VALUE CITY DEPARTMENT STORES INC /OH
EXHIBIT 10.3
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>5
<FILENAME>l94848aexv10w3.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>
<PAGE>
                                                                Exhibit 10.3

                                   $75,000,000



                 SENIOR SUBORDINATED CONVERTIBLE LOAN AGREEMENT

        DATED AS OF MARCH 15, 2000, AS AMENDED FROM TIME TO TIME, AND AS
                          AMENDED AND RESTATED BY THIS

             AMENDED AND RESTATED SENIOR CONVERTIBLE LOAN AGREEMENT

                             DATED AS JUNE 11, 2002

                                  BY AND AMONG

                       VALUE CITY DEPARTMENT STORES, INC.,

                                  AS BORROWER,


                               SHONAC CORPORATION,
                            DSW SHOE WAREHOUSE, INC.,
                           GRAMEX RETAIL STORES, INC.,
                                   VCM, LTD.,
                            FILENE'S BASEMENT, INC.,
                               GB RETAILERS, INC.,
                          J.S. OVERLAND DELIVERY, INC.
                   VALUE CITY DEPARTMENT STORES SERVICES, INC.
                         VALUE CITY LIMITED PARTNERSHIP,
                          VALUE CITY OF MICHIGAN, INC.,
                          WESTERVILLE ROAD GP, INC. AND
                            WESTERVILLE ROAD LP, INC.

                                 AS GUARANTORS,


                   THE LENDERS FROM TIME TO TIME PARTY HERETO,

                                   AS LENDERS,

                                       AND

                        SCHOTTENSTEIN STORES CORPORATION,

                                    AS AGENT





<PAGE>



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                              PAGE

<S>                                                                                                           <C>
ARTICLE I DEFINITIONS; CERTAIN TERMS............................................................................2

         SECTION 1.01          DEFINITIONS......................................................................2
         SECTION 1.02          TERMS GENERALLY.................................................................21
         SECTION 1.03          ACCOUNTING AND OTHER TERMS......................................................21
         SECTION 1.04          TIME REFERENCES.................................................................21

ARTICLE II THE LOAN............................................................................................22

         SECTION 2.01          THE LOAN........................................................................22
         SECTION 2.02          NOTES; REPAYMENT OF LOAN........................................................22
         SECTION 2.03          INTEREST........................................................................22
         SECTION 2.04          PREPAYMENT OF LOAN..............................................................23
         SECTION 2.05          TAXES...........................................................................24

ARTICLE III FEES, PAYMENTS AND OTHER COMPENSATION..............................................................25

         SECTION 3.01          [INTENTIONALLY OMITTED.]........................................................25
         SECTION 3.02          PAYMENTS; COMPUTATIONS AND STATEMENTS...........................................25
         SECTION 3.03          SHARING OF PAYMENTS, ETC........................................................26
         SECTION 3.04          APPORTIONMENT OF PAYMENTS.......................................................27
         SECTION 3.05          INCREASED COSTS AND REDUCED RETURN..............................................27

ARTICLE IV CONDITIONS TO EFFECTIVENESS.........................................................................30

         SECTION 4.01          CONDITIONS PRECEDENT TO EFFECTIVENESS...........................................30

ARTICLE V REPRESENTATIONS AND WARRANTIES.......................................................................33

         SECTION 5.01          REPRESENTATIONS AND WARRANTIES..................................................33

ARTICLE VI COVENANTS OF THE LOAN PARTIES.......................................................................42

         SECTION 6.01          AFFIRMATIVE COVENANTS...........................................................42
         SECTION 6.02          NEGATIVE COVENANTS..............................................................45

ARTICLE VII REPORTING REQUIREMENTS.............................................................................53

         SECTION 7.01          MAINTAIN RECORDS................................................................53
         SECTION 7.02          ACCESS TO RECORDS...............................................................54
         SECTION 7.03          PROMPT NOTICE TO ADMINISTRATIVE AGENT...........................................54
         SECTION 7.04          [INTENTIONALLY OMITTED].........................................................55
         SECTION 7.05          [INTENTIONALLY OMITTED].........................................................55
         SECTION 7.06          QUARTERLY REPORTS...............................................................55
         SECTION 7.07          ANNUAL REPORTS..................................................................55
</TABLE>



                                      -i-

<PAGE>

<TABLE>

<S>                                                                                                           <C>
         SECTION 7.08          OFFICER'S CERTIFICATES..........................................................56
         SECTION 7.09          [INTENTIONALLY OMITTED].........................................................56
         SECTION 7.10          ADDITIONAL FINANCIAL INFORMATION................................................56
         SECTION 7.11          FORMAT OF INFORMATION...........................................................57

ARTICLE VIII [INTENTIONALLY OMITTED.]..........................................................................57


ARTICLE IX EVENTS OF DEFAULT...................................................................................57

         SECTION 9.01          EVENTS OF DEFAULT...............................................................57

ARTICLE X AGENT................................................................................................60

         SECTION 10.01         APPOINTMENT.....................................................................60
         SECTION 10.02         NATURE OF DUTIES................................................................61
         SECTION 10.03         RIGHTS; EXCULPATION, ETC........................................................62
         SECTION 10.04         RELIANCE........................................................................62
         SECTION 10.05         INDEMNIFICATION.................................................................63
         SECTION 10.06         AGENT INDIVIDUALLY..............................................................63
         SECTION 10.07         SUCCESSOR AGENT.................................................................63
         SECTION 10.08         [INTENTIONALLY OMITTED].........................................................64
         SECTION 10.09         [INTENTIONALLY OMITTED].........................................................64

ARTICLE XI GUARANTY............................................................................................64

         SECTION 11.01         GUARANTY........................................................................64
         SECTION 11.02         GUARANTY ABSOLUTE...............................................................64
         SECTION 11.03         WAIVER..........................................................................65
         SECTION 11.04         CONTINUING GUARANTY; ASSIGNMENTS................................................65
         SECTION 11.05         SUBROGATION.....................................................................65

ARTICLE XII MISCELLANEOUS......................................................................................66

         SECTION 12.01         NOTICES, ETC....................................................................66
         SECTION 12.02         AMENDMENTS, ETC.................................................................67
         SECTION 12.03         NO WAIVER; REMEDIES, ETC........................................................67
         SECTION 12.04         EXPENSES; TAXES; ATTORNEYS' FEES................................................68
         SECTION 12.05         RIGHT OF SET-OFF................................................................69
         SECTION 12.06         SEVERABILITY....................................................................69
         SECTION 12.07         ASSIGNMENTS AND PARTICIPATIONS..................................................69
         SECTION 12.08         COUNTERPARTS....................................................................72
         SECTION 12.09         GOVERNING LAW...................................................................72
         SECTION 12.10         CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE...........................72
         SECTION 12.11         WAIVER OF JURY TRIAL, ETC.......................................................73
         SECTION 12.12         CONSENT BY THE AGENT AND LENDERS................................................73
         SECTION 12.13         NO PARTY DEEMED DRAFTER.........................................................73
         SECTION 12.14         REINSTATEMENT; CERTAIN PAYMENTS.................................................73
         SECTION 12.15         INDEMNIFICATION.................................................................74
</TABLE>


                                      -ii-

<PAGE>


<TABLE>

<S>                                                                                                           <C>
         SECTION 12.16         [INTENTIONALLY OMITTED.]........................................................75
         SECTION 12.17         RECORDS.........................................................................75
         SECTION 12.18         BINDING EFFECT..................................................................75
         SECTION 12.19         MAXIMUM INTEREST................................................................75
         SECTION 12.20         CONFIDENTIALITY.................................................................76
         SECTION 12.21         INTEGRATION.....................................................................77

ARTICLE XIII CONVERSION OF LOAN................................................................................77

         SECTION 13.01         CONVERSION PRIVILEGE AND CONVERSION PRICE.......................................77
         SECTION 13.02         EXERCISE OF CONVERSION PRIVILEGE................................................77
         SECTION 13.03         ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.............................78
         SECTION 13.04         NO IMPAIRMENT...................................................................84
         SECTION 13.05         ACCOUNTANTS' REPORT.............................................................84
         SECTION 13.06         COMMON STOCK RESERVED...........................................................84
         SECTION 13.07         NO REISSUANCE OF LOAN...........................................................84
         SECTION 13.08         ISSUE TAX.......................................................................84
         SECTION 13.09         CLOSING OF BOOKS................................................................85
         SECTION 13.10         DEFINITION OF COMMON STOCK......................................................85
         SECTION 13.11         FRACTIONS OF SHARES OF COMMON STOCK.............................................85
         SECTION 13.12         COVENANT AS TO COMMON STOCK.....................................................85
</TABLE>


                                     -iii-

<PAGE>

             AMENDED AND RESTATED SENIOR CONVERTIBLE LOAN AGREEMENT

         Senior Subordinated Convertible Loan Agreement, dated as of March 15,
2000, and amended and restated by this Amended and Restated Senior Convertible
Loan Agreement, dated as of June 11, 2002 (the "Agreement"), among Value City
Department Stores, Inc., an Ohio corporation (the "BORROWER"), Shonac
Corporation, an Ohio corporation ("SHONAC"), DSW Shoe Warehouse, Inc., a
Missouri corporation ("DSW"), Gramex Retail Stores, Inc., a Delaware corporation
("GRAMEX"), VCM, Ltd., an Ohio limited liability company ("VCM"), Filene's
Basement, Inc., a Delaware corporation ("FILENE'S"), GB Retailers, Inc., a
Delaware corporation ("GB"), J.S. Overland Delivery, Inc., a Delaware
corporation ("JS"), Value City Department Stores Services, Inc., a Delaware
corporation ("VC SERVICES"), Value City Limited Partnership, an Ohio limited
partnership ("VCLP"), Value City of Michigan, Inc., a Michigan corporation ("VC
MICHIGAN"), Westerville Road GP, Inc., a Delaware corporation ("WESTERVILLE
GP"), Westerville Road LP, Inc., a Delaware corporation ("WESTERVILLE LP", and
together with Shonac, DSW, Gramex, VCM, Filene's, GB, JS, VC Services, VCLP, VC
Michigan and Westerville GP, each a "GUARANTOR", and collectively, the
"GUARANTORS"), the lenders from time to time party hereto (each a "LENDER" and
collectively, the "LENDERS"), and Schottenstein Stores Corporation, a Delaware
corporation ("SSC"), as Agent for itself and the other Lenders (in such
capacity, together with its successors, if any, the "AGENT").

                                    RECITALS

         WHEREAS, the Borrower and Prudential Securities Credit Corp., LLC
("PSCC"), as initial lender and as administrative agent, entered into the Senior
Subordinated Convertible Loan Agreement, dated as of March 15, 2000 (the
"ORIGINAL LOAN AGREEMENT");

         WHEREAS, as of December 11, 2000, PSCC assigned all of its right, title
and interest under the Original Loan Agreement to SSC;

         WHEREAS, the Borrower and SSC entered into (a) the Waiver and Amendment
to the Senior Subordinated Convertible Loan Agreement, dated December 11, 2000,
(b) the Second Amendment to the Senior Subordinated Convertible Loan Agreement,
dated January 1, 2001, and (c) the Third Amendment to the Senior Subordinated
Convertible Loan Agreement, dated March 14, 2001, (d) the Fourth Amendment to
the Senior Subordinated Convertible Loan Agreement dated September 10, 2001
(marked as the Third Amendment), (e) the Fifth Amendment to the Senior
Subordinated Convertible Loan Agreement, dated November 2, 2001, and (f) the
Sixth Amendment to the Senior Subordinated Convertible Loan Agreement, dated
February 1, 2002, each of which amended the Original Loan Agreement;

         WHEREAS, the Borrower has requested and the Agent and the Lenders have
agreed to make certain revisions to the Original Loan Agreement;

         WHEREAS, the parties hereto now desire to amend and restate the
Original Loan Agreement on the terms and subject to the conditions set forth
below:

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


<PAGE>


                                   ARTICLE I

                           DEFINITIONS; CERTAIN TERMS

         Section 1.01 DEFINITIONS. As used in this Agreement, the following
terms shall have the respective meanings indicated below, such meanings to be
applicable equally to both the singular and plural forms of such terms:

         "ACTION" has the meaning specified therefor in Section 12.12.

         "ACQUISITION" means the purchase or acquisition of all or substantially
all of the assets of any Person, the purchase of a controlling equity interest
in any Person, or the merger or consolidation of any Person with any other
Person, in any transaction or group of transactions which are part of a common
plan.

         "AFFILIATE" means (i) with respect to any Person, any other Person that
directly or, alone or with a group of related Persons whose interests taken as a
whole, indirectly through one or more intermediaries, Controls, is Controlled
by, or is under common Control with, such Person; (ii) any Person which is a
parent, brother-sister or subsidiary of a Key Loan Party, whose enterprise's tax
returns or financial statements are consolidated with those of a Key Loan Party,
which is a member of the same controlled group of corporations (within the
meaning of Section 1563(a)(1), (2) and (3) of the Internal Revenue Code or 1986,
as amended from time to time) of which any Key Loan Party is a member, or
Controls or is Controlled by any Key Loan Party; and (iii) with respect to the
Loan Parties, without limiting the provisions of clauses (i) and (ii) hereof,
"Affiliate" includes SSC. Notwithstanding anything to the contrary contained
herein, in no event shall the Agent or any Lender be considered an "Affiliate"
of a Loan Party as a result of being party to this Agreement or the transactions
contemplated hereby

         "AGENT" has the meaning specified therefor in the preamble hereto.

         "AGENT'S ACCOUNT" means an account at a bank designated by the Agent
from time to time as the account into which the Loan Parties shall make certain
payments to the Agent for the benefit of the Agent and the Lenders under this
Agreement and the other Loan Documents.

         "AGREEMENT" means this Amended and Restated Senior Convertible Loan
Agreement, including all amendments, modifications and supplements and any
exhibits or schedules to any of the foregoing, and shall refer to the Agreement
as the same may be in effect at the time such reference becomes operative.

         "APPLICABLE LAW" means, as to any Person, (i) all statutes, rules,
regulations, orders or other requirements having the force of law, and (ii) all
court orders and injunctions, arbitrator's decisions and/or similar rulings, in
each instance ((i) and (ii)) of or by any Federal, state, municipal or other
governmental authority, or court, tribunal, panel or other body which has or
claims jurisdiction over such Person, or any property of such Person, or of any
other Person for whose conduct such Person would be responsible.


                                      -2-
<PAGE>


         "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered
into by an assigning Lender and an assignee, and accepted by the Agent, in
accordance with Section 12.07 hereof and substantially in the form of Exhibit I
hereto or such other form acceptable to the Agent.

         "AUTHORIZED OFFICER" means, with respect to any Person, the chief
executive officer, chief financial officer, president, executive vice president,
controller or treasurer of such Person.

         "BANKRUPTCY CODE" means the United States Bankruptcy Code (11 U.S.C.
ss. 101, ET SEQ.), as amended from time to time, and any successor statute.

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

         "BOARD OF DIRECTORS" means the board of directors of the Borrower as of
the Effective Date.

         "BORROWER" has the meaning specified therefor in the preamble hereto.

         "BUSINESS DAY" means any day other than (i) a Saturday or Sunday, (ii)
any day on which banks in New York City generally are not open to the general
public for the purpose of conducting commercial banking business, or (iii) a day
on which the principal office of the Agent is not open to the general public to
conduct business.

         "BUSINESS PLAN" means the business plan for the Loan Parties for the
fiscal years 2002 through and including 2004 dated March 19, 2002, as set forth
in that certain confidential side letter from the Borrower to the Agent.

         "CAPITAL EXPENDITURES" means, with respect to any Person for any
period, the sum of (i) the aggregate of all expenditures by such Person and its
Subsidiaries during such period that in accordance with GAAP are or should be
included in "property, plant and equipment" or in a similar fixed asset account
on its balance sheet, whether such expenditures are paid in cash or financed and
including all Capitalized Lease Obligations paid or payable during such period;
and (ii) to the extent not covered by clause (i) above, the aggregate of all
expenditures by such Person and its Subsidiaries during such period to acquire
by purchase or otherwise the business or fixed assets of, or the Capital Stock
of, any other Person.

         "CAPITAL GUIDELINE" means any law, rule, regulation, policy, guideline
or directive (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) of any central bank or
Governmental Authority (i) regarding capital adequacy, capital ratios, capital
requirements, the calculation of a bank's capital or similar matters, or (ii)
affecting the amount of capital required to be obtained or maintained by any
Lender, any Person controlling any Lender or the manner in which any Lender, any
Person controlling any Lender, allocates capital to any of its contingent
liabilities (including letters of credit), advances, acceptances, commitments,
assets or liabilities.

         "CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not


                                      -3-
<PAGE>


voting) of corporate stock; and (ii) with respect to any Person that is not a
corporation, any and all partnership, membership or other equity interests of
such Person.

         "CAPITALIZED LEASE" means, with respect to any Person, any lease of
real or personal property by such Person as lessee which is (i) required under
GAAP to be capitalized on the balance sheet of such Person; or (ii) a
transaction of a type commonly known as a "synthetic lease" (i.e. a lease
transaction that is treated as an operating lease for accounting purposes but
with respect to which payments of rent are intended to be treated as payments of
principal and interest on a loan for Federal income tax purposes).

         "CAPITALIZED LEASE OBLIGATIONS" means, with respect to any Person,
obligations of such Person and its Subsidiaries under Capitalized Leases, and,
for purposes hereof, the amount of any such obligation shall be the capitalized
amount thereof determined in accordance with GAAP.

         "CHANGE IN CONTROL" means the occurrence of any of the following: (i)
the acquisition, by any person or group (within the meaning of Section 13(d)(3)
of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3
of the Exchange Act) of 25% or more of the issued and outstanding capital stock
of the Borrower having the right, under ordinary circumstances, to vote for the
election of directors of the Borrower, excluding from the foregoing any
acquisition pursuant to the exercise of conversion rights under this Agreement;
(ii) more than half of the Persons who were directors of the Borrower on the
first day of any period consisting of twelve (12) consecutive calendar months
(the first of which twelve (12) month periods commencing with the first day of
the month during which this Agreement was executed), cease, for any reason other
than death, disability, or replacement by other Persons nominated by a
nominating committee controlled by SSC to be directors of the Borrower; (iii)
the failure of the Borrower to own, directly or indirectly, 95% of the capital
stock of each of the other Loan Parties; or (iv) the failure of SSC to possess,
directly or indirectly, the power to cause the direction of the management and
policies of the Key Loan Parties.

         "COMMON STOCK" means the common stock, no par value per share, of the
Borrower.

         "COMPETITIVE BUSINESS" means any business or enterprise consisting of
(i) operation of off-price discount department stores; (ii) operation of retail
furniture stores and related accessories; (iii) operation of designer and
name-brand shoe stores; (iv) operation of licensed shoe departments; (v)
furniture manufacturing; or (vi) bedding manufacturing.

         "CONTINGENT OBLIGATION" means, with respect to any Person, any
obligation of such Person guaranteeing or intended to guarantee any Indebtedness
("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY OBLIGOR") in any
manner, whether directly or indirectly, including, without limitation, (i) the
direct or indirect guaranty, endorsement (other than for collection or deposit
in the ordinary course of business), co-making, discounting with recourse or
sale with recourse by such Person of the obligation of a primary obligor; (ii)
the obligation to make take-or-pay or similar payments, if required, regardless
of nonperformance by any other party or parties to an agreement (other than such
agreements to purchase goods in the ordinary course of business); (iii) any
obligation of such Person, whether or not contingent, (A) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (B)


                                      -4-
<PAGE>


(other than such agreements to purchase goods in the ordinary course of
business) to advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (C) to purchase property, assets, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary obligation
or (D) otherwise to assure or hold harmless the holder of such primary
obligation against loss in respect thereof (other than such agreements to
purchase goods in the ordinary course of business); PROVIDED, HOWEVER, that the
term "Contingent Obligation" shall not include (1) any product warranties or (2)
obligations, warranties and indemnities not relating to Indebtedness which have
been made or undertaken, in each case, extended in the ordinary course of
business.

         "CONTROL", "CONTROLS", "CONTROLLED BY", or "UNDER COMMON CONTROL WITH"
means the possession, direct or indirect of the power to cause the direction of
the management and policies of a Person whether through the ownership of voting
securities, by contract or otherwise. A Person shall be deemed to have control
of another Person if it is a "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13-d-5 under the Exchange Act) or a member of a "group" that is
the beneficial owner, directly or indirectly, of 20% or more of the voting stock
of or equity interest in such Person.

         "CONVERSION DATE" has the meaning specified therefor in Section
13.02(a).

         "CONVERSION NOTICE" has the meaning specified therefor in Section
13.02(a).

         "CONVERSION PRICE" has the meaning specified therefor in Section
13.01(b).

         "CONVERSION SHARES" has the meaning specified therefor in Section
13.01(a).

         "CONVERTIBLE SECURITIES" means any evidences of indebtedness, shares
(other than Common Stock) of capital stock or other securities directly or
indirectly convertible into or exchangeable for Common Stock.

         "CONVERTING LENDER" has the meaning specified therefor in Section
13.01(b).

         "CURRENT MARKET PRICE" means, on any date specified herein, the average
of the daily Market Price during the ten consecutive trading days before such
date, except that, if on any such date the shares of Common Stock are not listed
or admitted for trading on any national securities exchange or quoted in the
over-the-counter market, the Current Market Price shall be the Market Price on
such date.

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

         "DISPOSITION" means any transaction, or series of related transactions,
pursuant to which any Person or any of its Subsidiaries sells, assigns,
transfers or otherwise disposes of any property or assets (whether now owned or
hereafter acquired) to any other Person, in each case, whether or not the
consideration therefor consists of cash, securities or other assets owned by the


                                      -5-
<PAGE>


acquiring Person, EXCLUDING any sales of Inventory in the ordinary course of
business on ordinary business terms.

         "DIVISION(S)" means the various business segments of the Key Loan
Parties, being the DSW/Shonac Business, the Filene's Business and the Value City
Business.

         "DOLLAR," "DOLLARS" and the symbol "$" each means lawful money of the
United States of America.

         "DSW/SHONAC BUSINESS" means, collectively, the businesses operated by
DSW and Shonac.

         "EBITDA" means, with respect to any Person for any period, the
consolidated Net Income of such Person and its Subsidiaries for such period,
PLUS without duplication, the sum of the following amounts of such Person and
its Subsidiaries for such period to the extent deducted in determining
consolidated Net Income of such Person and its Subsidiaries for such period: (A)
Interest Expense, (B) federal, state, local and foreign income tax expense, (C)
depreciation expense, (D) amortization expense and (E) expenses incurred in
connection with certain refinancings of Indebtedness by the Borrower.

         "EFFECTIVE DATE" means the date, on or before June 11, 2002, on which
all of the conditions precedent set forth in Section 4.01 are satisfied or
waived.

         "ELIGIBLE ASSIGNEE" means any Federal, state or foreign banking
institution, or any private entity or commercial institution primarily engaged
in the business of making commercial loans, and shall in no event include a
Person that is engaged in a Competitive Business with any Loan Party, and as
long as SSC remains in Control of the Key Loan Parties, an "Eligible Assignee"
shall in no event include a Person which is engaged in a Competitive Business or
a Related Business with SSC.

         "EMPLOYEE BENEFIT PLAN" means an employee benefit pension benefit plan
that is covered by Title IV of ERISA or is subject to the minimum funding
standards under Section 412 of the Internal Revenue Code of 1986, as amended
from time to time, and as to which a Key Loan Party or any ERISA Affiliate may
have any liability.

         "ENVIRONMENTAL ACTIONS" means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other communication from any Person or
Governmental Authority involving violations of Environmental Laws or Releases of
Hazardous Materials (i) from any assets, properties or businesses owned or
operated by any Loan Party or any of its Subsidiaries or any predecessor in
interest; or (ii) onto any facilities which received Hazardous Materials
generated by any Loan Party or any of its Subsidiaries or any predecessor in
interest.

         "ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. ss. 9601, ET SEQ.), the Hazardous
Materials Transportation Act (49 U.S.C. ss. 1801, ET SEQ.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901, ET SEQ.), the Federal Clean
Water Act (33 U.S.C. ss. 1251 ET SEQ.), the Clean Air Act (42 U.S.C. ss. 7401
ET SEQ.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 ET seq.)


                                      -6-
<PAGE>


and the Occupational Safety and Health Act (29 U.S.C. ss. 651 ET SEQ.), as such
laws may be amended or otherwise modified from time to time, and any other
present or future Federal, state, local or foreign statute, ordinance, rule,
regulation, order, judgment, decree, permit, license or other binding
determination of any Governmental Authority imposing liability or establishing
standards of conduct for protection of the environment or other government
restrictions relating to the protection of the environment or the Release,
deposit, or migration of any Hazardous Materials into the environment.

         "ENVIRONMENTAL LIABILITIES AND COSTS" means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, reasonable costs, and expenses (including all
reasonable fees, disbursements and expenses of counsel, experts, and consultants
and costs of investigations and feasibility studies), fines, penalties,
sanctions and interest incurred as a result of any claim or demand by any
Governmental Authority or any third party, and which relate to any environmental
condition or a Release of Hazardous Materials from or onto (i) any property
presently or formerly owned by any Loan Party or any of its Subsidiaries; or
(ii) any facility which received Hazardous Materials generated by any Loan Party
or any of its Subsidiaries.

         "ENVIRONMENTAL LIEN" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.

         "EQUIPMENT" means, without limitation, "equipment" as defined in the
UCC, and also all furniture, store fixtures, motor vehicles, rolling stock,
machinery, office equipment, plant equipment, tools, dies, molds, and other
goods, property, and assets which are used and/or were purchased for use in the
operation or furtherance of a Loan Party's business, and any and all accessions
or additions thereto, and substitutions therefor.

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

         "ERISA AFFILIATE" means any Person which is under common control with a
Key Loan Party within the meaning of Section 4001 of ERISA or is part of a group
which includes any Key Loan Party and which would be treated as a single
employer under Section 414 of the Internal Revenue Code of 1986, as amended from
time to time.

         "EVENT OF DEFAULT" means any of the events set forth in Section 9.01.
An "Event of Default" shall be deemed to have occurred and to be continuing
unless and until that Event of Default has been duly waived by the Agent or
cured to the satisfaction of the Agent.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, as amended, modified,
succeeded or replaced from time to time.

         "FAIR MARKET VALUE" means, on any date specified herein (i) in the case
of cash, the dollar amount thereof, (ii) in the case of a security, the Current
Market Price, and (iii) in all other cases, the fair value thereof (as of a date
which is within 20 days of the date as of which the determination is to be made)
determined in good faith by a committee of Borrower's Board of


                                      -7-
<PAGE>


Directors consisting of directors who are not Affiliates of Borrower, SSC or any
other Lender; PROVIDED, HOWEVER, that at the request of a Lender, the Fair
Market Value shall be determined in good faith by an independent investment
banking firm selected jointly by Borrower and Lender or, if that selection
cannot be made within ten days, by an independent investment banking firm
selected by the American Arbitration Association in accordance with its rules,
and PROVIDED, FURTHER, that Borrower shall pay all of the reasonable fees and
expenses of any third parties incurred in connection with determining the Fair
Market Value.

         "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate
per annum equal to, for each day during such period, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by it.

         "FILENE'S BUSINESS" means the businesses operated by Filene's.

         "FINAL MATURITY DATE" means June 10, 2009, or such earlier date on
which the Loan shall become due and payable in accordance with the terms of this
Agreement and the other Loan Documents.

         "FINANCIAL STATEMENTS" means (i) the audited consolidated balance sheet
of the Borrower and its Subsidiaries for the Fiscal Year ended February 2, 2002,
and the related consolidated statement of operations, shareholders' equity and
cash flows for the Fiscal Year then ended; and (ii) the unaudited consolidated
balance sheet of the Borrower and its Subsidiaries for the three months ended
May 2, 2002, and the related consolidated statement of operations, shareholder's
equity and cash flows for the three months then ended.

         "FISCAL YEAR" means the fiscal year of the Borrower and its
Subsidiaries ending on the Saturday nearest January 31st of each year.

         "GAAP" means generally accepted accounting principles in effect from
time to time in the United States, applied on a consistent basis; PROVIDED, that
for the purpose of Article VII hereof and the definitions used therein, "GAAP"
shall mean generally accepted accounting principles in effect on the date hereof
and consistent with those used in the preparation of the Financial Statements;
PROVIDED, FURTHER, that if there occurs after the date of this Agreement any
change in GAAP that affects in any respect the calculation of any covenant
contained in Article VII hereof, the Agent and the Borrower shall negotiate in
good faith amendments to the provisions of this Agreement that relate to the
calculation of such covenant with the intent of having the respective positions
of the Lenders and the Borrower after such change in GAAP conform as nearly as
possible to their respective positions as of the date of this Agreement.

         "GOVERNMENTAL AUTHORITY" means any nation or government, any Federal,
state, city, town, municipality, county, local or other political subdivision
thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising


                                      -8-
<PAGE>


executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.

         "GUARANTEED OBLIGATIONS" has the meaning specified therefor in Section
11.01.

         "GUARANTOR" means (i) certain Subsidiaries of the Borrower that are
signatories hereto, and (ii) each other Person which guarantees, pursuant to
Section 6.01(a) or otherwise, all or any part of the Obligations.

         "GUARANTY" means (i) the Guaranty of each Guarantor party hereto
contained in Article XI hereof; and (ii) each Guaranty substantially in the form
of Exhibit D, made by any other Guarantor in favor of the Agent for the benefit
of the Lenders, pursuant to Section 6.01(a) or otherwise.

         "HAZARDOUS MATERIAL" means (i) any element, compound or chemical that
is defined, listed or otherwise classified as a contaminant, pollutant, toxic
pollutant, toxic or hazardous substance, extremely hazardous substance or
chemical, hazardous waste, special waste, or solid waste under Environmental
Laws or that is reasonably likely to cause immediately, or at some reasonably
foreseeable future time, harm to or have an adverse effect on, the environment
or risk to human health or safety, including, without limitation, any pollutant,
contaminant, waste, hazardous waste, toxic substance or dangerous good which is
defined or identified in any Environmental Law and which is present in the
environment in such quantity or state that it contravenes any Environmental Law;
(ii) petroleum and its refined products; (iii) polychlorinated biphenyls; (iv)
any substance exhibiting a hazardous waste characteristic, including, without
limitation, corrosivity, ignitability, toxicity or reactivity as well as any
radioactive or explosive materials; and (v) any raw materials, building
components (including, without limitation, asbestos-containing materials) and
manufactured products containing hazardous substances listed or classified as
such under Environmental Laws.

         "HEDGING AGREEMENT" means any interest rate, foreign currency,
commodity or equity swap, collar, cap, floor or forward rate agreement, or other
agreement or arrangement designed to protect against fluctuations in interest
rates or currency, commodity or equity values (including, without limitation,
any option with respect to any of the foregoing and any combination of the
foregoing agreements or arrangements), and any confirmation executed in
connection with any such agreement or arrangement, including, without
limitation, the NCB Hedging Agreement.

         "HIGHEST LAWFUL RATE" means, with respect to the Agent or any Lender,
the maximum non-usurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on the
Obligations under laws applicable to the Agent or such Lender which are
currently in effect or, to the extent allowed by law, under such Applicable Laws
which may hereafter be in effect and which allow a higher maximum non-usurious
interest rate than Applicable Laws now allow.

         "INDEBTEDNESS" means, without duplication, all obligations, including
Contingent Obligations, that in accordance with GAAP should be classified upon
the balance sheet of any Key Loan Party and/or the consolidated balance sheet of
the Key loan Parties as liabilities, other


                                      -9-
<PAGE>


than trade payables, deferred rent, or accrued expenses incurred in the ordinary
course of business or to which reference should be made by footnotes thereto,
including, in any event and whether or not so classified, (i) all obligations in
respect of money borrowed (including any indebtedness which is non-recourse to
the credit of such Person but which is secured by a Lien on any asset of such
Person) whether or not evidenced by a promissory note, bond, debenture or other
written obligation to pay money; (ii) all obligations evidenced by bonds, notes,
debentures or other similar instruments; (iii) all obligations in connection
with Hedging Agreements; (iv) all obligations in connection with any letter of
credit or acceptance transaction (including, without limitation, the face amount
of all letters of credit and acceptances issued for the account of such Person
or reimbursement on account of which such Person would be obligated); (v) all
obligations in connection with the sale or discount of accounts receivable or
chattel paper of such Person; (vi) all obligations on account of deposits or
advances other than deferred rent incurred in the ordinary course of business;
(vii) all obligations as lessee under Capitalized Leases; and (viii) all
obligations in connection with any sale and leaseback transaction.
"Indebtedness" also includes: (x) Indebtedness of others secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed by such
Person; (y) any guaranty, endorsement, suretyship or other undertaking in
respect of Indebtedness pursuant to which that Person may be liable on account
of any obligation of any third party; and (z) the Indebtedness of a partnership
or joint venture for which such Person is liable as a general partner or joint
venturer.

         "INDEMNIFIED MATTERS" has the meaning specified therefor in Section
12.15.

         "INDEMNITEES" has the meaning specified therefor in Section 12.15.

         "INSOLVENCY PROCEEDING" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, or extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.

         "INTEREST EXPENSE" means, with respect to any Person for any period,
gross interest expense of such Person and its Subsidiaries for such period
determined on a consolidated basis and in accordance with GAAP (including,
without limitation, interest expense paid to Affiliates of such Person).

         "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended from time to time, (or any successor statute thereto) and the
regulations thereunder.

         "INVENTORY" means, with respect to any Person, all goods and
merchandise of such Person, including, without limitation, all raw materials,
work-in-process, packaging, supplies, materials and finished goods of every
nature used or usable in connection with the shipping, storing, advertising or
sale of such goods and merchandise, whether now owned or hereafter acquired, and
all such other property the sale or other disposition of which would give rise
to Accounts Receivable or cash.

         "LEASE" means any lease of real property to which any Loan Party or any
of its Subsidiaries is a party as lessor or lessee.


                                      -10-
<PAGE>


         "LENDERS" means the financial institutions listed on the signature
pages hereof, and each assignee that shall become a party hereto pursuant to
Section 12.07.

         "LENDER'S ACCOUNT" means all an account at a bank designated by each
Lender from time to time into which the Loan Parties shall make certain payments
to such Lender under this Agreement.

         "LIEN" means any mortgage, deed of trust, pledge, lien (statutory or
otherwise), security interest, charge or other encumbrance or security or
preferential arrangement of any nature, including, without limitation, any
conditional sale or title retention arrangement, any Capitalized Lease and any
assignment, deposit arrangement or financing lease intended as, or having the
effect of, security.

         "LISTING DEADLINE DATE" means October 31, 2002; PROVIDED, HOWEVER, that
in the event the Meeting is delayed as a result of a unilateral action by SSC or
a shareholder of SSC, the Listing Deadline Date shall be December 31, 2002.

         "LOAN" means the loan made by Lenders to the Borrower pursuant to
Article II hereof.

         "LOAN DOCUMENT" means this Agreement, the Notes, the Registration
Rights Agreement and any other agreement, instrument, and other document
executed and delivered pursuant hereto or thereto or otherwise evidencing the
Loan or any other Obligation.

         "LOAN PARTY" means the Borrower or any Guarantor.

         "MARKET PRICE" means, on any date specified herein, the amount per
share of the Common Stock, equal to (i) the last reported sale price of such
Common Stock, regular way, on such date or, in case no such sale takes place on
such date, the average of the closing bid and asked prices thereof regular way
on such date, in either case as officially reported on the principal national
securities exchange on which such Common Stock is then listed or admitted for
trading, (ii) if such Common Stock is not then listed or admitted for trading on
any national securities exchange but is designated as a national market system
security by the NASD, the last reported trading price of the Common Stock on
such date, (iii) if there shall have been no trading on such date or if the
Common Stock is not so designated, the average of the closing bid and asked
prices of the Common Stock on such date as shown by the NASD automated quotation
system, (iv) if trading in such Common Stock is quoted in the over-the-counter
market, the average of the closing bid and asked prices of the Common Stock on
such date as shown on the OTC Bulletin Board, or (v) if such Common Stock is not
then listed or admitted for trading on any national exchange or quoted in the
over-the-counter market, the fair value thereof (as of a date which is within 20
days of the date as of which the determination is to be made) determined in good
faith by a committee of Borrower's Board of Directors consisting of directors
who are not Affiliates of Borrower or SSC; PROVIDED, HOWEVER, that at the
request of a Lender, the Market Price shall be determined in good faith by an
independent investment banking firm selected jointly by Borrower and a Lender
or, if that selection cannot be made within 10 days, by an independent
investment banking firm selected by the American Arbitration Association in


                                      -11-
<PAGE>


accordance with its rules, and PROVIDED, FURTHER, that Borrower shall pay all of
the fees and expenses of any third parties incurred in connection with
determining the Market Price.

         "MATERIAL ACCOUNTING CHANGE" means any change in GAAP applicable to
accounting periods subsequent to the Key Loan Parties' fiscal year most recently
completed prior to the execution of this Agreement, which change has a material
effect on the Key Loan Parties' Consolidated financial condition or operating
results, as reflected on financial statements and reports prepared by or for the
Key Loan Party, when compared with such condition or results as if such change
had not taken place.

         "MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, operations, property, assets or financial condition of (x) the Loan
Parties taken as a whole or (y) the Value City Business taken as a whole
(including those portions of Shonac that operate as part of the Value City
Business) or (ii) the validity or enforceability of this Agreement or any of the
other Loan Documents or any of the material rights or remedies of the Agent or
the Lenders hereunder or thereunder.

         "MATERIAL CONTRACT" means, with respect to any Person, (i) each
contract or agreement (other than Leases, intercompany agreements benefit and
pension plans, stock option plans and labor and employment contracts) to which
such Person or any of its Subsidiaries is a party involving aggregate
consideration payable to or by such Person or such Subsidiary of $1,000,000 or
more annually (other than purchase orders in the ordinary course of the business
of such Person or such Subsidiary and other than contracts that by their terms
may be terminated by such Person or Subsidiary in the ordinary course of its
business upon less than 60 days' notice without penalty or premium) and (ii) all
other contracts or agreements material to the business, operations, condition
(financial or otherwise), performance, prospects or properties of such Person or
such Subsidiary.

         "MOODY'S" means Moody's Investors Service, Inc. and any successor
thereto.

         "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which any Loan Party or any of its ERISA Affiliates has
contributed to, or has been obligated to contribute, at any time during the
preceding six (6) years.

         "NCB HEDGING AGREEMENT" means the Hedging Agreement between the
Borrower and National City Bank dated as of March 28, 2000.

         "NET INCOME" means, with respect to any Person for any period, the net
income (loss) of such Person and its Subsidiaries for such period, determined on
a consolidated basis and in accordance with GAAP, but excluding from the
determination of Net Income (without duplication) (a) any extraordinary or non
recurring gains or losses or gains or losses from Dispositions, (b)
restructuring charges, (c) effects of discontinued operations and (d) interest
income.

         "NOTE" means a promissory note of the Borrower, substantially in the
form of Exhibit A hereto, made payable to the order of a Lender and evidencing
the Indebtedness resulting from the making by such Lender of its Pro Rata Share
of the Loan.


                                      -12-
<PAGE>


         "NOTICE OF ELECTION" has the meaning specified therefore in Section
2.03(c).

         "NYSE" means the New York Stock Exchange.

         "OBLIGATIONS" means all present and future indebtedness, obligations,
and liabilities of each Loan Party to the Agent and the Lenders under the Loan
Documents, whether or not the right of payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
disputed, undisputed, legal, equitable, secured, unsecured, and whether or not
such claim is discharged, stayed or otherwise affected by any proceeding
referred to in Section 9.01. Without limiting the generality of the foregoing,
the Obligations of each Loan Party under the Loan Documents include (i) the
obligation to pay principal, interest, including any PIK Interest, charges,
expenses, fees, attorneys' fees and disbursements, indemnities and other amounts
payable by such Person under the Loan Documents; and (ii) the obligation of such
Person to reimburse any amount in respect of any of the foregoing that the Agent
may elect to pay or advance on behalf of such Person.

         "OLD NOTE" has the meaning specified in Section 2.01.

         "OPTION" means options, warrants or other rights to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities.

         "ORIGINAL LOAN AGREEMENT" has the meaning specified therefore in the
preamble.

         "OTHER TAXES" has the meaning specified therefore in Section 2.05.

         "PARTICIPANT REGISTER" has the meaning specified therefor in Section
12.07(b)(v).

         "PAYMENT OFFICE" means the Agent's office located at Schottenstein
Stores Corporation, 1800 Moler Road, Columbus, Ohio, 43207, or at such other
office or offices of the Agent as may be designated in writing from time to time
by the Agent to the Borrower.

         "PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.

         "PERMITTED ACQUISITION" means (i) any Acquisition the cash
consideration for which is less than $3,000,000 in the aggregate in any fiscal
year of the Key Loan Parties and which satisfies the conditions set forth in
clauses (f), (g), (h) and (i) below; and (ii) an Acquisition in which each of
the following conditions are satisfied: (a) no Default or Event of Default then
exists or would arise from the consummation of such Acquisition; (b) such
Acquisition shall have been approved by the Board of Directors of the Person (or
similar governing body if such Person is not a corporation) which is the subject
of such Acquisition and such Person shall not have announced that it will oppose
such Acquisition or shall not have commenced any action which alleges that such
Acquisition will violate Applicable Law; (c) the Borrower shall have furnished
the Agent with ten (10) days' prior notice of such intended Acquisition and
shall have furnished the Agent with a current draft of the Acquisition agreement
and other Acquisition documents, a summary of any due diligence undertaken by
the Key Loan Parties in connection with such Acquisition, appropriate financial
statements of the Person which is the subject of such Acquisition, pro forma
projected financial statements for the twelve (12)


                                      -13-
<PAGE>


month period following such Acquisition after giving effect to such Acquisition
(including balance sheets, cash flows and income statements by month for the
acquired Person, individually, and on a consolidated basis with all Loan
Parties), and such other information as the Agent may reasonably require, each
of which shall be reasonably satisfactory to the Agent; (d) the structure of the
Acquisition shall be acceptable to the Agent in its reasonable judgment; if an
Acquisition of capital stock or other equity interests, after consummation of
such Acquisition, a Key Loan Party shall own directly or indirectly a majority
of the equity interests in the Person being acquired and shall Control a
majority of any voting interests, and/or shall otherwise Control the governance
of the Person being acquired; (e) the Agent shall have received (i) the results
of appraisals of the assets (or the assets of the Person) to be acquired in such
Acquisition and of a commercial finance examination of the Person that is (or
whose assets are) being acquired, and (ii) such other due diligence as the Agent
may reasonably require, all of the results of the foregoing to be reasonably
satisfactory to the Agent; (f) any assets acquired shall be utilized only in,
and if the Acquisition involves a merger, consolidation or stock acquisition,
the Person which is the subject of such Acquisition shall be engaged only in, a
Permitted Business; (g) if the Person which is the subject of such Acquisition
will be maintained as a Subsidiary of a Key Loan Party, such Subsidiary shall
have executed such documents as may be necessary to be joined as a "Guarantor"
hereunder; and (h) the total consideration paid for all Acquisitions (whether in
cash, tangible property, notes or other property (other than capital stock of
the Borrower)) after the Effective Date, shall not exceed in the aggregate the
sum of $15,000,000.

         "PERMITTED BUSINESS" means the business of owning and operating a chain
of retail department stores selling clothing apparel, housewares, home
furnishings, toys, sporting goods, jewelry, shoes, health and beauty care items
or any of the foregoing, and engaging in certain related licensing and other
retail and wholesale businesses reasonably related thereto, including, but not
limited to, any retail lease department operation.

         "PERMITTED DISPOSITION" means any of the following: (i) licenses of
intellectual property or licensed departments of a Loan Party or any of its
Subsidiaries in the ordinary course of business; (ii) Leases or subleases of
Leases, to the extent at any point in time such Leases or subleases have, in the
aggregate, anticipated minimum fixed annual rental payments of not more than
$3,000,000; (iii) sales, assignments, transfers, conveyances or other
dispositions of any or all of the Property specified in Schedule 6.02(c) hereof;
PROVIDED that in connection with a sale or similar disposition of any such
Property, if a Loan Party receives a note or similar obligation as all or part
of the consideration therefor, such Loan Party shall secure such note or
obligation with a Mortgage or similar Lien on such Property and pledge such note
or other obligation to the Agent as security for the Obligations pursuant to the
terms of the Loan Documents; (iv) sales of Inventory and Equipment in connection
with store closures permitted in accordance with the provisions of Section
6.02(c)(vii) hereof, PROVIDED that all sales of Inventory in connection with
store closings (x) after the occurrence and during the continuance of an Event
of Default or (y) consisting of more than fifteen (15) retail stores at the same
time, shall be in accordance with liquidation agreements and with liquidators
reasonably acceptable to the Agent; and (v) (x) the sale of any property, land
or building (including any related receivables or other intangible assets) to
any Person which is not a Subsidiary of a Key Loan Party, or (y) the sale of the
entire capital stock (or other equity interests) and Indebtedness of any
Subsidiary owned by a Loan Party to any Person which is not a Subsidiary of a
Key Loan Party, or (z) the consummation of any other asset sale with a Person
who is not a Subsidiary of a Key Loan Party, PROVIDED that:


                                      -14-
<PAGE>


(A) the consideration for such transaction represents fair value, and at least
90% of such consideration consists of cash, PROVIDED that in connection with a
sale or similar disposition of any such Property, if a Loan Party receives a
note or similar obligations as all or part of the consideration therefor, such
Loan Party shall secure such note or obligation with a Mortgage or similar Lien
on such property and pledge such note or other obligation to the Agent as
security for the Obligations pursuant to the terms of the Loan Documents; (B)
the aggregate consideration for all such transactions completed in any fiscal
year does not exceed $500,000; (C) the aggregate consideration for all such
transactions completed after the Effective Date does not exceed $1,500,000; and
(D) other than in connection with a transaction, the aggregate consideration for
which is equal to an amount less than $500,000, at least five (5) Business Days
prior to the date of completion of such transaction such Loan Party shall have
delivered to the Agent an officer's certificate executed on behalf of such Loan
Party by an Authorized Officer of such Loan Party, which certificate shall
contain a description of the proposed transaction, the date such transaction is
scheduled to be consummated, the estimated purchase price or other consideration
for such transaction, financial information pertaining to compliance with the
preceding clause (A), and which shall (if requested by the Agent) include a
certified copy of the draft or definitive documentation pertaining thereto.

         "PERMITTED INDEBTEDNESS" means any of the following: (i) Indebtedness
incurred under this Agreement and the other Loan Documents; (ii) [Intentionally
Omitted]; (iii) Indebtedness on account of Equipment or improvements to real
property acquired in compliance with the requirements of subparagraph (xiii) of
the definition of Permitted Liens, the incurrence of which would not otherwise
be prohibited by this Agreement; PROVIDED, that such Indebtedness shall not
exceed $10,000,000 in the aggregate at any time outstanding; (iv) (a)
Indebtedness consisting of all obligations of a Loan Party or any Subsidiary as
lessee under Capitalized Leases, and (b) Indebtedness consisting of all
obligations of a Loan Party or any Subsidiary under any lease (x) that is
accounted for by the lessee as an operating lease and (y) under which the lessee
is intended to be the "owner" of the leased property for Federal income tax
purposes; PROVIDED, that (A) at the time of any incurrence thereof after the
date hereof, and after giving effect thereto, no Event of Default shall have
occurred and be continuing or would result therefrom, and (B) the aggregate
outstanding principal amount (using the obligations in lieu of principal amount,
in the case of any Capitalized Lease, or present value, based on the implicit
interest rate, in lieu of principal amount, in the case of any lease described
above in part (b)) of Indebtedness permitted by this clause (iv) shall not
exceed $10,000,000 aggregate principal amount outstanding at any time; (v)
Indebtedness of the Loan Parties and any Subsidiary under the NCB Hedging
Agreement, (vi) the Indebtedness listed on Schedule 6.02(b), annexed hereto;
(vii) Indebtedness to sellers in connection with Permitted Acquisitions; (viii)
intercompany indebtedness between and among the Borrower and the other Loan
Parties; (ix) Indebtedness to creditors of the former Filene's incurred in
connection with the acquisition of Filene's, such Indebtedness not to exceed
$6,000,000; (x) Indebtedness with respect to indemnities, warranties, statutory
obligations, and surety, appeal and supersedeas bonds incurred in the ordinary
course of business; (xi) Indebtedness in respect of overdraft protections and
otherwise in connection with deposit accounts; and (xii) Indebtedness arising
out of the refinancing, extension, renewal or refunding of any Indebtedness
permitted under this Agreement, provided that the principal amount of such
Indebtedness is not increased from the amount outstanding at the time of such
refinancing.


                                      -15-
<PAGE>


         "PERMITTED INVESTMENTS" means each of the following: (i) direct
obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America (or by any agency
thereof to the extent such obligations are backed by the full faith and credit
of the United States of America), in each case maturing not more than one year
from the date of acquisition thereof; (ii) investments in commercial paper
maturing not more than one year from the date of acquisition thereof and having,
at such date of acquisition, the highest credit rating obtainable from Standard
& Poor's or from Moody's Investment Services, Inc.; (iii) investments in
certificates of deposit, banker's acceptances and time deposits maturing not
more than one year from the date of acquisition thereof issued or guaranteed by
or placed with, and money market deposit accounts issued or offered by, any
domestic office of any financial institution organized under the laws of the
United States of America or any State thereof that has a combined capital and
surplus and undivided profits of not less than $500,000,000; (iv) fully
collateralized repurchase agreements with a term of not more than 30 days for
securities described in clause (i) above (without regard to the limitation on
maturity contained in such clause) and entered into with a financial institution
satisfying the criteria described in clause (iii) above; (v) marketable direct
obligations issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing
within one year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either
Standard & Poor's or from Moody's Investment Services, Inc.; (vi) investments in
money market funds, substantially all the assets of which are comprised of
securities of the types described in clauses (i) through (vi) above; (vii)
investments acquired by a Loan Party or any of its Subsidiaries (x) in exchange
for any other investment held by such Loan Party or any such Subsidiary in
connection with or as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other investment, or (y) as a result of a
foreclosure by such Loan Party or any of its Subsidiaries with respect to any
secured investment or other transfer of title with respect to any secured
investment in default; (viii) investments by a Loan Party in the capital of any
wholly-owned subsidiary of such Loan Party, including without limitation, any
Permitted Acquisitions, provided that the provisions of Section 6.01(a) hereof
have been complied with respect to such Subsidiary; (ix) to the extent not
permitted by the foregoing clauses, existing investments in any Subsidiaries
(and any increases thereof attributable to increases in retained earnings); (x)
to the extent not permitted by the foregoing clauses, the existing investments
described on Schedule 6.02(e) hereto; (xi) investments of a Loan Party and any
Subsidiary in Hedging Agreements permitted by clause (v) of the definition of
Permitted Indebtedness; (xii) investments of any Person which are outstanding at
the time such Person becomes a Subsidiary of a Loan Party as a result of
Permitted Acquisition, but not any increase in the amount thereof; and (xiii)
any other investments (whether in the form of cash or contribution of property,
and if in the form of a contribution of property, such property shall be valued
for purposes of this clause at the fair value thereof) in any corporation,
partnership, limited liability company, joint venture or other business entity,
which is not itself a Subsidiary of a Key Loan Party or owned or Controlled by
any director, officer or employee of a Key Loan Party or any of its
Subsidiaries, not otherwise permitted by the foregoing clauses, made after the
Effective Date, shall be permitted to be incurred if (a) no Event of Default
shall have occurred and be continuing, or would result therefrom, and (b) the
aggregate cumulative amount of such investments (together with any loans and
advances permitted under Sections 6.02(e)(vi)(D) and (E)) does not exceed
$6,000,000.


                                      -16-
<PAGE>


         "PERMITTED LIENS" means any of the following: (i) Liens for taxes not
yet delinquent or which are being contested in good faith by appropriate
proceedings, PROVIDED that adequate reserves with respect thereto are maintained
on the books of a Key Loan Party in accordance with GAAP, and PROVIDED further
that, no notice of tax lien has been filed with respect thereto; (ii) Liens in
respect of property or assets imposed by law in the ordinary course of business,
such as carrier's, warehousemen's, mechanics', materialmen's, repairmen's,
landlord's or similar Liens arising in the ordinary course of business which (x)
are not overdue in accordance with customary business practices and consistent
with the applicable Loan Party's prior practices, and do not in the aggregate
materially detract from the value of such property or assets or materially
impair the use thereof in the operation of the business of the Loan Parties, or
(y) are being contested in good faith by a Loan Party, by appropriate
proceedings diligently instituted and conducted and without danger of any
material risk to the property or assets of such Loan Party and adequate reserves
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made therefor; (iii) Liens, pledges or deposits in
connection with workers' compensation, unemployment insurance and other types of
social security; (iv) deposits to secure the performance of tenders, bids,
sales, trade and government contracts, leases, statutory obligations, surety,
appeal, and supersedeas bonds, warranty, advance payment, customs, performance
and return-of-money bonds and other obligations of a like nature in the ordinary
course of business (exclusive of obligations in respect of the payment of
borrowed money) whether pursuant to statutory requirements, common law or
consensual arrangements; (v) easements, rights of way, leases, zoning or deed
restrictions, licenses, covenants, building restrictions, minor defects or
irregularities in title and other similar real estate encumbrances incurred in
the ordinary course of business that in the aggregate do not materially
interfere with the conduct of the business of the Loan Parties; defects and
irregularities in titles, survey exceptions, encumbrances, easements or
reservations of others for rights-of-way, roads, pipelines, railroad crossings,
services, utilities or other similar purposes; outstanding mineral rights or
reservations (including rights with respect to the removal of material resource)
which do not materially diminish the value of the surface estate, assuming usage
of such surface estate similar to that being carried on by any Loan Party as of
the Effective Date; (vi) any interest or title of a lessor under any lease
entered into by any Loan Party in the ordinary course of business not in
violation of the Loan Documents; (vii) any interest or title of any lessee under
any leases or subleases of real property of a Loan Party not in violation of the
requirements of the Loan Documents, provided that all such Liens do not in the
aggregate materially detract from the value of such Loan Party's property or
materially impair the use thereof in the operation of such Loan Party's
business; (viii) Liens arising from financing statements regarding property
subject to Capitalized Leases not in violation of the requirements of the Loan
Documents, provided that such Liens are only in respect of the property subject
to, and secure only, the respective lease; (ix) rights of consignors of goods to
a Loan Party as consignee; (x) Liens arising from judgments, decrees or
attachments in existence less than 30 days after the entry thereof, with respect
to which execution has been stayed and with respect to which payment in full
above any applicable deductible is covered by insurance or a bond, or in
circumstances not constituting an Event of Default under Section 9.01(j)(i);
(xi) Liens created by this Agreement or the other Loan Documents; (xii) Liens
(x) listed on Schedule 6.02(a), annexed hereto, or (y) arising out of the
refinancing, extension, renewal or refunding of any Indebtedness secured by any
such Lien, provided that the principal amount of such Indebtedness is not
increased and such Indebtedness is not secured by any additional assets; and
(xiii) Liens which


                                      -17-
<PAGE>


are placed upon Equipment or improvements to real property (including the
associated real property) used in the ordinary course of business of a Loan
Party or any Subsidiary (x) at the time of (or within 90 days after) the
acquisition of such Equipment or the completion of such improvements by such
Loan Party or any such Subsidiary to secure Indebtedness incurred to pay or
finance all or a portion of the purchase price or other cost thereof, provided
that the Lien on the Equipment so acquired or the real property so improved does
not encumber any other asset of such Loan Party or any such Subsidiary; or (y)
are existing on Equipment or real property at the time acquired by a Loan Party
or any Subsidiary or on assets of a Person at the time such Person first becomes
a Subsidiary of the Borrower; PROVIDED, that (A) any such Lien was not created
at the time of or in contemplation of the acquisition of such assets or Person
by a Loan Party or any Subsidiaries, (B) in the case of any such acquisition of
a Person, any such Lien attaches only to the Equipment or real estate, as
applicable, of such Person, and (C) in the case of any such acquisition of
Equipment or real estate by a Loan Party or any Subsidiary, any such Lien
attaches only to the property and assets so acquired and not to any other
property or assets of such Loan Party or any such Subsidiary; PROVIDED, that the
Liens outstanding from time to time under this clause (xiii) shall not secure
any Indebtedness other than Permitted Indebtedness described in clause (iii) of
such definition.

         "PERSON" shall have the meaning given to such term as defined in
Section 13(d)(3) of the Securities Exchange Act.

         "PIK INTEREST" means, as at any date of determination, the amount of
all interest accrued with respect to the Loan that has been paid-in-kind by
being added to the outstanding principal balance thereof on a monthly basis in
accordance with Section 2.03.

         "PIK OPTION CHANGE DATE" means the second anniversary of the Effective
Date.

         "POST-DEFAULT RATE" means a rate of interest per annum equal to the
rate of interest otherwise in effect from time to time pursuant to the terms of
this Agreement plus 3%.

         "PRO RATA SHARE" means the percentage obtained by dividing (i) the
aggregate unpaid principal amount of such Lender's portion of the Loan, by (ii)
the aggregate unpaid principal amount of the Loan.

         "PROPERTY" means any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.

         "PROXY" has the meaning specified therefor in Section 5.01(nn).

         "REFERENCE BANK" means JPMorgan Chase Bank, its successors or any other
commercial bank designated by the Agent to the Borrower from time to time.

         "REFERENCE RATE" means the rate of interest publicly announced by the
Reference Bank in New York, New York from time to time as its reference rate,
base rate or prime rate. The reference rate, base rate or prime rate is
determined from time to time by the Reference Bank as a means of pricing some
loans to its borrowers and neither is tied to any external rate of interest or
index nor necessarily reflects the lowest rate of interest actually charged by
the Reference Bank to any particular class or category of customers. Each change
in the Reference


                                      -18-
<PAGE>


Rate shall be effective from and including the date such change is publicly
announced as being effective.

         "REGISTER" has the meaning specified therefor in Section 12.07(b)(ii).

         "REGISTERED LOAN" has the meaning specified therefor in Section
12.07(b)(ii).

         "REGISTERED NOTE" has the meaning specified therefor in Section
2.02(c).

         "REGISTRATION RIGHTS AGREEMENT" means the registration rights
agreement, dated as of March 15, 2000 by and between the Borrower and PSCC
(whose interest thereunder was subsequently assigned to SSC on December 11,
2000).

         "REGULATION T", "REGULATION U" and "REGULATION X" mean, respectively,
Regulations T, U and X of the Board or any successor, as the same may be amended
or supplemented from time to time.

         "RELATED BUSINESS" means any business or enterprise consisting of asset
maximization services or asset valuation services.

         "RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, seeping, migrating,
dumping or disposing of any Hazardous Material (including the abandonment or
discarding of barrels, containers and other closed receptacles containing any
Hazardous Material) into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through or in the ambient air,
soil, surface or ground water, or property.

         "REMEDIAL ACTION" means all actions taken to (i) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate or in any other way address
Hazardous Materials in the indoor or outdoor environment; (ii) prevent or
minimize a Release or threatened Release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; (iii) perform pre-remedial studies and
investigations and post-remedial operation and maintenance activities; or (iv)
perform any other actions authorized by 42 U.S.C. ss. 9601.

         "REPORTABLE EVENT" means an event described in Section 4043 of ERISA
(other than an event not subject to the provision for 30-day notice to the PBGC
under the regulations promulgated under such Section).

         "REQUIRED LENDERS" means SSC and any of its affiliates to whom it
assigns all or any portion of its rights and obligations under this Agreement or
any of the Loan Documents.

         "REQUISITE APPROVAL" means the affirmative vote of at least a majority
of the shares of Common Stock (voting as one class, with each share of Common
Stock having one vote) voting regarding the issuance of the Conversion Shares in
excess of 19.9% of the issued and outstanding Common Stock on the Effective Date
with greater than fifty percent (50%) of the issued and outstanding shares of
Common Stock voting.


                                      -19-
<PAGE>


         "SEC" means the Securities and Exchange Commission or any other similar
or successor agency of the Federal government administering the Securities Act.

         "SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect from time to time.

         "SOLVENT" means, with respect to any Person on a particular date, that
on such date (i) the fair value of the property of such Person is not less than
the total amount of the liabilities of such Person; (ii) the present fair
saleable value of the assets of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its existing
debts as they become absolute and matured; (iii) such Person is able to realize
upon its assets and pay its debts and other liabilities, Contingent Obligations
and other commitments as they mature in the normal course of business; (iv) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature; and (v) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital. The determination of
whether a Person is Solvent shall take into account all such Person's properties
and liabilities regardless of whether, or the amount at which, any such property
or liability is included on a balance sheet of such Person prepared in
accordance with GAAP, including properties such as contingent contribution or
subrogation rights, business prospects, distribution channels and goodwill. The
determination of the sum of a Person's properties at a fair valuation or the
present fair saleable value of a Person's properties shall be made on a going
concern basis unless, at the time of such determination, the liquidation of the
business in which such properties are used or useful is in process or is
demonstrably imminent. In computing the amount of contingent or unrealized
properties or contingent or unliquidated liabilities at any time, such
properties and liabilities will be computed at the amounts which, in light of
all the facts and circumstances existing at such time, represent the amount that
reasonably can be expected to become realized properties or matured liabilities,
as the case may be. In computing the amount that would be required to pay a
person's probable liability on its existing debts as they become absolute and
matured, reasonable valuation techniques, including a present value analysis,
shall be applied using such rates over such periods as are appropriate under the
circumstances, and it is understood that, in appropriate circumstances, the
present value of Contingent Liabilities may be zero.

         "STANDARD & POOR'S" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. and any successor thereto.

         "SSC" has the meaning specified therefore in the preamble hereto.

         "SUBSIDIARY" means, with respect to any Person at any date, any
corporation, limited or general partnership, limited liability company, trust,
estate, association, joint venture or other business entity (i) the accounts of
which would be consolidated with those of such Person in such Person's
consolidated financial statements if such financial statements were prepared in
accordance with GAAP or (ii) of which more than 50% of (A) the outstanding
Capital Stock having (in the absence of contingencies) ordinary voting power to
elect a majority of the board of directors or other managing body of such
Person, (B) in the case of a partnership


                                      -20-
<PAGE>


or limited liability company, the interest in the capital or profits of such
partnership or limited liability company or (C) in the case of a trust, estate,
association, joint venture or other entity, the beneficial interest in such
trust, estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through one or more
intermediaries, by such Person.

         "TAXES" has the meaning set forth in Section 2.05.

         "UNRESTRICTED SUBSIDIARY" has the meaning specified therefor in Section
5.01(kk).

         "VALUE CITY BUSINESS" means the Key Loan Parties' business other than
the DSW/Shonac Business and the Filene's Business.

         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. References in this
Agreement to "determination" by the Agent include good faith estimates by the
Agent (in the case of quantitative determinations) and good faith beliefs by the
Agent (in the case of qualitative determinations).

         Section 1.03 ACCOUNTING AND OTHER TERMS. Unless otherwise expressly
provided herein, each accounting term used herein shall have the meaning given
it under GAAP applied on a basis consistent with those used in preparing the
Financial Statements.

         Section 1.04 TIME REFERENCES. Unless otherwise indicated herein, all
references to time of day refer to Eastern Standard Time or Eastern daylight
saving time, as in effect in New York City on such day. For purposes of the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding"; PROVIDED, HOWEVER, that with respect to a computation
of fees or interest payable to the Agent or any Lender, such period shall in any
event consist of at least one full day.

                                   ARTICLE II


                                      -21-
<PAGE>


                                    THE LOAN

         Section 2.01 THE LOAN. (a) The Lenders have made Advances (as defined
in the Original Loan Agreement) to the Borrower under the Original Loan
Agreement, of which $75,000,000 of the Advances remain outstanding on the
Effective Date (immediately prior to the effectiveness of this Agreement). The
Borrower acknowledges and agrees that upon the effectiveness of this Agreement,
the aggregate principal amount of such Advances shall automatically and
immediately be deemed to constitute the "Loan" to the Borrower by the Lenders
under this Agreement. It is the intention of the parties hereto that this
Agreement and the consolidation and substitution of the Note for the existing
"Notes" referred to in the Original Loan Agreement (the "OLD NOTE") shall not in
any way constitute (i) a forgiveness of the indebtedness of the Borrower under
the Old Note, (ii) a release of the Borrower from such obligations, or (iii) a
novation of the Old Note.

         (b) Any principal amount of the Loan which is prepaid or repaid may not
be reborrowed.

         Section 2.02 NOTES; REPAYMENT OF LOAN.

                (a) The obligations of the Borrower to repay the Loan and
interest thereon shall be evidenced by Notes, duly executed on behalf of the
Borrower, dated the Effective Date, and delivered to and made payable to the
order of each Lender in a principal amount equal to such Lender's Pro Rata Share
of the Loan as set forth on Schedule 1.01A.

                 (b) The Borrower shall repay the principal amount of the Loan
(including all PIK Interest added thereto) on the Final Maturity Date together
with all such other amounts as may be necessary to pay in full, in cash, all
Obligations to the Lenders.

                 (c) The Loan may not be evidenced by promissory notes other
than a Note which is a Registered Note. Upon the registration of the Loan, any
promissory note (other than a Registered Note) evidencing the same shall be null
and void and shall be returned to the Borrower. The Borrower agrees, at the
request of the Agent, to execute and deliver to each Lender, a promissory note
in registered form (a "REGISTERED NOTE") to evidence such Registered Loan (i.e.,
containing the registered note language set forth in Exhibit K hereto) and
registered as provided in Section 12.07. Once recorded in the Register, the Loan
evidenced by such Note may not be removed from the Register so long as it
remains outstanding and a Registered Note may not be exchanged for a promissory
note that is not a Registered Note.

         Section 2.03 INTEREST. (a) RATE. The Loan shall bear interest on the
principal amount thereof from time to time outstanding, from the Effective Date
until such principal amount becomes due, at an interest rate per annum equal to
10%; PROVIDED, HOWEVER, that if the Requisite Approval is not obtained and all
of the Conversion Shares are not approved for listing on the NYSE on or prior to
the Listing Deadline Date, the Loan shall bear interest on the principal amount
thereof, from the Listing Deadline Date until the date such Requisite Approval
is obtained and such Conversion Shares are listed on the NYSE, at an interest
rate per annum equal to the interest rate otherwise in effect pursuant to the
terms of this Agreement plus five


                                      -22-
<PAGE>


percent (5%).

                 (b) DEFAULT INTEREST. To the extent permitted by law, upon the
occurrence and during the continuance of an Event of Default, the principal of,
and all accrued and unpaid interest on, the Loan and all fees, indemnities or
any other Obligations of the Loan Parties under this Agreement and the other
Loan Documents, shall bear interest, from the date such Event of Default
occurred until the date such Event of Default is cured or waived in writing in
accordance herewith, at a rate per annum equal at all times to the Post-Default
Rate.

                 (c) INTEREST PAYMENT. Interest on the Loan shall be payable
quarterly in arrears, on the last day of January, April, July and October in
each year, commencing on July 31, 2002 and on the Final Maturity Date (whether
upon demand, by acceleration or otherwise), (i) prior to the PIK Option Change
Date, at the option of the Borrower, either (A) in cash, or (B) in PIK Interest,
the amount of which shall be accrued and added to the outstanding principal
amount of the Loan quarterly in arrears and shall be payable at Final Maturity,
and (ii) on and after the PIK Option Change Date, at the option of the Borrower,
either (A) entirely in cash, or (B) in a combination of cash and PIK Interest
(the amount of any such PIK Interest shall be accrued and added to the
outstanding principal amount of the Loan quarterly in arrears and shall be
payable at Final Maturity), PROVIDED, HOWEVER, that after the PIK Option Change
Date, at least 50% of the interest payable at any time shall be paid in cash.
The Borrower shall give the Agent and each of the Lenders prior telephonic
notice (immediately confirmed in writing in substantially the form of Exhibit C
hereto (a "NOTICE OF ELECTION")) not later than two (2) Business Days prior to
any date on which a payment of interest is required pursuant to this Section
2.03(c), specifying the amount of interest to be paid in cash and the amount to
be paid in PIK Interest. Such Notice of Election shall be irrevocable.
Notwithstanding anything to the contrary contained herein, interest at the
Post-Default Rate shall be payable in cash on demand.

                 (d) GENERAL. All interest shall be computed on the basis of a
year of 360 days for the actual number of days, including the first day but
excluding the last day, elapsed.

         Section 2.04 PREPAYMENT OF LOAN.

                 (a) OPTIONAL PREPAYMENT. Prior to June 10, 2007, the Borrower
shall not have any right to prepay the Loan. After June 10, 2007, the Borrower
may, upon at least 30, but not more than 60 Business Days' written notice to the
Agent (such notice being irrevocable), stating the proposed date and aggregate
principal amount of the prepayment, and if such notice is given, the Borrower
shall, prepay the Loan, in whole or in part, together with accrued interest to
the date of such prepayment on the principal amount prepaid and any amounts
owing in connection therewith; PROVIDED, HOWEVER, that each partial prepayment
shall be in an aggregate principal amount not less than $5,000,000 or an
integral multiple of $1,000,000 in excess thereof. Any portion of the Loan that
is prepaid may not be reborrowed, in whole or in part.

                 (b) INTEREST AND FEES. Any prepayment made pursuant to this
Section 2.04 shall be accompanied by accrued interest on the principal amount
being prepaid to the date of prepayment, and if such prepayment would reduce the
amount of the outstanding Loan to zero, such prepayment shall be accompanied by
the payment of all fees accrued to such date pursuant to the terms of this
Agreement.


                                      -23-
<PAGE>


                 (c) CUMULATIVE PREPAYMENTS. Except as otherwise expressly
provided in this Section 2.04, payments with respect to any subsection of this
Section 2.04 are in addition to payments made or required to be made under any
other provision of this Agreement.

         Section 2.05 TAXES. (a) All payments made by any Loan Party hereunder
or under any other Loan Document shall be made without set-off, counterclaim,
deduction or other defense. All such payments shall be made free and clear of
and without deduction for any present or future income, franchise, sales, use,
excise, stamp or other taxes, levies, imposts, deductions, charges, fees,
withholdings, restrictions or conditions of any nature now or hereafter imposed,
levied, collected, withheld or assessed by any jurisdiction (whether pursuant to
Federal, state, local or foreign law) or by any political subdivision or taxing
authority thereof or therein, and all interest, penalties or additional amounts,
excluding taxes on the net income of any Lender or the Agent imposed by the
jurisdiction in which such Lender or such Agent is organized or any political
subdivision thereof or taxing authority thereof or any jurisdiction in which
such Person's principal office is located or any political subdivision thereof
or taxing authority thereof (such nonexcluded taxes, levies, imposts,
deductions, charges, fees, withholdings, restrictions, conditions, interest,
penalties and additional amounts being hereinafter collectively referred to as
"TAXES"). If any Loan Party shall be required to deduct or to withhold any Taxes
from or in respect of any amount payable hereunder or under any other Loan
Document:

                        (i) the amount so payable shall be increased so that
after making all required deductions and withholdings (including Taxes on
amounts payable pursuant to this sentence) the Lenders or the Agent, as the case
may be, receive an amount equal to the sum they would have received had no such
deduction or withholding been made;

                         (ii) such Loan Party shall make such deduction or
withholding;

                         (iii) such Loan Party shall pay the full amount
deducted or withheld to the relevant taxation authority in accordance with
Applicable Law; and

                         (iv) whenever any Taxes are payable by any Loan Party,
as promptly as possible thereafter, such Loan Party shall send the Lenders and
the Agent an official receipt (or, if an official receipt is not available, such
other documentation as shall be satisfactory to the Lenders or the Agent, as the
case may be) evidencing payment of the amount or amounts so deducted or
withheld. In addition, each Loan Party agrees to pay any present or future
taxes, charges or similar levies which arise from any payment made hereunder or
from the execution, delivery, performance, recordation or filing of, or
otherwise with respect to, this Agreement or any other Loan Document other than
the foregoing excluded taxes (hereinafter referred to as "OTHER TAXES").

                 (b) The Loan Parties hereby jointly and severally agree to
indemnify and hold the Lenders and the Agent harmless from and against Taxes or
Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 2.05) paid by any Lender
or the Agent and any liability (including penalties, interest and expenses for
nonpayment, late payment or otherwise) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. Such indemnification shall be paid within 10 days from the date on
which any the Agent, on


                                      -24-
<PAGE>


behalf of the Lenders, makes written demand therefor, which demand shall
identify in reasonable detail the nature and amount of such Taxes or Other
Taxes.

                 (c) Each Lender that is organized in a jurisdiction outside
the United States hereby agrees that it shall, no later than the Effective Date
or, in the case of a Lender which becomes a party hereto pursuant to Section
12.07 hereof after the Effective Date, the date upon which such Lender becomes a
party hereto (and from time to time thereafter upon the reasonable request of
the Borrower or the Agent, but only if such Lender is legally able to do so),
deliver to the Borrower and the Agent either (i) two accurate, complete and
signed copies of either (x) U.S. Internal Revenue Service Form W-8ECI or
successor form, or (y) U.S. Internal Revenue Service Form W-8BEN or successor
form, in each case, indicating that such Lender is on the date of delivery
thereof entitled to receive payments of interest hereunder free from, or subject
to a reduced rate of, withholding of United States Federal income tax or (ii) in
the case of such a Lender that is entitled to claim exemption from withholding
of United States Federal income tax under Section 871(h) or Section 881(c) of
the Internal Revenue Code, (x) a certificate to the effect that such Lender is
(A) not a "bank" within the meaning of Section 881(c)(3)(A) of the Internal
Revenue Code, (B) not a "10 percent shareholder" of the Borrower within the
meaning of Section 881(c)(3)(B) of the Internal Revenue Code and (C) not a
controller foreign corporation receiving interest from a related person within
the meaning of Section 881(c)(3)(C) of the Internal Revenue Code and (y) two
accurate, complete and signed copies of U.S. Internal Revenue Service Form
W-8BEN or successor form.

                 (d) If any Loan Party fails to perform any of its obligations
under this Section 2.05, the Loan Parties shall indemnify the Lenders and the
Agent for any taxes, interest or penalties that may become payable as a result
of any such failure. The obligations of the Loan Parties under this Section 2.05
shall survive the termination of this Agreement and the payment of the Loan and
all other amounts payable hereunder.

                                  ARTICLE III

                      FEES, PAYMENTS AND OTHER COMPENSATION

         Section 3.01 [Intentionally Omitted.]

         Section 3.02 PAYMENTS; COMPUTATIONS AND STATEMENTS. (a) The Borrower
will make each payment under this Agreement not later than 12:00 noon (New York
City time) on the day when due, in lawful money of the United States of America
and in immediately available funds, in the manner set forth in clause (b) below.
All payments received after 12:00 noon (New York City time) on any Business Day
will be credited on the next succeeding Business Day. All payments shall be made
by the Borrower without set-off, counterclaim, deduction or other defense to the
Agent and the Lenders. Whenever any payment to be made under any such Loan
Document shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall in such case be included in the computation of interest or fees, as
the case may be. All computations of fees shall be made by the Agent on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for


                                      -25-
<PAGE>


which such fees are payable. Each determination by the Agent of an interest
payment amount or fees hereunder shall be rebuttably presumed to be accurate, in
the absence of manifest error.

                 (b) (i) Other than during the continuance of an Event of
Default, the Borrower shall make each payment relating to the payment of
principal and interest in respect of the Loan directly to the Lender's Account
of each Lender to whom payment is required to be made, in like funds and in
accordance with each Lender's Pro Rata Share of such payment. The Borrower shall
make all other payments under this Agreement to the Agent's Account for
distribution to the Lenders in accordance with clause (iii) below.

                         (ii) Upon the occurrence and during the continuance of
an Event of Default, the Borrower shall make all payments under this Agreement
to the Agent's Account for distribution to the Lenders in accordance with clause
(iii) below.

                         (iii) Upon the receipt of any payment under this
Agreement, the Agent will promptly (and in any case, not later than five (5)
Business Days) thereafter, cause to be distributed to the Lenders to whom
payment is required to be made, (A) in the case of payments relating to
principal and interest, in like funds in accordance with their Pro Rata Shares,
and (B) in the case of the payment of any other amount payable to any Lender, in
like funds; PROVIDED, HOWEVER, that this clause shall not apply to any payment
made under this Agreement that is solely for the account of the Agent.

                 (c) The Agent shall provide the Borrower, promptly after the
end of each calendar month, a summary statement (in the form from time to time
used by the Agent) of the amounts and dates of all payments on account of the
Loan to the Borrower during such month, the amount of interest accrued on the
Loan to the Borrower during such month, the amount of PIK Interest added to the
principal of the Loan during such month, and the amount and nature of any other
fees, commissions, expenses and other Obligations incurred during such month.
All entries on any such statement shall be presumed to be correct and, thirty
(30) days after the same is sent, shall be rebuttably presumed to be accurate,
absent manifest error. For purposes of such statement, the Agent shall have the
right to conclude, absent evidence to the contrary (i) that no payments have
been made by the Borrower and no requests for payments have been made to the
Borrower by any Lender other than in accordance with this Agreement, and (ii)
all payments of principal and interest required to be made directly to any
Lender's Account have been made pursuant to the terms of this Agreement.

         Section 3.03 SHARING OF PAYMENTS, ETC. Except as provided in Sections
2.02 and 3.02(b) hereof, if any Lender shall obtain any payment (whether
voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) on account of any Obligation in excess of its ratable share of
payments on account of similar obligations obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such participations in
such similar obligations held by them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them;
PROVIDED, HOWEVER, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of
such Lender's required repayment to (ii) the


                                      -26-
<PAGE>


total amount so recovered from the purchasing Lender of any interest or other
amount paid by the purchasing Lender in respect of the total amount so
recovered). The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 3.03 may, to the fullest extent
permitted by law, exercise all of its rights (including the Lender's right of
set-off) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such participation.

         Section 3.04 APPORTIONMENT OF PAYMENTS. Subject to Section 2.02 hereof
and to any written agreement among the Agent and/or the Lenders:

                 (a) All payments of principal, interest and PIK Interest in
respect of the outstanding portion of the Loan, all payments of fees and all
other payments in respect of any other Obligations, shall be allocated by the
Agent among such of the Lenders as are entitled thereto, in proportion to their
respective Pro Rata Shares or otherwise as provided herein or, in respect of
payments not made on account of the Loan, as designated by the Person making
payment when the payment is made.

                 (b) After the occurrence and during the continuance of an
Event of Default, the Agent may apply all payments in respect of any
Obligations, subject to the provisions of this Agreement, (i) FIRST, ratably to
pay the Obligations in respect of any fees, expense reimbursements, indemnities
and other amounts then due to the Agent until paid in full; (ii) SECOND, ratably
to pay the Obligations in respect of any fees and indemnities then due to the
Lenders until paid in full; (iii) THIRD, ratably to pay interest due in respect
of the Loan until paid in full; (iv) FOURTH, ratably to pay PIK Interest due in
respect of the Loan until paid in full; (v) FIFTH, ratably to pay the principal
of the Loan until paid in full; and (viii) SIXTH, to the ratable payment of all
other Obligations then due and payable.

                 (c) In each instance, so long as no Event of Default has
occurred and is continuing, Section 3.04(b) shall not be deemed to apply to any
payment by the Borrower specified by the Borrower to the Agent to be for the
prepayment of all or part of the principal of the Loan in accordance with the
terms and conditions of Section 2.04.

                 (d) For purposes of Section 3.04(b), "paid in full" with
respect to interest shall include interest accrued after the commencement of any
Insolvency Proceeding irrespective of whether a claim for such interest is
allowable in such Insolvency Proceeding.

                 (e) In the event of a direct conflict between the priority
provisions of this Section 3.04 and other provisions contained in any other Loan
Document, it is the intention of the parties hereto that both such priority
provisions in such documents shall be read together and construed, to the
fullest extent possible, to be in concert with each other. In the event of any
actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms
and provisions of this Section 3.04 shall control and govern.

         Section 3.05 INCREASED COSTS AND REDUCED RETURN. (a) If any Lender or
the Agent shall have determined that the adoption or implementation of, or any
change in, any law, rule, treaty or regulation, or any policy, guideline or
directive of, or any change in, the interpretation or administration thereof by,
any court, central bank or other administrative or


                                      -27-
<PAGE>


Governmental Authority, or compliance by any Lender or the Agent or any Person
controlling any such Lender or the Agent with any directive of, or guideline
from, any central bank or other Governmental Authority or the introduction of,
or change in, any accounting principles applicable to any Lender or the Agent or
any Person controlling any such Lender or the Agent (in each case, whether or
not having the force of law), shall (i) subject any Lender or the Agent, or any
Person controlling any such Lender or the Agent to any tax, duty or other charge
with respect to this Agreement or any Loan made by such Lender or the Agent, or
change the basis of taxation of payments to any Lender or the Agent or any
Person controlling any such Lender or the Agent of any amounts payable hereunder
(except for taxes on the overall net income of any Lender or the Agent or any
Person controlling any such Lender or the Agent), (ii) impose, modify or deem
applicable any reserve, special deposit or similar requirement against any Loan,
or against assets of or held by, or deposits with or for the account of, or
credit extended by, any Lender or the Agent or any Person controlling any such
Lender or the Agent or (iii) impose on any Lender or the Agent or any Person
controlling any such Lender or the Agent or any other condition regarding this
Agreement or any Loan, and the result of any event referred to in clauses (i),
(ii) or (iii) above shall be to increase the cost to any Lender or the Agent of
making any Loan, or agreeing to make any Loan, or to reduce any amount received
or receivable by any Lender or the Agent hereunder, then, within ten (10) days
after demand and receipt of a detailed calculation and statement of cause by the
Agent, on behalf of the affected Lenders, the Borrower shall pay to the Agent,
for the benefit of the affected Lenders, such additional amounts as will
compensate such Lenders for such increased costs or reductions in amount.

                 (b) If any Lender or the Agent shall have determined that any
Capital Guideline or the adoption or implementation of, or any change in, any
Capital Guideline by the Governmental Authority charged with the interpretation
or administration thereof, or compliance by any Lender or the Agent or any
Person controlling such Lender or the Agent with any Capital Guideline or with
any request or directive of any such Governmental Authority with respect to any
Capital Guideline, or the implementation of, or any change in, any applicable
accounting principles (in each case, whether or not having the force of law),
either (i) affects or would affect the amount of capital required or expected to
be maintained by any Lender or the Agent or any Person controlling such Lender
or the Agent, and any Lender or the Agent determines that the amount of such
capital is increased as a direct or indirect consequence of any Loan made or
maintained, or any guaranty or participation with respect thereto, any Lender's
or the Agent's or any such other controlling Person's other obligations
hereunder; or (ii) has or would have the effect of reducing the rate of return
on any Lender's or the Agent's any such other controlling Person's capital to a
level below that which such Lender or the Agent or such controlling Person could
have achieved but for such circumstances as a consequence of any Loan made or
maintained, or any guaranty or participation with respect thereto or any
agreement to make Loan, or such Lender's or the Agent's or such other
controlling Person's other obligations hereunder (in each case, taking into
consideration, such Lender's, Agent's or other controlling Person's policies
with respect to capital adequacy), then, within ten (10) days after demand and
receipt of a detailed calculation and statement of cause by the Agent, on behalf
of the affected Lenders, the Borrower shall pay to the Agent, for the benefit of
such affected Lenders, from time to time such additional amounts as will
compensate such Lenders for such cost of maintaining such increased capital or
such reduction in the rate of return on such Lender's or the Agent's or such
other controlling Person's capital.


                                      -28-
<PAGE>


                 (c) All amounts payable under this Section 3.05 shall bear
interest from the date that is ten (10) days after the date of demand by any
Lender or the Agent until payment in full to such Lender or the Agent at the
Reference Rate. A certificate of the Agent, on behalf of the affected Lenders,
claiming compensation under this Section 3.05, specifying the event herein above
described and the nature of such event shall be submitted by the Agent, on
behalf of the affected Lenders, to the Borrower, setting forth the additional
amount due and an explanation of the calculation thereof, and the Agent's
reasons for invoking the provisions of this Section 3.05, and shall be
rebuttably presumed to be correct, absent manifest error.

                 (d) If any Lender incurs increased costs and requests
compensation under this Section 3.05, then the Borrower may (i) request such
Lender use reasonable efforts to designate a different lending office for
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 designation or assignment (A) would eliminate or reduce amounts
payable pursuant to Section 3.05 hereof, and (B) would not subject such Lender
to any unreimbursed cost or expense, and would not otherwise be disadvantageous
to such Lender. The Borrower shall pay all reasonable costs and expenses
incurred by such Lender in connection with any such designation of assignment;
and (ii) at its sole expense and effort, upon notice to such Lender and the
Agent, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in Section 12.07), 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 (A) if such assignee is not an existing
Lender, the Borrower shall have received the prior written consent of the Agent,
which consent shall not unreasonably be withheld, (B) such Lender shall have
received payment of an amount equal to the outstanding principal of its Pro Rata
Share of the Loan, 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, which shall be paid to the Agent for distribution to such Lender)
and (C) such assignment will result in a reduction in such compensation,
payments or costs. 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.


                                      -29-
<PAGE>


         Section 3.06 ADDITIONAL FEES. Notwithstanding anything to the contrary
contained herein, in the event that the Requisite Approval is not obtained and
all of the Conversion Shares are not approved for listing on the NYSE (i) on or
prior to the Listing Deadline Date, the Borrower shall pay a fee at a rate per
annum equal to 3% of the principal amount of the Loan outstanding on the
Effective Date until the date such Requisite Approval is obtained and such
Conversion Shares are listed on the NYSE and (ii) prior to the Final Maturity
Date (whether upon demand, by acceleration, by prepayment in full or otherwise),
the Borrower shall pay a closing fee in an amount equal to 5% of the principal
amount of the Loan outstanding on the Effective Date.

                                   ARTICLE IV

                           CONDITIONS TO EFFECTIVENESS

         Section 4.01 CONDITIONS PRECEDENT TO EFFECTIVENESS. This Agreement
shall become effective as of the Business Day (the "EFFECTIVE DATE") when each
of the following conditions precedent shall have been satisfied in a manner
satisfactory to the Agent:

                 (a) PAYMENT OF FEES, ETC. The Borrower shall have paid on or
before the date of this Agreement all fees, costs, expenses and taxes then
payable pursuant to Section 12.04.

                 (b) REPRESENTATIONS AND WARRANTIES; NO EVENT OF DEFAULT. The
following statements shall be true and correct: (i) the representations and
warranties contained in Article V and in each other Loan Document, certificate
or other writing delivered to the Agent or any Lender pursuant hereto or thereto
on or prior to the Effective Date are true and correct on and as of the
Effective Date as though made on and as of such date; and (ii) no Default or
Event of Default shall have occurred and be continuing on the Effective Date or
would result from this Agreement or the other Loan Documents becoming effective
in accordance with its or their respective terms.

                 (c) LEGALITY. Amending and restating this Agreement and
maintaining of the Loan shall not contravene any law, rule or regulation
applicable to the Agent or any Lender.

                 (d) DELIVERY OF DOCUMENTS. The Agent shall have received on or
before the Effective Date the following, each in form and substance satisfactory
to the Agent and, unless indicated otherwise, dated the Effective Date, and all
conditions precedent to the effectiveness of such documents (where applicable)
shall have been satisfied:

                         (i) the Note, payable to the order of each Lender and
duly executed by the Borrower;

                         (ii) certified copies of request for copies of
information on Form UCC-11, listing all effective financing statements which
name as debtor any Loan Party and which are filed in the offices referred to in
paragraph (x) below, together with copies of such financing statements, none of
which, except for Permitted Liens and as otherwise agreed in writing by the
Agent, shall cover any of the Loan Parties' properties or assets and the results
of searches for any tax Lien and judgment Lien filed against such Person or its
property, which


                                      -30-
<PAGE>


results, except for Permitted Liens and as otherwise agreed to in writing by the
Agent, shall not show any such Liens;

                         (iii) the Registration Rights Agreement;

                         (iv) an opinion of Porter, Wright, Morris & Arthur
LLP, counsel to the Loan Parties, substantially in the form of Exhibit H and as
to such other matters as the Agent may reasonably request as well as opinions of
local counsel with respect to Guarantors formed in Michigan and Missouri;

                         (v) a certificate of the appropriate official(s) of the
state of organization and each state of foreign qualification of each Loan Party
certifying as to the subsistence in good standing of, and the payment of taxes
by, such Loan Party in such states;

                         (vi) a true and complete copy of the charter,
certificate of formation, certificate of limited partnership or other publicly
filed organizational document of each Loan Party certified as of a recent date
not more than thirty (30) days prior to the Effective Date (except as otherwise
agreed by the Agent) by an appropriate official of the state of organization of
such Loan Party, which shall set forth the same complete name of such Loan Party
as is set forth herein and the organizational number, if an organizational
number is issued in such jurisdiction, and Federal employee identification
number as of the Effective Date of such Loan Party;

                         (vii) a copy of the by-laws, limited liability company
agreement, operating agreement, agreement of limited partnership or other
organizational document of each Loan Party, together with all amendments
thereto, certified as of the Effective Date by an Authorized Officer of such
Loan Party;

                         (viii) a copy of the resolutions of each Loan Party,
certified as of the Effective Date by an Authorized Officer thereof, authorizing
(A) the borrowings hereunder and the transactions contemplated by the Loan
Documents to which such Loan Party is or will be a party, and (B) the execution,
delivery and performance by such Loan Party of each Loan Document to which such
Loan Party is or will be a party and the execution and delivery of the other
documents to be delivered by such Person in connection herewith and therewith;

                         (ix) a certificate of an Authorized Officer of each
Loan Party, certifying the names and true signatures of the representatives of
such Loan Party authorized to sign each Loan Document to which such Loan Party
is or will be a party and the other documents to be executed and delivered by
such Loan Party in connection herewith and therewith, together with evidence of
the incumbency of such authorized officers;

                         (x) a certificate of an Authorized Officer of the
Borrower, certifying the names and true signatures of the persons that are
authorized to provide the Notices of Election and all other notices under this
Agreement and the other Loan Documents;

                         (xi) certificate of the chief financial officer of the
Borrower, certifying as to the Solvency the Loan Parties taken as a whole, which
certificate shall be satisfactory in form and substance to the Agent;


                                      -31-
<PAGE>


                         (xii) a certificate of an Authorized Officer of each
Loan Party, certifying as to the matters set forth in subsection (b) of this
Section 4.01;

                         (xiii) evidence of the insurance coverage required by
Section 6.01 and the terms of each Security Agreement and each Mortgage and such
other insurance coverage with respect to the business and operations of the Loan
Parties as the Agent may reasonably request, in each case, where requested by
the Agent, with such endorsements as to the named insureds or loss payees
thereunder as the Agent may request and providing that such policy may be
terminated or canceled (by the insurer or the insured thereunder) only upon
thirty (30) days' prior written notice to the Agent and each such named insured
or loss payee, together with evidence of the payment of all premiums due in
respect thereof for such period as the Agent may request;

                         (xiv) a copy of the Financial Statements and other
such financial information regarding the Loan Parties, as the Agent or the
Lenders may request, including, but not limited to interim Financial Statements;

                         (xv) a copy of the Business Plan, certified as true
and correct by an Authorized Officer of the Borrower;

                         (xvi) copies of the Material Contracts as in effect on
the Effective Date, certified as true and correct copies thereof by an
Authorized Officer of the Borrower, together with a certificate of an Authorized
Officer of the Borrower stating that such agreements remain in full force and
effect and that none of the Loan Parties has breached or defaulted on any of its
obligations under such agreements in any material respect;

                         (xvii) such other agreements, instruments, approvals,
opinions and other documents, each satisfactory to the Agent in form and
substance, as the Agent may reasonably request.

                 (e) MATERIAL ADVERSE EFFECT. The Agent shall have determined,
in its sole judgment, that no event or development shall have occurred since
February 2, 2002 which could have a Material Adverse Effect.

                 (f) APPROVALS. All consents, authorizations and approvals of,
and filings and registrations with, and all other actions in respect of, any
Governmental Authority or other Person required in connection with amending this
Agreement or the maintaining of the Loan or the conduct of the Loan Parties'
business shall have been obtained and shall be in full force and effect.

                 (g) PROCEEDINGS; RECEIPT OF DOCUMENTS. All proceedings in
connection with the Loan and the other transactions contemplated by this
Agreement and the other Loan Documents, and all documents incidental hereto and
thereto, shall be satisfactory to the Agent and its counsel, and the Agent and
such counsel shall have received all such information and such counterpart
originals or certified copies or other copies of such documents as the Agent or
such counsel may reasonably request, including, without limitation, interim
financial statements and monthly availability projections.


                                      -32-
<PAGE>


                 (h) MANAGEMENT. The Lenders shall be satisfied with the ongoing
management of each Loan Party and the Agent shall have received satisfactory
reference checks for key management of each Loan Party.

                 (i) DUE DILIGENCE. The Agent shall have completed its business
and legal due diligence with respect to each Loan Party and the results thereof
shall be acceptable to the Agent, in its sole and absolute discretion.

                 (j) CONVERSION SHARES. The Borrower shall have reserved out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the exercise of the Conversion, 1,666,667 shares of Common Stock issuable upon
the exercise of the Conversion in accordance with the terms of Article XIII. The
Conversion Shares shall have been authorized for listing on the New York Stock
Exchange upon the official notice of its issuance.

                 (k) SENIOR INDEBTEDNESS. The Obligations under this Agreement
and the other Loan Documents rank at least pari passu in right of payment to all
existing and future senior Indebtedness and senior to all other Indebtedness of
each Loan Party.


                                   ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

         Section 5.01 REPRESENTATIONS AND WARRANTIES. Each Loan Party hereby
represents and warrants to the Agent and the Lenders as follows:

                 (a) ORGANIZATION; GOOD STANDING, ETC. Each Loan Party (i) is a
corporation, limited liability company or limited partnership duly organized,
validly existing and in good standing under the laws of the state or
jurisdiction of its organization; (ii) has all requisite power and authority to
conduct its business as now conducted and as presently contemplated and, to
execute and deliver each Loan Document to which it is a party, and to consummate
the transactions contemplated thereby; and (iii) is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its business
makes such qualification necessary, except where the failure to so qualify is
not reasonably likely to have a Material Adverse Effect.

                 (b) AUTHORIZATION, ETC. The execution, delivery and performance
by each Loan Party of each Loan Document to which it is or will be a party (i)
have been duly authorized by all necessary action other than the receipt of the
Requisite Approval in connection with the issuance of Conversion Shares in
excess of 19.9% of the Borrower's outstanding Common Stock on the Effective
Date; (ii) do not and will not contravene in any material respect its charter or
by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, or any Applicable Law or
any contractual restriction binding on or otherwise affecting it or any of its
properties; (iii) do not and will not result in or require the creation of any
Lien upon or with respect to any of its properties; and (iv) do not and will not
result in any default, noncompliance, suspension, revocation, impairment,
forfeiture or nonrenewal of any material permit, license, authorization or
approval applicable to its operations or any of its properties.


                                      -33-
<PAGE>


                 (c) GOVERNMENTAL APPROVALS. No authorization or approval or
other action by, and no notice to or filing with, any Governmental Authority is
required in connection with the due execution, delivery and performance by any
Loan Party of any Loan Document to which it is or will be a party.

                 (d) ENFORCEABILITY OF LOAN DOCUMENTS. This Agreement is, and
each other Loan Document to which any Loan Party is or will be a party, when
delivered hereunder, will be, a legal, valid and binding obligation of such
Person, enforceable against such Person in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or limiting creditors' rights generally or by
equitable principles relating to enforceability.

                 (e) CAPITALIZATION; SUBSIDIARIES. On the Effective Date, after
giving effect to the transactions contemplated hereby to occur on the Effective
Date, the authorized Capital Stock of the Borrower and the issued and
outstanding Capital Stock of the Borrower are as set forth on Schedule
5.01(e)(i). All of the issued and outstanding shares of Capital Stock of the
Borrower have been validly issued and are fully paid and nonassessable, and the
holders thereof are not entitled to any preemptive, first refusal or other
similar rights. There are no securities or instruments containing anti-dilution
or similar provisions that will be triggered by the issuance of the Conversion
Shares, except for anti-dilution provisions which have been validly waived on or
prior to the date hereof in respect of the issuance of the Conversion Shares.
The Conversion Shares have been duly authorized and reserved for issuance upon
Conversion of the Loan, and upon such conversion, will be validly issued, fully
paid and non-assessable, free from all taxes, liens and charges with respect to
the issue thereof, and will not be subject to preemptive rights or other similar
rights of stockholders of the Borrower.

                         (i) Except as described on Schedule 5.01(e)(i), as of
the Effective Date, there are no outstanding debt or equity securities of the
Borrower or any of its Subsidiaries and no outstanding obligations of the
Borrower or any of its Subsidiaries convertible into or exchangeable for, or
warrants, options or other rights for the purchase or acquisition from the
Borrower or any of its Subsidiaries, or other obligations of the Borrower or any
of its Subsidiaries to issue, directly or indirectly, any shares of Capital
Stock of the Borrower or any of its Subsidiaries.

                         (ii) Schedule 5.01(e)(ii) is a complete and correct
description of the name, jurisdiction of incorporation and ownership of the
outstanding Capital Stock of each of the Subsidiaries of the Borrower in
existence on the date hereof. All of the issued and outstanding shares of
Capital Stock of such Subsidiaries have been validly issued and are fully paid
and nonassessable, and the holders thereof are not entitled to any preemptive,
first refusal or other similar rights. Except as indicated on such Schedule, all
such Capital Stock is owned by the Borrower or one or more of its wholly-owned
Subsidiaries, free and clear of all Liens.

                 (f) LITIGATION; COMMERCIAL TORT CLAIMS. Except as set forth in
Schedule 5.01(f), (i) there is no pending or, to the best knowledge of any Loan
Party, threatened action, suit or proceeding affecting any Loan Party before any
court or other Governmental Authority or any arbitrator that (A) if adversely
determined, could have a Material Adverse Effect or (B) relates to this
Agreement or any other Loan Document or any transaction


                                      -34-
<PAGE>


contemplated hereby or thereby and (ii) as of the Effective Date, none of the
Loan Parties holds any commercial tort claims in respect of which a claim has
been filed in a court of law or a written notice by an attorney has been given
to a potential defendant.

                 (g) FINANCIAL CONDITION.

                         (i) All financial statements furnished to the Agent
and to each Lender by the Loan Parties on a consolidated basis have been
prepared in accordance with GAAP consistently applied (PROVIDED, HOWEVER, that
unaudited financial statements are subject to normal year-end adjustments and to
the absence of footnotes). All financial statements furnished to the Agent and
to each Lender by the Loan Parties present fairly the condition of the Loan
Parties at the date(s) thereof and the results of operations and cash flows (to
the extent cash flows are required to be prepared) for the period(s) covered
(PROVIDED, HOWEVER, that unaudited financial statements are subject to normal
year end adjustments and to the absence of footnotes). There has been no change
in the consolidated financial condition, results of operations, or cash flows of
the Loan Parties since the date(s) of such financial statements, other than
changes in the ordinary course of business, which changes have not been
materially adverse, either singularly or in the aggregate.

                         (ii) No Loan Party has any material Contingent
Obligations or material obligation under any Lease or Capitalized Lease which is
not noted in the Loan Parties' Consolidated financial statements furnished to
the Agent and to each Lender prior to the execution of this Agreement.

                 (h) COMPLIANCE WITH LAW, ETC. No Loan Party is in violation or
has received notice of any violation of its organizational documents, any law,
rule, regulation, judgment or order of any Governmental Authority applicable to
it or any of its property or assets, or any material term of any agreement or
instrument (including, without limitation, any Material Contract) binding on or
otherwise affecting it or any of its properties, except where such violation is
not reasonably likely to have a Material Adverse Effect and no default or event
of default has occurred and is continuing.

                 (i) ERISA. Except to the extent that such action is not
reasonably likely to have a Material Adverse Effect, neither any Loan Party nor
any ERISA Affiliate has within the past three (3) years:

                         (i) violated or failed to be in full compliance with
any Loan Party's Employee Benefit Plan;

                         (ii) failed timely to file all reports and filings
required by ERISA to be filed by any Loan Party;

                         (iii) engaged in any nonexempt "prohibited
transactions" or "reportable events" (respectively as described in ERISA);

                         (iv) engaged in, or committed, any act such that a tax
or penalty reasonably could be imposed upon any Loan Party on account thereof
pursuant to ERISA;


                                      -35-
<PAGE>


                         (v) incurred any material accumulated funding
deficiency within the meaning of ERISA;

                         (vi) terminated any Employee Benefit Plan such that a
Lien could be asserted against any assets of any Loan Party on account thereof
pursuant to ERISA; or

                         (vii) failed to make any required contribution or
payment to, or made a complete or partial withdrawal from, any Employee Benefit
Plan which is a multiemployer plan within the meaning of Section 4001(a) of
ERISA.

                 (j) TAXES, ETC.

                         (i) To the best knowledge of the Borrower, all Federal
and all material state and local tax returns and other reports required by
Applicable Law to be filed by any Loan Party have been filed, or extensions have
been obtained, and all taxes, assessments and other governmental charges imposed
upon any Loan Party or any property of any Loan Party and which have become due
and payable on or prior to the date hereof have been paid, except to the extent
contested in good faith by proper proceedings which stay the imposition of any
penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves have been set aside for the payment thereof on the
Financial Statements in accordance with GAAP.

                         (ii) Except as described on Schedule 5.01(j):

                                 (A) currently no Loan Party has received from
any taxing authority any request to perform any examination of or with respect
to any Loan Party nor any other written or verbal notice in any way relating to
any claimed failure by any Loan Party to comply with all Applicable Law
concerning payment of any taxes or other amounts in the nature of taxes in
excess of $500,000 in any one instance;

                                 (B) no agreement exists which waives or extends
any statute of limitations applicable to the right of any taxing authority to
assert a deficiency or make any other claim for or in respect to Federal income
taxes; and

                                 (C) no issue has been raised in any tax
examination of any Loan Party which reasonably could be expected to result in
the assertion of a deficiency for any fiscal year open for examination,
assessment, or claim by any taxing authority in excess of $500,000 in the
aggregate for all Loan Parties.

                 (k) REGULATIONS T, U AND X. No Loan Party is or will be engaged
in the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation T, U or X), and no proceeds of
the Loan have been or will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.

                 (l) NATURE OF BUSINESS. No Loan Party is engaged in any
business other than a Permitted Business.


                                      -36-
<PAGE>


                 (m) ADVERSE AGREEMENTS, ETC. To the best of such Loan Party's
knowledge, no Loan Party is a party to any agreement or instrument, or subject
to any charter, limited liability company agreement, partnership agreement or
other corporate, partnership or limited liability company restriction or any
judgment, order, regulation, ruling or other requirement of a court or other
Governmental Authority, which is reasonably likely to have a Material Adverse
Effect.

                 (n) PERMITS, ETC. Each Loan Party has, and is in compliance
with, all permits, licenses, authorizations, approvals, entitlements and
accreditations required for such Person lawfully to own, lease, manage or
operate, or to acquire, each business currently owned, leased, managed or
operated, or to be acquired, by such Person except where failure to so have or
to so comply is not reasonably likely to have a Material Adverse Effect. No
condition exists or event has occurred which, in itself or with the giving of
notice or lapse of time or both, would result in the suspension, revocation,
impairment, forfeiture or non-renewal of any such permit, license,
authorization, approval, entitlement or accreditation, and there is no claim
that any of the foregoing are not in full force and effect.

                 (o) PROPERTIES. (i) Each Loan Party has good and marketable
title to, valid leasehold interests in, or valid licenses to use, all property
and assets material to its business, free and clear of all Liens, except
Permitted Liens. All such properties and assets are in good working order and
condition, ordinary wear and tear excepted. No Loan Party has possession of any
property on consignment to that Loan Party, except as listed on Schedule
5.01(o)(i), and those as to which the Loan Parties notify the Agent in
accordance with the provisions of Section 7.03.

                         (ii) Schedule 5.01(o)(ii) sets forth a complete and
accurate list, as of the Effective Date, of the location, by state and street
address, of all real property owned or leased by each Loan Party and the name
and address of the landlord with respect thereto. As of the Effective Date, each
Loan Party has valid leasehold interests in the Leases described on Schedule
5.01(o)(ii) to which it is a party. Except as otherwise indicated on Schedule
5.01(o)(ii), there are no Leases for which any Affiliate of any Loan Party is
the lessor. Each such Lease is valid and enforceable in accordance with its
terms in all material respects and is in full force and effect. No consent or
approval of any landlord or other third party in connection with any such Lease
is necessary for any Loan Party to enter into and execute the Loan Documents to
which it is a party, except as set forth on Schedule 5.01(o)(ii). No Loan Party
and to the best knowledge of any Loan Party, no other party to any such Lease is
in material default of its obligations thereunder, and no Loan Party (or any
other party to any such Lease) has at any time delivered or received any notice
of default which remains uncured under any such Lease and, as of the Effective
Date, no event has occurred which, with the giving of notice or the passage of
time or both, would constitute a material default under any such Lease.

                 (p) FULL DISCLOSURE. Each Loan Party has disclosed to the Agent
all agreements, instruments and corporate or other restrictions to which it is
subject, and all other matters known to it, that, individually or in the
aggregate, is reasonably likely to result in a Material Adverse Effect. None of
the documents, instruments, agreements, other reports, financial statements,
certificates or other information furnished by or on behalf of any Loan Party to
the Agent in connection with the negotiation of this Agreement or delivered
hereunder (as


                                      -37-
<PAGE>


modified or supplemented by other information so furnished) contains 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 it
was made, not misleading; PROVIDED, that, with respect to projected financial
information, each Loan Party represents only that such information was prepared
in good faith based upon assumptions believed to be reasonable at the time.
There is no contingent liability or fact that is reasonably likely to have a
Material Adverse Effect which has not been set forth in a footnote included in
the Financial Statements or a Schedule hereto.

                 (q) LEASES. Schedule 5.01(q), annexed hereto, sets forth as of
the Effective Date a schedule of all presently effective Capitalized Leases.
(Schedule 5.01(o)(ii) includes a list of all other presently effective Leases).
Each of such Leases and Capitalized Leases is in full force and effect. No Loan
Party, to the best of its knowledge, is in default or violation of any such
Leases or Capitalized Leases, except where such violation is not reasonably
likely to have a Material Adverse Effect. No Loan Party has received any notice
or threat of cancellation of any such Lease or Capitalized Lease, which
cancellation (together with all other similar cancellations) is reasonably
likely to have a Material Adverse Effect.

                 (r) ENVIRONMENTAL MATTERS. Except as set forth on Schedule
5.01(r), (i) the operations of each Loan Party are in material compliance with
all Environmental Laws; (ii) to the best of each Loan Party's knowledge, there
has been no Release at any of the properties owned or operated by any Loan Party
or a predecessor in interest, or at any disposal or treatment facility which
received Hazardous Materials generated by any Loan Party or any predecessor in
interest which is reasonably likely to have a Material Adverse Effect; (iii) no
Environmental Action has been asserted against any Loan Party or any predecessor
in interest nor does any Loan Party have knowledge or notice of any threatened
or pending Environmental Action against any Loan Party or any predecessor in
interest which is reasonably likely to have a Material Adverse Effect; (iv) no
Loan Party has knowledge of any Environmental Actions that have been asserted
against any facilities that may have received Hazardous Materials generated by
any Loan Party or any predecessor in interest which are reasonably likely to
have a Material Adverse Effect; (v) to the best of each Loan Party's knowledge,
no property now or formerly owned or operated by a Loan Party has been used as a
treatment or disposal site for any Hazardous Material; (vi) no Loan Party has
failed to report to the proper Governmental Authority any Release which is
required to be so reported by any Environmental Laws which is reasonably likely
to have a Material Adverse Effect; (vii) each Loan Party holds all licenses,
permits and approvals required under any Environmental Laws in connection with
the operation of the business carried on by it, except for such licenses,
permits and approvals as to which a Loan Party's failure to maintain or comply
with is not reasonably likely to have a Material Adverse Effect; and (viii) no
Loan Party has received any notification pursuant to any Environmental Laws that
(A) any work, repairs, construction or Capital Expenditures are required to be
made as a condition of continued compliance with any Environmental Laws, or any
license, permit or approval issued pursuant thereto or (B) any license, permit
or approval referred to above is about to be reviewed, made, subject to
limitations or conditions, revoked, withdrawn or terminated, in each case,
except as is not reasonably likely to have a Material Adverse Effect.

                 (s) INSURANCE. Schedule 5.01(s) sets forth a list of all
insurance maintained by each Loan Party or under which any Loan Party is the
named insured on the Effective Date. Each of such policies is in full force and
effect and meets each of the


                                      -38-
<PAGE>


requirements set forth in Section 6.01(e). To the best of such Loan Party's
knowledge, neither the issuer of any such policy nor any Loan Party is in
default or violation of such policy.

                 (t) [Intentionally Omitted]

                 (u) SOLVENCY. After giving effect to the transactions
contemplated by this Agreement and before and after giving effect to each Loan,
each Loan Party is, and the Loan Parties on a consolidated basis are, Solvent.

                 (v) LOCATION OF BANK ACCOUNTS. Schedule 5.01(v) sets forth a
complete and accurate list as of the Effective Date of all deposit, checking and
other bank accounts, all securities and other accounts maintained with any
broker dealer and all other similar accounts maintained by each Loan Party,
together with a description thereof (I.E., the bank or broker dealer at which
such deposit or other account is maintained, the account number and a contact
person at such bank or broker dealer).

                 (w) INTELLECTUAL PROPERTY. Except as set forth on Schedule
5.01(w), each Loan Party owns or licenses or otherwise has the right to use all
material licenses, permits, patents, patent applications, trademarks, trademark
applications, service marks, tradenames, copyrights, copyright applications,
franchises, authorizations, non-governmental licenses and permits and other
intellectual property rights that are necessary for the operation of its
business, without infringement upon or conflict with the rights of any other
Person with respect thereto, except for such infringements and conflicts which,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect. Set forth on Schedule 5.01(w) is a complete and accurate list as
of the Effective Date of all such material licenses, permits, patents, patent
applications, trademarks, trademark applications, service marks, tradenames,
copyrights, copyright applications, franchises, authorizations, non-governmental
licenses and permits and other intellectual property rights of each Loan Party.
To the best knowledge of each Loan Party, no slogan or other advertising device,
product, process, method, substance, part or other material now employed, or now
contemplated to be employed, by any Loan Party infringes upon or conflicts with
any rights owned by any other Person, and no claim or litigation regarding any
of the foregoing is pending or threatened, except for such infringements and
conflicts which are not reasonably likely to have a Material Adverse Effect. To
the best knowledge of each Loan Party, no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or proposed, which is reasonably likely to have a Material Adverse
Effect.

                 (x) MATERIAL CONTRACTS AND LICENSES. Schedule 5.01(x) sets
forth a complete and accurate list as of the Effective Date of all Material
Contracts and all material licenses of each Loan Party, showing the parties and
subject matter thereof. Each such Material Contract and license (i) is in full
force and effect and is binding upon and enforceable against each Loan Party
that is a party thereto and, to the best knowledge of such Loan Party, all other
parties thereto in accordance with its terms, and (ii) is not in default due to
or has not been violated by, the action of any Loan Party or, to the best
knowledge of any Loan Party, any other party thereto, except where such default
is not reasonably likely to have a Material Adverse Effect. No Loan Party has
received any notice or threat of cancellation of any such Material Contract or
license which cancellation (together with all similar cancellations) is
reasonably likely to have a Material Adverse Effect.


                                      -39-
<PAGE>


                 (y) HOLDING COMPANY AND INVESTMENT COMPANY ACTS. None of the
Loan Parties is (i) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company", as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended; or (ii) an
"investment company" or an "affiliated person" or "promoter" of, or "principal
underwriter" of or for, an "investment company", as such terms are defined in
the Investment Company Act of 1940, as amended.

                 (z) LABOR RELATIONS.

                         (i) As of the Effective Date, no Loan Party has been,
and none is presently a party to any collective bargaining or other labor
contract except as listed on Schedule 5.01(z), annexed hereto.

                         (ii) There is not presently pending and, to any Loan
Party's knowledge, there is not threatened any of the following, except to the
extent any of the following is not reasonably likely to have a Material Adverse
Effect:

                                 (A) any strike, slowdown, picketing, work
stoppage, or employee grievance process;

                                 (B) any proceeding against or affecting any
Loan Party relating to the alleged violation of any Applicable Law pertaining to
labor relations or before the National Labor Relations Board, the Equal
Employment Opportunity Commission, or any comparable governmental body,
organizational activity, or other labor or employment dispute against or
affecting any Loan Party, which, if determined adversely to that Loan Party, is
reasonably likely to have a Material Adverse Effect on that Loan Party;

                                 (C) any lockout of any employees by any Loan
Party (and no such action is contemplated by any Loan Party); or

                                 (D) any application for the certification of a
collective bargaining agent.

                         (iii) No event has occurred or circumstance exists
which could provide the basis for any work stoppage or other labor dispute that
would be reasonably likely to have a Material Adverse Effect.

                         (iv) Each Loan Party:

                                 (A) has complied in all material respects with
all Applicable Law relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing; and

                                 (B) is not liable for the payment of
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for that Loan Party's


                                      -40-
<PAGE>


failure to comply with any Applicable Law referenced in Section 5.01(z)(iv)(A)
which is reasonably likely to have a Material Adverse Effect.

                         (aa) NO BANKRUPTCY FILING. No Loan Party is
contemplating either an Insolvency Proceeding or the liquidation of all or a
major portion of such Loan Party's assets or property, and no Loan Party has any
knowledge of any Person contemplating an Insolvency Proceeding against it.

                         (bb) SEPARATE EXISTENCE. Except where the failure to
observe, maintain or perform the following is not reasonably likely to have a
Material Adverse Effect, all customary formalities regarding the corporate
existence of each Loan Party will be observed.

                         (cc) NAME; JURISDICTION OF ORGANIZATION; ORGANIZATIONAL
ID NUMBER; CHIEF PLACE OF BUSINESS; CHIEF EXECUTIVE OFFICE; FEIN. Schedule
5.01(cc) sets forth a complete and accurate list as of the date hereof of (i)
the exact legal name of each Loan Party; (ii) the jurisdiction of organization
of each Loan Party; (iii) the organizational identification number of each Loan
Party as of the Effective Date (or indicates that such Loan Party has no
organizational identification number); (iv) each place of business of each Loan
Party; (v) the chief executive office of each Loan Party; and (vi) the Federal
employer identification number of each Loan Party as of the Effective Date.

                         (dd) TRADENAMES. Schedule 5.01(dd) hereto sets forth a
complete and accurate list as of the Effective Date of (i) all names under
which, to the knowledge of the Borrower, any Loan Party has conducted its
business in the past five (5) years; and (ii) all Persons with whom any Loan
Party has consolidated or merged, or from whom any Loan Party has acquired in a
single transaction or in a series of related transactions substantially all of
such Person's assets in the past five (5) years.

                         (ee) [INTENTIONALLY OMITTED].

                         (ff) [INTENTIONALLY OMITTED].

                         (gg) [INTENTIONALLY OMITTED].

                         (hh) SCHEDULES. All of the information which is
required to be scheduled to this Agreement is set forth on the Schedules
attached hereto, is correct and accurate in all material respects and does not
omit to state any information material thereto.

                         (ii) REPRESENTATIONS AND WARRANTIES IN DOCUMENTS; NO
DEFAULT. All representations and warranties set forth in this Agreement and the
other Loan Documents are true and correct in all material respects at the time
as of which such representations were made and on the Effective Date. No Event
of Default has occurred and is continuing and no condition exists which
constitutes a Default or an Event of Default.

                         (jj) INDEBTEDNESS. The Loan Parties do not have any
Indebtedness other than (i) Permitted Indebtedness, and (ii) a Loan Party's
guaranties of Permitted Indebtedness.


                                      -41-
<PAGE>


                         (kk) UNRESTRICTED SUBSIDIARIES. Each Subsidiary of the
Borrower that is not a party to this Agreement is set forth on Schedule 5.01(kk)
(the "UNRESTRICTED SUBSIDIARY"). Each Unrestricted Subsidiary is inactive or in
the process of being liquidated or dissolved and the Unrestricted Subsidiaries
do not, in the aggregate, have assets in excess of $500,000.

                         (ll) PROXY STATEMENT. The proxy statement described in
Section 6.01(n), including any amendments or supplements thereto, shall not, at
the time filed with the SEC, as of the date mailed to the Borrower's
shareholders or at the time of the shareholders meeting described in Section
6.01(n), contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. Notwithstanding the foregoing, the Borrower makes no representation
or warranty with respect to any information provided by a Lender in writing
specifically for use in the proxy statement. The proxy statement will comply as
to form in all material respects with the provisions of the Exchange Act.

                         (mm) VOTING REQUIREMENTS. The Requisite Approval is the
only vote of the holders of any class or series of the Borrower's Capital Stock
or other securities of the Borrower necessary under Applicable Law or stock
exchange (or similar self-regulatory organization) regulations to approve the
issuance of the Conversion Shares.

                         (nn) PROXY. The Borrower has received an irrevocable
proxy from SSC (the "PROXY") to vote 17,946,766 shares of Common Stock held by
SSC in favor of the approval of the issuance of the Conversion Shares. The
shares of Common Stock that are subject to the Proxies constitute all Capital
Stock of the Borrower held by SSC.

                                   ARTICLE VI

                          COVENANTS OF THE LOAN PARTIES

         Section 6.01 AFFIRMATIVE COVENANTS. So long as any principal or
interest on the Loan or any other Obligation (whether or not due) shall remain
unpaid, each Loan Party shall:

                 (a) ADDITIONAL GUARANTIES. Cause (i) each Subsidiary of any
Loan Party not in existence on the Effective Date, or any Unrestricted
Subsidiary that at any time fails to meet the requirements for an Unrestricted
Subsidiary, to execute and deliver to the Agent promptly and in any event within
three (3) Business Days after the formation, acquisition or change in status
thereof a Guaranty guaranteeing the Obligations, PROVIDED, HOWEVER, that nothing
contained herein shall be deemed a modification of any other provisions of this
Agreement restricting the formation or Acquisition of Subsidiaries by the Loan
Parties, or the requirements applicable to Unrestricted Subsidiaries.

                 (b) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its
Subsidiaries to comply, and use its assets in compliance with all Applicable
Laws, rules, regulations and orders (including, without limitation, all
Environmental Laws) except where the failure of such compliance will not have a
Material Adverse Effect. Without limiting the foregoing such compliance shall
include (i) paying before the same become delinquent all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or


                                      -42-
<PAGE>
upon any of its properties, and (ii) paying all lawful claims, making all
required withholdings, and filing all required reports and returns with
Governmental Authorities which if unpaid, not withheld or unfiled might become a
Lien or charge upon any of its properties, except (x) to the extent contested in
good faith by proper proceedings which stay the imposition of any penalty, fine
or Lien resulting from the non-payment thereof and with respect to which
adequate reserves have been set aside for the payment thereof in accordance with
GAAP, or (y) for the inadvertent failure of a Loan Party to pay such lawful
claims, make such withholdings or file such returns or reports so long as (A)
the aggregate amount thereof does not exceed $500,000, (B) no Lien has been
filed on account thereof and (C) promptly upon the date an Authorized Officer
obtains knowledge or should have obtained knowledge thereof, the Loan Parties
pay such claims, make such withholdings or file such returns or reports.

                 (c) PRESERVATION OF EXISTENCE, ETC. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, its existence, rights
and privileges, and become or remain, and cause each of its Subsidiaries to
become or remain, duly qualified and in good standing in each jurisdiction in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary except where the
failure to so qualify would not have a Material Adverse Effect.

                 (d) MAINTENANCE OF PROPERTIES AND LEASES, ETC. (i)Maintain and
preserve, and cause each of its Subsidiaries to maintain and preserve its
properties and assets in good working order and condition (ordinary wear and
tear and insured casualty excepted); and

                         (ii) comply, and cause each of its Subsidiaries to
comply, in all material respects, at all times with the provisions of all Leases
to which it is a party as lessee or under which it occupies property, so as to
prevent any loss or forfeiture thereof or thereunder.

                 (e) MAINTENANCE OF INSURANCE. Maintain, and cause each of its
Subsidiaries to maintain, insurance (including, without limitation,
comprehensive general liability, hazard, rent and business interruption
insurance) with responsible and reputable insurance companies or associations
(which shall include the companies presently providing such insurance, or such
other companies as may be selected by the Borrower with the consent of the
Agent, whose consent shall not be unreasonably withheld) with respect to its
properties (including all real properties leased or owned by it) and business,
in such amounts, in such form, for such periods and covering such risks as is
required by any Governmental Authority having jurisdiction with respect thereto
or as is carried generally in accordance with sound business practice by
companies in similar businesses similarly situated and in any event in amount,
adequacy and scope reasonably satisfactory to the Agent. The Borrower shall
provide the Agent with prompt written notice of any change in the insurance
policies owned by the Loan Parties, or under which any Loan Party is the named
insured, from those in effect as of the Effective Date.

                 (f) OBTAINING OF PERMITS, ETC. Obtain, maintain and preserve,
and cause each of its Subsidiaries to obtain, maintain and preserve, and take,
and cause each of its Subsidiaries to take, all necessary action to timely
renew, all permits, licenses, authorizations, approvals, entitlements and
accreditations which are necessary or useful in the proper conduct of its
business, except where the failure to do so is not reasonably likely to have a
Material Adverse Effect.


                                      -43-
<PAGE>


                 (g) ENVIRONMENTAL. Except where a violation or failure is not
reasonably likely to have a Material Adverse Effect, (i) keep any material
property either owned or operated by it or any of its Subsidiaries free of any
Environmental Liens; (ii) comply, and cause each of its Subsidiaries to comply,
in all material respects with Environmental Laws and provide to the Agent any
documentation of such compliance which the Agent may reasonably request; (iii)
provide the Agent with written notice within five (5) days of any Release of a
Hazardous Material in excess of any reportable quantity from or onto property at
any time owned or operated by it or any of its Subsidiaries and take any
Remedial Actions required to abate said Release; (iv) provide the Agent with
written notice within ten (10) days of the receipt of any of the following: (A)
notice that a material Environmental Lien has been filed against any property of
any Loan Party or any of its Subsidiaries; (B) commencement of any Environmental
Action or notice that an Environmental Action will be filed against any Loan
Party or any of its Subsidiaries which is reasonably likely to have a Material
Adverse Effect; and (C) notice of a violation, citation or other administrative
order to the extent that any of the foregoing are reasonably likely to have a
Material Adverse Effect; and (v) defend, indemnify and hold harmless the Agent
and the Lenders and their transferees, and their respective employees, agents,
officers and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs or expenses (including, without
limitation, attorney and consultant fees, investigation and laboratory fees,
court costs and litigation expenses) arising out of (A) the generation,
presence, disposal, Release or threatened Release of any Hazardous Materials on,
under, in, originating or emanating from any property at any time owned or
operated by any Loan Party or any of its Subsidiaries (or its predecessors in
interest or title), (B) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to the presence or
Release of such Hazardous Materials, (C) any request for information,
investigation, lawsuit brought or threatened, settlement reached or order by a
Governmental Authority relating to the presence or Release of such Hazardous
Materials, (D) any violation of any Environmental Law and/or (E) any
Environmental Action filed against the Agent or any Lender to the extent that
any of the foregoing is reasonably likely to have a Material Adverse Effect.

                 (h) FURTHER ASSURANCES. Take such action and execute,
acknowledge and deliver, and cause each of its Subsidiaries to take such action
and execute, acknowledge and deliver, at its sole cost and expense, such
agreements, instruments or other documents as the Agent may reasonably require
from time to time in order (i) to carry out more effectively the purposes of
this Agreement and the other Loan Documents, (ii) [Intentionally Omitted], (iii)
to establish and maintain the validity and effectiveness of any of the Loan
Documents, and (iv) to better assure, convey, grant, assign, transfer and
confirm unto the Agent and each Lender the rights now or hereafter intended to
be granted to it under this Agreement or any other Loan Document. In furtherance
of the foregoing, to the maximum extent permitted by Applicable Law, each Loan
Party authorizes the Agent to execute any such agreements, instruments or other
documents deemed reasonably necessary by the Agent in connection with this
Agreement in such Loan Party's name and to file such agreements, instruments or
other documents in any appropriate filing office.

                 (i) [Intentionally Omitted].


                                      -44-
<PAGE>


                 (j) CONDUCT OF BUSINESS. Conduct their business substantially
in accordance with the Business Plan, or as otherwise approved by the Agent
pursuant to Section 7.10 hereof. The foregoing shall not obligate the Borrower
to achieve any specific financial performance and no financial covenants are
intended to be imposed thereby.

                 (k) MAINTENANCE OF LISTING. Maintain and cause to be quoted at
all times, shares of the Borrower's Common Stock on a national securities
exchange registered under the Exchange Act (a "National Securities Exchange") or
the Nasdaq Stock Market;

                 (l) SEC. Maintain, at all times, the Borrower's status as
reporting company under the Exchange Act, and make timely filings thereunder;

                 (m) CONVERSION. Comply in all respects with the covenants and
other requirements of Article XIII;

                 (n) SHAREHOLDER MEETING. At the next annual meeting of
shareholders of the Borrower, which meeting shall occur on or before October 31,
2002, (the "MEETING"), the issuance of the Conversion Shares in excess of 19.9%
of the Borrower's issued and outstanding Common Stock shall be submitted to the
shareholders for approval; PROVIDED, HOWEVER, that in the event that a
unilateral action by SSC or its shareholders results in the delay of the
Meeting, then the Meeting shall occur on or before December 31, 2002. The
Borrower shall provide each shareholder entitled to vote at the Meeting with a
proxy statement, which has been previously reviewed by the Agent and counsel of
Agent's choice, soliciting each such shareholder's affirmative vote at the
Meeting in favor of the issuance of the Conversion Shares in excess of 19.9% of
the Borrower's issued and outstanding Common Stock. The Borrower shall use its
reasonable best efforts to solicit and obtain proxies from its shareholders and
shall take all other action necessary and advisable to secure the vote of
shareholders required by applicable law and the rules and regulations of the
NYSE to obtain their approval of the issuance of the Conversion Shares in excess
of 19.9% of the Borrower's issued and outstanding Common Stock. The Board of
Directors of the Borrower has unanimously approved the issuance of the
Conversion Shares in excess of 19.9% of the Borrower's issued and outstanding
Common Stock and shall recommend that the shareholders of the Borrower vote in
favor of the approval of the issuance of the Conversion Shares in excess of
19.9% of the Borrower's issued and outstanding Common Stock at the Meeting, and
the Borrower agrees that it shall include in the proxy statement such
recommendation of the Board of Directors of the Borrower that the shareholders
of the Borrower approve the issuance of the Conversion Shares in excess of 19.9%
of the Borrower's issued and outstanding Common Stock;

                 (o) PROXY. The Borrower agrees to vote all shares of Common
Stock subject to the Proxy in favor of the approval of the issuance of the
Conversion Shares in excess of 19.9% of the Borrower's issued and outstanding
Common Stock; and

                 (p) NYSE LISTING. The Borrower shall use its reasonable best
efforts to list the Conversion Shares in excess of 19.9% of the Borrower's
Common Stock on the Effective Date on the NYSE promptly following its receipt of
the Requisite Approval.

         Section 6.02 NEGATIVE COVENANTS. So long as any principal of or
interest on the


                                      -45-
<PAGE>


Loan, or any other Obligation (whether or not due) shall remain unpaid, each
Loan Party shall not:

                 (a) LIENS, ETC. (i) Create, incur, assume or suffer to exist,
or permit any of its Subsidiaries to create, incur, assume or suffer to exist,
any Lien upon or with respect to any of its properties, whether now owned or
hereafter acquired; file or suffer to exist under the Uniform Commercial Code or
any similar law or statute of any jurisdiction, a financing statement (or the
equivalent thereof) that names it or any of its Subsidiaries as debtor; sign or
suffer to exist any security agreement authorizing any secured party thereunder
to file such financing statement (or the equivalent thereof); sell any of its
property or assets subject to an understanding or agreement, contingent or
otherwise, to repurchase such property or assets (including sales of accounts
receivable) with recourse to it or any of its Subsidiaries or assign or
otherwise transfer, or permit any of its Subsidiaries to assign or otherwise
transfer, any account or other right to receive income; other than, as to all of
the above, Permitted Liens, or (ii) have possession of any property or
consignment to that Loan Party, except as of the Effective Date as set forth on
Schedule 5.01(o)(i), and after the Effective Date, those as to which the Loan
Parties have notified the Agent, in accordance with Section 7.03.

                 (b) INDEBTEDNESS. Create, incur, assume, guarantee or suffer
to exist, or otherwise become or remain liable with respect to, or permit any of
its Subsidiaries to create, incur, assume, guarantee or suffer to exist or
otherwise become or remain liable with respect to, any Indebtedness other than
(i) Permitted Indebtedness and (ii) guaranties of Permitted Indebtedness of
another Loan Party.

                 (c) FUNDAMENTAL CHANGES; DISPOSITIONS. (i) Wind-up, liquidate
or dissolve, or permit any of its Subsidiaries to wind-up, liquidate or
dissolve; (ii) merge, consolidate or amalgamate with any Person, or permit any
of its Subsidiaries to merge, consolidate or amalgamate with any Person; (iii)
purchase or otherwise acquire, whether in one transaction or a series of related
transactions, all or substantially all of the assets of any Person (or any
division thereof), or permit any of its Subsidiaries to do any of the foregoing;
(iv) suffer or cause, or permit any of its Subsidiaries to suffer or cause the
waste or destruction of any material part of its assets or properties; (v) use
or permit any of its Subsidiaries to use, any of its properties or assets in
violation of any policy of insurance thereon; (vi) sell, lease, sublease,
convey, transfer or otherwise dispose of, or permit any of its Subsidiaries to
sell, lease, sublease, convey, transfer or otherwise dispose of any of its
assets or properties; and (vii) other than leased departments and similar
arrangements with third parties, commit to open or close any location at which
any Loan Party maintains, offers for sale, or stores any of its assets or
properties, in any fiscal year such that the actual number of stores of all Key
Loan Parties in the aggregate (x) exceeds by ten (10) the number of stores
reflected on the Business Plan for such fiscal year, or (y) is more than ten
(10) fewer than the number of stores reflected on the Business Plan for such
fiscal year (without giving effect to any new stores which the Business Plan
projected to be opened or closed, but which have not in fact been opened or
closed); PROVIDED, HOWEVER, that if no Default or Event of Default shall have
occurred and be continuing or would result therefrom, each of the following
shall be permitted:

                         (A) if no Default or Event of Default shall have
occurred and be continuing or would result therefrom, with the prior written
consent of the Agent (which


                                      -46-
<PAGE>


consent shall not be unreasonably withheld) any wholly-owned Subsidiary may
merge, consolidate or amalgamate with or into a Key Loan Party or with or into
another wholly-owned Subsidiary of a Key Loan Party, so long as in any merger,
consolidation or amalgamation involving a Key Loan Party, the Key Loan Party is
the surviving, continuing or resulting corporation;

                         (B) if no Default or Event of Default shall have
occurred and be continuing or would result therefrom, any Loan Party may
liquidate or dissolve any Unrestricted Subsidiary;

                         (C) if no Default or Event of Default shall have
occurred and be continuing or would result therefrom, any Loan Party may engage
in any Acquisition which is a Permitted Acquisition, provided that all of the
conditions contained in the definition of the term Permitted Acquisition are
satisfied; and

                         (D) any Loan Party may engage in (1) the sale of
Inventory in compliance with this Agreement; (2) the disposal of Equipment which
is obsolete, worn out, or damaged beyond repair, or no longer useful in the Loan
Parties' businesses; and (3) Permitted Dispositions.

                 (d) LINE OF BUSINESS. Engage in any business other than the
business in which it is currently engaged or a business reasonably related
thereto, or any retail lease department operation.

                 (e) LOANS; ADVANCES; INVESTMENTS, ETC. (i) Make or commit or
agree to make any loan, advance guarantee of obligations, other extension of
credit or capital contributions to, or hold or invest in or commit or agree to
hold or invest in, or purchase or otherwise acquire any shares of the Capital
Stock, bonds, notes, debentures or other securities of, or make or commit or
agree to make any other investment in, any other Person; (ii) purchase or own
any futures contract or otherwise become liable for the purchase or sale of
currency or other commodities at a future date in the nature of a futures
contract; (iii) subordinate any debts or obligations owed to that Loan Party by
any third party (but not by another Loan Party) to any other debts owed by such
third party to any other Person; (iv) enter into leases of property or assets
not constituting Permitted Acquisitions, unless such leases are not otherwise in
violation of this Agreement; (v) organize or create any Affiliate other than in
connection with a Permitted Acquisition; or (vi) acquire any assets other than
in the ordinary course and conduct of that Loan Party's business as conducted at
the execution of this Agreement, other than in connection with a Permitted
Acquisition or as otherwise permitted in this Agreement, or permit any of its
Subsidiaries to do any of the foregoing, except for:

                         (A) Permitted Investments and investments directly
related to Permitted Acquisitions;

                         (B) advance payments made to that Loan Party's
suppliers in the ordinary course;

                         (C) advances to that Loan Party's officers, employees,
and salespersons with respect to reasonable expenses to be incurred by such
officers, employees, and


                                      -47-
<PAGE>


salespersons for the benefit of that Loan Party, which expenses are properly
substantiated by the Person seeking such advance and properly reimbursable by
that Loan Party;

                         (D) loans and advances to employees for business-
related moving expenses, costs of replacement homes, business machines or
supplies, automobiles and other similar expenses, in each case incurred in the
ordinary course of business not to exceed (together with loans and advances
under Section 6.02(e)(E) and investments permitted under clause (xiii) of the
definition of Permitted Investment) $6,000,000 in the aggregate outstanding to
all employees at any one time;

                         (E) loans and advances to that Loan Party's officers,
employees, and salespersons in connection with any employment agreements or
arrangements, or any stock options or option plans not to exceed $6,000,000
(together with loans and advances under Section 6.02(e)(D) and investments
permitted under clause (xiii) of the definition of Permitted Investments) in the
aggregate outstanding to all employees at any one time;

                         (F) intercompany loans existing on the date hereof and
described on Schedule 6.02(e)(vi)(F) hereof;

                         (G) loans and advances of a Person outstanding at the
time such Person becomes a Subsidiary as a result of a Permitted Acquisition,
PROVIDED, that any such loans or advances were not made at the time of or in
contemplation of the acquisition of such Person by a Loan Party or any
Subsidiaries;

                         (H) to the extent not permitted by the foregoing
clauses, the existing loans and advances described on Schedule 6.02(e)(vi)(H)
hereto;

                         (I) any other loans and advances to or for the benefit
of any Person which (1) is not itself a Loan Party, (2) are not otherwise
permitted by the foregoing clauses, and (3) are made after the Effective Date,
which loans and advances have been approved in advance by the Agent.

                (f) CAPITALIZED LEASE OBLIGATIONS. Create, incur or suffer to
exist, or permit any of its Subsidiaries to create, incur or suffer to exist,
any Capitalized Lease Obligations which would cause the aggregate amount of all
obligations under Capitalized Leases entered into after the Effective Date owing
by all Loan Parties and their Subsidiaries in any Fiscal Year to exceed the
amount set forth in clause (iv) of the definition of Permitted Indebtedness.

                 (g) RESTRICTED PAYMENTS.

                         (i) Pay any cash dividend or other distribution, in
respect of any class of such Loan Party's or any of its Subsidiaries' Capital
Stock, other than dividends payable to another Loan Party or payable solely in
the Capital Stock of such paying Loan Party;

                         (ii) make any repurchase, redemption, retirement,
defeasance, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any Capital Stock of any Loan Party or any direct
or indirect parent of any Loan Party, now or


                                      -48-
<PAGE>


hereafter outstanding; PROVIDED that the Loan Parties may make cash payments for
any such purposes if:

                                 (A) no Default or Event of Default shall have
occurred and be continuing at the time of declaration or payment thereof;

                                 (B) after giving effect to the making of any
such cash payment, the aggregate amount so expended for such purposes subsequent
to the Effective Date does not exceed $1,500,000; and

                                 (C) after giving effect to the making of any
such cash payment, the aggregate amount so expended for such purposes in any
Fiscal Year of the Key Loan Parties does not exceed $500,000.

                 (h) FEDERAL RESERVE REGULATIONS. Permit any Loan or the
proceeds of any Loan under this Agreement to be used for any purpose that would
cause such Loan to be a margin loan under the provisions of Regulation T, U or X
of the Board.

                 (i) TRANSACTIONS WITH AFFILIATES. (i) Except as set forth in
that certain confidential side letter from the Borrower to the Agent and for
loans which may be made between Loan Parties permitted pursuant to Section
6.02(e) above, make any payment, nor give any value to any Affiliate except for
leases, goods and services with such Affiliate for a price and on terms which
shall be in the ordinary course of business at prices and on terms and
conditions no less favorable to that Loan Party than those which would have been
charged and imposed in an arm's-length transaction from unrelated third parties,
except (A) sales of goods to an Affiliate for use or distribution outside of the
United States of America which complies with the any applicable legal
requirements of the Internal Revenue Code of 1986 and the Treasury Regulations,
each as amended from time to time, PROVIDED, that such sales shall not exceed
$500,000 in the aggregate in any Fiscal Year of the Key Loan Parties, (B) loans,
advances and other payments to officers and directors as part of their
compensation which are entered into in the ordinary course of business and which
are not otherwise prohibited under the Loan Documents, (C) other dividends and
distributions to officers, directors and shareholders otherwise permitted under
this Agreement, or (D) transactions between or among the Loan Parties not
prohibited hereunder and not involving any other Affiliate; (ii) (A) without
prior written consent of the Agent, amend, modify or waive any of the provisions
of the instruments, documents or agreements described in the confidential side
letter referred to in clause (i) above, the effect of which is to increase the
payments or value to be furnished by a Loan Party to any Affiliate (other than
for ordinary increases under such instruments, documents and agreements in the
ordinary course of business, for which the Loan Parties are presently obligated
to make payment in such instrument, document or agreement as in effect on the
Effective Date) or which would cause such instruments, documents or agreements
to be at prices and on terms and conditions no less favorable to that Loan Party
than those which would have been charged and imposed in an arm's-length
transaction from unrelated third parties, or (B) make any payments under such
instruments, documents or agreements in advance of the date when due other than
payments made to Affiliates to fund obligations or anticipated claims under
medical claims, employee benefit plans or agreements, and other similar plans,
all in accordance with current practice; and (iii) fail to use its best efforts
to cause its Affiliates to execute and deliver to the


                                      -49-
<PAGE>


Agent and the Lenders such documentation as the Agent may reasonably require to
evidence the Affiliates' agreement with the provisions of this Section 6.02(i).

                 (j) LIMITATIONS ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES AND RESTRICTIONS ON OBLIGATIONS. Create or otherwise
cause, incur, assume, suffer or permit to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of (i) any Loan
Party to create or grant liens in favor of the Agent or to incur Obligations or
(ii) any Subsidiary of any Loan Party (A) to pay dividends or to make any other
distribution on any shares of Capital Stock of such Subsidiary owned by any Loan
Party or any of its Subsidiaries, (B) to pay or prepay or to subordinate any
Indebtedness owed to any Loan Party or any of its Subsidiaries, (C) to make
loans or advances to any Loan Party or any of its Subsidiaries or (D) to
transfer any of its property or assets to any Loan Party or any of its
Subsidiaries, or permit any of its Subsidiaries to do any of the foregoing;
PROVIDED, HOWEVER, that nothing in any of clauses (A) through (D) of this
Section 6.02(j) shall prohibit or restrict compliance with:

                         (1) this Agreement and the other Loan Documents;

                         (2) any agreements in effect on the date of this
                    Agreement and described on Schedule 6.02(j);

                         (3) any Applicable Law, rule or regulation (including,
                    without limitation, applicable currency control laws and
                    applicable state corporate statutes restricting the payment
                    of dividends in certain circumstances);

                         (4) in the case of clause (D) any agreement setting
                    forth customary restrictions on the subletting, assignment
                    or transfer of any property or asset that is a lease,
                    license, conveyance or contract of similar property or
                    assets; or

                         (5) in the case of clause (D), any agreement,
                    instrument or other document evidencing a Permitted Lien
                    from restricting on customary terms the transfer of any
                    property or assets subject thereto.

                 (k) LIMITATION ON ISSUANCE OF CAPITAL STOCK. Issue or sell or
enter into any agreement or arrangement for the issuance and sale of, or permit
any of its Subsidiaries to issue or sell or enter into any agreement or
arrangement for the issuance and sale of, any shares of its Capital Stock, any
securities convertible into or exchangeable for its Capital Stock or any
warrants, PROVIDED, that the Borrower may issue (i) [Intentionally Omitted],
(ii) the Conversion Shares, (iii) up to 5,000,000 shares of Common Stock (and
following the fifth anniversary of the Effective Date, up to an additional
5,000,000 shares of Common Stock) that are issued to Persons other than
Affiliates of the Borrower, including (A) shares of Common Stock or options
exercisable therefor, issued or to be issued under the Borrower's 2000 Stock
Option Plan as in effect on the Effective Date or under any other employee stock
option or purchase plan or plans, or pursuant to compensatory or incentive
agreements, for officers, employees or consultants of the Borrower or any of its
Subsidiaries, in each case adopted or assumed after such date by the Borrower's
Board of Directors; provided in each case that the exercise or purchase price
for any


                                      -50-
<PAGE>


such share shall not be less than 95% of the fair market value (determined in
good faith by the Borrower's Board of Directors) of the Common Stock on the date
of the grant, and such additional number of shares as may become issuable
pursuant to the terms of any such plans by reason of adjustments required
pursuant to antidilution provisions applicable to such securities in order to
reflect any subdivision or combination of Common Stock, by reclassification or
otherwise, or any dividend on Common Stock payable in Common Stock, (B) shares
of restricted stock issued by the Borrower to executive officers of the
Borrower, and (C) shares of Common Stock issued by the Borrower as charitable
gifts.

                 (l) MODIFICATIONS OF INDEBTEDNESS, ORGANIZATIONAL DOCUMENTS AND
CERTAIN OTHER AGREEMENTS, ETC. (i) Amend, modify or otherwise change (or permit
the amendment, modification or other change) in any manner of any of the
provisions of any of its or its Subsidiaries' Indebtedness or of any instrument
or agreement (including, without limitation, any purchase agreement, indenture,
loan agreement or security agreement) relating to any such Indebtedness if such
amendment, modification or change (A) would shorten the final maturity or
average life to maturity of, or require any payment to be made earlier than the
date originally scheduled on, such Indebtedness, or would increase the interest
rate applicable to such Indebtedness, unless (x) Excess Availability, both
immediately prior to, immediately after giving effect thereto and projected
Excess Availability on a pro forma projected basis for the 12 months immediately
following, such amendment, modification or change is at least $100 million, or
(y) the total amount of such Indebtedness so amended, modified or changed since
the Effective Date (together with the amounts permitted under clause (ii)
hereof), does not exceed $500,000 in the aggregate in any Fiscal Year of the Key
Loan Parties, (B) would change the subordination provision, if any, of such
Indebtedness, or (C) would otherwise be adverse to the Lenders in any respect;
(ii) except for the Obligations and except as otherwise explicitly permitted
herein, make any voluntary or optional payment, prepayment, redemption,
defeasance, sinking fund payment or other acquisition for value of any of its or
its Subsidiaries' Indebtedness (including, without limitation, by way of
depositing money or securities with the trustee therefor before the date
required for the purpose of paying any portion of such Indebtedness when due),
or refund, refinance, replace or exchange any other Indebtedness for any such
Indebtedness (except to the extent such Indebtedness is otherwise expressly
permitted by the definition of "Permitted Indebtedness"), or make any payment,
prepayment, redemption, defeasance, sinking fund payment or repurchase of any
outstanding Indebtedness as a result of any asset sale, change of control,
issuance and sale of debt or equity securities or similar event, or give any
notice with respect to any of the foregoing, unless (x) Excess Availability,
both immediately prior to, immediately after giving effect thereto and projected
Excess Availability on a pro forma projected basis for the 12 months immediately
following, such payment is at least $100 million, or (y) the total amount of
such Indebtedness so paid since the Effective Date (together with the amounts
permitted under clause (i)(A) hereof), does not exceed $500,000 in the aggregate
in any Fiscal Year of the Key Loan Parties; (iii) except as permitted by Section
6.02(c), amend, modify or otherwise change its name, jurisdiction of
organization, organizational identification number or FEIN; (iv) amend, modify
or otherwise change its certificate of incorporation or bylaws (or other similar
organizational documents), including, without limitation, by the filing or
modification of any certificate of designation, or any agreement or arrangement
entered into by it, with respect to any of its Capital Stock (including any
shareholders' agreement), or enter into any new agreement with respect to any of
its Capital Stock, except any such amendments, modifications or changes or any
such new agreements or arrangements pursuant to this


                                      -51-
<PAGE>


clause (iv) that either individually or in the aggregate, could not have a
Material Adverse Effect; (v) [Intentionally Omitted]; (vi) agree to any material
amendment or other material change to or waiver of any of its rights under any
Material Contract without the consent of the Agent (which consent shall not be
unreasonably withheld); or (vii) alter, modify or amend any Lease in a manner
which is reasonably likely to have a Material Adverse Effect.

                 (m) INVESTMENT COMPANY ACT OF 1940. Engage in any business,
enter into any transaction, use any securities or take any other action or
permit any of its Subsidiaries to do any of the foregoing, that would cause it
or any of its Subsidiaries to become subject to the registration requirements of
the Investment Company Act of 1940, as amended, by virtue of being an
"investment company" or a company "controlled" by an "investment company" not
entitled to an exemption within the meaning of such Act.

                 (n) [INTENTIONALLY OMITTED].

                 (o) ERISA. Do or permit any ERISA Affiliate to do any of the
following, if as a result thereof, such Loan Party or ERISA Affiliate will, or
could reasonably be expected to, incur liability that is reasonably likely to
have a Material Adverse Effect:

                         (i) violate or fail to be in full compliance with any
Loan Party's Employee Benefit Plan;

                         (ii) fail timely to file all reports and filings
required by ERISA to be filed by any Loan Party;

                         (iii) engage in any nonexempt "prohibited transactions"
or "reportable events" (respectively as described in ERISA);

                         (iv) engage in, or commit any act such that a tax or
penalty reasonably could be imposed upon any Loan Party on account thereof
pursuant to ERISA;

                         (v) incur any material accumulated funding deficiency
within the meaning of ERISA;

                         (vi) terminate any Employee Benefit Plan such that a
Lien could be asserted against any assets of any Loan Party on account thereof
pursuant to ERISA; or

                         (vii) fail to make any required contribution or
payment to, or make a complete or partial withdrawal from, any Employee Benefit
Plan which is a multiemployer plan within the meaning of Section 4001(a) of
ERISA.

                 (p) ENVIRONMENTAL. Knowingly or negligently permit the use,
handling, generation, storage, treatment, Release or disposal of Hazardous
Materials at any property owned or leased by it or any of its Subsidiaries,
except in compliance with Environmental Laws and so long as such use, handling,
generation, storage, treatment, Release or disposal of Hazardous Materials is
not reasonably likely to result in a Material Adverse Effect.

                 (q) [INTENTIONALLY OMITTED].



                                      -52-
<PAGE>


                 (r) [Intentionally Omitted].

                 (s) UNRESTRICTED SUBSIDIARIES. Permit any Unrestricted
Subsidiary at any time to carry on any business activity or have any assets in
excess of $500,000 in the aggregate;

                 (t) INTELLECTUAL PROPERTY. Conduct its business so as to
infringe the patents, industrial designs, trademarks, trade names, trade styles,
brand names, service marks, logos, copyrights, trade secrets, know-how,
confidential information, or other intellectual or proprietary property of any
third Person, except where such infringement is not reasonably likely to have a
Material Adverse Effect.

                                  ARTICLE VII

                             REPORTING REQUIREMENTS

         Section 7.01 MAINTAIN RECORDS. The Loan Parties shall:

                 (a) At all times, keep proper books of account, in which full,
true, and accurate entries shall be made of all of the Loan Parties' financial
transactions, all in accordance with GAAP applied consistently with prior
periods to fairly reflect the consolidated financial condition of the Loan
Parties at the close of, and its results of operations for, the periods in
question.

                 (b) Timely provide the Agent with those financial reports,
statements, and schedules required by this Article VII or otherwise, each of
which reports, statements and schedules shall be prepared, to the extent
applicable, in accordance with GAAP applied consistently with prior periods to
fairly reflect the Consolidated financial condition of the Loan Parties at the
close of, and the results of operations for, the period(s) covered therein.

                 (c) At all times, keep accurate current records of its assets
and properties including, without limitation, accurate current stock, cost, and
sales records of its Inventory for each Division, accurately and sufficiently
itemizing and describing the kinds, types, and quantities of Inventory and the
cost and selling prices thereof.

                 (d) At all times, retain (i) Deloitte and Touche, LLP, or such
other nationally recognized independent certified public accountants who are
reasonably satisfactory to SSC (as long as it remains in Control of the Key Loan
Parties) and the Agent, and instruct such accountants, subject to the terms of
such accountants' internal policies, and subject to the confidentiality
provisions of this Agreement, to fully cooperate with, and be available to, the
Agent to discuss the Loan Parties' financial performance, financial condition,
operating results, controls, and such other matters, within the scope of the
retention of such accountants, as may be raised by the Agent.

                 (e) Not change any Loan Party's Fiscal Year.


                                      -53-
<PAGE>


         Section 7.02 ACCESS TO RECORDS.

                 (a) Each Loan Party shall accord the Agent with reasonable
access during normal business hours from time to time as the Agent may require
to all properties owned by or over which any Loan Party has control. The Agent
shall have the right, and each Loan Party will permit the Agent from time to
time as the Agent may request, to examine, inspect, copy, and make extracts from
any and all of the Loan Parties' books, records, electronically stored data,
papers, and files. Each Loan Party shall make that Loan Party's copying
facilities available to the Agent.

                 (b) Each Loan Party hereby authorizes the Agent to inspect,
copy, duplicate, review, cause to be reduced to hard copy, run off, draw off,
and otherwise use any and all computer or electronically stored information or
data which relates to any Loan Party. Each Loan Party shall request full
cooperation with the Agent from any service bureau, contractor, accountant, or
other Person.

                 (c) The Agent from time to time may designate one or more
representatives to exercise the Agent's rights under this Section 7.02 as fully
as if the Agent were doing so; PROVIDED, that the Agent shall not designate a
Person which is in a Competitive Business.

         Section 7.03 PROMPT NOTICE TO ADMINISTRATIVE AGENT.

                 (a) The Borrower shall provide the Agent with written notice
promptly upon the occurrence of any of the following events, which written
notice shall be with reasonable particularity as to the facts and circumstances
in respect of which such notice is being given (i) any change in any Loan
Party's president, chief executive officer, chief operating officer, and chief
financial officer (without regard to the title(s) actually given to the Persons
discharging the duties customarily discharged by officers with those titles);
(ii) any ceasing of any Loan Party's payment of the debts of that Loan Party
generally as they mature, in the ordinary course, to its creditors (other than
its ceasing of making of such payments on account of a dispute which, if
adversely determined to the Loan Parties is not reasonably likely to have a
Material Adverse Effect); (iii) any failure by any Loan Party to pay rent at any
of that Loan Party's locations, which failure continues for more than three (3)
days following the last day on which such rent was payable unless such failure
is not reasonably likely to have a Material Adverse Effect; (iv) any material
adverse change in the business, operations, or financial affairs of any
Borrower; (v) the occurrence of any Default; (vi) any intention on the part of
any Loan Party to discharge that Loan Party's present independent accountants or
any withdrawal or resignation by such independent accountants from their acting
in such capacity (as to which, see Section 7.01(d)); (vii) any litigation which,
if determined adversely to any Loan Party, is reasonably likely to have a
Material Adverse Effect; (viii) any intention of a Key Loan Party to enter into
a consignment arrangement or licensing or other similar agreement (whether for
intellectual property, leased departments in stores or otherwise) with any other
Person; (ix) any additional or amended collective bargaining or other labor
contract entered into after the Effective Date; (x)any Material Accounting
Changes; (xi) [Intentionally Omitted]; (xii) any event, occurrence or
circumstance not specifically described herein that is reasonably likely to have
a Material Adverse Effect; (xiii) any Loan Party's entering into a license
agreement after the Effective Date; (xiv) any Loan


                                      -54-
<PAGE>


Party's entering into a Capitalized Lease after the Effective Date; and (xv) any
Loan Party's entering into a Lease after the Effective Date.

                 (b) The Borrower shall (i) provide the Agent, when so
distributed, with copies of any materials distributed to the shareholders of the
Borrower; (ii) provide the Agent (A) when filed, copies of all filings with the
SEC. Such copies may be provided in electronic format; (B) when received, copies
of all correspondence from the SEC, other than routine general communications
from the SEC; and (C) should any of the information on any of the Schedules
hereto become misleading in any material respect, promptly advise the Agent in
writing with such revisions or updates as may be necessary or appropriate to
update or correct the same; PROVIDED, HOWEVER, that no such Schedule shall be
deemed to have been amended, modified or superseded by any such correction or
update, nor shall any breach of any representation or warranty resulting from
the inaccuracy or incompleteness of such Schedule be deemed to have been cured
or waived, unless and until the Agent, in its discretion shall have accepted in
writing such revisions; (iii) at the request of Agent, from time to time,
provide the Agent with copies of all advertising (including copies of all print
advertising and duplicate tapes of all video and radio advertising); and
(iv)provide the Agent, when received by and Loan Party, with a copy of any
management letter or similar communications from any independent accountant of
any Loan Party.

         Section 7.04 [INTENTIONALLY OMITTED].

         Section 7.05 [INTENTIONALLY OMITTED].

         Section 7.06 QUARTERLY REPORTS. Quarterly, within forty-five (45) days
following the end of each of the Loan Parties' fiscal quarters, the Borrower
shall provide the Agent with the following:

                 (a) An original counterpart of a management prepared financial
statement (which shall be prepared in the same manner and using the same
assumptions as set forth in the forecasts furnished to, and approved by, the
Agent pursuant to the provisions of Section 7.10(c) hereof) for (A) the Loan
Parties on a consolidated basis, (B) the DSW/Shonac Business, (C) the Filene's
Business, and (D) the Value City Business, in each case for the fiscal quarter
most recently ended, and for the period from the beginning of the Loan Parties'
then current fiscal year through the end of the subject quarter, with
comparative information for the same period of the previous fiscal year, which
statement shall include a balance sheet, statement of operations and cash flows
and comparisons for the corresponding quarter of the then immediately previous
year, as well as to the Loan Party's forecast;

                 (b) A list of all leases entered into or terminated during such
quarter; and

                 (c) The officer's compliance certificate described in
Section 7.08.

         Section 7.07 ANNUAL REPORTS.

                 (a) Annually, within ninety (90) days following the end of the
Loan Parties' fiscal year, the Borrower shall furnish the Agent with the
following: (i) an original


                                      -55-
<PAGE>


signed counterpart of the Loan Parties' consolidated annual financial statement,
which statement shall have been prepared by, and bear the unqualified opinion
of, the Borrower's independent certified public accountants (i.e. said statement
shall be "certified" by such accountants) and shall include, at a minimum (with
comparative information for the then prior fiscal year) a balance sheet,
statement of operations, statement of changes in shareholders' equity, and cash
flows; (ii) a consolidating annual financial statement for (x) the DSW/Shonac
Business, (y) the Filene's Business, and (z) the Value City Business which shall
include (with comparative information for the then prior fiscal year) a balance
sheet, statement of changes in shareholders' equity, and cash flows; and (iii)
the officer's compliance certificate described in Section 7.08.

                 (b) No later than fifteen (15) days prior to the end of each
of the Loan Parties' fiscal years, the Borrower shall give written notice to
such independent certified accountants (with a copy of such notice, when sent,
to the Agent) that such annual financial statement will be delivered by the
Borrower to the Agent and that the Borrower has been advised that the Agent and
each Lender will rely thereon with respect to the administration of, and
transactions under, the credit facilities contemplated by this Agreement.

         Section 7.08 OFFICER'S CERTIFICATES. The Borrower shall cause either
the Borrower's chief executive officer, president, executive vice president,
chief financial officer, controller, or treasurer (collectively, an "AUTHORIZED
OFFICER"), in each instance, to provide such Person's Certificate with those
monthly financial statements to be provided within thirty (30) days of the end
of each month and with those to be provided quarterly and annual statements to
be furnished pursuant to this Agreement, which Certificate shall:

                 (a) Indicate that (i) with respect to the Consolidated
financial statement, the subject statement was prepared in accordance with GAAP
consistently applied, and (ii) with respect to all financial statements,
presents fairly the financial condition of the applicable Loan Parties at the
close of, and the results of the applicable Loan Parties' operations and cash
flows (where such cash flows are required to be provided) for, the period(s)
presented, SUBJECT, HOWEVER, to the following: (x) usual year end adjustments
(this exception shall note be included in the Certificate which accompanies such
annual statement); and (y) Material Accounting Changes, in which event, such
Certificate shall include a schedule (in reasonable detail) of the effect of
each such Material Accounting Change.

                 (b) Indicate either that (i) no Default has occurred and is
continuing, or (ii) if such an event has occurred, its nature (in reasonable
detail) and the steps (if any) being taken or contemplated by the Loan Parties
to be taken on account thereof.

         Section 7.09 [Intentionally Omitted].

         Section 7.10 ADDITIONAL FINANCIAL INFORMATION.

                 (a) In addition to all other information required to be
provided pursuant to this Article VII, the Borrower promptly shall provide the
Agent with such other and additional information concerning the Loan Parties,
the operation of the Loan Parties' business, and the Loan Parties' financial
condition, including original counterparts of financial reports and statements,
as the Agent may from time to time reasonably request from the Borrower.


                                      -56-
<PAGE>


                 (b) The Borrower shall, upon the Agent's request, provide the
Agent, from time to time hereafter, with updated forecasts of the Loan Parties'
anticipated performance and operating results for the current fiscal year. Such
forecasts shall be in a format consistent with the format previously provided to
the Agent.

                 (c) In all events, the Borrower, no sooner than ninety (90) nor
later than sixty (60) days prior to the end of each of the Loan Parties' fiscal
years, shall provide the Agent with an updated and extended forecast which shall
go out at least through the end of the then next fiscal year and shall include a
statement of operations, balance sheet, and statement of cash flow, by month,
each consolidated (with consolidating schedules by Division) and each prepared
in conformity with GAAP and consistent with the Loan Parties' then current
accounting practices.

                 (d) When available the "Annual Budget", as approved by the
Borrower's Board of Directors, shall be provided to the Agent. The Annual Budget
shall be subject to the approval of the Agent (whose approval shall not be
unreasonably withheld) only if the Annual Budget varies in a material way from
the Business Plan for such fiscal year.

                 (e) Each Loan Party recognizes that all commercial finance
examinations, inventories, analysis, financial information, and other materials
which the Agent may obtain, develop, or receive with respect to the Loan Parties
(other than appraisals and inventories received from third parties) are
confidential to the Agent and that, except as otherwise provided herein, no Loan
Party is entitled to receipt of any of such commercial finance examinations,
inventories, analysis, financial information, and other materials, nor copies or
extracts thereof or therefrom.

         Section 7.11 FORMAT OF INFORMATION. All information required to be
delivered pursuant to this Article VII may be delivered by and in electronic
format.

                                  ARTICLE VIII

                            [INTENTIONALLY OMITTED.]

                                   ARTICLE IX

                                EVENTS OF DEFAULT

         Section 9.01 EVENTS OF DEFAULT. The occurrence of any event described
in this Article IX respectively shall constitute an Event of Default herein. The
occurrence of any Event of Default shall also constitute, without notice or
demand, a default under all other agreements between the Agent or any Lender and
any Loan Party and instruments and papers heretofore, now, or hereafter given
the Agent or any Lender by any Loan Party in connection with any of the Loan
Documents. An Event of Default shall occur upon:

                 (a) The failure by any Loan Party to pay when due any principal
of, interest on, or fees in respect of, the Loan;


                                      -57-
<PAGE>


                 (b) The failure by any Loan Party to pay when due (or upon
demand, if payable on demand) any payment Obligation other than any payment
Obligation on account of the principal of, or interest on, or fees in respect of
the Loan;

                 (c) The failure by any Loan Party to promptly, punctually,
faithfully and timely perform, discharge, or comply with any covenant or
Obligation included in any of the following provisions hereof:

                           SECTION              RELATES TO
                           6.02(b)              Indebtedness
                           6.01(b)              Pay Taxes
                           6.02(g)              Dividends. Investments. Other
                                                   Corporate Actions
                           6.02(e)              Loans and Advances
                           6.02(i)              Affiliate Transactions
                           Article VII          Reporting Requirements

                 (d) [Intentionally Omitted].

                 (e) the failure by any Loan Party, within twenty (20) days
following the earlier of any Authorized Officer's knowledge of a breach of any
covenant or Obligation not described in any of clauses (a) through (d) above, or
of its receipt of written notice from the Agent of the breach of any of such
covenants or Obligations, provided that if such failure cannot be reasonably
cured within such twenty (20) day period and the Loan Parties have diligently
proceeded, and continue to diligently proceed, to effectuate a cure of such
failure, such failure shall not be an Event of Default hereunder unless (i) such
failure is not cured within twenty (20) days after the expiration of such
initial twenty (20) day period, or (b) such failure, in the reasonable judgment
of the Agent, is reasonably likely to have a Material Adverse Effect;

                 (f) the determination by the Agent that any representation or
warranty at any time made by any Loan Party to the Agent or any Lender was not
true or complete in all material respects when given;

                 (g) the occurrence and continuance of any Event of Default or
other event, which with the giving of notice, the passage of time or both, would
be an Event of Default under any Indebtedness of any Loan Party equal to or in
excess of One Million Dollars ($1,000,000.00) to any creditor other than the
Agent or any Lender, (whether or not such Indebtedness has been accelerated),
or, Leases aggregating more than five percent (5%) of all Leases of the Loan
Parties existing from time to time could be terminated due to a default by a
Loan Party thereunder (whether or not the subject creditor or lessor takes any
action on account of such occurrence);

                 (h) the occurrence of any breach of any covenant or Obligation
imposed by, or of any default under, any agreement between the Agent or any
Lender and any Loan Party


                                      -58-
<PAGE>


or instrument given by any Loan Party to any Agent or any Lender relating to
Indebtedness of any Loan Party in excess of $1,000,000 in the aggregate and the
expiration, without cure, of any applicable grace period (notwithstanding that
the Agent or Lender may not have exercised all or any of its rights on account
of such breach or default);

                 (i) the occurrence of any uninsured loss, theft, damage, or
destruction of or to any material portion of the property or assets of the Loan
Parties;

                 (j) (i) the entry of any judgment in excess of Two Million Five
Hundred Thousand Dollars ($2,500,000.00) against any Loan Party, which judgment
(A) is not covered by insurance (as to which the insurer has not notified the
applicable Loan Party of the insurer's reservation of rights) or (B) is not
satisfied, stayed (if a money judgment) or appealed from (with execution or
similar process stayed) within thirty (30) days of its entry;

                         (ii) the entry of any order or the imposition of any
other process having the force of law, the effect of which is to restrain the
conduct by any Key Loan Party of its business in the ordinary course and which
is reasonably likely to have a Material Adverse Effect;

                 (k) any act by, against, or relating to any Loan Party, or its
property or assets, which act constitutes the determination, by any Loan Party,
to initiate a program of substantial or total self-liquidation; application for,
consent to, or sufferance of the appointment of a receiver, trustee, or other
Person, pursuant to court action or otherwise, over all, or any part of any Loan
Party's property; the granting of any trust mortgage or execution of an
assignment for the benefit of the creditors of any Loan Party, or the occurrence
of any other voluntary or involuntary liquidation or extension of debt agreement
for any Loan Party; the offering by or entering into by any Loan Party of any
composition, extension, or any other arrangement seeking relief generally from
or extension of the debts of any Loan Party; or the initiation of any judicial
or non-judicial proceeding or agreement by, against, or including any Loan Party
which seeks or intends to accomplish a reorganization or arrangement with
creditors; and/or the initiation by or on behalf of any Loan Party of the
liquidation or winding up of all or any part of any Loan Party's business or
operations except that any of the foregoing actions which are commenced against
a Loan Party shall not be deemed an Event of Default hereunder as long as such
action is timely contested in good faith by that Loan Party by appropriate
proceedings and is dismissed within 60 days of the institution of the foregoing;

                 (l) the failure by any Loan Party to generally pay the debts of
that Loan Party as they mature; adjudication of bankruptcy or insolvency
relative to any Loan Party; the entry of an order for relief or similar order
with respect to any Loan Party in any proceeding pursuant to the Bankruptcy Code
or any other Federal bankruptcy law; the filing of any complaint, application,
or petition by any Loan Party initiating any matter in which any Loan Party is
or may be granted any relief from the debts of that Loan Party pursuant to the
Bankruptcy Code or any other insolvency statute or procedure; the filing of any
complaint, application, or petition against any Loan Party initiating any matter
in which that Loan Party is or may be granted any relief from the debts of that
Loan Party pursuant to the Bankruptcy Code or any other insolvency statute or
procedure, which complaint, application, or petition is not


                                      -59-
<PAGE>


timely contested in good faith by that Loan Party by appropriate proceedings or,
if so contested, is not dismissed within 60 days of when filed;

                 (m) the termination or attempted termination of any Guaranty by
any Guarantor;

                 (n) (i) any challenge by or on behalf of any Loan Party to the
validity of any Loan Document or the applicability or enforceability of any Loan
Document strictly in accordance with the subject Loan Document's terms or which
seeks to void, avoid, limit, or otherwise adversely affect any payment made
pursuant thereto;

                         (ii) any determination by any court or any other
judicial or Government Authority that any Loan Document is not enforceable
strictly in accordance with the subject Loan Document's terms or which voids,
avoids, limits, or otherwise adversely affects any payment made pursuant
thereto; or

                 (o) any Change in Control;

                 (p) an event or development occurs which, as determined by the
Agent in its discretion, has, or could reasonably be expected to have, a
Material Adverse Effect; or

                 (q) [Intentionally Omitted].

         then, and in any such event, the Agent may, with the consent or at the
direction of the Required Lenders, by notice to the Borrower, (i) declare all or
any portion of the Loan and other Obligations then outstanding to be due and
payable, whereupon all or such portion of the aggregate principal of the Loan
and other Obligations, all accrued and unpaid interest thereon, all fees and all
other amounts payable under this Agreement and the other Loan Documents shall
become due and payable immediately, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by each
Loan Party and (ii) exercise any and all of its other rights and remedies under
Applicable Law, hereunder and under the other Loan Documents; PROVIDED, HOWEVER,
that upon the occurrence and during the continuance of any Event of Default
described in subsection (k) or (l) of this Section 9.01, without any notice to
any Loan Party or any other Person or any act by the Agent or any Lender, and
the Loan, together with all accrued and unpaid interest and PIK Interest
thereon, all fees and all other amounts due under this Agreement and the other
Loan Documents shall become due and payable automatically and immediately,
without presentment, demand, protest or notice of any kind, all of which are
expressly waived by each Loan Party.

                                   ARTICLE X

                                      AGENT

         Section 10.01 APPOINTMENT. Each Lender (and each subsequent maker of
any Loan by its making thereof) hereby irrevocably appoints and authorizes the
Agent to perform the duties of the Agent as set forth in this Agreement
including: (i) to receive on behalf of each Lender any payment of principal of
or interest on the Loan outstanding hereunder and all other amounts accrued
hereunder for the account of the Lenders and paid to the Agent, and, subject to


                                      -60-
<PAGE>


Sections 2.02 and 3.02 of this Agreement, to distribute promptly to each Lender
its Pro Rata Share of all payments so received; (ii) to distribute to each
Lender copies of all material notices and agreements received by the Agent and
not required to be delivered to each Lender pursuant to the terms of this
Agreement, provided that the Agent shall not have any liability to the Lenders
for the Agent's inadvertent failure to distribute any such notices or agreements
to the Lenders; (iii) to maintain, in accordance with its customary business
practices, ledgers and records reflecting the status of the Obligations, the
Loan, and related matters and to maintain, in accordance with its customary
business practices, ledgers and records reflecting the status of the properties
and assets of the Loan Parties and related matters; (iv) to execute or file any
and all financing or similar statements or notices, amendments, renewals,
supplements, documents, instruments, proofs of claim, notices and other written
agreements with respect to this Agreement or any other Loan Document; (v)
[Intentionally Omitted]; (vi) to perform, exercise, and enforce any and all
other rights and remedies of the Lenders with respect to the Loan Parties, the
Obligations, or otherwise related to any of same to the extent reasonably
incidental to the exercise by the Agent of the rights and remedies specifically
authorized to be exercised by the Agent by the terms of this Agreement or any
other Loan Document, or as directed by the Required Lenders; (vii) to incur and
pay such fees necessary or appropriate for the performance and fulfillment of
its functions and powers pursuant to this Agreement or any other Loan Document;
and (viii) subject to Section 10.03 of this Agreement, to take such action as
the Agent deems appropriate on its behalf to administer the Loan and the Loan
Documents and to exercise such other powers delegated to the Agent by the terms
hereof or the other Loan Documents (including, without limitation, the power to
give or to refuse to give notices, waivers, consents, approvals and instructions
and the power to make or to refuse to make determinations and calculations)
together with such powers as are reasonably incidental thereto to carry out the
purposes hereof and thereof. As to any matters not expressly provided for by
this Agreement and the other Loan Documents (including, without limitation,
enforcement or collection of the Loan), the Agent shall not be required to
exercise any discretion or take any action, which, in the reasonable opinion of
the Agent, exposes the Agent to liability or which is contrary to this Agreement
or any other Loan Document or Applicable Law. The Lenders hereby agree that the
Required Lenders shall make all decisions concerning (A) waivers, (B)
amendments, (C) remedial action, including, without limitation, the right to
call a default, accelerate and take any enforcement action, and (D) performance
by the Lenders or enforcement of the rights of the Lenders hereunder and under
the Intercreditor Agreement; PROVIDED, HOWEVER, that the foregoing shall not
limit the rights of all Lenders under Section 12.02 hereof.

         Section 10.02 NATURE OF DUTIES. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement or in the
other Loan Documents. The duties of the Agent shall be mechanical and
administrative in nature. Neither the Agent nor the Lenders shall have by reason
of this Agreement or any other Loan Document any fiduciary relationship. Nothing
in this Agreement or any other Loan Document, express or implied, is intended to
or shall be construed to impose upon the Agent or the Required Lenders any
obligations in respect of this Agreement or any other Loan Document except as
expressly set forth herein or therein. Each Lender shall make its own
independent investigation of the financial condition and affairs of the Loan
Parties in connection with the making and the continuance of the Loan hereunder
and shall make its own appraisal of the creditworthiness of the Loan Parties and
the value of the properties and assets of the Loan Parties, and neither the
Agent nor the Required Lenders shall have any duty or responsibility, either
initially or on a


                                      -61-
<PAGE>


continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before the initial Loan
hereunder or at any time or times thereafter; PROVIDED, that, upon the
reasonable request of a Lender, the Agent shall provide to such Lender any
documents or reports delivered to the Agent by the Loan Parties pursuant to the
terms of this Agreement or any other Loan Document.

         Section 10.03 RIGHTS; EXCULPATION, ETC. Neither the Agent nor the
Lenders, nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by them under or in
connection with this Agreement or the other Loan Documents, except for their own
gross negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction. Without limiting the generality of the
foregoing, the Agent and the Lenders (i) may treat the payee of any Loan as the
owner thereof until the Agent receives written notice of the assignment or
transfer thereof, pursuant to Section 12.07 hereof, signed by such payee and in
form satisfactory to the Agent; (ii) may consult with legal counsel (including,
without limitation, counsel to the Agent or counsel to the Loan Parties),
independent public accountants, and other experts selected by any of them and
shall not be liable for any action taken or omitted to be taken in reasonable
good faith by any of them in accordance with the advice of such counsel or
experts; (iii) make no warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, certificates, warranties or
representations made in or in connection with this Agreement or the other Loan
Documents; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Person, the existence
or possible existence of any Default or Event of Default, or to inspect the
Collateral or other property (including, without limitation, the books and
records) of any Person; and (v) shall not be responsible to any Lender for the
due execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto. Neither the Agent nor the
Required Lenders shall be liable for any apportionment or distribution of
payments made in good faith pursuant to Section 3.04. The Agent may at any time
(but shall not be required to) request instructions from the Required Lenders
with respect to any actions or approvals which by the terms of this Agreement or
of any of the other Loan Documents the Agent is permitted or required to take or
to grant, and if such instructions are promptly requested, the Agent shall be
absolutely entitled to refrain from taking any action or to withhold any
approval under any of the Loan Documents until it shall have received such
instructions from the Required Lenders. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against the Agent as a result
of the Agent acting or refraining from acting under this Agreement or any of the
other Loan Documents in accordance with the instructions of the Required
Lenders, or against the Required Lenders on the same basis for which a right of
action could be brought against the Agent in connection with such acting or
refraining from acting, except to the extent such action, lack of action or
instruction is determined by a court of competent jurisdiction, pursuant to a
final judgment, to have constituted gross negligence or willful misconduct.

         Section 10.04 RELIANCE. The Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message believed by it in reasonable good faith to be genuine and
correct and to have been signed, sent or made by the


                                      -62-
<PAGE>


proper Person, and with respect to all matters pertaining to this Agreement or
any of the other Loan Documents and its duties hereunder or thereunder, upon
advice of counsel selected by it.

         Section 10.05 INDEMNIFICATION. To the extent that the Agent is not
reimbursed and indemnified by any Loan Party, the Lenders will reimburse and
indemnify the Agent from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, advances
or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against the Agent in any way relating to or arising out
of this Agreement or any of the other Loan Documents (it being understood that
the foregoing shall not be deemed to include principal, interest or fees owed by
a Loan Party to the Agent) or any action taken or omitted by the Agent under
this Agreement or any of the other Loan Documents, in proportion to each
Lender's Pro Rata Share, including, without limitation, advances and
disbursements made pursuant to Section 10.08; PROVIDED, HOWEVER, that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, advances or
disbursements for which there has been a final judicial determination that such
liability resulted from the Agent's gross negligence or willful misconduct. The
obligations of the Lenders under this Section 10.05 shall survive the payment in
full of the Loan and the termination of this Agreement.

         Section 10.06 AGENT INDIVIDUALLY. With respect to its Pro Rata Share of
the Loan made by it, the Agent shall have and may exercise the same rights and
powers hereunder and is subject to the same obligations and liabilities as and
to the extent set forth herein for any other Lender or maker of a Loan. The term
"Lenders" or "Required Lenders" or any similar terms shall, unless the context
clearly otherwise indicates, include the Agent in its individual capacity as a
Lender. The Agent and its Affiliates may accept deposits from, lend money to,
and generally engage in any kind of banking, trust or other business with any
Key Loan Party as if it were not acting as the Agent pursuant hereto without any
duty to account to the other Lenders.

         Section 10.07 SUCCESSOR AGENT. (a) The Agent may resign from the
performance of all its functions and duties hereunder and under the other Loan
Documents at any time by giving at least thirty (30) Business Days' prior
written notice to the Borrower and each Lender. Such resignation shall take
effect upon the acceptance by a successor Agent of appointment pursuant to
clauses (b) and (c) below or as otherwise provided below.

                 (b) Upon any such notice of resignation, the Borrower shall
appoint a successor Agent acceptable to SSC. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the Agent, and the Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After the Agent's
resignation hereunder as the Agent, the provisions of this Article X shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
the Agent under this Agreement and the other Loan Documents.

                 (c) If a successor Agent shall not have been so appointed
within said thirty (30) Business Day period, the Agent shall then appoint a
successor Agent who shall serve as the Agent until such time, if any, as the
Borrower (with the consent of SSC) appoints a successor Agent as provided above.


                                      -63-
<PAGE>


         Section 10.08 [Intentionally Omitted].

         Section 10.09 [Intentionally Omitted].

                                   ARTICLE XI

                                    GUARANTY

         Section 11.01 GUARANTY. Each Guarantor hereby unconditionally and
irrevocably guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all Obligations of the Borrower now
or hereafter existing under any Loan Document, whether for principal, interest
(including, without limitation, all interest that accrues after the commencement
of any Insolvency Proceeding of the Borrower), fees, commissions,
indemnifications or otherwise (such obligations, to the extent not paid by the
Borrower, being THE "GUARANTEED OBLIGATIONS"), and agrees to pay any and all
expenses (including reasonable counsel fees and expenses) incurred by the Agent
and the Lenders in enforcing any rights under the Guaranty set forth in this
Article XI. Without limiting the generality of the foregoing, each Guarantor's
liability shall extend to all amounts that constitute part of the Guaranteed
Obligations and would be owed by the Borrower to the Agent and the Lenders under
any Loan Document but for the fact that they are unenforceable or not allowable
due to the existence of an Insolvency Proceeding involving the Borrower.

         Section 11.02 GUARANTY ABSOLUTE. Each Guarantor guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms of the
Loan Documents, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Agent or the Lenders with respect thereto. The Obligations of each Guarantor
under this Article XI are independent of the Guaranteed Obligations, and a
separate action or actions may be brought and prosecuted against each Guarantor
to enforce such Obligations, irrespective of whether any action is brought
against any Loan Party or whether any Loan Party is joined in any such action or
actions. The liability of each Guarantor under this Article XI shall be
irrevocable, absolute and unconditional irrespective of, and each Guarantor
hereby irrevocably waives any defenses it may now or hereafter have in any way
relating to, any or all of the following:

                 (a) Any lack of validity or enforceability of any Loan Document
or any agreement or instrument relating thereto;

                 (b) Any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from any Loan Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to any Loan Party or
otherwise;

                 (c) Any taking, release or amendment or waiver of or consent to
departure from any other Guaranty, for all or any of the Guaranteed Obligations;

                 (d) Any change, restructuring or termination of the corporate,
limited liability company or partnership structure or existence of any Loan
Party; or


                                      -64-
<PAGE>


                 (e) Any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any representation by
the Agent or the Lenders that might otherwise constitute a defense available to,
or a discharge of, any Loan Party or any other Guarantor or surety.

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

         Section 11.03 WAIVER. Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this Article XI and any requirement that the Agent or
the Lenders exhaust any right or take any action against any Loan Party or any
other Person. Each Guarantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated herein and that
the waiver set forth in this Section 11.03 is knowingly made in contemplation of
such benefits. Each Guarantor hereby waives any right to revoke this Article XI,
and acknowledges that this Article XI is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.

         Section 11.04 CONTINUING GUARANTY; ASSIGNMENTS. This Article XI is a
continuing guaranty and shall (a) remain in full force and effect until the
later of the cash payment in full of the Guaranteed Obligations (other than
indemnification obligations as to which no claim has been made) and all other
amounts payable under this Article XI and the Final Maturity Date, (b) be
binding upon each Guarantor, its successors and assigns and (c) inure to the
benefit of and be enforceable by the Agent and the Lenders and their successors,
pledgees, transferees and assigns. Without limiting the generality of the
foregoing clause (c), any Lender may pledge, assign or otherwise transfer all or
any portion of its rights and obligations under this Agreement (including,
without limitation, all or any portion of its Pro Rata Share of the Loan owing
to it) to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted such Lender herein or
otherwise, in each case as provided in Section 12.07.

         Section 11.05 SUBROGATION. No Guarantor will exercise any rights that
it may now or hereafter acquire against any Loan Party or any other Guarantor
that arise from the existence, payment, performance or enforcement of such
Guarantor's obligations under this Article XI, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the Agent
and the Lenders against any Loan Party or any other Guarantor, whether or not
such claim, remedy or right arises in equity or under contract, statute or
common law, including, without limitation, the right to take or receive from any
Loan Party or any other Guarantor, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security solely on
account of such claim, remedy or right, unless and until all of the Guaranteed
Obligations and all other amounts payable under this Article XI shall have been
paid in full in cash and the Final Maturity Date shall have occurred. If any
amount shall be paid to any Guarantor in violation of the immediately preceding
sentence at any time prior to the later of the payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this


                                      -65-
<PAGE>


Article XI and the Final Maturity Date, such amount shall be held in trust for
the benefit of the Agent and the Lenders and shall forthwith be paid to the
Agent and the Lenders to be credited and applied to the Guaranteed Obligations
and all other amounts payable under this Article XI, whether matured or
unmatured, in accordance with the terms of this Agreement. If (i) any Guarantor
shall make payment to the Agent and the Lenders of all or any part of the
Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other
amounts payable under this Article XI shall be paid in full in cash and (iii)
the Final Maturity Date shall have occurred, the Agent and the Lenders will, at
such Guarantor's request and expense, execute and deliver to such Guarantor
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to such Guarantor of an
interest in the Guaranteed Obligations resulting from such payment by such
Guarantor.

                                  ARTICLE XII

                                  MISCELLANEOUS

         Section 12.01 NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to any Loan Party, at the following address:

                  Value City Department Stores, Inc.
                  3241 Westerville Road
                  Columbus, OH 43224
                  Attention:  James A. McGrady
                  Telephone:  (614) 478-2300
                  Telecopier:  (614) 473-2721

                  with a copy to:

                  Porter Wright Morris & Arthur LLP
                  41 South High Street
                  Columbus, OH  43215
                  Attention:  Robert J. Tannous, Esq. and Timothy E. Grady, Esq.
                  Telephone:  614-227-1953
                  Telecopier:  614-227-2100

                  if to the Agent, to it at the following address:

                  Schottenstein Stores Corporation
                  1800 Moler Road
                  Columbus, OH  43207
                  Attention:  Irwin A. Bain, Esq.
                  Telephone:  614-449-4332
                  Telecopier:  614-443-0927



                                      -66-
<PAGE>


                  with a copy to:

                  Cadwalader, Wickersham & Taft
                  100 Maiden Lane
                  New York, New York  10038
                  Attention:  Dennis J. Block, Esq.
                  Telephone:  212-504-6000
                  Telecopier:  614-504-6666

                  or, as to each party, at such other address as shall be
designated by such party in a written notice to the other parties complying as
to delivery with the terms of this Section 12.01. All such notices and other
communications shall be effective, (i) if sent by certified mail, return receipt
requested, the date when actually received, (ii) if sent by recognized overnight
express delivery, the Business Day following the day when sent, (iii) if
delivered by hand on a Business Day after 9:00 AM and no later than three (3)
hours prior to the close of customary business hours of the recipient, when
delivered (otherwise, at the opening of the then next Business Day), and (iv) by
telecopier and sent on a Business Day after 9:00 AM and no later than three (3)
hours prior to the close of customary business hours of the recipient, one (1)
hour after being sent (otherwise, at the opening of the then next Business Day).

         Section 12.02 AMENDMENTS, ETC. Subject to Section 6.02(l), no amendment
or waiver of any provision of any Loan Document, including this Agreement, and
no consent to any departure by any Loan Party therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Agent, the
Required Lender, the Borrower and the Guarantors, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given, PROVIDED, HOWEVER, that no amendment, waiver or consent
shall (i) reduce the principal of, or interest on, the Loan, reduce the amount
of any fee payable for the account of any Lender, or postpone or extend any date
fixed for any payment of principal of, or interest or fees on the Loan payable
to any Lender, in each case without the written consent of any Lender affected
thereby, (ii) amend the definition of "Pro Rata Share", (iii) release the
Borrower or any Guarantor or (iv) amend, modify or waive Section 3.04, Article
XIII or this Section 12.02 of this Agreement in each case, without the written
consent of each Lender. Notwithstanding the foregoing, no amendment, waiver or
consent shall, unless in writing and signed by the Agent, affect the rights or
duties of the Agent (but not in its capacity as a Lender) under this Agreement
or the other Loan Documents.

         Section 12.03 NO WAIVER; REMEDIES, ETC. No failure on the part of the
Agent or any Lender to exercise, and no delay in exercising, any right hereunder
or under any other Loan Document shall operate as a waiver thereof; nor shall
any single or partial exercise of any right under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of the Agent and the Lenders provided herein and in the other Loan
Documents are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of the Agent and the Lenders
under any Loan Document against any party thereto are not conditional or
contingent on any attempt by the Agent and the Lenders to exercise any of their
rights under any other Loan Document against such party or against any other
Person.


                                      -67-
<PAGE>


         Section 12.04 EXPENSES; TAXES; ATTORNEYS' FEES. The Borrower will pay
within ten (10) days after demand therefor (which demand shall include a
statement of the nature thereof), all costs and expenses incurred by or on
behalf of the Agent (and, in the case of clauses (b) through (m) below, each
Lender), regardless of whether the transactions contemplated hereby are
consummated, including, without limitation, reasonable fees, costs, client
charges and expenses of counsel for the Agent (and, in the case of clauses (b)
through (m) below, each Lender), accounting, due diligence, periodic field
audits, physical counts, valuations, investigations, searches and filings,
monitoring of assets, title searches and reviewing environmental assessments,
miscellaneous disbursements, examination, travel, lodging and meals, arising
from or relating to the following: (a) the negotiation, preparation, execution,
delivery, performance and administration of this Agreement and the other Loan
Documents (including, without limitation, the preparation of any additional Loan
Documents pursuant to Section 6.01(b) or the review of any of the agreements,
instruments and documents referred to in Section 6.01(f)); (b) any requested
amendments, waivers or consents to this Agreement or the other Loan Documents
whether or not such documents become effective or are given; (c) the
preservation and protection of any of the Lenders' rights under this Agreement
or the other Loan Documents; (d) the defense of any claim or action asserted or
brought against the Agent or any Lender by any Person that arises from or
relates to this Agreement, any other Loan Document, the Agent's or the Lenders'
claims against any Loan Party, or any and all matters in connection therewith;
(e) the commencement or defense of, or intervention in, any court proceeding
arising from or related to this Agreement or any other Loan Document; (f) the
filing of any petition, complaint, answer, motion or other pleading by the Agent
or any Lender; (g) [Intentionally Omitted]; (h) [Intentionally Omitted]; (i) any
attempt to collect from any Loan Party; (j) all liabilities and costs arising
from or in connection with the past, present or future operations of any Loan
Party involving any damage to real or personal property or natural resources or
harm or injury alleged to have resulted from any Release of Hazardous Materials
on, upon or into such property; (k) any Environmental Liabilities and Costs
incurred in connection with the investigation, removal, cleanup and/or
remediation of any Hazardous Materials present or arising out of the operations
of any facility of any Loan Party; (l) any Environmental Liabilities and Costs
incurred in connection with any Environmental Lien; or (m) the receipt by the
Agent or any Lender of any advice from professionals with respect to any of the
foregoing; PROVIDED THAT with respect to clauses (d), (e) and (f) above, such
costs and expenses shall not include those costs and expenses that have been
determined by a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of such Lender or Agent, as the case may be.
Without limitation of the foregoing or any other provision of any Loan Document:
(x) the Borrower agree to pay all stamp, document, transfer, recording or filing
taxes or fees and similar impositions now or hereafter determined by the Agent
or any Lender to be payable in connection with this Agreement or any other Loan
Document, and the Borrower agrees to save the Agent and each Lender harmless
from and against any and all present or future claims, liabilities or losses
with respect to or resulting from any omission to pay or delay in paying any
such taxes, fees or impositions unless such omission is the result of the gross
negligence or willful misconduct of any Lender; (y) the Borrower agrees to pay
all broker and investment banking fees that may become due in connection with
the transactions contemplated by this Agreement and the other Loan Documents
(the Agent and the Lenders represent and warrant that no brokers have been
engaged or retained by any of them in connection with the transactions evidenced
by the Loan Documents); and (z) if the Borrower fails to perform any covenant or


                                      -68-
<PAGE>


agreement contained herein or in any other Loan Document, the Agent may itself
perform or cause performance of such covenant or agreement, and the expenses of
the Agent incurred in connection therewith shall be reimbursed on demand by the
Borrower.

         Section 12.05 RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, the Agent or any Lender may, and is hereby
authorized to, at any time and from time to time, without notice to any Loan
Party (any such notice being expressly waived by the Loan Parties) and to the
fullest extent permitted by law, 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 the Agent or such Lender to or for the credit
or the account of any Loan Party against any and all obligations of the Loan
Parties either now or hereafter existing under any Loan Document, irrespective
of whether or not the Agent or such Lender shall have made any demand hereunder
or thereunder and although such obligations may be contingent or unmatured. The
Agent and each Lender agree to notify such Loan Party promptly after any such
set-off and application made by the Agent or such Lender provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Agent and the Lenders under this Section 12.05
are in addition to the other rights and remedies (including other rights of
set-off) which the Agent and the Lenders may have under this Agreement or any
other Loan Documents of law or otherwise.

         Section 12.06 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

         Section 12.07 ASSIGNMENTS AND PARTICIPATIONS. (a) This Agreement and
the other Loan Documents shall be binding upon and inure to the benefit of each
Loan Party and the Agent and each Lender and their respective successors and
assigns; PROVIDED, HOWEVER, that none of the Loan Parties may assign or transfer
any of its rights hereunder without the prior written consent of each Lender and
any such assignment without the Lenders' prior written consent shall be null and
void.

                 (b) Each Lender may, with the written consent (which consent
shall not be unreasonably withheld) of SSC (so long as SSC is the Agent or a
Lender under this Agreement) and the Borrower (so long as no Event of Default
has occurred and is continuing), assign to one or more other Lenders or other
entities all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of the Loan made by it);
PROVIDED, HOWEVER, that (i) such assignment is in an amount which is at least
$5,000,000 or a multiple of $1,000,000 in excess thereof (or the remainder of
such Lender's Pro Rata Share of the Loan) (except such minimum amount shall not
apply to an assignment by a Lender to an Affiliate of such Lender or a fund or
account managed by such Lender or an Affiliate of such Lender or, in the case of
SSC, a shareholder of such Lender), (ii) the parties to each such assignment
shall execute and deliver to the Agent, for its acceptance, an Assignment and
Acceptance, together with any promissory note subject to such assignment and
such parties shall deliver to the Agent a processing and recordation fee of
$5,000 (except the payment of such fee shall not be required in connection with
an assignment by a Lender to an Affiliate of such Lender or a fund or account
managed by such Lender or an Affiliate of such Lender, or, in the case of


                                      -69-
<PAGE>


SSC, a shareholder of such Lender) and (iii) no written consent of the SSC and
the Borrower shall be required in connection with any assignment by a Lender to
an Affiliate of such Lender or a fund or account managed by such Lender or an
Affiliate of such Lender, or in the case of SSC, a shareholder of such Lender.
Upon such execution, delivery and acceptance, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least three (3) Business Days after the delivery thereof to the Agent (or such
shorter period as shall be agreed to by the Agent and the parties to such
assignment), (A) the assignee thereunder shall become a "Lender" hereunder and,
in addition to the rights and obligations hereunder held by it immediately prior
to such effective date, have the rights and obligations hereunder that have been
assigned to it pursuant to such Assignment and Acceptance and (B) the assigning
Lender thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of an assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto).

                        (i) By executing and delivering an Assignment and
Acceptance, the assigning Lender and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (A) other than as
provided in such Assignment and Acceptance, the assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document furnished pursuant hereto provided that such assigning Lender's
obligations and responsibilities under the confidentiality provisions of this
Agreement shall continue despite any assignment by such assigning Lender; (B)
the assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Party or any
of its Subsidiaries or the performance or observance by any Loan Party of any of
its obligations under this Agreement or any other Loan Document furnished
pursuant hereto; (C) such assignee confirms that it has received a copy of this
Agreement and the other Loan Documents, together with such other documents and
information it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (D) such assignee will,
independently and without reliance upon the assigning Lender, the Agent or any
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Loan Documents; (E) such assignee
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the other Loan Documents as are
delegated to the Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental hereto and thereto; and (F) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement and the other Loan Documents
are required to be performed by it as a Lender.

                        (ii) The Borrower authorizes the Agent, and the Agent
agrees, to maintain, or cause to be maintained at the Payment Office, a copy of
each Assignment and Acceptance delivered to and accepted by it and a register
(THE "REGISTER") for the recordation of the names and addresses of the Lenders,
and the principal amount of the Loan (the "REGISTERED LOANS") owing to each
Lender from time to time. The entries in the Register shall be conclusive


                                      -70-
<PAGE>


and binding for all purposes, absent manifest error, and the Borrower, the Agent
and the Lenders shall treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower and any Lender at any reasonable time
and from time to time upon reasonable prior notice.

                        (iii) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee, together with any promissory
notes subject to such assignment, the Agent shall, if the Agent consents to such
assignment and if such Assignment and Acceptance has been completed (A) accept
such Assignment and Acceptance and (B) record the information contained therein
in the Register.

                        (iv) In addition to the other requirements contained in
this Section 12.07, a Registered Loan (and the registered note, if any,
evidencing the same) may be assigned or sold in whole or in part only by
registration of such assignment or sale on the Register (and each registered
note shall expressly so provide). Any assignment or sale of all or part of such
Registered Loan (and the registered note, if any, evidencing the same) may be
effected only by registration of such assignment or sale on the Register,
together with the surrender of the registered note, if any, evidencing the same
duly endorsed by (or accompanied by a written instrument of assignment or sale
duly executed by) the holder of such registered note, whereupon, at the request
of the designated assignee(s) or transferee(s), one or more new registered notes
in the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s). Prior to the registration of assignment or sale of
any Registered Loan (and the registered note, if any, evidencing the same), the
Agent shall treat the Person in whose name such Registered Loan (and the
registered note, if any, evidencing the same) is registered as the owner thereof
for the purpose of receiving all payments thereon and for all other purposes,
notwithstanding notice to the contrary.

                        (v) In the event that any Lender sells participations
in a Registered Loan, such Lender shall maintain a register on which it enters
the name of all participants in the Registered Loans held by it (the
"PARTICIPANT REGISTER"). A Registered Loan (and the registered note, if any,
evidencing the same) may be participated in whole or in part only by
registration of such participation on the Participant Register (and each
registered note shall expressly so provide). Any participation of such
Registered Loan (and the registered note, if any, evidencing the same) may be
effected only by the registration of such participation on the Participant
Register.

                        (vi) Any foreign Person who purchases or is assigned or
participates in any portion of such Registered Loan shall provide the Agent and
the assigning or selling Lender with a completed Internal Revenue Service Form
W-8BEN (Certificate of Foreign Status) or a substantially similar form for such
purchaser, participant or any other affiliate who is a holder of beneficial
interests in the Registered Loan.

                 (c) Each Lender may, with the written consent (which consent
shall not be unreasonably withheld) of SSC (so long as SSC is the Agent or a
Lender under this Agreement) and the Borrower (so long as no Event of Default
has occurred and is continuing), sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement and the other Loan Documents (including, without limitation,


                                      -71-
<PAGE>


all or a portion of its Pro Rata Share of the Loan made by it); PROVIDED, that
(i) such Lender's obligations under this Agreement (including without
limitation, its Commitments hereunder) and the other Loan Documents shall remain
unchanged; (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, and the Borrower, the Agent and
the other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents; (iii) a participant shall not be entitled to require
such Lender to take or omit to take any action hereunder except (A) action
directly effecting an extension of the maturity dates or decrease in the
principal amount of the Loan, (B) action directly effecting an extension of the
due dates or a decrease in the rate of interest payable on the Loan or the fees
payable under this Agreement, or (C) actions directly effecting a release of any
Loan Party (except as provided otherwise by this Agreement or any other Loan
Document); and (iv) no consent of SSC or the Borrower will be required for the
sale by a Lender to an Affiliate of such Lender or a fund or account managed by
such Lender or an Affiliate of such Lender.

         Section 12.08 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement. Delivery of an executed counterpart
of this Agreement by telecopier shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telecopier also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement. The foregoing shall apply to each other Loan
Document mutatis mutandis.

         SECTION 12.09 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN
RESPECT OF SUCH OTHER LOAN DOCUMENT) SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED IN THE STATE OF NEW YORK.

         SECTION 12.10 CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF
NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY HEREBY
IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS. NOTHING HEREIN SHALL AFFECT THE RIGHT
OF THE AGENT AND THE LENDERS TO SERVICE OF PROCESS IN ANY MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY LOAN PARTY
IN ANY OTHER JURISDICTION. EACH LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT


                                      -72-
<PAGE>


REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT ANY LOAN PARTY HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH LOAN
PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

         Section 12.11 WAIVER OF JURY TRIAL, ETC. EACH LOAN PARTY, THE AGENT AND
EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR
OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION
THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR
COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH LOAN
PARTY CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT
OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY
LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK
TO ENFORCE THE FOREGOING WAIVERS. EACH LOAN PARTY HEREBY ACKNOWLEDGES THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO
THIS AGREEMENT.

         Section 12.12 CONSENT BY THE AGENT AND LENDERS. Except as otherwise
expressly set forth herein to the contrary, if the consent, approval,
satisfaction, determination, judgment, acceptance or similar action (an
"ACTION") of the Agent shall be permitted or required pursuant to any provision
hereof or any provision of any other agreement to which any Loan Party is a
party and to which the Agent or any Lender has succeeded thereto, such Action
shall be required to be in writing and may be withheld or denied by the Agent,
in its sole good faith discretion.

         Section 12.13 NO PARTY DEEMED DRAFTER. Each of the parties hereto
agrees that no party hereto shall be deemed to be the drafter of this Agreement.

         Section 12.14 REINSTATEMENT; CERTAIN PAYMENTS. If any claim is ever
made upon the Agent or any Lender for repayment or recovery of any amount or
amounts received by the Agent or such Lender in payment or on account of any of
the Obligations, the Agent or such Lender shall give prompt notice of such claim
to each other Lender and the Borrower, and if the Agent or such Lender repays
all or part of such amount by reason of (i) any judgment, decree or order of any
court or administrative body having jurisdiction over the Agent or such Lender
or any of its property, or (ii) any good faith settlement or compromise of any
such claim effected by the Agent or such Lender with any such claimant, then and
in such event each Loan Party agrees that (A) any such judgment, decree, order,
settlement or compromise shall be binding upon it


                                      -73-
<PAGE>


notwithstanding the cancellation of any Indebtedness hereunder or under the
other Loan Documents or the termination of this Agreement or the other Loan
Documents, and (B) it shall be and remain liable to the Agent or such Lender
hereunder for the amount so repaid or recovered to the same extent as if such
amount had never originally been received by the Agent or such Lender.

         Section 12.15 INDEMNIFICATION.

                 (a) GENERAL INDEMNITY. In addition to each Loan Party's other
Obligations under this Agreement, each Loan Party agrees to, jointly and
severally, defend, protect, indemnify and hold harmless the Agent and each
Lender and all of their respective officers, directors, employees, attorneys,
consultants and agents (collectively called the "INDEMNITEES") from and against
any and all losses, damages, liabilities, obligations, penalties, reasonable
fees, costs and expenses (including, without limitation, reasonable attorneys'
fees, costs and expenses) incurred by such Indemnitees, whether prior to or from
and after the Effective Date, whether direct, indirect or consequential, as a
result of or arising from or relating to or in connection with any of the
following: (i) the negotiation, preparation, execution or performance or
enforcement of this Agreement, any other Loan Document or of any other document
executed in connection with the transactions contemplated by this Agreement;
(ii) the Agent's or any Lender's furnishing of funds to the Borrower under this
Agreement or the other Loan Documents, including, without limitation, the
management of the Loan; (iii) any matter relating to the financing transactions
contemplated by this Agreement or the other Loan Documents or by any document
executed in connection with the transactions contemplated by this Agreement or
the other Loan Documents; or (iv) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any Indemnitee is a
party thereto (collectively, the "INDEMNIFIED MATTERS"); PROVIDED, HOWEVER, that
the Loan Parties shall not have any obligation to any Indemnitee under this
subsection (a) for any Indemnified Matter caused by the gross negligence or
willful misconduct of such Indemnitee, as determined by a final judgment of a
court of competent jurisdiction.

                 (b) ENVIRONMENTAL INDEMNITY. Without limiting Section 12.15(a)
hereof, each Loan Party agrees to, jointly and severally, defend, indemnify, and
hold harmless the Indemnitees against any and all Environmental Liabilities and
Costs and all other claims, demands, penalties, fines, liability (including
strict liability), losses, damages, costs and expenses (including without
limitation, reasonable legal fees and expenses, consultant fees and laboratory
fees), arising out of (i) any Releases or threatened Releases (A) at any
property presently or formerly owned or operated by any Loan Party or any
Subsidiary of any Loan Party, or any predecessor in interest, or (B) of any
Hazardous Materials generated and disposed of by any Loan Party or any
Subsidiary of any Loan Party, or any predecessor in interest; (ii) any
violations of Environmental Laws; (iii) any Environmental Action relating to any
Loan Party or any Subsidiary of any Loan Party, or any predecessor in interest;
(iv) any personal injury (including wrongful death) or property damage (real or
personal) arising out of exposure to Hazardous Materials used, handled,
generated, transported or disposed by any Loan Party or any Subsidiary of any
Loan Party, or any predecessor in interest; and (v) any breach of any warranty
or representation regarding environmental matters made by the Loan Parties in
Section 6.01(g) or the breach of any covenant made by the Loan Parties in
Section 5.01(r). Notwithstanding the foregoing, the Loan Parties shall not have
any obligation to any Indemnitee under this subsection


                                      -74-
<PAGE>


(b) regarding any potential environmental matter covered hereunder which is
caused by the gross negligence or willful misconduct of such Indemnitee, as
determined by a final judgment of a court of competent jurisdiction.

                 (c) To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section 12.15 may be unenforceable because it is
violative of any law or public policy, each Loan Party shall, jointly and
severally, contribute the maximum portion which it is permitted to pay and
satisfy under Applicable Law, to the payment and satisfaction of all Indemnified
Matters incurred by the Indemnitees. The indemnities set forth in this Section
12.15 shall survive the repayment of the Obligations and discharge of any Liens
granted under the Loan Documents.

         Section 12.16 [Intentionally Omitted.]

         Section 12.17 RECORDS. The unpaid principal of and interest on the
Loan, the interest rate or rates applicable to such unpaid principal and
interest, the duration of such applicability, and the accrued and unpaid fees
shall at all times be ascertained from the records of the Agent, which shall be
rebuttably presumed to be correct, absent manifest error.

         Section 12.18 BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by each Loan Party, the Agent and each Lender
and when the conditions precedent set forth in Section 4.01 hereof have been
satisfied or waived in writing by the Agent, and thereafter shall be binding
upon and inure to the benefit of each Loan Party, the Agent and each Lender, and
their respective successors and assigns, except that the Loan Parties shall not
have the right to assign their rights hereunder or any interest herein without
the prior written consent of each Lender, and any assignment by any Lender shall
be governed by Section 12.07 hereof.

         Section 12.19 MAXIMUM INTEREST. It is the intention of the parties
hereto that the Agent and each Lender shall conform strictly to usury laws
applicable to it. Accordingly, if the transactions contemplated hereby or by any
other Loan Document would be usurious as to the Agent or any Lender under laws
applicable to it (including the laws of the United States of America and the
State of New York or any other jurisdiction whose laws may be mandatorily
applicable to the Agent or such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in this Agreement or any other Loan Document or any agreement entered into in
connection with or as security for the Obligations, it is agreed as follows: (i)
the aggregate of all consideration which constitutes interest under law
applicable to the Agent or any Lender that is contracted for, taken, reserved,
charged or received by the Agent or such Lender under this Agreement or any
other Loan Document or agreements or otherwise in connection with the
Obligations shall under no circumstances exceed the maximum amount allowed by
such applicable law, any excess shall be canceled automatically and if
theretofore paid shall be credited by the Agent or such Lender on the principal
amount of the Obligations (or, to the extent that the principal amount of the
Obligations shall have been or would thereby be paid in full, refunded by the
Agent or such Lender, as applicable, to the Borrower); and (ii) in the event
that the maturity of the Obligations is accelerated by reason of any Event of
Default under this Agreement or otherwise, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest under
law applicable to


                                      -75-
<PAGE>


the Agent or any Lender may never include more than the maximum amount allowed
by such applicable law, and excess interest, if any, provided for in this
Agreement or otherwise shall be canceled automatically by the Agent or such
Lender, as applicable, as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by the Agent or such Lender, as applicable,
on the principal amount of the Obligations (or, to the extent that the principal
amount of the Obligations shall have been or would thereby be paid in full,
refunded by the Agent or such Lender to the Borrower). All sums paid or agreed
to be paid to the Agent or any Lender for the use, forbearance or detention of
sums due hereunder shall, to the extent permitted by law applicable to the Agent
or such Lender, be amortized, prorated, allocated and spread throughout the full
term of the Loan until payment in full so that the rate or amount of interest on
account of the Loan hereunder does not exceed the maximum amount allowed by such
applicable law. If at an time and from time to time (x) the amount of interest
payable to the Agent or any Lender on any date shall be computed at the Highest
Lawful Rate applicable to the Agent or such Lender pursuant to this Section
12.19 and (y) in respect of any subsequent interest computation period the
amount of interest otherwise payable to the Agent or such Lender would be less
than the amount of interest payable to the Agent or such Lender computed at the
Highest Lawful Rate applicable to the Agent or such Lender, then the amount of
interest payable to the Agent or such Lender in respect of such subsequent
interest computation period shall continue to be computed at the Highest Lawful
Rate applicable to the Agent or such Lender until the total amount of interest
payable to the Agent or such Lender shall equal the total amount of interest
which would have been payable to the Agent or such Lender if the total amount of
interest had been computed without giving effect to this Section 12.19.

         For purposes of this Section 12.19, the term "applicable law" shall
mean that law in effect from time to time and applicable to the loan transaction
between the Borrower, on the one hand, and the Agent and the Lenders, on the
other, that lawfully permits the charging and collection of the highest
permissible, lawful non-usurious rate of interest on such loan transaction and
this Agreement, including laws of the State of New York and, to the extent
controlling, laws of the United States of America.

         The right to accelerate the maturity of the Obligations does not
include the right to accelerate any interest that has not accrued as of the date
of acceleration.

         Section 12.20 CONFIDENTIALITY. The Agent and each Lender agrees (on
behalf of itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential information
of this nature and in accordance with safe and sound practices of comparable
commercial finance companies, any non-public information supplied to it by the
Loan Parties pursuant to this Agreement or the other Loan Documents which is
identified in writing by the Loan Parties as being confidential at the time the
same is delivered to such Person (or consists of information (such as business
plans and financial information) which is customarily confidential information)
(and which at the time is not, and does not thereafter become, publicly
available or legally available to such Person from another source (other than
the Loan Parties) on a nonconfidential basis), PROVIDED, that nothing herein
shall limit the disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for the Agent or
any Lender, (iii) to examiners, auditors, accountants or Securitization Parties,
so long as such Person first agrees, in writing, to be bound by


                                      -76-
<PAGE>


confidentiality provisions similar in substance to this Section 12.20, (iv) in
connection with any litigation to which the Agent or any Lender is a party or
(v) to any assignee or participant (or prospective assignee or participant) so
long as such assignee or participant (or prospective assignee or participant)
first agrees, in writing, to be bound by confidentiality provisions similar in
substance to this Section 12.20. The Agent and each Lender agrees that, upon
receipt of a request or identification of the requirement for disclosure
pursuant to clause (iv) hereof, it will make reasonable efforts to keep the Loan
Parties informed of such request or identification; PROVIDED, that the each Loan
Party acknowledges that the Agent and each Lender may make disclosure as
required or requested by any Governmental Authority or representative thereof
and that the Agent and each Lender may be subject to review by Securitization
Parties or other regulatory agencies and may be required to provide to, or
otherwise make available for review by, the representatives of such parties or
agencies any such non-public information.

         Section 12.21 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.

                                  ARTICLE XIII
                               CONVERSION OF LOAN

         Section 13.01 CONVERSION PRIVILEGE AND CONVERSION PRICE.

                 (a) Subject to and upon compliance with the provisions of this
Article, at any time and from time to time, to the extent any portion of the
Loan remains outstanding, any Lender may at its option convert all or any
portion of its Pro Rata Share of the Loan into fully paid and nonassessable
shares of Common Stock ("CONVERSION SHARES") at the Conversion Price, determined
as hereinafter provided, in effect at the time of receipt of a Conversion Notice
by the Borrower. Such conversion right shall expire at the close of business on
the Maturity Date.

                 (b) Each Lender that elects to convert all or any portion of
its Pro Rata Share of the Loan in accordance with the terms of this Article (a
"CONVERTING LENDER") shall convert such portion of its Pro Rata Share of the
Loan into the number of Conversion Shares obtained by dividing the principal
amount of the portion of its Pro Rata Share of the Loan to be converted plus all
accrued and unpaid interest thereon by the Conversion Price. The "CONVERSION
PRICE" shall initially be equal to $4.50 per share, subject to adjustment and
readjustment from time to time as provided in Section 13.03, and, as so
adjusted, shall remain in effect until a further readjustment is required by
Section 13.03.

         Section 13.02 EXERCISE OF CONVERSION PRIVILEGE.

                 (a) In order to exercise the Conversion with respect to the
Loan or portion thereof, a Converting Lender shall deliver to the Borrower
written notice (the "CONVERSION NOTICE") by telecopier, or any other method
described in Section 12.01 hereof, not less than two (2) Business Days nor more
than ten (10) Business Days prior to the date of such Conversion (the
"CONVERSION DATE"). The Conversion Notice shall set forth (i) the Conversion
Date, (ii) the amount of the Lender's Pro Rata Share of the Loan and accrued
interest to be


                                      -77-
<PAGE>


converted, (iii) any portion of the Pro Rata Share of the Loan held by such
Converting Lender that is not to be Converted, (iv) the current Conversion
Price, (v) the number Conversion Shares to be issued and (vi) the amount of
cash, if any, to be paid by the Borrower to the Converting Lender in lieu of
fractional shares.

                 (b) Conversion Shares issued on a Conversion Date shall be
deemed to have been issued immediately prior to the close of business on such
Conversion Date, and a Converting Lender shall be treated for all purposes as
the record holder of such Conversion Shares at such time. On the Conversion
Date, the Borrower shall issue and deliver to the Converting Lender, (i) a
certificate or certificates for the Conversion Shares issuable on such
Conversion Date, (ii) payment in lieu of any fraction of a share, as provided in
Section 13.11 hereof.

                 (c) All Conversion Shares delivered upon such conversion shall
bear the following restrictive legend:

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
         REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
         SECURITIES LAW OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR
         OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
         STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
         PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS
         OF SUCH ACT AND SUCH LAWS OR UNLESS THE BORROWER RECEIVES AN OPINION
         OF COUNSEL TO THE EFFECT THAT REGISTRATION UNDER SUCH ACT AND SUCH
         APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED OR UNLESS SOLD
         PURSUANT TO RULE 144 UNDER SUCH ACT.

         If Conversion Shares to be issued upon conversion are to be registered
in a name other than that of the Converting Lender, the security registrar
shall, prior to such conversion, record in the security register the name of the
Person in whose name such Conversion Shares are to be registered.

         Section 13.03 ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.

                 (a) SPECIAL DEFINITION. For purposes of this Section 13.03,
"ADDITIONAL SHARES OF COMMON STOCK" shall mean any or all shares of Common Stock
issued (or, pursuant to Section 13.03(c), deemed to be issued) by the Borrower
after the Effective Date, other than shares of Common Stock issued or issuable:

                         (i) shares issued upon the conversion of the Loan,

                         (ii) such number of additional shares as may become
issuable upon the conversion of the Loan by reason of adjustments required
pursuant to the applicable anti-dilution provisions as in effect on the date
hereof,

                         (iii) up to 5,000,000 shares of Common Stock (and
following


                                      -78-
<PAGE>


the fifth anniversary of the Effective Date, up to an additional 5,000,000
shares of Common Stock) that are issued to Persons other than Affiliates of the
Borrower, including (A) shares of Common Stock or options exercisable therefor,
issued or to be issued under the Borrower's 2000 Stock Option Plan as in effect
on the date hereof or under any other employee stock option or purchase plan or
plans, or pursuant to compensatory or incentive agreements, for officers,
employees or consultants of the Borrower or any of its Subsidiaries, in each
case adopted or assumed after such date by the Borrower's Board of Directors;
PROVIDED in each case that the exercise or purchase price for any such share
shall not be less than 95% of the fair market value (determined in good faith by
the Borrower's Board of Directors) of the Common Stock on the date of the grant,
and such additional number of shares as may become issuable pursuant to the
terms of any such plans by reason of adjustments required pursuant to
antidilution provisions applicable to such securities in order to reflect any
subdivision or combination of Common Stock, by reclassification or otherwise, or
any dividend on Common Stock payable in Common Stock, (B) shares of restricted
stock issued by the Borrower to executive officers of the Borrower, and (C)
shares of Common Stock issued by the Borrower as charitable gifts; PROVIDED;
HOWEVER, that all options exercisable for shares of Common Stock granted to
executive officers of the Borrower or its Subsidiaries during the six months
following the date hereof shall have an exercise price of no less than $4.50 per
share, and

                         (iv) [Intentionally Omitted.]

                 (b) NO ADJUSTMENT OF CONVERSION PRICE. Subject to the
provisions of Section 13.03(c)(ii) and Section 13.03(f) below, no adjustment in
the number of shares of Common Stock into which the Loan is convertible shall be
made, by adjustment in the Conversion Price in respect of the issuance of
Additional Shares of Common Stock or otherwise, unless the consideration per
share for an Additional Share of Common Stock issued or deemed to be issued by
the Borrower is less than the greater of the Current Market Price and the Fair
Market Value on the date of, and immediately prior to, the issue of such
Additional Share of Common Stock.

                 (c) ISSUE OF SECURITIES DEEMED AN ISSUE OF ADDITIONAL SHARES
OF COMMON STOCk.

                         (i) OPTIONS AND CONVERTIBLE SECURITIES. In the event
the Borrower at any time or from time to time after the Effective Date shall
issue any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date; PROVIDED, that such Additional
Shares of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section 13.03(e) hereof) of such
Additional Shares of Common Stock would be less than the Conversion Price in
effect on the date of and immediately prior to such issue, or such record date,
as the case may be, and PROVIDED, FURTHER, that in any such case in


                                      -79-
<PAGE>


which Additional Shares of Common Stock are deemed to be issued:

                                (A) no further adjustment in the Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;

                                 (B) if such Options or Convertible Securities
by their terms provide, with the passage of time, pursuant to any provisions
designed to protect against dilution, or otherwise, for any increase or decrease
in the consideration payable to the Borrower, or increase or decrease in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the applicable Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities;

                                 (C) upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon such expiration, be
recomputed as if such Options or Convertible Securities, as the case may be,
were never issued;

                                 (D) no readjustment pursuant to clause (B) or
(C) above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (i) the Conversion Price on the original date on
which an adjustment was made pursuant to this Section 13.03(c)(i), or (ii) the
Conversion Price that would have resulted from any issuance of Additional Shares
of Common Stock between such original adjustment date and the date on which a
readjustment is made pursuant to clause (B) or (C) above; and

                                 (E) if such record date shall have been fixed
and such Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Conversion Price which became
effective on such record date shall be cancelled as of the close of business on
such record date, and thereafter the Conversion Price shall be adjusted pursuant
to this Section 13.03(c) as of the actual date of their issuance.

                        (ii) STOCK DIVIDENDS, STOCK DISTRIBUTIONS AND
SUBDIVISIONS. In the event the Borrower at any time or from time to time after
the Effective Date shall declare or pay any dividend or make any other
distribution on the Common Stock payable in Common Stock, or effect a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock), then and in any such
event, Additional Shares of Common Stock shall be deemed to have been issued:

                                 (A) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or distribution, or

                                 (B) in the case of any such subdivision, at the
close of


                                      -80-
<PAGE>



business on the date immediately prior to the date upon which such corporate
action becomes effective.

                 If such record date shall have been fixed and such dividend
shall not have been fully paid on the date fixed for the payment thereof, the
adjustment previously made in the Conversion Price which became effective on
such record date shall be cancelled as of the close of business on such record
date, and thereafter the Conversion Price shall be adjusted pursuant to this
Section 13.03(c) as of the time of actual payment of such dividend.

                 (d) Adjustment of Conversion Price.

                         (i) UPON ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.
In the event the Borrower shall issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
Section 13.03(c)(i), but excluding Additional Shares of Common Stock deemed to
be issued pursuant to Section 13.03(c)(ii), which event is dealt with in Section
13.03(f) hereof) without consideration or for a consideration per share less
than the Conversion Price in effect on the date of and immediately prior to such
issue, then such Conversion Price shall be reduced, concurrently with such
issue, to the price determined by dividing (i) an amount equal to the sum of (a)
the number of shares of Common Stock outstanding immediately prior to such issue
or sale and the number of shares of Common Stock issuable upon conversion of the
aggregate principal amount of the Loan and any Convertible Securities and upon
exercise of any Options multiplied by the then existing Conversion Price and (b)
the consideration, if any, received by the Borrower upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding immediately after
such issue or sale and the number of shares of Common Stock issuable upon
conversion of the aggregate principal amount of the Loan and any Convertible
Securities and upon exercise of any Options.

                         (ii) CONVERSION PRICE RESET. If the consolidated EBITDA
of the Borrower and its subsidiaries for the fiscal year ending February 1,
2003, is less than $90,000,000 or the combined, unconsolidated EBITDA of each of
the Borrower (excluding Subsidiaries), Value City Limited Partnership, Value
City of Michigan, Inc., GB Retailers, Inc., Gramex Retail Stores, Inc., VCM,
Ltd. and any Person acquired after the date hereof that operates Value City
department stores is less than $35,000,000 in the aggregate, then effective as
of the close of business on February 1, 2003, the Conversion Price shall be
reduced to $4.00 per share and the number of Conversion Shares shall be
increased to give effect to all other adjustments as provided in this Section
13.03 as if the Conversion Price on the Effective Date had been $4.00 per share.

                 (e) DETERMINATION OF CONSIDERATION. For purposes of this
Article XIII, the consideration received by the Borrower for the issue of any
Additional Shares of Common Stock shall be computed as follows:

                         (i) CASH AND PROPERTY: Such consideration shall:

                                 (A) insofar as it consists of cash, be the
aggregate amount of cash received by the Borrower excluding amounts paid or
payable for accrued interest


                                      -81-
<PAGE>



or accrued dividends;


                                 (B) insofar as it consists of property other
than cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by a committee of the Borrower's Board of Directors
consisting of directors who are not Affiliates of the Borrower or SSC; PROVIDED,
HOWEVER, that at the request of any Lender, the fair value shall be determined
in good faith by an independent investment banking firm selected jointly by the
Borrower and such Lender or, if that selection cannot be made within ten days,
by an independent investment banking firm selected by the American Arbitration
Association in accordance with its rules, and PROVIDED, further, that the
Borrower shall pay all of the reasonable fees and expenses of any third parties
incurred in connection with determining the fair value; and

                                 (C) in the event Additional Shares of Common
Stock are issued together with other shares of securities or other assets of the
Borrower for a single undivided consideration, be the proportion of such
consideration so received allocable to such Additional Shares of Common Stock,
computed as provided in clauses (A) and (B) above, as determined in good faith
by a committee of the Borrower's Board of Directors consisting of directors who
are not Affiliates of the Borrower, a Lender or SSC, or at the request of any
Lender, the proportion of such consideration so received allocable to such
Additional Shares of Common Stock value shall be determined in good faith by an
independent investment banking firm selected jointly by the Borrower and the
Lenders or, if that selection cannot be made within ten days, by an independent
investment banking firm selected by the American Arbitration Association in
accordance with its rules, and PROVIDED, further, that the Borrower shall pay
all of the reasonable fees and expenses of any third parties incurred in
connection with determining the proportion of such consideration so received
allocable to such Additional Shares of Common Stock.

                         (ii) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Borrower for Additional Shares of Common
Stock deemed to have been issued pursuant to Section 13.03(c)(i) shall be
determined by dividing:

                                (x) the total amount, if any, received or
                        receivable by the Borrower as consideration for the
                        issue of such Options or Convertible Securities, plus
                        the minimum aggregate amount of additional consideration
                        (as set forth in the instruments relating thereto,
                        without regard to any provision contained therein for a
                        subsequent adjustment of such consideration) payable to
                        the Borrower upon the exercise of such Options or the
                        conversion or exchange of such Convertible Securities,
                        or in the case of Options for Convertible Securities,
                        the exercise of such Options for Convertible Securities
                        and the conversion or exchange of such Convertible
                        Securities, by

                              (y) the maximum number of shares of Common Stock
                        (as set forth in the instruments relating thereto,
                        without regard to any provision contained therein for a
                        subsequent adjustment of such number) issuable upon the
                        exercise of such



                                      -82-
<PAGE>


                        Options or the conversion or exchange of such
                        Convertible Securities.

                 (f) ADJUSTMENT FOR STOCK DIVIDENDS, STOCK DISTRIBUTIONS,
SUBDIVISIONS, COMBINATIONS OR CONSOLIDATIONS OF COMMON STOCK.


                         (i) STOCK DIVIDENDS, STOCK DISTRIBUTIONS OR
SUBDIVISIONS. In the event the Borrower shall issue Additional Shares of Common
Stock pursuant to Section 13.03(c)(ii) in a stock dividend, other stock
distribution or subdivision, the Conversion Price in effect immediately prior to
such stock dividend, stock distribution or subdivision shall, concurrently with
the effectiveness of such stock dividend, stock distribution or subdivision, be
proportionately decreased to adjust equitably for such dividend, distribution or
subdivision.

                         (ii) COMBINATIONS OR CONSOLIDATIONS. In the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Conversion Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased to adjust equitably for such
combination or consolidation.

                 (g) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of
any consolidation or merger of the Borrower with or into another corporation or
the conveyance of all or substantially all of the assets of the Borrower to
another corporation, or any proposed reorganization or reclassification of the
Borrower (except a transaction for which provision for adjustment is otherwise
made in this Article XIII), the Loan shall thereafter be convertible into the
number of shares of stock or other securities or property to which a holder of
the number of shares of Common Stock deliverable upon conversion of such portion
of the Loan would have been entitled upon such consolidation, merger,
conveyance, reorganization or reclassification; and, in any such case,
appropriate adjustment (as determined by the Board of Directors) shall be made
in the application of the provisions herein set forth with respect to the rights
and interest thereafter of the Lenders, to the end that the provisions set forth
herein (including provisions with respect to changes in and other adjustments of
the Conversion Price) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the Loan. The Borrower shall not effect any
such consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor corporation or purchaser, as the case may be,
shall assume by written instrument the obligation to deliver to each Lender such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, such Lender is entitled to receive. Nothing in this Section 13.03
shall be deemed to authorize the Borrower to enter into any transaction not
otherwise permitted by this Agreement.

                 (h) EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. If the Borrower
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock other than (a) a dividend
payable in Additional Shares of Common Stock or (b) a regularly scheduled cash


                                      -83-
<PAGE>


dividend payable out of consolidated earnings or earned surplus, determined in
accordance with generally accepted accounting principles, adequate provision
shall be made so that the Lender shall receive, upon conversion of its portion
of the Loan, a pro rata share of such dividend based upon the maximum number of
shares of Common Stock at the time issuable to the Lender (determined without
regard to whether the Loan is convertible at such time).

         Section 13.04 NO IMPAIRMENT. The Borrower will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Borrower but will at all
times in good faith assist in the carrying out of all the provisions of this
Article XIII and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights and other rights of the
Lenders against impairment.

         Section 13.05 ACCOUNTANTS' REPORT. In each case of any adjustment or
readjustment of the Conversion Price pursuant to this Article XIII, the Borrower
at its sole expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare a report setting forth such
adjustment or readjustment and showing in reasonable detail the method of
calculation thereof and the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or to be received
by the Borrower for any Additional Shares of Common Stock issued or sold or
deemed to have been issued, (b) the number of shares of Common Stock outstanding
or deemed to be outstanding, and (c) the Conversion Price in effect immediately
prior to such issue or sale and as adjusted and readjusted (if required by
Article XIII) on account thereof. The Borrower shall forthwith mail a copy of
each such report to each Lender. In the event that a Lender disagrees with such
report, the Borrower shall cause independent certified public accountants of
recognized national standing (which may be the regular auditors of the Borrower)
selected by the Borrower to review and verify or revise such computation (other
than any computation of the fair value of property) and report. The Borrower
shall also keep copies of all such reports at its principal office and shall
cause the same to be available for inspection at such office during normal
business hours by any Lender.

         Section 13.06 COMMON STOCK RESERVED. The Borrower shall reserve and at
all times keep available out of its authorized but unissued Common Stock, free
from preemptive or other preferential rights, restrictions, reservations,
dedications, allocations, options, other warrants and other rights under any
stock option, conversion option or similar agreement, such number of shares of
Common Stock as shall from time to time be sufficient to effect conversion of
the Loan.

         Section 13.07 NO REISSUANCE OF LOAN. Any portion of the principal
amount of the Loan which is converted into shares of Common Stock as provided
herein shall not be reissued.

         Section 13.08 ISSUE TAX. The issuance of certificates for shares of
Common Stock upon conversion of the Loan shall be made without charge to each
Lender for any issuance tax in respect thereof; PROVIDED, that the Borrower
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate


                                      -84-
<PAGE>


in a name other than that of a Lender.

         Section 13.09 CLOSING OF BOOKS. The Borrower will at no time close its
transfer books against the transfer of any shares of Common Stock issued or
issuable upon the conversion of the Loan in any manner which interferes with the
timely conversion of the Loan, except as may otherwise be required to comply
with applicable securities laws.

         Section 13.10 DEFINITION OF COMMON STOCK. As used in this Article XIII,
the term "Common Stock" shall mean and include the Borrower's authorized Common
Stock, no par value per share, as constituted on the date hereof, and shall also
include any capital stock of any class of the Borrower thereafter authorized
which shall neither be limited to a fixed sum or percentage of par value in
respect of the rights of the holders thereof to participate in dividends nor
entitled to a preference in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Borrower; PROVIDED,
that the shares of Common Stock receivable upon conversion of shares of the Loan
shall include only shares designated as Common Stock on the Effective Date.

         Section 13.11 FRACTIONS OF SHARES OF COMMON STOCK. No fractional shares
of Common Stock or scrip certificates in respect thereof shall be issued upon
Conversion. The number of full shares which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate principal amount of the
Loan to be Converted plus accrued and unpaid interest thereon in accordance with
the terms of Section 13.01(b) hereof. Instead of any fractional shares of Common
Stock which would otherwise be issuable upon conversion of any portion of the
Loan, the Borrower shall pay a cash adjustment in respect of such fraction
(calculated to the nearest 1/100 of a share) in an amount in Dollars equal to
the such fraction multiplied by the then effective Conversion Price.

         Section 13.12 COVENANT AS TO COMMON STOCK. The Borrower covenants that
all shares of Common Stock which may be delivered upon Conversion of the Loan
will be newly issued shares, upon such delivery will have been duly authorized
and validly issued, will be fully paid and nonassessable and the Borrower will
pay all taxes, liens and charges with respect to the issue thereof. The Borrower
further covenants that all governmental, corporate, shareholder and third-party
approvals (including those of any exchange on which such Conversion Securities
are, or are proposed to be listed) will have been duly obtained and will be in
full force and effect on or before any Conversion Securities are or are required
to be issued pursuant to this Article.


                                      -85-
<PAGE>




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


                                    BORROWER:

                                    VALUE CITY DEPARTMENT STORES, INC.,
                                    an Ohio corporation


                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President


                                    SUBSIDIARY GUARANTORS:


                                    SHONAC CORPORATION,
                                    an Ohio corporation


                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President


                                    DSW SHOE WAREHOUSE, INC.,
                                    a Missouri Corporation


                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President


                                   GRAMEX RETAIL STORES, INC.,
                                   a Delaware corporation


                                   By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President


                                      -86-
<PAGE>


                                    FILENE'S BASEMENT, INC.,
                                    a Delaware corporation


                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President


                                    GB RETAILERS, INC.,
                                    a Delaware corporation


                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President


                                    J.S. OVERLAND DELIVERY, INC.,
                                    a Delaware corporation


                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President


                                    VALUE CITY DEPARTMENT STORES SERVICES, INC.
                                    a Delaware corporation


                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President


                                    VALUE CITY LIMITED PARTNERSHIP,
                                    an Ohio limited partnership


                                    By:  Westerville Road GP, Inc., its
                                         General Partner


                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President


                                      -87-
<PAGE>


                                    VALUE CITY OF MICHIGAN, INC.,
                                    a Michigan corporation


                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President


                                    VCM, LTD.,
                                    an Ohio limited liability company


                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President


                                    WESTERVILLE ROAD GP, INC.,
                                    a Delaware corporation


                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President


                                    WESTERVILLE ROAD LP, INC.,
                                    a Delaware corporation


                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President



                                    AGENT AND LENDER:

                                    SCHOTTENSTEIN STORES CORPORATION,
                                    a Delaware corporation


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



                                      -88-

</TEXT>
</DOCUMENT>
