicable on such date to the Index Debt.

     "Assessment  Rate" means, for any day, the annual assessment rate in effect
on such day that is payable by a member of the Bank Insurance Fund classified as
"well-capitalized"   and  within  supervisory  subgroup  "B"  (or  a  comparable
successor risk classification)  within the meaning of 12 C.F.R. Part 327 (or any
successor provision) to the Federal Deposit Insurance  Corporation for insurance
by such  Corporation  of time  deposits  made in dollars at the  offices of such
member in the United States;  provided that if, as a result of any change in any
law, rule or  regulation,  it is no longer  possible to determine the Assessment
Rate as aforesaid,  then the Assessment  Rate shall be such annual rate as shall
be reasonably

<PAGE>   7
                                                                               3

determined by the Administrative  Agent to be representative of the cost of such
insurance to the Lenders.

     "Assignment and Acceptance" means an assignment and acceptance entered into
by a Lender and an  assignee  (with the  consent of any party  whose  consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent.

     "Availability  Period"  means the period from and  including  the Effective
Date  to but  excluding  the  earlier  of the  Maturity  Date  and  the  date of
termination of the Commitments.

     "Base CD  Rate"  means  the sum of (a) the  Three-Month  Secondary  CD Rate
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.

     "Board" means the Board of Governors of the Federal  Reserve  System of the
United States of America.

     "Borrower" means Liz Claiborne, Inc., a Delaware corporation.

     "Borrowing"  means  Revolving  Loans of the same Type,  made,  converted or
continued on the same date and, in the case of Eurodollar  Loans,  as to which a
single Interest Period is in effect.

     "Borrowing  Request"  means a request by the  Borrower  for a Borrowing  in
accordance with Section 2.03.

     "Business Day" means any day that is not a Saturday, Sunday or other day on
which  commercial  banks in New York City are  authorized  or required by law to
remain closed;  provided that, when used in connection  with a Eurodollar  Loan,
the term  "Business  Day" shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.

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

     "Change in Control"  means (a) the  acquisition  of ownership,  directly or
indirectly,  beneficially  or of  record,  by any  Person or group  (within  the
meaning of Section 13(d) of the Securities Exchange Act of 1934 and the rules of
the  Securities  and  Exchange  Commission  thereunder  as in effect on the date
hereof)  of  shares  representing  more than 33 1/3% of the  aggregate  ordinary
voting power  represented  by the issued and  outstanding  capital  stock of the
Borrower; or (b) occupation of a majority of the seats (other than vacant seats)
on the board of  directors  of the  Borrower  by Persons  who were  neither  (i)
nominated  by the board of  directors  of the  Borrower  nor (ii)  appointed  by
directors so nominated.

<PAGE>   8
                                                                               4

     "Change in Law" means (a) the adoption of any law, rule or regulation after
the date of this Agreement,  (b) any change in any law, rule or regulation or in
the  interpretation or application  thereof by any Governmental  Authority after
the date of this  Agreement or (c) compliance by any Lender (or, for purposes of
Section  2.12(b),  by any  lending  office of such  Lender  or by such  Lender's
holding company,  if any) with any request,  guideline or directive  (whether or
not having the force of law) of any Governmental  Authority made or issued after
the date of this Agreement.

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

     "Commitment"  means,  with respect to each Lender,  the  commitment of such
Lender to make Revolving Loans,  expressed as an amount representing the maximum
aggregate amount of such Lender's Revolving Credit Exposure  hereunder,  as such
commitment may be (a) reduced from time to time pursuant to Section 2.06 and (b)
reduced or increased  from time to time  pursuant to  assignments  by or to such
Lender pursuant to Section 9.04. The initial amount of each Lender's  Commitment
is set forth on Schedule 2.01, or in the  Assignment and Acceptance  pursuant to
which such Lender shall have assumed its Commitment, as applicable.

     "Conduit  Lender"  means any  special  purpose  corporation  organized  and
administered by any Lender for the purpose of making Loans  hereunder  otherwise
required  to be made by such Lender and  designated  by such Lender in a written
instrument,  subject to the consent of the Borrower (which,  in each case, shall
not be unreasonably withheld or delayed);  provided, that the designation by any
Lender of a Conduit  Lender shall not relieve the  designating  Lender of any of
its  obligations  to fund a Loan under this  Agreement  if, for any reason,  its
Conduit Lender fails to fund any such Loan, and the designating  Lender (and not
the Conduit Lender) shall have the sole right and  responsibility to deliver all
consents and waivers  required or requested under this Agreement with respect to
its Conduit Lender;  and provided  further,  that no Conduit Lender shall (a) be
entitled to receive any greater amount  pursuant to Section 2.12,  2.13, 2.14 or
9.03 than the designating  Lender would have been entitled to receive in respect
of the extensions of credit made by such Conduit Lender or (b) be deemed to have
any Commitment hereunder.

     "Consolidated  EBITDA" means,  for any period,  Consolidated Net Income for
such period plus, without duplication and to the extent reflected as a charge in
the statement of such  Consolidated  Net Income for such period,  the sum of (a)
income or  franchise  tax  expense,  (b)  interest  expense,  both  expensed and
capitalized,  amortization  or writeoff of debt discount and debt issuance costs
and  commissions,   discounts  and  other  fees  and  charges   associated  with
Indebtedness  (including the Loans), (c) depreciation and amortization  expense,
(d)  amortization of intangibles  (including,  but not limited to, goodwill) and
organization  costs, (e) any  extraordinary,  unusual or non-recurring  non-cash
expenses or losses (including, whether or not otherwise includable as a separate
item in the statement of such Consolidated Net Income for such period,  non-cash
losses on sales of assets outside of the ordinary  course of business),  and (f)
any other non-cash  charges,  and minus, to the extent included in the statement
of such Consolidated Net Income for such period, the sum of (a) interest income,
(b) any  extraordinary,  unusual or  non-recurring  income or gains  (including,
whether or not otherwise  includable as a separate item in the statement of such
Consolidated Net Income for such period, gains on the

<PAGE>   9
                                                                               5

sales of assets  outside of the ordinary  course of business)  and (c) any other
non-cash income, all as determined on a consolidated basis.

     "Consolidated  EBITDAR"  means,  with  respect to any period,  Consolidated
EBITDA for such period plus the Consolidated  Rental Expense of the Borrower for
such period.

     "Consolidated Interest Expense" means, for any period, (a) the total amount
of interest  expense,  both  expensed and  capitalized,  of the Borrower and its
Subsidiaries  determined  on  a  consolidated  basis,  without  duplication,  in
accordance  with GAAP for such period minus (b) the amount of interest income of
the  Borrower  and  its  Subsidiaries  determined  on a  consolidated  basis  in
accordance with GAAP for such period

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

     "Consolidated  Rental Expense" means, for any period,  the aggregate amount
of fixed and contingent rentals payable by the Borrower and its Subsidiaries for
such period  determined on a  consolidated  basis in  accordance  with GAAP with
respect to leases of real property  minus the aggregate  amount of rental income
(including  licensee  related  income  from  licensees  operating  on the  store
premises of the Borrower and its  Subsidiaries)  payable to the Borrower and its
Subsidiaries  for such period in accordance  with GAAP with respect to leases of
real and personal property.

     "Consolidated  Total Debt"  means,  at any date,  the  aggregate  principal
amount of the Indebtedness of the Borrower and its Subsidiaries at such date set
forth  on the  Borrower's  consolidated  balance  sheet  opposite  the  captions
"Current  Portion of Long Term  Borrowings,"  "Long Term  Borrowings" and "Short
Term Borrowings," determined on a consolidated basis in accordance with GAAP.

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

     "Control"  means the  possession,  directly or indirectly,  of the power to
direct or cause the direction of the management or policies of a Person, whether
through  the  ability to  exercise  voting  power,  by  contract  or  otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.

<PAGE>  10
                                                                               6

     "Default"  means  any  event or  condition  which  constitutes  an Event of
Default or which  upon  notice,  lapse of time or both  would,  unless  cured or
waived, become an Event of Default.

     "Disclosed  Matters"  means  the  actions,  suits and  proceedings  and the
environmental matters disclosed in Schedule 3.06.

     "Documentation Agent" means Bank One, NA.

     "dollars"  or "$" refers to lawful  money of the  United  States of America
unless otherwise specified.

     "Effective  Date"  means  the date on which  the  conditions  specified  in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).

     "Environmental Laws" means all applicable laws, rules, regulations,  codes,
ordinances,  orders,  decrees,  judgments,   injunctions,   notices  or  binding
agreements  issued,  promulgated or entered into by any Governmental  Authority,
which  relate in any way to the  environment,  preservation  or  reclamation  of
natural  resources,  the  management,  release  or  threatened  release  of  any
Hazardous Material or to human health and safety matters.

     "Environmental  Liability"  means any  liability,  contingent  or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties  or  indemnities),  of the  Borrower  or any  Subsidiary,  directly or
indirectly, resulting from or based upon (a) violation of any Environmental Law,
(b)  the  generation,  use,  handling,  transportation,  storage,  treatment  or
disposal of any Hazardous  Materials,  (c) exposure to any Hazardous  Materials,
(d) the  release or  threatened  release  of any  Hazardous  Materials  into the
environment  or (e) any  contract or  agreement  pursuant to which  liability is
incurred by the Borrower or any Subsidiary with respect to any of the foregoing.

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

     "ERISA Affiliate" means any trade or business (whether or not incorporated)
that, together with the Borrower,  is treated as a single employer under Section
414(b) or (c) of the Code or,  solely for  purposes  of Section 302 of ERISA and
Section 412 of the Code,  is treated as a single  employer  under Section 414 of
the Code.

     "ERISA Event" means (a) any "reportable  event", as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived);  (b) the existence  with
respect  to any Plan of an  "accumulated  funding  deficiency"  (as  defined  in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing  pursuant to Section  412(d) of the Code or Section 303(d) of ERISA of an
application  for a waiver of the minimum  funding  standard  with respect to any
Plan; (d) the  incurrence by the Borrower or any of its ERISA  Affiliates of any
liability  under Title IV of ERISA with respect to the  termination of any Plan;
(e) the receipt by the Borrower or any ERISA  Affiliate  from the PBGC or a plan
administrator  of any notice  relating to an intention to terminate  any Plan or
Plans or to appoint a trustee to administer any

<PAGE>  11
                                                                               7

Plan; (f) the  incurrence by the Borrower or any of its ERISA  Affiliates of any
liability with respect to the withdrawal or partial  withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of
any notice,  or the receipt by any  Multiemployer  Plan from the Borrower or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability
or a determination that a Multiemployer Plan is, or is expected to be, insolvent
or in reorganization, within the meaning of Title IV of ERISA.

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

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

     "Excluded  Taxes"  means,  with respect to the  Administrative  Agent,  any
Lender or any other  recipient of any payment to be made by or on account of any
obligation of the Borrower  hereunder,  (a) income or franchise taxes imposed on
(or  measured  by) its net income by the  United  States of  America,  or by the
jurisdiction under the laws of which such recipient is organized or in which its
principal  office  is  located  or,  in the case of any  Lender,  in  which  its
applicable  lending  office is located,  (b) any branch profits taxes imposed by
the  United  States  of  America  or  any  similar  tax  imposed  by  any  other
jurisdiction  in which the  Borrower is located and (c) in the case of a Foreign
Lender  (other than an  assignee  pursuant  to a request by the  Borrower  under
Section 2.16(b)),  any United States  withholding tax that is imposed on amounts
payable to such Foreign  Lender at the time such Foreign  Lender becomes a party
to this  Agreement  or at the time such Lender  changes its  applicable  lending
office or is  attributable  to such  Foreign  Lender's  failure or  inability to
comply with Section  2.14(e),  except to the extent that such  Foreign  Lender's
assignor (if any) or such Foreign  Lender,  in the case of a Lender that changes
its applicable lending office, was entitled, at the time of assignment or at the
time of the change in applicable  lending office, to receive  additional amounts
from the  Borrower  with  respect to such  withholding  tax  pursuant to Section
2.14(a).

     "Federal Funds  Effective  Rate" means,  for any day, the weighted  average
(rounded  upwards,  if  necessary,  to the  next  1/100  of 1%) of the  rates on
overnight Federal funds  transactions with members of the Federal Reserve System
arranged by Federal funds brokers,  as published on the next succeeding Business
Day by the  Federal  Reserve  Bank  of New  York,  or,  if  such  rate is not so
published for any day that is a Business Day, the average (rounded  upwards,  if
necessary,  to the  next  1/100 of 1%) of the  quotations  for such day for such
transactions  received  by the  Administrative  Agent from three  Federal  funds
brokers of recognized standing selected by it.

     "Financial   Officer"  means  the  Senior   Vice-President  -  Finance  and
Administration, chief financial officer, principal accounting officer, treasurer
or controller of the Borrower.

     "Fixed  Charge  Coverage  Ratio"  means,  as at the last day of any period,
Consolidated  EBITDAR divided by the sum of Consolidated  Interest  Expense plus
Consolidated Rental Expense.

<PAGE>  12
                                                                               8

     "Foreign  Lender"  means any Lender that is  organized  under the laws of a
jurisdiction  other than that in which the Borrower is located.  For purposes of
this  definition,  the United  States of  America,  each State  thereof  and the
District of Columbia shall be deemed to constitute a single jurisdiction.

     "GAAP" means generally accepted accounting  principles in the United States
of America.

     "Governmental  Authority"  means the  government  of the  United  States of
America, any other nation or any political subdivision thereof, whether state or
local,  and any agency,  authority,  instrumentality,  regulatory  body,  court,
central  bank or  other  entity  exercising  executive,  legislative,  judicial,
taxing,  regulatory  or  administrative  powers or functions of or pertaining to
government.

     "Guarantee"  of or by any Person (the  "guarantor")  means any  obligation,
contingent or otherwise,  of the guarantor  guaranteeing  or having the economic
effect of guaranteeing  any Indebtedness or other obligation of any other Person
(the  "primary  obligor") in any manner,  whether  directly or  indirectly,  and
including any obligation of the guarantor,  direct or indirect,  (a) to purchase
or pay (or  advance  or  supply  funds  for the  purchase  or  payment  of) such
Indebtedness  or other  obligation or to purchase (or to advance or supply funds
for the purchase of) any  security for the payment  thereof,  (b) to purchase or
lease property,  securities or services for the purpose of assuring the owner of
such  Indebtedness or other obligation of the payment  thereof,  (c) to maintain
working capital,  equity capital or any other financial  statement  condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness  or other  obligation  or (d) as an account party in respect of any
letter of credit or letter of guaranty  issued to support such  Indebtedness  or
obligation; provided, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.

     "Hazardous  Materials"  means all radioactive  substances or wastes and all
hazardous or toxic substances, wastes or other pollutants,  including petroleum,
asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas,
and all other substances or wastes regulated under any Environmental Law.

     "Hedging Agreement" means any interest rate protection  agreement,  foreign
currency  exchange  agreement,  commodity  price  protection  agreement or other
interest or currency exchange rate or commodity price hedging arrangement.

     "Indebtedness"  of  any  Person  means,   without   duplication,   (a)  all
obligations  of such Person for  borrowed  money,  (b) all  obligations  of such
Person evidenced by bonds,  debentures,  notes or similar  instruments,  (c) all
obligations  of such Person  under  conditional  sale or other  title  retention
agreements  relating to property acquired by such Person, (d) all obligations of
such Person in respect of the  deferred  purchase  price of property or services
(excluding  accounts payable  incurred in the ordinary course of business),  (e)
all  Indebtedness  of  others  secured  by (or  for  which  the  holder  of such
Indebtedness has an existing right,  contingent or otherwise,  to be secured by)
any Lien on  property  owned or  acquired  by such  Person,  whether  or not the
Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person
of

<PAGE>  13
                                                                               9

Indebtedness of others,  (g) all Capital Lease  Obligations of such Person,  (h)
all obligations,  contingent or otherwise, of such Person as an account party in
respect of letters of credit and  letters of guaranty  and (i) all  obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances.  The
Indebtedness of any Person shall include, without duplication,  the Indebtedness
of any other entity (including any partnership in which such Person is a general
partner)  to the  extent  such  Person  is liable  therefor  as a result of such
Person's ownership interest in or other relationship with such entity, except to
the extent the terms of such Indebtedness provide that such Person is not liable
therefor.

     "Indemnified Taxes" means Taxes other than Excluded Taxes.

     "Index Debt" means senior,  unsecured,  long-term indebtedness for borrowed
money of the Borrower  that is not  guaranteed by any other Person or subject to
any other credit enhancement.

     "Interest  Election  Request" means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.05.

     "Interest  Payment  Date" means (a) with respect to any ABR Loan,  the last
day of each March,  June,  September  and  December  and (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar  Borrowing with an
Interest Period of more than three months' duration,  each day prior to the last
day of such Interest  Period that occurs at intervals of three months'  duration
after the first day of such Interest Period.

     "Interest  Period" means with respect to any  Eurodollar  Loan,  the period
commencing on the date of such Loan and ending on the numerically  corresponding
day in the  calendar  month  that is one,  two,  three or six  months (or to the
extent  available  to all Lenders,  nine or twelve  months)  thereafter,  as the
Borrower may elect; provided, that (i) if any Interest Period would end on a day
other than a Business Day,  such  Interest  Period shall be extended to the next
succeeding  Business Day unless such next succeeding  Business Day would fall in
the next calendar  month,  in which case such  Interest  Period shall end on the
next  preceding  Business  Day and  (ii) any  Interest  Period  pertaining  to a
Eurodollar  Loan that commences on the last Business Day of a calendar month (or
on a day  for  which  there  is no  numerically  corresponding  day in the  last
calendar  month of such  Interest  Period) shall end on the last Business Day of
the last calendar month of such Interest Period.  For purposes hereof,  the date
of a Borrowing initially shall be the date on which such Borrowing is made or if
initially an ABR Loan,  on the date  initially  converted  and, in the case of a
Eurodollar  Loan,  thereafter  shall be the  effective  date of the most  recent
conversion or continuation of such Borrowing.

     "Lenders"  means the Persons  listed on Schedule  2.01 and any other Person
that shall have become a party hereto  pursuant to an Assignment and Acceptance,
other than any such  Person  that  ceases to be a party  hereto  pursuant  to an
Assignment and Acceptance.

     "Leverage Ratio" means, as at the last day of any period,  the ratio of (a)
Consolidated Total Debt on such day to (b) Consolidated EBITDA for such period.

<PAGE>  14
                                                                              10

     "LIBO  Rate"  means,  with  respect  to any  Eurodollar  Borrowing  for any
Interest Period,  the rate appearing on Page 3750 of the Telerate Service (or on
any  successor  or  substitute  page of such  Service,  or any  successor  to or
substitute  for such  Service,  providing  rate  quotations  comparable to those
currently  provided  on  such  page  of  such  Service,  as  determined  by  the
Administrative  Agent from time to time for purposes of providing  quotations of
interest rates applicable to dollar deposits in the London interbank  market) at
approximately   11:00  a.m.,  London  time,  two  Business  Days  prior  to  the
commencement  of such Interest  Period,  as the rate for dollar  deposits with a
maturity  comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
Eurodollar  Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered  to  the  principal  London  office  of  the  Administrative   Agent  in
immediately  available  funds in the London  interbank  market at  approximately
11:00 a.m.,  London time,  two Business Days prior to the  commencement  of such
Interest Period.

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

     "Loan  Documents"  means this Agreement,  the Subsidiary  Guarantee and any
Notes.

     "Loan Parties" means the Borrower and each  Subsidiary that is a party to a
Loan Document.

     "Loans"  means the loans made by the  Lenders to the  Borrower  pursuant to
this Agreement.

     "Material  Adverse  Effect"  means a  material  adverse  effect  on (a) the
business,  assets,  operations  or  condition,  financial or  otherwise,  of the
Borrower and the Subsidiaries  taken as a whole, (b) the ability of the Borrower
to perform any of its  obligations  under this Agreement or (c) the rights of or
benefits  available  to the  Lenders  under this  Agreement  and the  Subsidiary
Guarantee.

     "Material  Indebtedness"  means  Indebtedness  (other than the  Loans),  or
obligations in respect of one or more Hedging Agreements,  of any one or more of
the Borrower and its  Subsidiaries in an aggregate  principal  amount  exceeding
$25,000,000.  For purposes of determining Material Indebtedness,  the "principal
amount" of the  obligations  of the Borrower or any Subsidiary in respect of any
Hedging  Agreement  at any time shall be the maximum  aggregate  amount  (giving
effect to any netting  agreements) that the Borrower or such Subsidiary would be
required to pay if such Hedging Agreement were terminated at such time.

     "Maturity Date" means November 16, 2003.

     "Moody's" means Moody's Investors Service, Inc.

<PAGE>  15
                                                                              11

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

     "Note" has the meaning set forth in Section 2.07(e).

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

     "PBGC"  means the  Pension  Benefit  Guaranty  Corporation  referred to and
defined in ERISA and any successor entity performing similar functions.

     "Permitted  Acquisition"  means  any  acquisition  by the  Borrower  or any
Subsidiary  of any of the  assets  of,  or  capital  stock  in, a Person or of a
division or line of business of a Person if,  immediately  after  giving  effect
thereto,  (a)  no  Default  has  occurred  and is  continuing  or  would  result
therefrom,  (b) the principal business of any such acquired Person,  division or
line of business shall be a Permitted Line of Business, (c) all actions required
to be taken under Section 5.10 with respect to any Subsidiary  acquired or newly
formed in connection with such acquisition have been taken, (d) the Borrower and
its Subsidiaries are in compliance,  on a pro forma basis after giving effect to
such acquisition,  with the covenants contained in Section 6.01 recomputed as at
the last day of the most recently ended fiscal quarter of the Borrower for which
financial  statements are available,  as if such acquisition had occurred on the
first day of each  relevant  period  for  testing  such  compliance  and (e) the
Borrower has delivered to the Administrative  Agent an officers'  certificate to
the effect set forth in clauses (a),  (b), (c) and (d) above,  together with all
relevant  financial  information  for the  Person or assets to be  acquired  and
reasonably detailed calculations  demonstrating  satisfaction of the requirement
set forth in clause (d) above.

     "Permitted Encumbrances" means:

          (a) Liens  imposed  by law for taxes that are not yet due or are being
     contested in compliance with Section 5.05;

          (b) carriers', warehousemen's,  mechanics', materialmen's, repairmen's
     and other like  Liens  imposed by law,  arising in the  ordinary  course of
     business and securing obligations that are not overdue by more than 30 days
     or are being contested in compliance with Section 5.05;

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

          (d) Liens granted and deposits made to secure the performance of bids,
     trade contracts,  leases,  statutory obligations,  surety and appeal bonds,
     performance  bonds and other  obligations of a like nature, in each case in
     the ordinary course of business; and

<PAGE>  16
                                                                              12

          (e)  easements,   zoning   restrictions,   rights-of-way  and  similar
     encumbrances  on real  property  imposed by law or arising in the  ordinary
     course of business that do not secure any monetary  obligations  and do not
     materially  detract  from the value of the  affected  property or interfere
     with the ordinary conduct of business of the Borrower or any Subsidiary;

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

     "Permitted  Lines of  Business"  means (a) the  business of the Borrower as
conducted on the Effective Date, (b) any wholesale, retail or other distribution
of products  (including  catalogue and internet) or services under any Trademark
or any  derivative  thereof,  (c) any similar  business and any  business  which
provides a service  and/or  supplies  products in  connection  with any business
described  in clause  (a) or (b)  above or (d) any  reasonable  modification  or
extension thereof.

     "Person" means any natural person, corporation,  limited liability company,
trust, joint venture, association, company, partnership,  Governmental Authority
or other entity.

     "Plan" means any employee  pension benefit plan (other than a Multiemployer
Plan) subject to the  provisions of Title IV of ERISA or Section 412 of the Code
or  Section  302 of ERISA,  and in respect  of which the  Borrower  or any ERISA
Affiliate  is (or, if such plan were  terminated,  would under  Section  4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

     "Prime Rate" means the rate of interest per annum  publicly  announced from
time to time by the  Administrative  Agent as its  prime  rate in  effect at its
principal  office in New York  City;  each  change in the  Prime  Rate  shall be
effective from and including the date such change is publicly announced as being
effective.

     "Register" has the meaning set forth in Section 9.04(c).

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

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

     "Required  Lenders" means,  at any time,  Lenders having  Revolving  Credit
Exposures and unused  Commitments  representing  more than 50% of the sum of the
total Revolving Credit Exposures and unused Commitments at such time.

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

<PAGE>  17
                                                                              13

     "Responsible  Officer" means the chief executive  officer,  president,  any
vice  president or Financial  Officer of the  Borrower,  but in any event,  with
respect to financial matters, a Financial Officer of the Borrower.

     "Restricted  Payment" means any dividend or other distribution  (whether in
cash,  securities or other  property) with respect to any shares of any class of
capital  stock of the  Borrower or any  Subsidiary,  or any payment  (whether in
cash,  securities  or other  property),  including  any sinking  fund or similar
deposit,  on  account  of the  purchase,  redemption,  retirement,  acquisition,
cancellation  or termination of any such shares of capital stock of the Borrower
or any  option,  warrant or other  right to acquire  any such  shares of capital
stock of the Borrower.

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

     "Revolving Loan" means a Loan made pursuant to Section 2.03.

     "S&P" means  Standard & Poor's Ratings  Services,  a division of the McGraw
Hill Companies, Inc.

     "Statutory  Reserve Rate" means a fraction  (expressed  as a decimal),  the
numerator of which is the number one and the  denominator of which is the number
one minus the  aggregate  of the  maximum  reserve  percentages  (including  any
marginal,  special,  emergency or supplemental  reserves) expressed as a decimal
established by the Board to which the  Administrative  Agent is subject (a) with
respect to the Base CD Rate,  for new  negotiable  nonpersonal  time deposits in
dollars of over $100,000 with maturities approximately equal to three months and
(b) with respect to the LIBO Rate, for eurocurrency  funding (currently referred
to as  "Eurocurrency  Liabilities" in Regulation D of the Board).  The Statutory
Reserve Rate shall be adjusted  automatically on and as of the effective date of
any change in any reserve percentage.

     "Subordinated   Indebtedness"  means  any  Indebtedness  of  the  Borrower,
provided that with respect to any such Indebtedness (i) no part of the principal
of such  Indebtedness is stated to be payable or is required to be paid (whether
by way of mandatory sinking fund, mandatory redemption,  mandatory prepayment or
otherwise)  prior to the Maturity Date and the payment of principal of which and
(subject to clause (ii) below) any other  obligations of the Borrower in respect
thereof  are  subordinated  to the prior  payment  in full of  principal  of and
interest  (including   post-petition  interest)  on  the  Loans  and  all  other
obligations and liabilities of the Borrower to the Administrative  Agent and the
Lenders  hereunder  on terms and  conditions  first  approved  in writing by the
Required  Lenders,  (ii) no part of the interest  accruing on such  Indebtedness
(other  than  interest   payable   solely  in  kind  which  shall  be  similarly
subordinated)  is payable,  without the prior  written  consent of the  Required
Lenders, after a Default or Event of Default has occurred and is continuing, and
(iii) such Indebtedness  otherwise  contains terms,  covenants and conditions in
form and substance reasonably satisfactory to the Required Lenders, as evidenced
by their prior written approval thereof.

<PAGE>  18
                                                                              14

     "subsidiary"  means, with respect to any Person (the "parent") at any date,
any corporation,  limited liability company,  partnership,  association or other
entity the accounts of which would be  consolidated  with those of the parent in
the parent's consolidated financial statements if such financial statements were
prepared  in  accordance  with  GAAP as of  such  date,  as  well  as any  other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests  representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership,  more than 50% of the general partnership interests are, as of such
date,  owned,  controlled  or held,  or (b) that is, as of such date,  otherwise
Controlled,  by the parent or one or more  subsidiaries  of the parent or by the
parent and one or more subsidiaries of the parent.

     "Subsidiary"  means any  wholly-owned  subsidiary  of the  Borrower and any
other subsidiary of the Borrower that the Borrower and the Administrative  Agent
agree in writing to designate as a  "Subsidiary",  it being  understood that the
Borrower  and the  Administrative  Agent have  agreed to  designate  each of the
entities set forth on Schedule 3.13 as a Subsidiary.

     "Subsidiary Guarantee" means the Subsidiary Guarantee, substantially in the
form of Exhibit C, among the Subsidiary  Guarantors  signatories thereto and the
Administrative Agent, for the benefit of the Lenders.

     "Subsidiary  Guarantor" means each Subsidiary indicated on Schedule 3.13 as
being a "Subsidiary Guarantor", together with each other Subsidiary that becomes
a party to the Subsidiary Guarantee in compliance with Section 5.10.

     "Syndication Agent" means Fleet National Bank

     "Taxes" means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

     "Three-Month  Secondary CD Rate" means,  for any day, the secondary  market
rate for three-month certificates of deposit reported as being in effect on such
day (or, if such day is not a Business Day, the next preceding  Business Day) by
the Board through the public  information  telephone line of the Federal Reserve
Bank of New York (which rate will, under the current  practices of the Board, be
published  in Federal  Reserve  Statistical  Release  H.15(519)  during the week
following such day) or, if such rate is not so reported on such day or such next
preceding  Business  Day, the average of the  secondary  market  quotations  for
three-month certificates of deposit of major money center banks in New York City
received at  approximately  10:00 a.m.,  New York City time, on such day (or, if
such day is not a  Business  Day,  on the next  preceding  Business  Day) by the
Administrative  Agent from three  negotiable  certificate of deposit  dealers of
recognized standing selected by it.

     "364-Day Credit  Agreement"  means the 364-Day Credit Agreement dated as of
November 16, 2000, (as amended,  supplemented or otherwise modified from time to
time  in  accordance   with  its  terms)  among  the  Borrower,   the  financial
institutions party thereto,  the Syndication Agent,  Documentation Agent and the
Administrative  Agent,  providing  for a 364-Day  credit  facility in an initial
aggregate amount of $500,000,000.

     "Trademarks" has the meaning set forth in Section 5.06.

<PAGE>  19
                                                                              15

     "Transactions"  means  the  execution,  delivery  and  performance  by  the
Borrower of this  Agreement and by the  Subsidiary  Guarantors of the Subsidiary
Guarantee, the borrowing of Loans, the use of the proceeds thereof.

     "Type", when used in reference to any Loan or Borrowing,  refers to whether
the rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the LIBO Rate or the Alternate Base Rate.

     "Withdrawal  Liability" means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer  Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.

     SECTION 1.02. Terms Generally.  The definitions of terms herein shall apply
equally to the  singular  and plural  forms of the terms  defined.  Whenever the
context may require,  any pronoun  shall  include the  corresponding  masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed  by the phrase  "without  limitation."  The word "will"
shall be  construed  to have the same  meaning  and effect as the word  "shall."
Unless the context requires  otherwise (a) any definition of or reference to any
agreement,  instrument or other document  herein shall be construed as referring
to such  agreement,  instrument or other  document as from time to time amended,
supplemented  or  otherwise  modified  (subject  to  any  restrictions  on  such
amendments,  supplements or modifications  set forth herein),  (b) any reference
herein to any Person shall be construed to include such Person's  successors and
assigns,  (c) the words "herein," "hereof" and "hereunder," and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any  particular  provision  hereof,  (d)  all  references  herein  to  Articles,
Sections,  Exhibits  and  Schedules  shall be construed to refer to Articles and
Sections of, and Exhibits and  Schedules  to, this  Agreement  and (e) the words
"asset" and  "property"  shall be  construed to have the same meaning and effect
and to refer to any and all  tangible  and  intangible  assets  and  properties,
including cash, securities, accounts and contract rights.

     SECTION  1.03.  Accounting  Terms;  GAAP.  Except  as  otherwise  expressly
provided  herein,  all  terms of an  accounting  or  financial  nature  shall be
construed  in  accordance  with GAAP,  as in effect from time to time;  provided
that,  if the  Borrower  notifies  the  Administrative  Agent that the  Borrower
requests an amendment  to any  provision  hereof to eliminate  the effect of any
change occurring after the date hereof in GAAP or in the application  thereof on
the operation of such  provision (or if the  Administrative  Agent  notifies the
Borrower that the Required  Lenders request an amendment to any provision hereof
for such  purpose),  regardless  of whether any such  notice is given  before or
after such change in GAAP or in the  application  thereof,  then such  provision
shall be interpreted  on the basis of GAAP as in effect and applied  immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.

<PAGE>  20
                                                                              16

                                   ARTICLE II

                                   The Credits

     SECTION 2.01.  Commitments.  Subject to the terms and  conditions set forth
herein,  each Lender agrees to make Revolving Loans to the Borrower from time to
time during the Availability  Period in an aggregate  principal amount that will
not  result  in (a) such  Lender's  Revolving  Credit  Exposure  exceeding  such
Lender's  Commitment  or (b) the sum of the  total  Revolving  Credit  Exposures
exceeding the total Commitments.  Within the foregoing limits and subject to the
terms and  conditions  set forth  herein,  the Borrower  may borrow,  prepay and
reborrow Revolving Loans.

     SECTION 2.02.  Loans and Borrowings.  (a) Each Revolving Loan shall be made
as part of a Borrowing consisting of Revolving Loans made by the Lenders ratably
in accordance with their  respective  Commitments.  The failure of any Lender to
make any Loan  required to be made by it shall not  relieve any other  Lender of
its  obligations  hereunder;  provided that the  Commitments  of the Lenders are
several and no Lender shall be  responsible  for any other  Lender's  failure to
make Loans as required.

     (b) Subject to Section 2.11, each Borrowing shall be comprised  entirely of
ABR  Loans or  Eurodollar  Loans  as the  Borrower  may  request  in  accordance
herewith.  Each Lender at its option may make any Eurodollar Loan by causing any
domestic  or  foreign  branch or  Affiliate  of such  Lender to make such  Loan;
provided that any exercise of such option shall not affect the obligation of the
Borrower to repay such Loan in accordance with the terms of this Agreement.

     (c)  At the  commencement  of  each  Interest  Period  for  any  Eurodollar
Borrowing,  such Borrowing  shall be in an aggregate  amount that is an integral
multiple of $1,000,000 and not less than  $5,000,000.  At the time that each ABR
Borrowing is made,  such  Borrowing  shall be in an aggregate  amount that is an
integral multiple of $500,000 and not less than $1,000,000; provided that an ABR
Borrowing  may be in an  aggregate  amount  that is equal to the  entire  unused
balance  of the  total  Commitments.  Borrowings  of more  than  one Type may be
outstanding at the same time;  provided that there shall not at any time be more
than a total of 15 Eurodollar Borrowings outstanding.

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

     SECTION 2.03. Requests for Borrowings. To request a Borrowing, the Borrower
shall notify the  Administrative  Agent of such request by telephone  (a) in the
case of a Eurodollar  Borrowing,  not later than 11:00 a.m., New York City time,
three Business Days before the date of the proposed Borrowing or (b) in the case
of an ABR Borrowing,  not later than 11:00 a.m., New York City time, on the date
of the proposed  Borrowing.  Each such  telephonic  Borrowing  Request  shall be
irrevocable and shall be confirmed  promptly by hand delivery or telecopy to the
Administrative Agent of a written Borrowing Request in a form approved by the

<PAGE>  21
                                                                              17

Administrative  Agent and  signed by the  Borrower.  Each  such  telephonic  and
written Borrowing Request shall specify the following  information in compliance
with Section 2.02:

          (i) the aggregate amount of the requested Borrowing;

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

          (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
     Borrowing;

          (iv) in the  case of a  Eurodollar  Borrowing,  the  initial  Interest
     Period to be applicable  thereto,  which shall be a period  contemplated by
     the definition of the term "Interest Period"; and

          (v) the location and number of the  Borrower's  account to which funds
     are to be disbursed,  which shall comply with the  requirements  of Section
     2.04.

If no election as to the Type of  Borrowing  is  specified,  then the  requested
Borrowing  shall be an ABR  Borrowing.  If no Interest  Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month's duration.  Promptly following
receipt  of  a  Borrowing   Request  in  accordance   with  this  Section,   the
Administrative  Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.

     SECTION 2.04.  Funding of Borrowings.  (a) Each Lender shall make each Loan
to be made by it  hereunder on the  proposed  date  thereof by wire  transfer of
immediately available funds by 12:00 noon, New York City time, to the account of
the  Administrative  Agent most  recently  designated  by it for such purpose by
notice to the Lenders.  The Administrative  Agent will make such Loans available
to the Borrower by promptly crediting the amounts so received, in like funds, to
an account of the Borrower maintained with the Administrative  Agent in New York
City and designated by the Borrower in the applicable Borrowing Request.

     (b) Unless the  Administrative  Agent  shall have  received  notice  from a
Lender prior to the  proposed  date of any  Borrowing  that such Lender will not
make  available  to  the  Administrative  Agent  such  Lender's  share  of  such
Borrowing,  the  Administrative  Agent may assume that such Lender has made such
share  available on such date in accordance  with  paragraph (a) of this Section
and may, in reliance  upon such  assumption,  make  available  to the Borrower a
corresponding  amount. In such event, if a Lender has not in fact made its share
of the applicable  Borrowing  available to the  Administrative  Agent,  then the
applicable Lender and the Borrower  severally agree to pay to the Administrative
Agent forthwith on demand such corresponding  amount with interest thereon,  for
each day from and  including  the date  such  amount  is made  available  to the
Borrower to but excluding the date of payment to the  Administrative  Agent,  at
(i) in the case of such Lender,  the Federal Funds Effective Rate or (ii) in the
case of the Borrower,  the interest rate otherwise applicable to such Borrowing.
If such Lender pays such amount to the  Administrative  Agent,  then such amount
shall constitute such Lender's Loan included in such Borrowing.

<PAGE>  22
                                                                              18

     SECTION 2.05. Interest Elections.  (a) Each Borrowing initially shall be of
the Type  specified in the  applicable  Borrowing  Request and, in the case of a
Eurodollar Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request.  Thereafter, the Borrower may elect to convert such Borrowing
to a  different  Type  or to  continue  such  Borrowing  and,  in the  case of a
Eurodollar  Borrowing,  may elect Interest Periods therefor,  all as provided in
this Section. The Borrower may elect different options with respect to different
portions of the affected  Borrowing,  in which case each such  portion  shall be
allocated ratably among the Lenders holding the Loans comprising such Borrowing,
and the Loans  comprising  each such  portion  shall be  considered  a  separate
Borrowing.

     (b) To make an election pursuant to this Section, the Borrower shall notify
the  Administrative  Agent of such  election  by  telephone  by the time  that a
Borrowing  Request  would be required  under  Section 2.03 if the Borrower  were
requesting a Borrowing of the Type  resulting  from such  election to be made on
the effective  date of such election.  Each such  telephonic  Interest  Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the Borrower.

     (c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.02:

          (i) the Borrowing to which such Interest Election Request applies and,
     if different  options are being elected with respect to different  portions
     thereof,  the portions thereof to be allocated to each resulting  Borrowing
     (in which case the  information  to be specified  pursuant to clauses (iii)
     and (iv) below shall be specified for each resulting Borrowing);

          (ii) the effective date of the election made pursuant to such Interest
     Election Request, which shall be a Business Day;

          (iii) whether the  resulting  Borrowing is to be an ABR Borrowing or a
     Eurodollar Borrowing; and

          (iv)  if  the  resulting  Borrowing  is a  Eurodollar  Borrowing,  the
     Interest  Period  to be  applicable  thereto  after  giving  effect to such
     election,  which shall be a period  contemplated  by the  definition of the
     term "Interest Period".

If any such Interest  Election Request requests a Eurodollar  Borrowing but does
not  specify  an  Interest  Period,  then the  Borrower  shall be deemed to have
selected an Interest Period of one month's duration.

     (d)  Promptly  following  receipt  of an  Interest  Election  Request,  the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.

     (e) If the Borrower  fails to deliver a timely  Interest  Election  Request
with respect to a Eurodollar  Borrowing  prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided herein, at
the end of such Interest Period such

<PAGE>  23
                                                                              19

Borrowing shall be converted to an ABR Borrowing.  Notwithstanding  any contrary
provision  hereof, if an Event of Default has occurred and is continuing and the
Administrative  Agent, at the request of the Required  Lenders,  so notifies the
Borrower,  then, so long as an Event of Default is continuing (i) no outstanding
Borrowing  may be converted to or continued as a Eurodollar  Borrowing  and (ii)
unless repaid, each Eurodollar  Borrowing shall be converted to an ABR Borrowing
at the end of the Interest Period applicable thereto.

     SECTION 2.06.  Termination and Reduction of Commitments.  Unless previously
terminated, the Commitments shall terminate on the Maturity Date.

     (a) The  Borrower may at any time  terminate,  or from time to time reduce,
the  Commitments  without  penalty;  provided  that  (i) each  reduction  of the
Commitments shall be in an amount that is an integral multiple of $1,000,000 and
not less than  $10,000,000  and (ii) the Borrower  shall not terminate or reduce
the  Commitments  if, after giving  effect to any  concurrent  prepayment of the
Loans in accordance with Section 2.08, the sum of the Revolving Credit Exposures
would exceed the total Commitments.

     (b) The Borrower shall notify the  Administrative  Agent of any election to
terminate or reduce the Commitments under paragraph (a) of this Section at least
three  Business  Days  prior  to the  effective  date  of  such  termination  or
reduction,  specifying  such election and the effective  date thereof.  Promptly
following  receipt of any notice,  the  Administrative  Agent  shall  advise the
Lenders of the contents thereof.  Each notice delivered by the Borrower pursuant
to this Section shall be  irrevocable;  provided that a notice of termination of
the  Commitments  delivered  by the  Borrower  may  state  that  such  notice is
conditioned  upon the  effectiveness of other credit  facilities,  in which case
such  notice  may be revoked by the  Borrower  (by notice to the  Administrative
Agent on or prior to the  specified  effective  date) if such  condition  is not
satisfied.  Any termination or reduction of the Commitments  shall be permanent.
Each  reduction of the  Commitments  shall be made ratably  among the Lenders in
accordance with their respective Commitments.

     SECTION 2.07. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally  promises to pay to the Administrative  Agent for the account of
each  Lender the then  unpaid  principal  amount of each  Revolving  Loan on the
Maturity Date.

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

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

<PAGE>  24
                                                                              20

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

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

     SECTION 2.08. Prepayment of Loans. (a) The Borrower shall have the right at
any time and  from  time to time to  prepay  any  Borrowing  in whole or in part
without penalty,  except as provided in Section 2.13, subject to prior notice in
accordance with paragraph (b) of this Section.

     (b) The  Borrower  shall  notify  the  Administrative  Agent  by  telephone
(confirmed  by  telecopy)  of  any  prepayment  hereunder  (i) in  the  case  of
prepayment of a Eurodollar  Borrowing,  not later than 11:00 a.m., New York City
time, three Business Days before the date of prepayment,  or (ii) in the case of
prepayment of an ABR  Borrowing,  not later than 11:00 a.m., New York City time,
on the date of  prepayment.  Each such  notice  shall be  irrevocable  and shall
specify  the  prepayment  date and the  principal  amount of each  Borrowing  or
portion thereof to be prepaid; provided that, if a notice of prepayment is given
in connection  with a conditional  notice of termination  of the  Commitments as
contemplated  by Section 2.06,  then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with Section 2.06.  Promptly
following receipt of any such notice relating to a Borrowing, the Administrative
Agent shall advise the Lenders of the contents thereof.  Each partial prepayment
of any  Borrowing,  and the remainder of such  Borrowing  after giving effect to
such prepayment, shall be in an amount that would be permitted in the case of an
advance  of a  Borrowing  of the same Type as  provided  in Section  2.02.  Each
prepayment of a Borrowing  shall be applied ratably to the Loans included in the
prepaid  Borrowing.  Prepayments shall be accompanied by accrued interest to the
extent required by Section 2.10.

     SECTION 2.09.  Fees. (a) The Borrower  agrees to pay to the  Administrative
Agent for the account of each Lender a facility  fee,  which shall accrue at the
Applicable  Rate on the daily amount of the  Commitment of such Lender  (whether
used or unused)  during the period from and including the Effective  Date to but
excluding the date on which such Commitment  terminates;  provided that, if such
Lender  continues to have any Revolving  Credit  Exposure  after its  Commitment
terminates,  then such facility fee shall continue to accrue on the daily amount
of such Lender's  Revolving Credit Exposure from and including the date on which
its Commitment  terminates to but excluding the date on which such Lender ceases
to have any Revolving Credit Exposure. Accrued facility fees shall be payable in
arrears on the last day of March, June,  September and December of each year and
on the date on which the Commitments terminate,

<PAGE>  25
                                                                              21

commencing on the first such date to occur after the date hereof;  provided that
any facility fees  accruing  after the date on which the  Commitments  terminate
shall be payable on demand.  All facility fees shall be computed on the basis of
a year of 360 days and shall be payable  for the actual  number of days  elapsed
(including the first day but excluding the last day).

     (b) The Borrower  agrees to pay to the  Administrative  Agent,  for its own
account,  fees  payable in the amounts and at the times  separately  agreed upon
between the Borrower and the Administrative Agent.

     (c)  All  fees  payable  hereunder  shall  be  paid on the  dates  due,  in
immediately  available funds, to the Administrative  Agent for distribution,  in
the case of facility fees and utilization fees, to the Lenders.  Fees paid shall
not be refundable under any circumstances.

     SECTION 2.10.  Interest.  (a) The Loans comprising each ABR Borrowing shall
bear  interest  at a rate per annum  equal to the  Alternate  Base Rate plus the
Applicable Rate.

     (b) The Loans comprising each Eurodollar Borrowing shall bear interest at a
rate per annum equal to the LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Rate.

     (c) Notwithstanding  the foregoing,  if any principal of or interest on any
Loan or any fee or other amount  payable by the  Borrower  hereunder is not paid
when due,  whether at stated  maturity,  upon  acceleration  or otherwise,  such
overdue amount shall bear interest,  after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise  applicable to such Loan as provided above or (ii) in the case of
any other amount, 2% plus the rate applicable to ABR Loans as provided above.

     (d)  Accrued  interest  on each Loan  shall be  payable  in arrears on each
Interest Payment Date for such Loan; provided that (i) interest accrued pursuant
to paragraph (c) of this Section  shall be payable on demand,  (ii) in the event
of any  repayment or  prepayment  of any Loan (other than a prepayment of an ABR
Revolving Loan prior to the end of the Availability Period), accrued interest on
the  principal  amount  repaid or  prepaid  shall be payable on the date of such
repayment or prepayment,  (iii) in the event of any conversion of any Eurodollar
Revolving Loan prior to the end of the current Interest Period therefor, accrued
interest on such Loan shall be payable on the effective date of such  conversion
and  (iv)  all  accrued  interest  shall  be  payable  upon  termination  of the
Commitments

     (e) All interest  hereunder shall be computed on the basis of a year of 360
days,  except that interest  computed by reference to the Alternate Base Rate at
times when the Alternate  Base Rate is based on the Prime Rate shall be computed
on the  basis of a year of 365 days  (or 366 days in a leap  year),  and in each
case shall be payable for the actual number of days elapsed (including the first
day but excluding the last day). The applicable Alternate Base Rate or LIBO Rate
shall be determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.

     SECTION 2.11.  Alternate Rate of Interest.  If prior to the commencement of
any Interest Period for a Eurodollar Borrowing:

<PAGE>  26
                                                                              22

          (a) the Administrative  Agent determines (which determination shall be
     conclusive absent manifest error) that adequate and reasonable means do not
     exist for ascertaining the LIBO Rate for such Interest Period; or

          (b) the  Administrative  Agent is advised by the Required Lenders that
     the LIBO Rate for such  Interest  Period  will not  adequately  and  fairly
     reflect the cost to such Lenders (or Lender) of making or maintaining their
     Loans (or its Loan) included in such Borrowing for such Interest Period;

then the Administrative  Agent shall give notice thereof to the Borrower and the
Lenders by  telephone  or telecopy as promptly as  practicable  thereafter  and,
until the  Administrative  Agent  notifies the Borrower and the Lenders that the
circumstances  giving  rise to such  notice no longer  exist,  (i) any  Interest
Election   Request  that  requests  the  conversion  of  any  Borrowing  to,  or
continuation  of any Borrowing as, a Eurodollar  Borrowing shall be ineffective,
and  (ii)  if any  Borrowing  Request  requests  a  Eurodollar  Borrowing,  such
Borrowing shall be made as an ABR Borrowing;  provided that if the circumstances
giving rise to such notice  affect  only one Type of  Borrowing,  then the other
Type of Borrowing shall be permitted.

     SECTION 2.12. Increased Costs. (a) If any Change in Law shall:

          (i) impose, modify or deem applicable any reserve,  special deposit or
     similar requirement against assets of, deposits with or for the account of,
     or credit extended by, any Lender (including the type referred to in clause
     (b) of the definition of "Statutory Reserve Rate" in Section 1.01 ); or

          (ii)  impose on any  Lender or the London  interbank  market any other
     condition  affecting this Agreement or Eurodollar Loans made by such Lender
     therein;

and the result of any of the  foregoing  shall be to  increase  the cost to such
Lender of making or  maintaining  any  Eurodollar  Loan (or of  maintaining  its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable  by  such  Lender  hereunder  (whether  of  principal,   interest  or
otherwise),  then the Borrower will pay to such Lender such additional amount or
amounts as will  compensate  such Lender for such  additional  costs incurred or
reduction suffered.

     (b) If any  Lender  determines  that any  Change in Law  regarding  capital
requirements has or would have the effect of reducing the rate of return on such
Lender's capital or on the capital of such Lender's holding company,  if any, as
a  consequence  of this  Agreement  or the Loans made by such  Lender to a level
below  that  which  such  Lender or such  Lender's  holding  company  could have
achieved but for such Change in Law (taking  into  consideration  such  Lender's
policies  and the  policies of such  Lender's  holding  company  with respect to
capital  adequacy),  then from time to time the Borrower will pay to such Lender
such  additional  amount  or  amounts  as will  compensate  such  Lender or such
Lender's holding company for any such reduction suffered.

     (c) A certificate of a Lender setting forth the amount or amounts necessary
to  compensate  such  Lender  or its  holding  company,  as the case may be,  as
specified  in  paragraph  (a) or (b) of this  Section  shall be delivered to the
Borrower and shall be conclusive

<PAGE>  27
                                                                              23

absent  manifest  error.  The Borrower shall pay such Lender the amount shown as
due on any such certificate within 10 days after receipt thereof.

     (d)  Failure  or delay on the part of any  Lender  to  demand  compensation
pursuant to this Section shall not constitute a waiver of such Lender's right to
demand such  compensation;  provided that the Borrower  shall not be required to
compensate  a  Lender  pursuant  to this  Section  for any  increased  costs  or
reductions  incurred  more than three  months prior to the date that such Lender
notifies the Borrower of the Change in Law giving rise to such  increased  costs
or reductions  and of such Lender's  intention to claim  compensation  therefor;
provided  further that, if the Change in Law giving rise to such increased costs
or reductions is  retroactive,  then the  three-month  period  referred to above
shall be extended to include the period of retroactive effect thereof.

     SECTION 2.13. Break Funding Payments. The Borrower agrees to indemnify each
Lender  and to hold each  Lender  harmless  from any loss or  expense  that such
Lender may sustain or incur as a  consequence  of (a) default by the Borrower in
making a borrowing of, conversion into or continuation of Eurodollar Loans after
the  Borrower  has given a notice  requesting  the same in  accordance  with the
provisions  of this  Agreement,  (b)  default  by the  Borrower  in  making  any
prepayment of or conversion from Eurodollar Loans after the Borrower has given a
notice  thereof in accordance  with the  provisions of this  Agreement,  (c) the
making of a prepayment of Eurodollar  Loans on a day that is not the last day of
an Interest  Period with respect  thereto,  (d) the assignment of any Eurodollar
Loan other than on the last day of the Interest Period  applicable  thereto as a
result  of  a  request  by  the  Borrower   pursuant  to  Section   2.16.   Such
indemnification  may include an amount  equal to the excess,  if any, of (i) the
amount of interest  that would have accrued on the amount so prepaid,  or not so
borrowed,  converted  or  continued  or assigned for the period from the date of
such  prepayment or of such failure to borrow,  convert or continue or assign to
the last day of such  Interest  Period  (or, in the case of a failure to borrow,
convert or continue,  or assign the Interest Period that would have commenced on
the date of such  failure) in each case at the  applicable  rate of interest for
such Loans provided for herein (excluding, however, the Applicable Rate included
therein,  if any) over (ii) the amount of interest (as reasonably  determined by
such  Lender)  that would have  accrued to such Lender on such amount by placing
such  amount on  deposit  for a  comparable  period  with  leading  banks in the
interbank eurodollar market. A certificate as to any amounts payable pursuant to
this Section  submitted to the Borrower by any Lender shall be conclusive in the
absence of manifest  error.  This covenant shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.

     SECTION  2.14.  Taxes.  (a) Any and all  payments  by or an  account of any
obligation of the Borrower hereunder shall be made free and clear of and without
deduction  for any  Indemnified  Taxes  or  Other  Taxes;  provided  that if the
Borrower shall be required to deduct any  Indemnified  Taxes or Other Taxes from
such payments,  then (i) the sum payable shall be increased as necessary so that
after  making  all  required  deductions  (including  deductions  applicable  to
additional sums payable under this Section) the  Administrative  Agent or Lender
(as the case may be) receives an amount equal to the sum it would have  received
had no such  deductions  been made, (ii) the Borrower shall make such deductions
and (iii)  the  Borrower  shall pay the full  amount  deducted  to the  relevant
Governmental Authority in accordance with applicable law.

<PAGE>  28
                                                                              24

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

     (c) The Borrower shall indemnify the  Administrative  Agent and each Lender
within  30 days  after  written  demand  therefor,  for the full  amount  of any
Indemnified  Taxes or Other Taxes  (including  Indemnified  Taxes or Other Taxes
imposed or asserted on or  attributable  to amounts  payable under this Section)
paid by the  Administrative  Agent or such  Lender,  as the case may be, and any
penalties,  interest and reasonable  expenses arising  therefrom or with respect
thereto,  whether or not such Indemnified Taxes or Other Taxes were correctly or
legally  imposed  or  asserted  by  the  relevant  Governmental   Authority.   A
certificate  as to the amount of such  payment  or  liability  delivered  to the
Borrower  by a Lender  or by the  Administrative  Agent on its own  behalf or on
behalf of a Lender, shall be conclusive absent manifest error.

     (d) As soon as practicable  after any payment of Indemnified Taxes or Other
Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to
the Administrative Agent the original or a certified copy of a receipt issued by
such  Governmental  Authority  evidencing  such  payment,  a copy of the  return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.

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

     SECTION 2.15. Payments Generally; Pro Rata Treatment;  Sharing of Set-offs.
(a) The  Borrower  shall make each  payment  required to be made by it hereunder
(whether of principal, interest or fees, or under Section 2.12, 2.13 or 2.14, or
otherwise)  prior to 3:00 p.m.  New York  City  time,  on the date when due,  in
immediately  available  funds,  without  set-off or  counterclaim.  Any  amounts
received   after  such  time  on  any  date  may,  in  the   discretion  of  the
Administrative  Agent,  be deemed to have been  received on the next  succeeding
Business Day for purposes of  calculating  interest  thereon.  All such payments
shall be made to the Administrative Agent at its offices at 270 Park Avenue, New
York, New York,  except that payments  pursuant to Sections 2.12, 2.13, 2.14 and
9.03 shall be made directly to the Persons entitled thereto.  The Administrative
Agent shall  distribute any such payments  received by it for the account of any
other Person to the appropriate recipient promptly following receipt thereof. If
any payment hereunder shall be due on a day that is not a Business Day, the date
for payment shall be extended to the next  succeeding  Business Day, and, in the
case of any payment accruing interest, interest thereon shall be payable for the
period of such extension. All payments hereunder shall be made in dollars.

     (b) If at any time insufficient  funds are received by and available to the
Administrative  Agent to pay fully all amounts of  principal,  interest and fees
then due hereunder,  such funds shall be applied (i) first,  to pay interest and
fees  then  due  hereunder,  ratably  among  the  parties  entitled  thereto  in
accordance with the amounts of interest and fees then due to such

<PAGE>  29
                                                                              25

parties, and (ii) second, to pay principal then due hereunder, ratably among the
parties entitled thereto in accordance with the amounts of principal then due to
such parties.

     (c) If any Lender shall, by exercising any right of set-off or counterclaim
or otherwise,  obtain  payment in respect of any principal of or interest on any
of its Revolving Loans resulting in such Lender  receiving  payment of a greater
proportion of the aggregate  amount of its Revolving Loans and accrued  interest
thereon  than the  proportion  received  by any other  Lender,  then the  Lender
receiving  such  greater  proportion  shall  purchase  (for cash at face  value)
participations  in the Revolving Loans of other Lenders to the extent  necessary
so that the benefit of all such payments shall be shared by the Lenders  ratably
in accordance with the aggregate  amount of principal of and accrued interest on
their respective  Revolving Loans;  provided that (i) if any such participations
are  purchased  and all or any  portion of the payment  giving  rise  thereto is
recovered,  such  participations  shall  be  rescinded  and the  purchase  price
restored  to the  extent  of such  recovery,  without  interest,  and  (ii)  the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrower  pursuant to and in  accordance  with the express  terms of this
Agreement  or  any  payment  obtained  by a  Lender  as  consideration  for  the
assignment of or sale of a participation  in any of its Loans to any assignee or
participant,  other than to the Borrower or any Subsidiary or Affiliate  thereof
(as to which  the  provisions  of this  paragraph  shall  apply).  The  Borrower
consents to the foregoing  and agrees,  to the extent it may  effectively  do so
under applicable law, that any Lender acquiring a participation  pursuant to the
foregoing  arrangements  may exercise against the Borrower rights of set-off and
counterclaim with respect to such  participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.

     (d) Unless the  Administrative  Agent shall have  received  notice from the
Borrower  prior to the date on which any  payment  is due to the  Administrative
Agent for the account of the Lenders  hereunder  that the Borrower will not make
such  payment,  the  Administrative  Agent may assume that the Borrower has made
such payment on such date in accordance  herewith and may, in reliance upon such
assumption,  distribute  to the Lenders  the amount  due. In such event,  if the
Borrower has not in fact made such payment,  then each of the Lenders  severally
agrees to repay to the  Administrative  Agent  forthwith on demand the amount so
distributed  to such  Lender  with  interest  thereon,  for  each  day  from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the Federal Funds Effective Rate.

     (e) If any Lender shall fail to make any payment  required to be made by it
pursuant  to 2.04(b)  or  2.15(d),  then the  Administrative  Agent may,  in its
discretion  (notwithstanding  any contrary provision hereof),  apply any amounts
thereafter  received by the Administrative  Agent for the account of such Lender
to  satisfy  such  Lender's  obligations  under  such  Sections  until  all such
unsatisfied obligations are fully paid.

     SECTION 2.16.  Mitigation  Obligations;  Replacement of Lenders. (a) If any
Lender requests  compensation under Section 2.12, or if the Borrower is required
to pay any additional amount to any Lender or any Governmental Authority for the
account of any Lender  pursuant  to Section  2.14,  then such  Lender  shall use
reasonable  efforts to  designate  a  different  lending  office for  funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its  offices,  branches or  affiliates,  if, in the  judgment of such
Lender, such

<PAGE>  30
                                                                              26

designation or assignment (i) would eliminate or reduce amounts payable pursuant
to  Section  2.12 or 2.14,  as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed  cost or expense and would not otherwise
be  disadvantageous  to such  Lender.  The  Borrower  hereby  agrees  to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.

     (b) If any Lender  requests  compensation  under  Section  2.12,  or if the
Borrower  is  required  to  pay  any  additional  amount  to any  Lender  or any
Governmental  Authority for the account of any Lender  pursuant to Section 2.14,
or if any Lender  defaults in its obligation to fund Loans  hereunder,  then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative  Agent,  require  such  Lender to assign  and  delegate,  without
recourse  (in  accordance  with and  subject to the  restrictions  contained  in
Section 9.04), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such  obligations  (which  assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) if such assignee
is not a Lender,  the Borrower shall have received the prior written  consent of
the  Administrative  Agent which consent shall not be  unreasonably  withheld or
delayed,  (ii) such Lender shall have received payment of an amount equal to the
outstanding  principal of its Loans, accrued interest thereon,  accrued fees and
all other amounts  payable to it hereunder,  from the assignee (to the extent of
such  outstanding  principal and accrued  interest and fees) or the Borrower (in
the case of all  other  amounts)  and  (iii) in the case of any such  assignment
resulting from a claim for compensation  under Section 2.12 or payments required
to be made pursuant to Section 2.14,  such assignment will result in a reduction
in such  compensation  or  payments.  A Lender shall not be required to make any
such  assignment and  delegation  if, prior thereto,  as a result of a waiver by
such Lender or otherwise,  the  circumstances  entitling the Borrower to require
such assignment and delegation cease to apply.

     SECTION  2.17.  Source of Funds.  None of the funds to be lent  pursuant to
this  Agreement  are assets of an  employee  benefit  plan or  constitute  "plan
assets" within the meaning of Department of Labor Regulation Section 2510.3-101.

                                  ARTICLE III

                         Representations and Warranties

     The Borrower represents and warrants to the Lenders that:

     SECTION  3.01.   Organization;   Powers.  Each  of  the  Borrower  and  its
Subsidiaries is duly organized,  validly existing and in good standing under the
laws of the  jurisdiction  of its  organization,  has all  requisite  power  and
authority  to carry on its  business  as now  conducted  and,  except  where the
failure to do so,  individually  or in the  aggregate,  could not  reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good  standing  in, every  jurisdiction  where such  qualification  is
required.

     SECTION 3.02.  Authorization;  Enforceability.  The Transactions are within
the Borrower's  corporate  powers and have been duly authorized by all necessary
corporate  and, if required,  stockholder  action.  This Agreement has been duly
executed  and  delivered  by the Borrower  and  constitutes  a legal,  valid and
binding obligation of the Borrower, enforceable in

<PAGE>  31
                                                                              27

accordance  with  its  terms,  subject  to  applicable  bankruptcy,  insolvency,
reorganization,  moratorium or other laws affecting  creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.

     SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do
not require any consent or approval  of,  registration  or filing  with,  or any
other action by, any Governmental  Authority,  except such as have been obtained
or made and are in full force and effect,  (b) will not  violate any  applicable
law or regulation or the charter,  by-laws or other organizational  documents of
the  Borrower  or any of its  Subsidiaries  or  any  order  of any  Governmental
Authority,  (c) will not  violate  or result in a default  under any  indenture,
agreement  or  other  instrument  binding  upon  the  Borrower  or  any  of  its
Subsidiaries  or its assets,  or give rise to a right  thereunder to require any
payment to be made by the Borrower or any of its  Subsidiaries in a manner which
could reasonably be expected to have a Material Adverse Effect, and (d) will not
result in the creation or  imposition  of any material  Lien on any asset of the
Borrower or any of its Subsidiaries.

     SECTION 3.04.  Financial  Condition;  No Material  Adverse Change.  (a) The
Borrower has heretofore  furnished to the Lenders its consolidated balance sheet
and statements of income,  stockholders  equity and cash flows (i) as of and for
the fiscal  year ended  January 1, 2000,  reported  on by Arthur  Andersen  LLP,
independent  public  accountants,  and (ii) as of and for the fiscal quarter and
the portion of the fiscal year ended September 30, 2000,  certified by its chief
financial  officer.  Such financial  statements  present fairly, in all material
respects, the financial position and results of operations and cash flows of the
Borrower and its consolidated Subsidiaries as of such dates and for such periods
in accordance with GAAP,  subject to year-end audit  adjustments and the absence
of footnotes in the case of the statements referred to in clause (ii) above. The
Borrower and its  Subsidiaries do not have any material  Guarantees,  contingent
liabilities  and  liabilities  for  taxes,  or any  long-term  leases or unusual
forward  or  long-term  commitments,  including  any  interest  rate or  foreign
currency  swap or  exchange  transaction  or  other  obligation  in  respect  of
derivatives,  that are not reflected in the financial  statements referred to in
this  paragraph  or in the  notes  thereto  (and,  in the case of such  lease or
commitment,  which is required in  accordance  with GAAP to be reflected in such
statements or notes) or which has not otherwise been disclosed to the Lenders in
writing.

     (b) Since  September  30,  2000,  there has been no  development,  event or
circumstance  that has had or could  reasonably  be  expected to have a Material
Adverse Effect.

     SECTION  3.05.  Properties;  Liens.  (a)  Each  of  the  Borrower  and  its
Subsidiaries  has good title to, or valid  leasehold  interests in, all its real
and personal  property  material to its  business,  except for minor  defects in
title  that do not  interfere  with its  ability  to  conduct  its  business  as
currently  conducted or to utilize such properties for their intended  purposes,
and none of such property is subject to any Lien, except as permitted by Section
6.03.

     (b) Each of the Borrower and its Subsidiaries  owns, or is licensed to use,
all trademarks,  tradenames, copyrights, patents and other intellectual property
material  to its  business,  and  the  use  thereof  by  the  Borrower  and  its
Subsidiaries  does not infringe upon the rights of any other Person,  except for
any  such  infringements  that,  individually  or in the  aggregate,  could  not
reasonably be expected to result in a Material Adverse Effect.

<PAGE>  32
                                                                              28

     SECTION  3.06.  Litigation  and  Environmental  Matters.  (a)  There are no
actions,  suits or  proceedings  by or before  any  arbitrator  or  Governmental
Authority  pending  against or, to the  knowledge  of the  Borrower,  threatened
against or  affecting  the Borrower or any of its  Subsidiaries  (i) as to which
there is a  reasonable  possibility  of an adverse  determination  and that,  if
adversely  determined,  could  reasonably  be expected,  individually  or in the
aggregate,  to result in a Material  Adverse  Effect  (other than the  Disclosed
Matters) or (ii) that involve  this  Agreement,  any other Loan  Document or the
Transactions.

     (b) Except for the  Disclosed  Matters and except with respect to any other
matters that, individually or in the aggregate, could not reasonably be expected
to result in a Material  Adverse  Effect,  neither the  Borrower  nor any of its
Subsidiaries  (i) has  failed  to comply  with any  Environmental  Law,  (ii) is
subject to any Environmental Liability, (iii) has received any written notice of
any claim with respect to any  Environmental  Liability or (iv) has knowledge of
any reason to reasonably conclude that Environmental Liability will be incurred.

     (c)  Since  the date of this  Agreement,  there  has been no  change in the
status of the Disclosed  Matters that,  individually  or in the  aggregate,  has
resulted in, or  materially  increased  the  likelihood  of, a Material  Adverse
Effect.

     SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and
its  Subsidiaries is in compliance with all laws,  regulations and orders of any
Governmental  Authority  applicable  to it or its property  and all  indentures,
agreements and other instruments  binding upon it or its property,  except where
the failure to do so, individually or in the aggregate,  could not reasonably be
expected to result in a Material Adverse Effect.

     SECTION 3.08. No Default.  Neither the Borrower nor any of its Subsidiaries
is in default under or with respect to any Contractual  Obligation or any order,
award or decree of any Governmental  Authority or arbitrator  binding upon it or
its  properties  in any  respect  which could  reasonably  be expected to have a
Material  Adverse  Effect.  No Default or Event of Default has  occurred  and is
continuing.

     SECTION 3.09.  Investment and Holding Company Status.  Neither the Borrower
nor any of its  Subsidiaries  is (a) an  "investment  company" as defined in, or
subject  to  regulation  under,  the  Investment  Company  Act of  1940 or (b) a
"holding  company" as defined  in, or subject to  regulation  under,  the Public
Utility Holding Company Act of 1935.

     SECTION  3.10.  No  Burdensome  Restrictions.  Neither the Borrower nor any
Subsidiary is a party to any  indenture,  agreement,  lease or other  instrument
which is so unusual or burdensome  such that it could be reasonably  expected to
have a Material Adverse Effect.

     SECTION 3.11.  Taxes.  Each of the Borrower and its Subsidiaries has timely
filed or caused to be filed all Tax returns  and  reports  required to have been
filed and have paid or caused to be paid all Taxes required to have been paid by
it,  except (a) Taxes  that are being  contested  in good  faith by  appropriate
proceedings and for which the Borrower or such  Subsidiary,  as applicable,  has
set aside on its books  adequate  reserves or (b) to the extent that the failure
to do so could not  reasonably  be  expected  to result  in a  Material  Adverse
Effect.

<PAGE>  33
                                                                              29

     SECTION  3.12.  Federal  Regulations.  No part of the proceeds of any Loans
hereunder will be used,  directly or indirectly,  for "buying" or "carrying" any
"margin stock" within the respective  meanings of each of the quoted terms under
Regulation  U of the Board as now and from time to time  hereafter  in effect or
for any  purpose  which  violates,  or which  would be  inconsistent  with,  the
provisions of the  Regulations  of such Board.  If requested by the Agent or any
Lender,  the  Borrower  will furnish to the Agent and each Lender a statement to
the foregoing effect in conformity with the requirements of FR Form U-1 referred
to in said Regulation U.

     SECTION 3.13. Subsidiaries.  Schedule 3.13 sets forth as of the date hereof
the name, and, where  applicable,  the jurisdiction of  organization,  number of
authorized and issued shares and ownership of each Subsidiary of the Borrower.

     SECTION 3.14. ERISA. No ERISA Event has occurred or is reasonably  expected
to occur that,  when taken  together  with all other such ERISA Events for which
liability  is  reasonably  expected to occur,  could  reasonably  be expected to
result in a  Material  Adverse  Effect.  The  present  value of all  accumulated
benefit  obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial  Accounting  Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed the fair
market  value of the assets of such Plan,  except to the extent any such  excess
(individually  or in the  aggregate)  could not reasonably be expected to have a
Material  Adverse  Effect,  and the  present  value of all  accumulated  benefit
obligations of all underfunded Plans (based on the assumptions used for purposes
of Statement of Financial  Accounting  Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed the fair
market  value of the assets of all such  underfunded  Plans except to the extent
any such excess  (individually  or in the  aggregate)  could not  reasonably  be
expected to have a Material Adverse Effect.

     SECTION  3.15.  Disclosure.  None  of the  reports,  financial  statements,
certificates or other  information  furnished by or on behalf of the Borrower to
the  Administrative  Agent or any Lender in connection  with the  negotiation of
this  Agreement or delivered  hereunder  (as modified or  supplemented  by other
information so furnished) contain any material  misstatement of fact or omits to
state any material fact necessary to make the statements  therein,  in the light
of the circumstances under which they were made, not misleading;  provided that,
with respect to projected  financial  information,  the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.

                                   ARTICLE IV

                                   Conditions

     SECTION 4.01.  Effective Date. The obligations of the Lenders to make Loans
hereunder  shall  not  become  effective  until  the date on  which  each of the
following conditions is satisfied (or waived in accordance with Section 9.02):

<PAGE>  34
                                                                              30

          (a) The Administrative  Agent (or its counsel) shall have received (i)
     either (A) a  counterpart  of this  Agreement,  executed and delivered by a
     duly   authorized   officer  of  the  Borrower  or  (B)  written   evidence
     satisfactory  to the  Administrative  Agent  (which  may  include  telecopy
     transmission of a signed  signature page of this Agreement) that such party
     has signed a counterpart  of this  Agreement and (ii) a counterpart  of the
     Subsidiary  Guarantee,  executed and delivered by a duly authorized officer
     of each Subsidiary Guarantor.

          (b) The  Administrative  Agent shall have received  favorable  written
     opinions  (addressed to the Administrative  Agent and the Lenders and dated
     the Effective Date) of (i) Kramer Levin Naftalis & Frankel LLP, counsel for
     the Borrower, substantially in the form of Exhibit B-1, and (ii) Roberta S.
     Karp, General Counsel of the Borrower, substantially in the form of Exhibit
     B-2, and each opinion covering such other matters relating to the Borrower,
     this Agreement or the Transactions as the Required Lenders shall reasonably
     request. The Borrower hereby requests such counsel to deliver such opinion.

          (c) The  Administrative  Agent  shall  have  received  all  government
     approvals  necessary  or, in the  discretion of the  Administrative  Agent,
     advisable in  connection  with the  financing  contemplated  hereby and the
     continuing  operations of the Borrower and its Subsidiaries shall have been
     obtained and be in full force and effect.

          (d) The  Administrative  Agent shall have received such  documents and
     certificates  as the  Administrative  Agent or its counsel  may  reasonably
     request  relating to the  organization,  existence and good standing of the
     Borrower and its  Subsidiaries,  the  authorization of the Transactions and
     any other legal  matters  relating to the Borrower,  this  Agreement or the
     Transactions,  all in form and  substance  reasonably  satisfactory  to the
     Administrative Agent and its counsel.

          (e)  The   Administrative   Agent  shall  have  received  (i)  audited
     consolidated  financial  statements of the Borrower for the two most recent
     fiscal years ended prior to the Effective  Date as to which such  financial
     statements are available and (ii) unaudited interim consolidated  financial
     statements of the Borrower for each  quarterly  period ended  subsequent to
     the date of the latest financial  statements  delivered  pursuant to clause
     (i) of this paragraph as to which such financial statements are available.

          (f) The Administrative Agent shall have received a certificate,  dated
     the  Effective  Date and signed by the  president,  a vice  president  or a
     Financial  Officer  of  the  Borrower,   confirming   compliance  with  the
     conditions  set forth in paragraphs  (a) and (b) of Section 4.02 (with such
     paragraph   (a)  being   deemed  for  this   purpose  not  to  include  the
     parenthetical clause included therein).

          (g) The  Administrative  Agent shall have  received all fees and other
     amounts due and payable on or prior to the Effective  Date,  including,  to
     the extent invoiced, reimbursement or payment of all out-of-pocket expenses
     required to be reimbursed or paid by the Borrower hereunder.

<PAGE>  35
                                                                              31

The  Administrative  Agent  shall  notify the  Borrower  and the  Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing,  the obligations of the Lenders to make Loans hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived
pursuant  to  Section  9.02) at or prior to 3:00 p.m.,  New York City  time,  on
November  16, 2000 (and,  in the event such  conditions  are not so satisfied or
waived, the Commitments shall terminate at such time).

     SECTION 4.02.  Each Credit Event.  The  obligation of each Lender to make a
Loan on the  occasion of any  Borrowing  is subject to the  satisfaction  of the
following conditions:

          (a) The  representations  and  warranties of the Borrower set forth in
     this Agreement  (except the  representations  set forth in Section 3.04(b),
     Section  3.06 and the first  sentence  of Section  3.08)  shall be true and
     correct in all material  respects on and as of the date of such  Borrowing,
     except for  representations  and warranties which are made as of a specific
     date which shall be true and correct as of such date.

          (b) At the  time  of and  immediately  after  giving  effect  to  such
     Borrowing, no Default shall have occurred and be continuing.

Each Borrowing  shall be deemed to constitute a  representation  and warranty by
the Borrower on the date thereof as to the matters  specified in paragraphs  (a)
and (b) of this Section.

                                   ARTICLE V

                              Affirmative Covenants

     Until the Commitments  have expired or been terminated and the principal of
and interest on each Loan and all fees payable hereunder shall have been paid in
full, the Borrower covenants and agrees with the Lenders that:

     SECTION  5.01.  Financial  Statements.  The  Borrower  will  furnish to the
Administrative Agent and each Lender:

     (a) as soon as available, but in any event within 2 Business Days after the
end of 90 days following the end of each fiscal year of the Borrower,  a copy of
the audited  consolidated  balance  sheet of the Borrower  and its  consolidated
subsidiaries  as at the end of such year and the  related  audited  consolidated
statements of income and of cash flows for such year, setting forth in each case
in  comparative  form the figures for the previous  year,  reported on without a
"going concern" or like qualification or exception, or qualification arising out
of the scope of the audit, by Arthur Andersen LLP or other independent certified
public accountants of nationally recognized standing; and

     (b) as soon as available, but in any event within 2 Business Days after the
end of 45 days following the end of each of the first three quarterly periods of
each fiscal year of the Borrower,  the unaudited  consolidated  balance sheet of
the Borrower and its consolidated subsidiaries as at the end of such quarter and
the related  unaudited  consolidated  statements of income and of cash flows for
such quarter and the portion of the fiscal year through the end of

<PAGE>  36
                                                                              32

such quarter, setting forth in each case in comparative form the figures for the
previous year, signed by a Responsible Officer (subject to normal year-end audit
adjustments).

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

     SECTION 5.02. Certificates; Other Information. The Borrower will furnish to
the Administrative  Agent and each Lender (or, in the case of clause (d), to the
relevant Lender):

     (a) concurrently with the delivery of the financial  statements referred to
in  Section  5.01(a),   a  certificate  of  the  independent   certified  public
accountants  reporting on such financial  statements  stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default, except as specified in such certificate;

     (b) concurrently with the delivery of any financial  statements pursuant to
Section 5.01,  (i) a certificate of a Responsible  Officer  stating that, to the
best of each such Responsible  Officer's knowledge,  each Loan Party during such
period has observed or performed all of its covenants and other agreements,  and
satisfied  every  condition,  contained  in this  Agreement  and the other  Loan
Documents to which it is a party to be  observed,  performed or satisfied by it,
that such Responsible  Officer has obtained no knowledge of any Default or Event
of  Default  except as  specified  in such  certificate  and (ii) in the case of
quarterly  or  annual  financial  statements,   a  Certificate   containing  all
information  and  calculations  necessary  for  determining  compliance  by  the
Borrower and its Subsidiaries with the provisions of this Agreement  referred to
therein as of the last day of the fiscal quarter or fiscal year of the Borrower,
as the case may be;

     (c)  within  five days  after the same are  sent,  copies of all  financial
statements  and reports that the  Borrower  sends to the holders of any class of
its debt securities or public equity  securities and, within five days after the
same are filed, copies of all financial statements and reports that the Borrower
may make to, or file  with,  the  Securities  and  Exchange  Commission,  or any
Governmental Authority; and

     (d) promptly, such additional financial and other information as any Lender
may from time to time reasonably request.

     SECTION 5.03.  Notices of Material Events.  The Borrower will promptly (and
in any event within five days after the Borrower knows of the following  events)
furnish  to the  Administrative  Agent  and each  Lender  written  notice of the
following:

     (a) the occurrence of any Default;

     (b) the filing or  commencement  of any action,  suit or  proceeding  by or
before  any  arbitrator  or  Governmental  Authority  against or  affecting  the
Borrower or any Affiliate thereof as to which there is a reasonable  possibility
of an adverse determination and that, if adversely determined,  could reasonably
be expected to result in a Material Adverse Effect;

<PAGE>  37
                                                                              33

     (c) the  occurrence  of any ERISA  Event that,  alone or together  with any
other ERISA Events that have  occurred,  could  reasonably be expected to have a
Material Adverse Effect; and

     (d) any other  development that results in, or could reasonably be expected
to result in, a Material Adverse Effect.

Each notice  delivered under this Section shall be accompanied by a statement of
a  Responsible  Officer  setting  forth the details of the event or  development
requiring  such notice and any action taken or proposed to be taken with respect
thereto.

     SECTION 5.04. Existence;  Conduct of Business.  The Borrower will, and will
cause each of its  Subsidiaries  to, do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence and the
rights, licenses,  permits, privileges and franchises material to the conduct of
Permitted Lines of Business;  provided that the foregoing shall not prohibit any
merger, consolidation, liquidation or dissolution permitted under Section 6.04.

     SECTION 5.05.  Payment of  Obligations.  The Borrower  will, and will cause
each of its  Subsidiaries  to, pay its  obligations,  including Tax liabilities,
that,  if not paid,  could result in a Material  Adverse  Effect before the same
shall become  delinquent or in default,  except where (a) the validity or amount
thereof is being  contested in good faith by  appropriate  proceedings,  (b) the
Borrower or such  Subsidiary has set aside on its books  adequate  reserves with
respect  thereto in  accordance  with GAAP and (c) the  failure to make  payment
pending such contest  could not  reasonably  be expected to result in a Material
Adverse Effect.

     SECTION 5.06.  Maintenance of Properties  and  Trademarks;  Insurance.  The
Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain
all property  material to the conduct of its business in good working  order and
condition, ordinary wear and tear excepted, provided that the Borrower shall, in
good  faith,  determine  when to  repair  any  property,  (b)  take  all  action
reasonably  necessary or desirable in accordance with good business practices to
(i)  maintain  in full force and  effect  such  domestic  and  foreign  patents,
trademarks,  service  marks,  trade  names,  copyrights  and  licenses  and such
material  rights with respect to the foregoing,  now or hereafter  acquired,  in
each  case  necessary  for  the  conduct  of  its  business  (collectively,  the
"Trademarks")  and (ii)  protect all  domestic  and foreign  Trademarks  against
infringement  by third  parties and (c)  maintain,  with  financially  sound and
reputable insurance companies,  insurance in such amounts and against such risks
as a prudent  Person  engaged in the same or similar  business of a similar size
and otherwise similarly situated would maintain.

     SECTION 5.07. Books and Records;  Inspection Rights. The Borrower will, and
will cause each of its  Subsidiaries to, keep proper books of record and account
in which full,  true and correct entries in conformity with GAAP are made of all
dealings  and  transactions  in relation to its  business  and  activities.  The
Borrower will, and will cause each of its  Subsidiaries  to, permit on an annual
basis (or at any time and from time to time after the  occurrence and during the
continuance of a Default or Event of Default) any representatives  designated by
the Administrative  Agent or any Lender,  upon reasonable prior notice, to visit
and inspect its  properties,  to examine  and make  extracts  from its books and
records, and to discuss its affairs,

<PAGE>  38
                                                                              34

finances and condition  with its officers and  independent  accountants,  all at
such reasonable times and as often as reasonably requested.

     SECTION  5.08.   Environmental  Laws.  The  Borrower  will,  and  will  use
reasonable best efforts to cause each of its Subsidiaries to:

     (a) Comply in all material  respects with, and use reasonable  best efforts
to ensure  compliance in all material  respects by their tenants and subtenants,
if any,  with,  all applicable  Environmental  Laws,  except for such matters of
noncompliance  which could not  reasonably be expected,  individually  or in the
aggregate, to result in a Material Adverse Effect.

     (b)  Except to the  extent  being  contested  in good  faith,  conduct  and
complete all investigations,  studies,  sampling and testing,  and all remedial,
removal and other actions required under  Environmental  Laws or by Governmental
Authorities.

     SECTION 5.09.  Compliance.  The Borrower  will,  and will cause each of its
Subsidiaries to, comply with all Contractual Obligations and Requirements of Law
except  to the  extent  that  failure  to comply  therewith  could  not,  in the
aggregate, reasonably be expected to have a Material Adverse Effect.

     SECTION 5.10. Additional  Subsidiaries.  The Borrower will, with respect to
any  Person  that,  subsequent  to the  Effective  Date,  becomes  a  Subsidiary
organized in a jurisdiction  within the United  States,  promptly cause such new
Subsidiary  to  become  a  party  to  the  Subsidiary   Guarantee   pursuant  to
documentation which is in form and substance  satisfactory to the Administrative
Agent;  provided  that the  Administrative  Agent and the  Borrower may agree in
writing that any  non-material  or less than  wholly-owned  Subsidiary  need not
become a Subsidiary Guarantor.

     SECTION 5.11. Use of Proceeds.  The proceeds of the Loans will be used only
to  refinance  existing  debt,  provide  working  capital and for other  general
corporate  purposes of the  Borrower,  including,  without  limitation,  capital
expenditures,  stock  repurchases,  Permitted  Acquisitions  and  support of its
commercial  paper  facility.  No part of the  proceeds of any Loan will be used,
whether directly or indirectly,  for any purpose that entails a violation of any
of the Regulations of the Board, including Regulations U and X.

                                   ARTICLE VI

                               Negative Covenants

     Until the  Commitments  have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder have been paid in full, the
Borrower covenants and agrees with the Lenders that:

     SECTION 6.01. Financial Covenants.

<PAGE>  39
                                                                              35

          (a) Leverage Ratio. The Borrower will not permit the Leverage Ratio as
     at the last day of any period of four  consecutive  fiscal  quarters of the
     Borrower to exceed 2.50 to 1.00.

          (b) Fixed Charge  Coverage  Ratio.  The  Borrower  will not permit the
     Fixed  Charge  Coverage  Ratio for any  period of four  consecutive  fiscal
     quarters of the  Borrower to be less than (i) 2.25 to 1.00 from the Closing
     Date until but excluding the first anniversary  thereof,  (ii) 2.50 to 1.00
     from the first  anniversary  of the Closing  Date until but  excluding  the
     second anniversary thereof and (iii) 2.75 to 1.00 from and after the second
     anniversary of the Closing Date.

     SECTION 6.02. Indebtedness.  The Borrower will not, and will not permit any
Subsidiary  to,  create,  incur,  assume or  permit  to exist any  Indebtedness,
except:

          (a) Indebtedness created hereunder;

          (b) Indebtedness existing on the date hereof and set forth in Schedule
     6.02;

          (c)  Indebtedness  of  the  Borrower  to  any  Subsidiary  and  of any
     Subsidiary to the Borrower or any other Subsidiary;

          (d) Guarantees by the Borrower of  Indebtedness  of any Subsidiary and
     by any Subsidiary of Indebtedness of the Borrower or any other Subsidiary;

          (e) Indebtedness of the Borrower or any Subsidiary incurred to finance
     the  acquisition,  construction  or  improvement  of any  fixed or  capital
     assets, including Capital Lease Obligations and any Indebtedness assumed in
     connection  with the acquisition of any such assets or secured by a Lien on
     any such assets prior to the  acquisition  thereof,  provided that (i) such
     Indebtedness is incurred prior to or within 90 days after such  acquisition
     or the  completion  of  such  construction  or  improvement  and  (ii)  the
     aggregate  principal  amount of  Indebtedness  permitted by this clause (e)
     shall not exceed $150,000,000 at any time outstanding;

          (f)  Indebtedness  of any Person that becomes a  Subsidiary  after the
     date hereof;  provided that (i) such Indebtedness exists or is committed at
     the  time  such  Person   becomes  a  Subsidiary  and  is  not  created  in
     contemplation  of or in connection  with such Person  becoming a Subsidiary
     and (ii) the  Borrower and its  Subsidiaries  are in  compliance,  on a pro
     forma basis after giving  effect to such  acquisition,  with the  covenants
     contained  in  Section  6.01  recomputed  as at the  last  day of the  most
     recently  ended  fiscal  quarter  of  the  Borrower  for  which   financial
     statements are available,  as if such acquisition had occurred on the first
     day of each relevant period for testing such compliance;

          (g) Indebtedness of the Borrower or any Subsidiary  incurred (a) as an
     account  party in respect of trade letters of credit issued in the ordinary
     course of business and (b) in connection  with standby letters of credit in
     an  aggregate  principal  amount  not  exceeding  $25,000,000  at any  time
     outstanding;

<PAGE>  40
                                                                              36

          (h)  Indebtedness  of the  Borrower  or any  Subsidiary  in respect of
     commercial paper;  provided that the aggregate amount of such Indebtedness,
     when added to the aggregate  amount of outstanding  Loans and "Loans" under
     the 364-Day Credit Agreement,  shall not exceed the aggregate amount of the
     Commitments and the "Commitments" under the 364-Day Credit Agreement;

          (i) Subordinated Indebtedness;

          (j)  any   refinancings,   refundings,   renewals  or   extensions  of
     Indebtedness  permitted  hereunder  that do not  increase  the  outstanding
     principal amount of such Indebtedness;

          (k) additional  Indebtedness not otherwise permitted hereunder secured
     by Liens and not exceeding  $100,000,000 in aggregate  principal  amount at
     any time outstanding;

          (l) Indebtedness not otherwise permitted hereunder, not secured by any
     Lien and incurred after the date hereof; provided that the Borrower and its
     Subsidiaries are in compliance, on a pro forma basis after giving effect to
     such Indebtedness,  with the covenants contained in Section 6.01 recomputed
     as at the  last  day of the  most  recently  ended  fiscal  quarter  of the
     Borrower  for  which  financial  statements  are  available,   as  if  such
     Indebtedness had been incurred on the first day of each relevant period for
     testing such compliance; and

          (m) Indebtedness created under the 364-Day Credit Agreement.

     SECTION  6.03.  Liens.  The  Borrower  will not,  and will not  permit  any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter  acquired by it, or assign or sell any income or
revenues  (including  accounts  receivable) or rights in respect of any thereof,
except:

          (a) Permitted Encumbrances;

          (b)  any  Lien  on  any  property  or  asset  of the  Borrower  or any
     Subsidiary  existing  on the date  hereof and set forth in  Schedule  6.03;
     provided that (i) such Lien shall not apply to any other  property or asset
     of the  Borrower  or any  Subsidiary  and (ii) such Lien shall  secure only
     those  obligations  which it  secures on the date  hereof  and  extensions,
     renewals and  replacements  thereof  that do not  increase the  outstanding
     principal amount thereof;

          (c) Liens  arising by the terms of letters of credit  entered  into in
     the ordinary  course of business to secure  reimbursement  obligations  and
     other obligations in connection therewith;

          (d) Liens solely constituting the right of any other Person to a share
     of any  licensing  royalties  (pursuant  to a licensing  agreement or other
     related  agreement  entered into by the Borrower or any of its Subsidiaries
     with  such  Person  in the  ordinary  course  of  the  Borrower's  or  such
     Subsidiary's business) otherwise payable to the Borrower or any

<PAGE>  41
                                                                              37

     of its  Subsidiaries,  provided that such right shall have been conveyed to
     such Person for  consideration  received by the Borrower or such Subsidiary
     on an arm's-length basis;

          (e) Liens  arising by reason of any  judgment,  decree or order of any
     court or other Governmental Authority for the payment of money in aggregate
     amount not to exceed $25,000,000 at any time outstanding;

          (f) Liens arising in connection  with  factoring  accounts  receivable
     related to any acquired Subsidiary;  provided that such factoring shall not
     continue for a period longer than one year from the date such Subsidiary is
     acquired;

          (g)  any  Lien  existing  on  any  property  or  asset  prior  to  the
     acquisition  thereof by the Borrower or any  Subsidiary  or existing on any
     property or asset of any Person that  becomes a  Subsidiary  after the date
     hereof prior to the time such Person  becomes a  Subsidiary;  provided that
     (i) such Lien is not created in contemplation of or in connection with such
     acquisition or such Person becoming a Subsidiary,  as the case may be, (ii)
     such Lien shall not apply to any other  property or assets of the  Borrower
     or any Subsidiary  and (iii) such Lien shall secure only those  obligations
     which it secures on the date of such  acquisition  or the date such  Person
     becomes  a  Subsidiary,  as the case may be and  extensions,  renewals  and
     replacements thereof that do not increase the outstanding  principal amount
     thereof;

          (h) Liens on fixed or capital assets acquired, constructed or improved
     by  the  Borrower  or any  Subsidiary;  provided  that  (i)  such  security
     interests secure Indebtedness permitted by clause (e) of Section 6.02, (ii)
     such security  interests and the Indebtedness  secured thereby are incurred
     prior to or within 90 days after such acquisition or the completion of such
     construction or improvement,  (iii) the  Indebtedness  secured thereby does
     not exceed 100% of the cost of acquiring,  constructing  or improving  such
     fixed or capital assets and (iv) such security interests shall not apply to
     any other property or assets of the Borrower or any Subsidiary; and

          (i) Liens securing  Indebtedness  permitted under Sections 6.02(j) and
     6.02(k);  provided that with respect to Indebtedness  incurred  pursuant to
     Section 6.02(j) no such Lien is spread to cover additional property.

     SECTION 6.04.  Fundamental Changes.  Except in connection with transactions
otherwise permitted pursuant to Section 6.05 or 6.06, the Borrower will not, and
will not permit any  Subsidiary  to,  merge into or  consolidate  with any other
Person,  or permit  any other  Person to merge into or  consolidate  with it, or
sell, transfer, lease or otherwise dispose of (in one transaction or in a series
of transactions) all or substantially all of its assets, or all or substantially
all of the stock of any of its Subsidiaries (in each case,  whether now owned or
hereafter  acquired),  or  liquidate or  dissolve,  except that,  if at the time
thereof and  immediately  after giving  effect  thereto,  no Default  shall have
occurred  and be  continuing  (i) any Person may merge  into the  Borrower  in a
transaction in which the Borrower is the surviving corporation,  (ii) any Person
may merge into any Subsidiary in a transaction in which the surviving  entity is
a  Subsidiary  and,  if  required  to be so under  Section  5.10,  a  Subsidiary
Guarantor,  (iii) any Subsidiary may sell, transfer,  lease or otherwise dispose
of its assets to the Borrower or to another Subsidiary which is

<PAGE>  42
                                                                              38

a Subsidiary  Guarantor and (iv) any Subsidiary may liquidate or dissolve if the
Borrower determines in good faith that such liquidation or dissolution is in the
best  interests  of the Borrower and is not  materially  disadvantageous  to the
Lenders;  provided that any such merger  involving a Person that is not a wholly
owned Subsidiary  immediately prior to such merger shall not be permitted unless
also permitted by Section 6.05.

     SECTION 6.05.  Investments,  Loans, Advances,  Guarantees and Acquisitions;
Hedging  Agreements.  (a) The Borrower  will not, and will not permit any of its
Subsidiaries to,  purchase,  hold or acquire  (including  pursuant to any merger
with any Person that was not a wholly owned Subsidiary prior to such merger) any
capital stock,  evidences of  indebtedness  or other  securities  (including any
option,  warrant or other  right to acquire  any of the  foregoing)  of, make or
permit to exist any loans or advances to,  guarantee any obligations of, or make
or permit to exist any investment or any other interest in, any other Person, or
purchase or otherwise  acquire (in one transaction or a series of  transactions)
any assets of any other Person constituting a business unit, except:

          (i) existing  investments not otherwise permitted under this Agreement
     and described in Schedule 6.05(i) hereto;

          (ii) investments made in accordance with the investment  policy of the
     Borrower as set forth on Schedule  6.05(ii)  hereto;  as provided  that any
     material amendment or other material modification to such policy is subject
     to the approval of the Administrative Agent in its reasonable discretion;

          (iii)  investments  by  the  Borrower  in  the  capital  stock  of its
     Subsidiaries;

          (iv) Permitted Acquisitions;

          (v)  investments  received in connection with the bona fide settlement
     of any defaulted  Indebtedness  or other  liability owed to the Borrower or
     any Subsidiary;

          (vi)  advances  or loans made in the  ordinary  course of  business to
     employees of the Borrower or any of its Subsidiaries in an aggregate amount
     not to exceed $10,000,000 at any time outstanding;

          (vii)  loans or  advances to third  party  contractors,  suppliers  or
     customers  in the  ordinary  course of business  and  consistent  with past
     practice;

          (viii) loans or advances  made by the Borrower to any  Subsidiary  and
     made by any Subsidiary to the Borrower or any other Subsidiary;

          (ix)  guarantees by the Borrower or any  Subsidiary of  obligations of
     the Borrower or any other Subsidiary which do not constitute Indebtedness;

          (x) Guarantees  constituting  Indebtedness  permitted by Section 6.02;
     and

          (xi) any other  investments in, advances or loans to or Guarantees of,
     any Person in an aggregate  amount not to exceed  $200,000,000  at any time
     outstanding;

<PAGE>  43
                                                                              39

     (b) The Borrower will not, and will not permit any of its  Subsidiaries to,
enter into any Hedging Agreement,  other than Hedging Agreements entered into in
the  ordinary  course  of  business  (including,   without  limitation,  Hedging
Agreements in connection with the Borrower's stock repurchase  program) to hedge
or  mitigate  risks to which the  Borrower or any  Subsidiary  is exposed in the
conduct of its business or the management of its liabilities.

     SECTION 6.06.  Limitation on Sale of Assets.  Except in the ordinary course
of business,  the Borrower will not, and will not permit any of its Subsidiaries
to,  sell,  convey,  lease,  transfer  or  otherwise  dispose of (other  than as
otherwise  permitted by Section 6.04 or 6.05) all or any substantial part of its
assets;   provided  that  the  foregoing  shall  not  prohibit  any  such  sale,
conveyance,  lease,  transfer  or  disposition  (i) which (x) is for a price not
materially  less than the fair market  value of such  assets of the  Borrower or
such Subsidiary,  (y) would not materially impair the ability of the Borrower to
perform its  obligations  under this  Agreement  and (z) together with all other
such sales,  conveyances,  leases,  transfers  and  dispositions,  would have no
Material  Adverse Effect,  (ii) of assets that  individually or in the aggregate
constitute  less  than  15%  of  the  total  assets  of  the  Borrower  and  its
Subsidiaries  taken as a whole or (iii) of assets in connection  with  factoring
arrangements  with  respect  to any  acquired  Subsidiary,  provided  that  such
factoring  arrangements do not continue longer than a year after such Subsidiary
is acquired by the Borrower.

     SECTION  6.07.  Restricted  Payments.  The Borrower  will not, and will not
permit any of its  Subsidiaries  to,  declare or make,  or agree to pay or make,
directly or  indirectly,  any  Restricted  Payment,  except (a) the Borrower may
declare and pay dividends  with respect to its capital  stock payable  solely in
additional  shares of its  common  stock,  (b) so long as no Default or Event of
Default  has  occurred  and is  continuing,  the  Borrower  may  declare and pay
dividends with respect to its capital stock,  (c) any Subsidiary may declare and
pay dividends to the Borrower or, in the case of any  Subsidiary  that is wholly
owned by another Subsidiary, to such other Subsidiary, (d) the Borrower may make
Restricted  Payments  pursuant to and in  accordance  with stock option plans or
other  benefit  plans  for  management  or  employees  of the  Borrower  and its
Subsidiaries,  (e) so long as no Default or Event of Default has occurred and is
continuing,  the Borrower may repurchase its capital stock pursuant to its stock
repurchase  program  and (f) so long as no  Default  or  Event  of  Default  has
occurred  and is  continuing,  the  Borrower  may make  Restricted  Payments  in
connection  with the  repurchase of the Capital Stock of Lucky Brands,  Inc. and
Segrets, Inc.

     SECTION 6.08. Transactions with Affiliates. The Borrower will not, and will
not permit any of its  Subsidiaries  to, sell,  lease or otherwise  transfer any
property or assets to, or purchase,  lease or otherwise  acquire any property or
assets from,  or otherwise  engage in any other  transactions  with,  any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Borrower or such  Subsidiary than could
be  obtained  on  an  arm's-length  basis  from  unrelated  third  parties,  (b)
transactions  between or among the Borrower and its  Subsidiaries  not involving
any other Affiliate and (c) any Restricted Payment permitted by Section 6.07.

     SECTION 6.09.  Changes in Fiscal  Periods.  The Borrower will not, and will
not permit any of its  Subsidiaries  to, permit the fiscal year of such Borrower
to end on a day other

<PAGE>  44
                                                                              40

than the last Saturday  closest to December 31 or change such Borrower's  method
of determining fiscal quarters.

     SECTION 6.10. Lines of Business. The Borrower will not, and will not permit
any of its Subsidiaries to, enter into any business,  either directly or through
any Subsidiary, except for Permitted Lines of Business.

                                  ARTICLE VII

                                Events of Default

     If any of the following events ("Events of Default") shall occur:

          (a) the Borrower  shall fail to pay any principal of any Loan when and
     as the same shall become due and  payable,  whether at the due date thereof
     or at a date fixed for prepayment thereof or otherwise;

          (b) the Borrower shall fail to pay any interest on any Loan or any fee
     or any other amount (other than an amount referred to in clause (a) of this
     Article)  payable under this  Agreement,  when and as the same shall become
     due and payable, and such failure shall continue unremedied for a period of
     five days;

          (c) any representation or warranty made or deemed made by or on behalf
     of the Borrower or any  Subsidiary in or in connection  with this Agreement
     or any amendment or  modification  hereof,  or in any report,  certificate,
     financial   statement  or  other  document  furnished  pursuant  to  or  in
     connection  with this  Agreement or any amendment or  modification  hereof,
     shall prove to have been materially incorrect when made or deemed made;

          (d) the  Borrower  shall  fail to observe  or  perform  any  covenant,
     condition  or  agreement  contained  in Section  5.04 (with  respect to the
     Borrower's existence) or 5.11 or in Article VI;

          (e) the  Borrower  shall  fail to observe  or  perform  any  covenant,
     condition  or  agreement  contained  in this  Agreement  (other  than those
     specified  in clause (a),  (b) or (d) of this  Article),  and such  failure
     shall continue unremedied for a period of 30 days after notice thereof from
     the  Administrative  Agent  (given at the  request  of any  Lender)  to the
     Borrower;

          (f) the  Borrower  or any  Subsidiary  shall fail to make any  payment
     (whether of principal or interest and  regardless  of amount) in respect of
     any  Material  Indebtedness,  when and as the  same  shall  become  due and
     payable (after giving effect to any applicable period of grace);

          (g) any default or any event of default  with  respect to any Material
     Indebtedness which results in such Material Indebtedness becoming due prior
     to its  scheduled  maturity or that enables or permits (with or without the
     giving of notice, the

<PAGE>  45
                                                                              41

     lapse of time or both) the holder or holders of any  Material  Indebtedness
     or any  trustee  or agent  on its or their  behalf  to cause  any  Material
     Indebtedness  to become  due,  or to require  the  prepayment,  repurchase,
     redemption or defeasance thereof, prior to its scheduled maturity;

          (h) an  involuntary  proceeding  shall be commenced or an  involuntary
     petition shall be filed seeking (i)  liquidation,  reorganization  or other
     relief in respect of the Borrower or any  Subsidiary or its debts,  or of a
     substantial  part of its  assets,  under  any  Federal,  state  or  foreign
     bankruptcy,  insolvency,  receivership  or similar law now or  hereafter in
     effect  or  (ii)  the  appointment  of  a  receiver,   trustee,  custodian,
     sequestrator,  conservator  or similar  official  for the  Borrower  or any
     Subsidiary or for a substantial part of its assets,  and, in any such case,
     such  proceeding or petition shall continue  undismissed  for 60 days or an
     order  or  decree  approving  or  ordering  any of the  foregoing  shall be
     entered;

          (i) the Borrower or any Subsidiary shall (i) voluntarily  commence any
     proceeding  or file any petition  seeking  liquidation,  reorganization  or
     other relief under any Federal,  state or foreign  bankruptcy,  insolvency,
     receivership or similar law now or hereafter in effect, (ii) consent to the
     institution of, or fail to contest in a timely and appropriate  manner, any
     proceeding or petition described in clause (h) of this Article, (iii) apply
     for or  consent  to the  appointment  of a  receiver,  trustee,  custodian,
     sequestrator,  conservator  or similar  official  for the  Borrower  or any
     Subsidiary  or for a  substantial  part of its assets,  (iv) file an answer
     admitting the material  allegations  of a petition  filed against it in any
     such proceeding, (v) make a general assignment for the benefit of creditors
     or (vi) take any action for the purpose of effecting any of the foregoing;

          (j) the  Borrower or any  Subsidiary  shall  become  unable,  admit in
     writing or fail generally to pay its debts as they become due;

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

          (l) an ERISA Event  shall have  occurred  that,  in the opinion of the
     Required Lenders, when taken together with all other ERISA Events that have
     occurred,  could  reasonably  be expected  to result in a Material  Adverse
     Effect; or

          (m) a Change in Control shall occur;

then,  and in every such event (other than an event with respect to the Borrower
described  in clause  (h) or (i) of this  Article),  and at any time  thereafter
during the continuance of such event, the Administrative  Agent with the consent
of the Required  Lenders may, and at the request of the Required  Lenders shall,
by notice to the Borrower,  take either or both of the following actions, at the
same or different  times:  (i)  terminate  the  Commitments,  and  thereupon the
Commitments

<PAGE>  46
                                                                              42

shall terminate  immediately,  and (ii) declare the Loans then outstanding to be
due and  payable  in whole  (or in  part,  in which  case any  principal  not so
declared  to be due  and  payable  may  thereafter  be  declared  to be due  and
payable),  and  thereupon  the  principal of the Loans so declared to be due and
payable,  together  with  accrued  interest  thereon  and  all  fees  and  other
obligations  of the  Borrower  accrued  hereunder,  shall become due and payable
immediately,  without presentment,  demand, protest or other notice of any kind,
all of which are hereby  waived by the  Borrower;  and in case of any event with
respect to the  Borrower  described  in clause (h) or (i) of this  Article,  the
Commitments  shall  automatically  terminate and the principal of the Loans then
outstanding,  together  with  accrued  interest  thereon  and all fees and other
obligations of the Borrower accrued hereunder,  shall  automatically  become due
and payable,  without presentment,  demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.

                                  ARTICLE VIII

                            The Administrative Agent

     Each of the Lenders hereby irrevocably appoints the Administrative Agent as
its agent and  authorizes the  Administrative  Agent to take such actions on its
behalf and to exercise such powers as are delegated to the Administrative  Agent
by the terms  hereof,  together  with such actions and powers as are  reasonably
incidental thereto.

     The bank serving as the Administrative  Agent hereunder shall have the same
rights  and  powers in its  capacity  as a Lender as any  other  Lender  and may
exercise the same as though it were not the Administrative  Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally  engage
in any kind of business with the Borrower or any  Subsidiary or other  Affiliate
thereof as if it were not the Administrative Agent hereunder.

     The  Administrative  Agent shall not have any duties or obligations  except
those  expressly  set forth  herein.  Without  limiting  the  generality  of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other  implied  duties,  regardless  of whether a Default  has  occurred  and is
continuing,  (b) the  Administrative  Agent  shall not have any duty to take any
discretionary action or exercise any discretionary  powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent is
required  to  exercise  in writing by the  Required  Lenders,  and (c) except as
expressly set forth herein, the Administrative  Agent shall not have any duty to
disclose,  and shall not be liable for the failure to disclose,  any information
relating to the Borrower or any of its  Subsidiaries  that is communicated to or
obtained by the bank serving as Administrative Agent or any of its Affiliates in
any capacity.  The Administrative Agent shall not be liable for any action taken
or not taken by it with the consent or at the request of the Required Lenders or
in  the  absence  of  its  own  gross  negligence  or  willful  misconduct.  The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written  notice  thereof is given to the  Administrative  Agent by the
Borrower or a Lender, and the Administrative  Agent shall not be responsible for
or have any duty to  ascertain or inquire  into (i) any  statement,  warranty or
representation  made in or in connection with this Agreement,  (ii) the contents
of  any  certificate,  report  or  other  document  delivered  hereunder  or  in
connection  herewith,  (iii)  the  performance  or  observance  of  any  of  the
covenants,  agreements or other terms or conditions  set forth herein,  (iv) the
validity, enforceability,  effectiveness or genuineness of this Agreement or any
other agreement,

<PAGE>  47
                                                                              43

instrument or document,  or (v) the  satisfaction  of any condition set forth in
Article IV or elsewhere herein, other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent.

     The  Administrative  Agent shall be  entitled  to rely upon,  and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement,  instrument,  document or other writing  believed by it to be genuine
and to have been signed or sent by the proper Person. The  Administrative  Agent
also may rely upon any statement  made to it orally or by telephone and believed
by it to be made by the proper  Person,  and shall not incur any  liability  for
relying thereon.  The  Administrative  Agent may consult with legal counsel (who
may be counsel for the  Borrower),  independent  accountants  and other  experts
selected by it, and shall not be liable for any action  taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.

     The  Administrative  Agent may perform any and all its duties and  exercise
its rights and powers by or through any one or more sub-agents  appointed by the
Administrative  Agent.  The  Administrative  Agent  and any such  sub-agent  may
perform any and all its duties and exercise its rights and powers  through their
respective  Related  Parties.  The  exculpatory   provisions  of  the  preceding
paragraphs  shall apply to any such sub-agent and to the Related  Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the  syndication of the credit  facility  provided
for herein as well as activities as Administrative Agent.

     Subject to the  appointment  and  acceptance of a successor  Administrative
Agent as provided in this paragraph,  the Administrative Agent may resign at any
time by notifying the Lenders and the Borrower.  Upon any such resignation,  the
Required  Lenders shall have the right,  in consultation  with the Borrower,  to
appoint  a  successor.  If no  successor  shall  have been so  appointed  by the
Required Lenders and shall have accepted such  appointment  within 30 days after
the  retiring  Administrative  Agent gives notice of its  resignation,  then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent which shall be a bank with an office in New York, New York,
or an Affiliate of any such bank.  Upon the  acceptance  of its  appointment  as
Administrative  Agent hereunder by a successor,  such successor shall succeed to
and become  vested with all the  rights,  powers,  privileges  and duties of the
retiring  Administrative  Agent, and the retiring  Administrative Agent shall be
discharged  from its duties and obligations  hereunder.  The fees payable by the
Borrower to a successor  Administrative Agent shall be the same as those payable
to its  predecessor  unless  otherwise  agreed  between  the  Borrower  and such
successor.   After  the  Administrative  Agent's  resignation   hereunder,   the
provisions  of this  Article and Section  9.03 shall  continue in effect for its
benefit in respect  of any  actions  taken or omitted to be taken by it while it
was acting as Administrative Agent.

     Each Lender  acknowledges  that it has,  independently and without reliance
upon the  Administrative  Agent or any other Lender and based on such  documents
and information as it has deemed  appropriate,  made its own credit analysis and
decision to enter into this  Agreement.  Each Lender also  acknowledges  that it
will,  independently and without reliance upon the  Administrative  Agent or any
other Lender and based on such  documents and  information as it shall from time
to time deem appropriate, continue to make its own decisions in

<PAGE>  48
                                                                              44

taking or not taking  action  under or based upon this  Agreement,  any  related
agreement or any document furnished hereunder or thereunder.

     Neither the Documentation  Agent or Syndication Agent shall have any duties
or responsibilities hereunder in its capacity as such.

                                   ARTICLE IX

                                  Miscellaneous

     SECTION   9.01.   Notices.   Except  in  the  case  of  notices  and  other
communications  expressly  permitted to be given by  telephone,  all notices and
other  communications  provided  for  herein  shall be in  writing  and shall be
delivered  by  hand  or  overnight  courier  service,  mailed  by  certified  or
registered mail or sent by facsimile, as follows:

          (a) if to the Borrower,  to it at Liz  Claiborne,  Inc., One Claiborne
     Avenue, North Bergen, New Jersey 07047, Attention of Robert Vill (Facsimile
     No. 201-295-7825);

          (b) if to the Administrative  Agent, to The Chase Manhattan Bank, Loan
     and Agency Services Group,  One Chase Manhattan Plaza, 8th Floor, New York,
     New York 10081,  Attention of Jesus Sang  (Facsimile  No. (212)  270-0002),
     with a copy to The Chase  Manhattan  Bank,  1411 Broadway,  New York 10018,
     Attention  of Liz  Claiborne  Relationship  Manager  (Facsimile  No.  (212)
     391-7118); and

          (c) if to any other Lender, to it at its address (or number) set forth
     in its Administrative Questionnaire.

Any party  hereto may change its  address or  facsimile  number for  notices and
other  communications  hereunder  by  notice to the other  parties  hereto.  All
notices and other  communications  given to any party hereto in accordance  with
the provisions of this Agreement  shall be deemed to have been given on the date
of receipt.

     SECTION  9.02.  Waivers;  Amendments.  (a)  No  failure  or  delay  by  the
Administrative  Agent or any Lender in exercising  any right or power  hereunder
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such  right or  power,  or any  abandonment  or  discontinuance  of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the  exercise  of any other  right or power.  The  rights  and  remedies  of the
Administrative  Agent  and the  Lenders  hereunder  are  cumulative  and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any  provision  of this  Agreement  or consent to any  departure by the Borrower
therefrom shall in any event be effective  unless the same shall be permitted by
paragraph  (b) of this  Section,  and  then  such  waiver  or  consent  shall be
effective  only in the  specific  instance  and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan shall not
be  construed  as  a  waiver  of  any   Default,   regardless   of  whether  the
Administrative  Agent or any  Lender may have had  notice or  knowledge  of such
Default at the time.

<PAGE>  49
                                                                              45

     (b) Neither this Agreement nor any provision hereof may be waived,  amended
or modified  except  pursuant to an agreement or agreements  in writing  entered
into by the  Borrower  and  the  Required  Lenders  or by the  Borrower  and the
Administrative Agent with the consent of the Required Lenders;  provided that no
such  agreement  shall (i) increase  the  Commitment  of any Lender  without the
written consent of such Lender,  (ii) reduce the principal amount of any Loan or
reduce  the rate of  interest  thereon,  or reduce any fees  payable  hereunder,
without the written consent of each Lender affected thereby,  (iii) postpone the
scheduled  date of payment of the  principal  amount of any Loan or any interest
thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse
any  such  payment,  or  postpone  the  scheduled  date  of  expiration  of  any
Commitment,  without the written consent of each Lender affected  thereby,  (iv)
change Section  2.15(b) or (c) in a manner that would alter the pro rata sharing
of payments  required thereby,  without the written consent of each Lender,  (v)
except in connection with transactions  otherwise  permitted pursuant to Section
6.04,  6.05  or  6.06,  release  all or  substantially  all  of  the  Subsidiary
Guarantors from their  obligations under the Subsidiary  Guarantee,  without the
written  consent of each Lender,  or (vi) change any of the  provisions  of this
Section or the definition of "Required  Lenders" or any other  provision  hereof
specifying  the number or  percentage  of Lenders  required  to waive,  amend or
modify any  rights  hereunder  or make any  determination  or grant any  consent
hereunder,  without the written consent of each Lender; provided further that no
such agreement shall amend,  modify or otherwise  affect the rights or duties of
the  Administrative  Agent  hereunder  without the prior written  consent of the
Administrative Agent.

     SECTION 9.03.  Expenses;  Indemnity;  Damage Waiver. (a) The Borrower shall
pay (i) all reasonable  out-of-pocket  expenses  incurred by the  Administrative
Agent and Chase  Securities  Inc.,  including the reasonable  fees,  charges and
disbursements  of counsel for the  Administrative  Agent, in connection with the
syndication of the credit  facility  provided for herein,  the  preparation  and
administration of this Agreement or any amendments,  modifications or waivers of
the provisions  hereof (whether or not the transactions  contemplated  hereby or
thereby shall be consummated) and (ii) all  out-of-pocket  expenses  incurred by
any Administrative  Agent or any Lender,  including the reasonable fees, charges
and disbursements of any counsel for the Administrative  Agent or any Lender, in
connection  with the  enforcement or protection of its rights in connection with
this Agreement,  including its rights under this Section,  or in connection with
the  Loans  made   hereunder,   including  in   connection   with  any  workout,
restructuring or negotiations in respect thereof.

     (b) The Borrower shall indemnify the Administrative  Agent and each Lender,
and each Related Party of any of the  foregoing  Persons (each such Person being
called an "Indemnitee") against, and hold each Indemnitee harmless from, any and
all losses,  claims,  damages,  liabilities and related expenses,  including the
fees,  charges and disbursements of any counsel for any Indemnitee,  incurred by
or asserted  against any Indemnitee  arising out of, in connection with, or as a
result of (i) the  execution or delivery of this  Agreement or any  agreement or
instrument  contemplated  hereby, the performance by the parties hereto of their
respective  obligations hereunder or the consummation of the Transactions or any
other transactions contemplated hereby, (ii) any Loan or the use of the proceeds
therefrom,  (iii)  any  actual or  alleged  presence  or  release  of  Hazardous
Materials  on or from any  property  owned or operated by the Borrower or any of
its  Subsidiaries,  or any  Environmental  Liability,  or  (iv)  any  actual  or
prospective claim,  litigation,  investigation or proceeding  relating to any of
the

<PAGE>  50
                                                                              46

foregoing, whether based on contract, tort or any other theory and regardless of
whether any  Indemnitee is a party thereto;  provided that such indemnity  shall
not, as to any Indemnitee,  be available to the extent that such losses, claims,
damages,  liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.

     (c) To the extent that the Borrower fails to pay any amount  required to be
paid  by it to the  Administrative  Agent  under  paragraph  (a) or (b) of  this
Section,  each Lender severally agrees to pay to the  Administrative  Agent such
Lender's  Applicable  Percentage  (determined as of the time that the applicable
unreimbursed  expense or  indemnity  payment is sought) of such  unpaid  amount;
provided that the  unreimbursed  expense or  indemnified  loss,  claim,  damage,
liability  or related  expense,  as the case may be, was incurred by or asserted
against the Administrative Agent in its capacity as such.

     (d) To the extent  permitted by  applicable  law,  the  Borrower  shall not
assert,  and hereby waives,  any claim against any Indemnitee,  on any theory of
liability, for special, indirect,  consequential or punitive damages (as opposed
to direct or actual damages)  arising out of, in connection with, or as a result
of, this  Agreement or any  agreement or  instrument  contemplated  hereby,  the
Transactions or any Loan or the use of the proceeds thereof.

     (e) All amounts due under this Section  shall be payable  promptly no later
than seven (7) days after written demand therefor.

     SECTION 9.04.  Successors and Assigns. (a) The provisions of this Agreement
shall be binding  upon and inure to the benefit of the parties  hereto and their
respective successors and assigns permitted hereby, except that the Borrower may
not assign or  otherwise  transfer  any of its rights or  obligations  hereunder
without the prior written  consent of each Lender (and any attempted  assignment
or  transfer  by the  Borrower  without  such  consent  shall be null and void).
Nothing in this  Agreement,  expressed or implied,  shall be construed to confer
upon any Person (other than the parties hereto, their respective  successors and
assigns permitted hereby and, to the extent expressly  contemplated  hereby, the
Related Parties of each of the  Administrative  Agent and the Lenders) any legal
or equitable right, remedy or claim under or by reason of this Agreement.

     (b) Any Lender may assign to one or more  assignees all or a portion of its
rights and obligations  under this Agreement  (including all or a portion of its
Commitment  and the Loans at the time owing to it);  provided that (i) except in
the case of an  assignment  to a Lender or an Affiliate of a Lender other than a
Conduit Lender, each of the Borrower and the Administrative  Agent must give its
prior  written  consent  to  such   assignment   (which  consent  shall  not  be
unreasonably withheld),  (ii) except in the case of an assignment to a Lender or
an Affiliate of a Lender or an assignment of the entire  remaining amount of the
assigning  Lender's  Commitment,  the amount of the  Commitment of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and   Acceptance   with  respect  to  such   assignment   is  delivered  to  the
Administrative  Agent)  shall not be less than  $10,000,000  unless  each of the
Borrower and the  Administrative  Agent  otherwise  consent,  (iii) each partial
assignment  shall be made as an  assignment of a  proportionate  part of all the
assigning Lender's rights and obligations under this Agreement, (iv) the parties
to each assignment shall execute and

<PAGE>  51
                                                                              47

deliver to the Administrative Agent an Assignment and Acceptance,  together with
a processing and  recordation fee of $3,500,  and (v) the assignee,  if it shall
not be a Lender,  shall deliver to the  Administrative  Agent an  Administrative
Questionnaire;  provided  further  that any  consent of the  Borrower  otherwise
required under this paragraph shall not be required if an Event of Default under
clause (a), (b), (h) or (i) of Article VII has occurred and is continuing.  Upon
acceptance  and recording  pursuant to paragraph  (d) of this Section,  from and
after the  effective  date  specified in each  Assignment  and  Acceptance,  the
assignee  thereunder  shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a
Lender under this Agreement,  and the assigning Lender  thereunder shall, to the
extent of the interest  assigned by such Assignment and Acceptance,  be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance  covering all of the assigning  Lender's rights and obligations under
this Agreement,  such Lender shall cease to be a party hereto but shall continue
to be entitled,  (with  respect to the period prior to such  assignment ) to the
benefits of Sections 2.12, 2.13, 2.14 and 9.03). Any assignment or transfer by a
Lender of rights or  obligations  under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a  participation  in such rights and  obligations  in accordance  with
paragraph (e) of this Section. Notwithstanding the foregoing, any Conduit Lender
may assign at any time to its designating  Lender  hereunder with the consent of
the Borrower,  any or all of the Loans it may have funded hereunder and pursuant
to its designation agreement.

     (c) The  Administrative  Agent,  acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices in The City of New York a copy of
each  Assignment  and  Acceptance  delivered  to  it  and  a  register  for  the
recordation  of the names and addresses of the Lenders,  and the  Commitment of,
and  principal  amount of the Loans owing to each  Lender  pursuant to the terms
hereof from time to time (the "Register").  The entries in the Register shall be
conclusive, and the Borrower, the Administrative Agent and the Lenders may treat
each Person whose name is recorded in the Register  pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement, notwithstanding notice
to the contrary.

     (d) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Lender and an assignee, the assignee's completed  Administrative
Questionnaire  (unless the assignee  shall already be a Lender  hereunder),  the
processing and  recordation fee referred to in paragraph (b) of this Section and
any  written  consent  to such  assignment  required  by  paragraph  (b) of this
Section,  the  Administrative  Agent shall accept such Assignment and Acceptance
and record the  information  contained  therein in the  Register.  No assignment
shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this paragraph.

     (e)  Any  Lender  may,   without  the  consent  of  the   Borrower  or  the
Administrative Agent, sell participations to one or more banks or other entities
(a "Participant") in all or a portion of such Lender's rights and/or obligations
under this Agreement (including all or a portion of its Commitment and the Loans
owing to it);  provided that (i) such Lender's  obligations under this Agreement
shall remain unchanged,  (ii) such Lender shall remain solely responsible to the
other  parties  hereto  for the  performance  of  such  obligations,  (iii)  the
Borrower,  the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and

<PAGE>  52
                                                                              48

(iv) all Participants shall represent, for the benefit of Borrower, that none of
the  participation  interests  are being  acquired  with  assets of an  employee
benefit plan or with assets that  constitute  "plan assets" under  Department of
Labor Regulation  Section  2510.3-101 . Any agreement or instrument  pursuant to
which a Lender sells such a  participation  shall provide that such Lender shall
retain the sole right to enforce this  Agreement  and to approve any  amendment,
modification  or waiver of any provision of this  Agreement;  provided that such
agreement  or  instrument  may provide  that such  Lender will not,  without the
consent  of the  Participant,  agree to any  amendment,  modification  or waiver
described in the first proviso to Section 9.02(b) that affects such Participant.
Subject  to  paragraph  (f) of this  Section,  the  Borrower  agrees  that  each
Participant shall be entitled to the benefits of Sections 2.12, 2.13 and 2.14 to
the  same  extent  as if it were a  Lender  and had  acquired  its  interest  by
assignment pursuant to paragraph (b) of this Section.

     (f) A  Participant  shall not be entitled  to receive  any greater  payment
under  Sections 2.12,  2.13 or 2.14 than the  applicable  Lender would have been
entitled to receive with respect to the participation  sold to such Participant,
unless  the  sale of the  participation  to such  Participant  is made  with the
Borrower's prior written  consent.  A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.14 unless
the Borrower is notified of the participation  sold to such Participant and such
Participant  agrees,  for the benefit of the  Borrower,  to comply with  Section
2.14(e) as though it were a Lender.

     (g) Any Lender may at any time pledge or assign a security  interest in all
or any portion of its rights under this Agreement to secure  obligations of such
Lender,  including any such pledge or assignment to a Federal  Reserve Bank, and
this  Section  shall not apply to any such  pledge or  assignment  of a security
interest;  provided  that no such pledge or  assignment  of a security  interest
shall release a Lender from any of its  obligations  hereunder or substitute any
such assignee for such Lender as a party hereto.

     (h) Each of the Borrower,  the Subsidiary Guarantors and each Lender hereby
confirms that it will not institute  against a Conduit  Lender or join any other
Person in instituting  against a Conduit Lender any bankruptcy,  reorganization,
arrangement,  insolvency or liquidation proceeding under any state bankruptcy or
similar  law,  for one year and one day after the  payment in full of the latest
maturing commercial paper note issued by such Conduit Lender; provided, however,
that each Lender designating any Conduit Lender hereby agrees to indemnify, save
and hold harmless each other party hereto for any loss, cost,  damage or expense
arising out of its inability to institute such a proceeding against such Conduit
Lender during such period of forbearance.

     SECTION 9.05.  Survival.  All covenants,  agreements,  representations  and
warranties  made  by  the  Borrower  herein  and in the  certificates  or  other
instruments  delivered in connection with or pursuant to this Agreement shall be
considered  to have been  relied  upon by the  other  parties  hereto  and shall
survive  the  execution  and  delivery of this  Agreement  and the making of any
Loans,  regardless of any  investigation  made by any such other party or on its
behalf and notwithstanding  that the Administrative Agent or any Lender may have
had notice or knowledge of any Default or incorrect  representation  or warranty
at the time any credit is extended  hereunder,  and shall continue in full force
and effect as long as the  principal  of or any accrued  interest on any Loan or
any fee or any other amount payable under this Agreement is

<PAGE>  53
                                                                              49

outstanding  and  unpaid  and so long as the  Commitments  have not  expired  or
terminated.  The  provisions of Sections 2.12,  2.13,  2.14 and 9.03 and Article
VIII  shall  survive  and  remain in full  force and  effect  regardless  of the
consummation  of the  transactions  contemplated  hereby,  the  repayment of the
Loans,  the expiration or termination of the  Commitments or the  termination of
this Agreement or any provision hereof.

     SECTION 9.06. Counterparts;  Integration; Effectiveness. This Agreement may
be  executed in  counterparts  (and by  different  parties  hereto on  different
counterparts), each of which shall constitute an original, but all of which when
taken  together  shall  constitute a single  contract.  This  Agreement  and any
separate letter  agreements  with respect to fees payable to the  Administrative
Agent  constitute the entire contract among the parties  relating to the subject
matter hereof and supersede any and all previous  agreements and understandings,
oral or written,  relating to the subject matter  hereof.  Except as provided in
Section 4.01,  this  Agreement  shall become  effective  when it shall have been
executed by the  Administrative  Agent and when the  Administrative  Agent shall
have  received  counterparts  hereof  which,  when  taken  together,   bear  the
signatures of each of the other parties hereto,  and thereafter shall be binding
upon and  inure to the  benefit  of the  parties  hereto  and  their  respective
successors and assigns.  Delivery of an executed counterpart of a signature page
of this  Agreement  by  telecopy  shall be  effective  as delivery of a manually
executed counterpart of this Agreement.

     SECTION  9.07.  Severability.  Any provision of this  Agreement  held to be
invalid,  illegal  or  unenforceable  in  any  jurisdiction  shall,  as to  such
jurisdiction,  be  ineffective to the extent of such  invalidity,  illegality or
unenforceability without affecting the validity,  legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a  particular  jurisdiction  shall not  invalidate  such  provision in any other
jurisdiction.

     SECTION 9.08.  Right of Setoff.  If an Event of Default shall have occurred
and be continuing, each Lender is hereby authorized at any time and from time to
time, to the fullest  extent  permitted by law, to set off and apply any and all
deposits (general or special, time or demand,  provisional or final) at any time
held and  other  indebtedness  at any time  owing by such  Lender  to or for the
credit or the account of the Borrower  against any of and all the obligations of
the Borrower now or hereafter existing under this Agreement held by such Lender,
irrespective of whether or not such Lender shall have made any demand under this
Agreement  and although  such  obligations  may be unmatured  provided that such
Lender shall  promptly  notify the  Borrower of such setoff.  The rights of each
Lender  under  this  Section  are in  addition  to  other  rights  and  remedies
(including other rights of setoff) which such Lender may have.

     SECTION 9.09. Governing Law;  Jurisdiction;  Consent to Service of Process.
(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York.

     (b) The Borrower hereby irrevocably and unconditionally submits, for itself
and its property,  to the nonexclusive  jurisdiction of the Supreme Court of the
State of New York sitting in New York County and of the United  States  District
Court of the Southern  District of New York,  and any  appellate  court from any
thereof,  in any  action  or  proceeding  arising  out of or  relating  to  this
Agreement,  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

<PAGE>  54
                                                                              50

such action or proceeding may be heard and determined in such New York State or,
to the extent  permitted  by law,  in such  Federal  court.  Each of the parties
hereto agrees that a final  judgment in any such action or  proceeding  shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.  Nothing in this Agreement shall affect any
right that the  Administrative  Agent or any Lender may otherwise  have to bring
any action or proceeding  relating to this Agreement against the Borrower or its
properties in the courts of any jurisdiction.

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

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

     SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT  PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING  DIRECTLY OR INDIRECTLY  ARISING OUT OF OR RELATING
TO THIS  AGREEMENT OR THE  TRANSACTIONS  CONTEMPLATED  HEREBY  (WHETHER BASED ON
CONTRACT,  TORT OR ANY OTHER  THEORY).  EACH PARTY HERETO (A) CERTIFIES  THAT NO
REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,  SEEK
TO  ENFORCE  THE  FOREGOING  WAIVER AND (B)  ACKNOWLEDGES  THAT IT AND THE OTHER
PARTIES  HERETO HAVE BEEN INDUCED TO ENTER INTO THIS  AGREEMENT  BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     SECTION  9.11.  Headings.  Article  and Section  headings  and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement  and  shall  not  affect  the   construction  of,  or  be  taken  into
consideration in interpreting, this Agreement.

     SECTION 9.12.  Confidentiality.  Each of the  Administrative  Agent and the
Lenders expressly agrees to maintain the  confidentiality of the Information (as
defined  below),  except that  Information  may be disclosed  (a) to its and its
Affiliates' directors,  officers,  employees and agents,  including accountants,
legal counsel and other advisors (it being  understood  that the Persons to whom
such  disclosure  is made will be  informed of the  confidential  nature of such
Information and instructed to keep such  Information  confidential),  (b) to the
extent  required  by any  regulatory  authority,  (c) to the extent  required by
applicable laws or regulations or by any subpoena or similar legal process,  (d)
to any other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding  relating to this Agreement
or the enforcement of rights hereunder, (f) subject to an

<PAGE>  55
                                                                              51

agreement containing provisions substantially the same as those of this Section,
to any  assignee  of or  Participant  in,  or  any  prospective  assignee  of or
Participant in, any of its rights or obligations under this Agreement,  (g) with
the consent of the  Borrower or (h) to the extent such  Information  (i) becomes
publicly  available  other than as a result of a breach of this  Section or (ii)
becomes available to the Administrative Agent or any Lender on a nonconfidential
basis from a source other than the  Borrower.  For the purposes of this Section,
"Information"  means all information  received from the Borrower relating to the
Borrower or its business,  other than any such  information that is available to
the  Administrative  Agent or any  Lender on a  nonconfidential  basis  prior to
disclosure by the Borrower;  provided that, in the case of information  received
from the Borrower after the date hereof,  such information is clearly identified
at the time of delivery as  confidential.  Any Person  required to maintain  the
confidentiality  of  Information as provided in this Section shall be considered
to have complied  with its  obligation to do so if such Person has exercised the
same degree of care to maintain the  confidentiality of such Information as such
Person would accord to its own confidential information,  provided,  however, in
no event less than reasonable care.

<PAGE>  56

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

                            LIZ CLAIBORNE, INC.


                                  by          /s/Robert Vill
                                              -----------------------
                                     Name:    Robert Vill
                                     Title:   Vice President Treasury,
                                              Investor Relations and Treasurer


                            THE CHASE MANHATTAN BANK, individually
                            and as Administrative Agent

                                  by          /s/Thomas H. Bell
                                              -----------------------
                                     Name:    Thomas H. Bell
                                     Title:   Vice President


                            FLEET NATIONAL BANK, individually and as
                            Syndication Agent


                                  by          /s/Thomas J. Bullard
                                              -------------------------
                                     Name:    Thomas J. Bullard
                                     Title:   Director


                            BANK ONE, NA (MAIN OFFICE CHICAGO),
                            individually and as Documentation Agent


                                  by          /s/John D. Runger
                                              ----------------------
                                     Name:    John D. Runger
                                     Title:   Senior Vice President

<PAGE>   57
                                                                              53

                            BANK OF AMERICA N.A.


                                  by          /s/Deirdre  B. Doyle
                                              ------------------------
                                     Name:    Deirdre B. Doyle
                                     Title:   Principal


                            SUNTRUST BANKS, INC.


                                  by          /s/Laura Kahn
                                              ------------------
                                     Name:    Laura Kahn
                                     Title:   Director, Senior Relationship
                                              Manager


                            THE HUNTINGTON NATIONAL BANK


                                  by          /s/Laura Conway
                                              --------------------
                                     Name:    Laura Conway
                                     Title:   Vice President


                            CREDIT SUISSE FIRST BOSTON


                                  by          /s/Robert N. Finney
                                              ------------------------
                                     Name:    Robert N. Finney
                                     Title:   Managing Director


                                  by          /s/Vitaly G. Butenko
                                              ----------------------
                                     Name:    Vitaly G. Butenko
                                     Title:   Assistant Vice President


                            CITIBANK, N.A.


                                  by          /s/Marc Merlino
                                              --------------------
                                     Name:    Marc Merlino
                                     Title:   Vice President


                            UNION BANK OF CALIFORNIA, N.A.


                                  by          /s/Theresa L. Rocha
                                              --------------------------
                                     Name:    Theresa L. Rocha
                                     Title:   Vice President

<PAGE>   58
                                                                              54

                            FIRSTAR BANK, N.A.


                                  by          /s/Thomas L. Bayer
                                              ------------------------
                                     Name:    Thomas L. Bayer
                                     Title:   Vice President


                            FIRST UNION NATIONAL BANK


                                  by          /s/Christopher M. McLaughlin
                                              ----------------------------
                                     Name:    Christopher M. McLaughlin
                                     Title:   Vice President


                            HSBC BANK USA


                                  by          /s/Adriana Collins
                                              --------------------
                                     Name:    Adriana Collins
                                     Title:   Vice President


                            BANK LEUMI USA


                                  by          /s/John Koenigsberg
                                              -------------------------
                                     Name:    John Koenigsberg
                                     Title:   First Vice President


                                  by          /s/Phyllis Rosenfeld
                                              ------------------------
                                     Name:    Phyllis Rosenfeld
                                     Title:   Vice President


                            COMERICA BANK


                                  by          /s/ Joel S. Gordon
                                              -----------------------
                                     Name:    Joel S. Gordon
                                     Title:   Account Officer

<PAGE>   59
                                                                              55

                            THE BANK OF NEW YORK


                                  by          /s/Michael V. Flannery
                                              ---------------------------
                                     Name:    Michael V. Flannery
                                     Title:   Vice President





                            WELLS FARGO BANK


                                  by          /s/Peter M. Angolica
                                              ----------------------
                                     Name:    Peter M. Angolica
                                     Title:   Vice President


                                  by          /s/Bradley A. Hardy
                                              ----------------------
                                     Name:    Bradley A. Hardy
                                              Title:  Vice President

<PAGE>   60
                                                                   SCHEDULE 2.01

<TABLE>
                                   COMMITMENTS

<CAPTION>
                     BANK                                       COMMITMENT
------------------------------------------------------      ------------------
<S>                                                         <C>
The Chase Manhattan Bank .............................      $    31,666,666.67
Fleet National Bank ..................................      $    28,333,333.33
Bank One, NA .........................................      $    28,333,333.33
BankAmerica ..........................................      $    16,666,666.67
SunTrust Bank, Inc. ..................................      $    16,666,666.67
The Huntington National Bank .........................      $    16,666,666.67
Credit Suisse First Boston ...........................      $    16,666,666.67
Citicorp .............................................      $    16,666,666.67
Union Bank of California .............................      $    11,666,666.67
Firstar Bank, N.A ....................................      $    10,000,000.00
First Union ..........................................      $    10,000,000.00
HSBC Bank USA ........................................      $    10,000,000.00
Bank Leumi ...........................................      $    10,000,000.00
Comerica Bank ........................................      $    10,000,000.00
The Bank of New York .................................      $    10,000,000.00
Wells Fargo Bank .....................................      $     6,666,666.67
TOTAL ................................................      $   250,000,000.00
</TABLE>
<PAGE>   61
                                                                   SCHEDULE 3.06

                                DISCLOSED MATTERS

See Part II,  Item 1- "Legal  Proceedings"  contained  in  Borrower's  Quarterly
Report on Form 10Q for the period ended September 30, 2000.

<PAGE>   62
                                                                   SCHEDULE 3.13

<TABLE>
                                  SUBSIDIARIES

<CAPTION>
Name                                              Jurisdiction of Incorporation
<S>                                               <C>
Liz Claiborne Cosmetics, Inc.*                               Delaware
Liz Claiborne Accessories, Inc.*                             Delaware
Liz Claiborne Accessories - Sales, Inc.*                     Delaware
Liz Claiborne Export, Inc.*                                  Delaware
Liz Claiborne Foreign Holdings, Inc.*                        Delaware
Monet Puerto Rico Inc.*                                      Delaware
L. C. Licensing, Inc.*                                       Delaware
Liz Claiborne Sales, Inc.*                                   Delaware
Liz Claiborne-Texas, Inc.*                                   Delaware
LCI Investments, Inc.*                                       Delaware
LCI Holdings, Inc.*                                          Delaware
L.C. Caribbean Holdings, Inc.*                               Delaware
Liz Claiborne Shoes, Inc.*                                   Delaware
L.C. Service Company, Inc.*                                  Delaware
LC/QL Investments, Inc.*                                     Delaware
L.C. Dyeing, Inc.*                                           Delaware
L.C. Augusta, Inc.*                                          Delaware
L.C. Special Markets, Inc.*                                  Delaware
DB Newco Corp.*                                              Delaware
Liz Claiborne Japan, Inc.*                                   Delaware
LC Libra, LLC*                                               Delaware
L.C.K.C., LLC*                                               Delaware
Monet International Inc.*                                    Delaware
LCI Laundry Inc.*                                           California
Lucky Brand Dungarees, Inc.                                  Delaware
Lucky Brand Dungarees Stores, Inc.                           Delaware
Liz Claiborne Puerto Rico Inc.*                              Delaware
Liz Claiborne Foreign Sales Corporation               British Virgin Islands
Segrets, Inc.                                                Delaware
Segrets Stores, Inc.                                         Delaware

<FN>
*  Indicates a Subsidiary Guarantor
</FN>
</TABLE>

<PAGE>   63
                                                                   SCHEDULE 6.02

<TABLE>
                              EXISTING INDEBTEDNESS

<CAPTION>
<S>                                                                 <C>
First Union National Bank L/C Credit Line                           $200,000,000
Fleet National Bank L/C Credit Line                                  125,000,000
Huntington National Bank L/C Credit Line                             100,000,000
HSBC Bank Standby L/C Credit Line                                     10,000,000
Other HSBC - U.K. Standby L/C's                                          675,000
Other Fortio Bank - Netherlands Standby L/C's                            182,000
Pennsylvania Industrial Development Authority Loan                       504,730
Intecompany Debt - Liz Claiborne International                       101,970,000

<CAPTION>
Synthetic Lease - Pending
<S>                                                                 <C>
Sun Trust Bank - Midwest Distribution Center                          60,000,000

<CAPTION>
Capitalized Leases
<S>                                                                 <C>
Laundry - General Electric - IBM                                         124,573
Laundry - General Electric - Gerber                                      176,391

<CAPTION>
Conditional Purchase Price Payments
<S>                                                                 <C>
Lucky Brands - ($15 minimum)                                          45,000,000
Segrets additional remaining equity investment
Approximately 2.3% at fair market value - current estimate               600,000
                                                                    ------------
                                                                    $644,232,694
</TABLE>
<PAGE>   64
                                                                   SCHEDULE 6.03


                                 EXISTING LIENS

                                      None

<PAGE>   65
                                                                SCHEDULE 6.05(i)

<TABLE>
                              EXISTING INVESTMENTS
<CAPTION>
                                                    10/31/00
                                                  Closing Price
                                                  -------------
<S>                                               <C>             <C>
Vanguard 500 Index Fund    62,110.00 shares        $132.02         $8,200,000.00
Kenneth Cole Productions Class A Stock
1,500,000 shares                                    $45.00        $67,500,000.00
                                                                  --------------
                                                                  $75,700,000.00

</TABLE>
<PAGE>   66

                                                               SCHEDULE 6.05(ii)

                          BORROWER'S INVESTMENT POLICY

                               Effective: 08/24/99

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

OBJECTIVE

1)   To establish the policies and  guidelines  governing the investment of idle
     or surplus cash generated by the company

2)   To define the minimum  acceptable  credit and maximum market exposure of an
     investment

3)   To identify those individuals authorized to transact business on behalf of,
     and for the benefit of the company

SCOPE

Unless  specifically  limited in the text,  these  policies and  guidelines  are
applicable  to Liz  Claiborne,  Inc. and all of its  subsidiaries.  All currency
representations within this policy are in U.S. Dollars.

POLICY

To maximize the  utilization  of idle or surplus cash by investing in accordance
with principles of sound  investment  management and the guidelines set forth in
this Investment  Policy. The criteria for the selection of cash investments will
be as follows:

        First:  Preservation of Capital
        Second: Liquidity/Marketability
        Third:  Maximization of after-tax yield

INDIVIDUALS AUTHORIZED TO TRADE

1)       CFO
2)       VP Investor Relations and Treasury, Treasurer
3)       VP Cash and Risk Management
4)       Portfolio/Risk Manager
5)       Cash Manager*

*    In the absence of the Cash Manager,  the Senior Treasury Analyst may invest
     daily surplus cash in any of the approved Institutional Money Market Funds.

<PAGE>   67

APPROVED INVESTMENT VEHICLES AND REQUIREMENTS

     See Appendix A, "Investment Guidelines"

TIME LIMITATIONS

     One year, except for:

     a)   Up to three years for Government Securities
     b)   Up to 15 months for Federal Agency Securities
     c)   Up to four years for Municipal Bonds providing the total average
          maturity of all tax exempt bonds does not exceed 2 1/2 years.

CUSTODY

     Limited to any of the following:

     a)   Bear Stearns
     b)   Chase Manhattan Bank
     c)   Merrill Lynch
     d)   Salomon Smith Barney

POLICY DEVIATION

     Any deviation from these  guidelines must be approved,  in writing,  by two
     members of the Investment Committee (comprised of the Senior Vice President
     Finance  and  Administration;  CFO;  VP Investor  Relations  and  Treasury,
     Treasurer; VP Cash and Risk Management).  If a rating is lowered,  approval
     to hold the security must also be obtained, in writing, from two members of
     the Investment Committee.

<PAGE>   68

<TABLE>
                                   APPENDIX A

                               LIZ CLAIBORNE, INC.
                              INVESTMENT GUIDELINES
                               Effective: 08/24/99

<CAPTION>
                             LIMIT PER  MAXIMUM %
          SECURITY            ISSUE       OF      REQUIRED MINIMUM RATINGS
                             (000's)    PORTFOLIO S&P              MOODY'S        ADDITIONAL REQUIREMENTS
---------------------------- ---------- --------- ----------- --- -------------- -------------------------------------------------
          TAXABLE                                 Credit ratings may rely
                                                     on credit support
---------------------------- ---------- --------- ----------- --- -------------- -------------------------------------------------
<S>                          <C>        <C>       <C>         <C> <C>            <C>
Bankers Acceptances          10,000       25%     A-1         AND P-1            - None

Commercial Paper             25,000       75%     A-1         AND P-1            - Must be Direct Corporate Obligation or
                                                                                   Corporate Parent Guaranty

Corporate Bonds and Notes    25,000       75%     AA-         OR  Aa3            - None

Domestic Bank CD's           10,000       25%     A-1         AND P-1            - None

Eurodollar Deposits          10,000       20%     A-1         AND P-1            - None

Federal Agency Securities     None       100%     N/A             N/A            - None

Foreign Bank CD's/Time       10,000       20%     A-1         AND P-1            - None
Deposits

Institutional Money Market   50,000      100%     N/A             N/A            - Fund Investment objectives/parameters must
Funds                                                                              be consistent with this policy
                                                                                 - Fund may not deviate from a $1 per share price

Repurchase Agreements        25,000       50%     N/A             N/A            - Limited to US Government and/or Agency
                                                                                   securities with collateralization at no less
                                                                                   than 102%
                                                                                 - 4 day maximum term

US Treasury Obligations       None       100%     N/A             N/A            - None

Taxable Debt                 25,000       50%     AAA         OR  Aaa            - No more than 20% of any one issue
(7/28 day Auction Rate
Securities)

<CAPTION>
---------------------------- ---------- --------- ----------- --- -------------- -------------------------------------------------
   TAX EXEMPT/ADVANTAGED
---------------------------- ---------- --------- ----------- --- -------------- -------------------------------------------------
<S>                          <C>         <C>      <C>         <C> <C>            <C>
Institutional Money Market   50,000      100%     N/A             N/A            - Fund Investment objective/parameters must be
Funds                                                                              consistent with this policy
                                                                                 - Fund may not deviate from a $1 per share price

Municipal Bonds/Notes                                                            - Issue must be at least $25 million
- Short term                 10,0000     100%     SP-1 or A-1 AND VMIG1, MIG1 or
- Long term                  20,000      10%      AAA         OR  P-1
                                                                  Aaa

Daily/Weekly Municipal Put   15,000       50%     SP-1 or A-1 AND VMIG1, MIG1 or - Issue must be at least $25 million
Bonds                                                             P-1

Municipal Preferreds         25,000      100%     AAA         AND Aaa            - No more than 20% of any one issue

Money Market Preferreds      25,000       50%     AA-         OR  Aa3            - No more than 20% of any one issue
(49 day Auction Rate
Securities)

Tax Exempt Commercial Paper  15,000       50%     AA-         OR  Aa3            - None

Tax Exempt Debt              15,000       50%     AAA         OR  Aaa            - No more than 20% of any one issue
(35 day Auction Rate
Securities)
</TABLE>
</TEXT>
</DOCUMENT>
