FOOTSTAR INC
CREDIT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>CREDIT AGREEMENT
<TEXT>


                                                                  Conformed Copy

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                                CREDIT AGREEMENT

                            dated as of May 25, 2000

                                      among

                                 FOOTSTAR, INC.,

                 the BANKS listed on the signature pages hereof,

                                       and

                              FLEET NATIONAL BANK,
          as Administrative Agent, Issuing Bank, and Swingline Lender,

                           FIRST UNION NATIONAL BANK,
                              as Syndication Agent

                                       and

                                BANK OF NEW YORK,
                               Documentation Agent

                                    * * * * *

                      FLEETBOSTON ROBERTSON STEPHENS INC.,
                                  Lead Arranger

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

<PAGE>

                                Table of Contents
                                                                            Page

ARTICLE I  DEFINITIONS.........................................................1

SECTION 1.01.  DEFINITIONS.....................................................1
SECTION 1.02.  ACCOUNTING TERMS AND DETERMINATIONS............................19
SECTION 1.03.  TYPES OF BORROWINGS............................................19

ARTICLE II  THE CREDITS.......................................................19

SECTION 2.01.  COMMITMENTS TO LEND............................................19
SECTION 2.02.  NOTICE OF COMMITTED BORROWINGS.................................20
SECTION 2.03.  MONEY MARKET BORROWINGS........................................20
SECTION 2.04.  SWINGLINE LOANS................................................24
SECTION 2.05.  NOTICE TO BANKS; FUNDING OF LOANS..............................25
SECTION 2.06.  NOTES..........................................................26
SECTION 2.07.  INTEREST RATE ELECTIONS........................................27
SECTION 2.08.  INTEREST RATES.................................................28
SECTION 2.09.  FEES...........................................................30
SECTION 2.10.  TERMINATION OR REDUCTION OF COMMITMENTS........................31
SECTION 2.11.  MATURITY OF LOANS..............................................31
SECTION 2.12.  PREPAYMENTS....................................................31
SECTION 2.13.  GENERAL PROVISIONS AS TO PAYMENTS..............................32
SECTION 2.14.  FUNDING LOSSES.................................................33
SECTION 2.15.  COMPUTATION OF INTEREST AND FEES...............................33
SECTION 2.16.  JUDGMENT CURRENCY..............................................34
SECTION 2.17.  LETTERS OF CREDIT..............................................34
SECTION 2.18.  NOT USED.......................................................40
SECTION 2.19.  ELIGIBLE SUBSIDIARIES..........................................40

ARTICLE III  CONDITIONS.......................................................41

SECTION 3.01.  EFFECTIVENESS..................................................41
SECTION 3.02.  EACH CREDIT EVENT..............................................42
SECTION 3.03.  BORROWINGS BY ELIGIBLE SUBSIDIARIES; LETTERS OF
               CREDIT FOR ELIGIBLE SUBSIDIARIES ..............................43

ARTICLE IV  REPRESENTATIONS AND WARRANTIES....................................43

SECTION 4.01.  CORPORATE EXISTENCE AND POWER..................................43
SECTION 4.02.  CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION.....43
SECTION 4.03.  BINDING EFFECT.................................................44
SECTION 4.04.  FINANCIAL INFORMATION..........................................44
SECTION 4.05.  LITIGATION.....................................................45
SECTION 4.06.  COMPLIANCE WITH ERISA..........................................45
SECTION 4.07.  ENVIRONMENTAL MATTERS..........................................45
SECTION 4.08.  TAXES..........................................................46
SECTION 4.09.  SUBSIDIARIES...................................................46
SECTION 4.10.  NOT AN INVESTMENT COMPANY OR HOLDING COMPANY...................46


                                       -i-
<PAGE>

SECTION 4.11.  FULL DISCLOSURE................................................47
SECTION 4.12.  COMPLIANCE WITH LAWS AND AGREEMENTS............................47
SECTION 4.13.  GOVERNMENTAL APPROVALS.........................................47
SECTION 4.14.  FEET ACQUISITION; TITLE TO PROPERTIES..........................47
SECTION 4.15.  FRANCHISES, PATENTS, COPYRIGHTS, ETC...........................48
SECTION 4.16.  SECURITY.......................................................48

ARTICLE V  COVENANTS..........................................................48

SECTION 5.01.  INFORMATION....................................................48
SECTION 5.02.  PAYMENT OF OBLIGATIONS.........................................50
SECTION 5.03.  MAINTENANCE OF PROPERTY; INSURANCE.............................50
SECTION 5.04.  CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE...............50
SECTION 5.05.  COMPLIANCE WITH LAWS...........................................51
SECTION 5.06.  INSPECTION OF PROPERTY, BOOKS AND RECORDS......................51
SECTION 5.07.  ADDITIONAL GUARANTORS..........................................51
SECTION 5.08.  AMENDMENT OF CERTAIN DOCUMENTS.................................51
SECTION 5.09.  INVESTMENTS, ACQUISITIONS......................................51
SECTION 5.10.  NEGATIVE PLEDGE................................................52
SECTION 5.11.  CONSOLIDATIONS, MERGERS AND SALES OF ASSETS....................54
SECTION 5.12.  USE OF PROCEEDS AND LETTERS OF CREDIT..........................54
SECTION 5.13.  TRANSACTIONS WITH AFFILIATES...................................54
SECTION 5.14.  RESTRICTIONS AFFECTING SUBSIDIARIES............................55
SECTION 5.15.  RESTRICTED PAYMENTS............................................55
SECTION 5.16.  DEBT...........................................................55
SECTION 5.17.  LEVERAGE RATIO.................................................56
SECTION 5.18.  INTEREST COVERAGE RATIO........................................56
SECTION 5.19.  MAXIMUM CAPITAL EXPENDITURES...................................56

ARTICLE VI  DEFAULTS..........................................................57

SECTION 6.01.  EVENTS OF DEFAULT..............................................57
SECTION 6.02.  DEFAULT........................................................59
SECTION 6.03.  EXCLUSION OF IMMATERIAL SUBSIDIARIES...........................59

ARTICLE VII  THE AGENTS.......................................................59

SECTION 7.01.  APPOINTMENT AND AUTHORIZATION..................................59
SECTION 7.02.  AGENT AND AFFILIATES...........................................60
SECTION 7.03.  ACTION BY AGENT................................................60
SECTION 7.04.  CONSULTATION WITH EXPERTS......................................60
SECTION 7.05.  LIABILITY OF AGENT.............................................60
SECTION 7.06.  INDEMNIFICATION................................................60
SECTION 7.07.  CREDIT DECISION................................................61
SECTION 7.08.  SUCCESSOR AGENT................................................61
SECTION 7.09.  AGENT'S FEES...................................................61
SECTION 7.10.  SUB-AGENTS; ISSUING BANKS; SWINGLINE LENDER....................61
SECTION 7.11.  DOCUMENTATION AGENT; SYNDICATION AGENT AND MANAGING AGENTS.....61


                                      -ii-
<PAGE>

ARTICLE VIII  CHANGE IN CIRCUMSTANCES.........................................61

SECTION 8.01.  BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR.......61
SECTION 8.02.  ILLEGALITY.....................................................62
SECTION 8.03.  INCREASED COST AND REDUCED RETURN..............................62
SECTION 8.04.  TAXES..........................................................64
SECTION 8.05.  BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE LOANS......66
SECTION 8.06.  OTHER COSTS....................................................66
SECTION 8.07.  SUBSTITUTION OF BANK...........................................66

ARTICLE IX  MISCELLANEOUS.....................................................67

SECTION 9.01.  NOTICES........................................................67
SECTION 9.02.  NO WAIVERS.....................................................67
SECTION 9.03.  EXPENSES; INDEMNIFICATION......................................67
SECTION 9.04.  SETOFFS........................................................68
SECTION 9.05.  AMENDMENTS AND WAIVERS.........................................69
SECTION 9.06.  SUCCESSORS AND ASSIGNS.........................................69
SECTION 9.07.  COLLATERAL.....................................................72
SECTION 9.08.  GOVERNING LAW; SUBMISSION TO JURISDICTION......................72
SECTION 9.09.  COUNTERPARTS; INTEGRATION......................................72
SECTION 9.10.  WAIVER OF JURY TRIAL...........................................72
SECTION 9.11.  CONFIDENTIALITY................................................72
SECTION 9.12.  REPLACEMENT NOTE...............................................73
SECTION 9.13.  USURY, ETC.....................................................73

Exhibits:
---------

A             Form of Note
B             Form of Money Market Quote Request
C             Form of Invitation for Money Market Quote Request
D             Form of Money Market Quote
E-1           Form of Guarantee Agreement
E-2           Form of Pledge Agreement
F-1           Form of Opinion of Marc Schuback, counsel for Company and
              Subsidiaries
F-2           Form of Opinion of Pitney, Hardin, Kipp & Szuch LLP, Counsel for
              Company and Subsidiaries
G             Form of Election to Participate
H             Form of Election to Terminate
I             Form of Borrowings/Letter of Credit Opinion for Eligible
              Subsidiaries
J             Form of Assignment and Acceptance


                                     -iii-
<PAGE>

Schedules:
----------

4.09         Material Subsidiaries Information
5.09         Existing Investments
5.10         Existing Liens
5.14         Restrictions Affecting Subsidiaries
5.19         Maximum Capital Expenditures


                                      -iv-

<PAGE>

                                CREDIT AGREEMENT

      AGREEMENT  dated as of May 25,  2000  among  FOOTSTAR,  INC.,  a  Delaware
corporation,  the BANKS listed on the  signature  pages hereof or who  hereafter
become parties hereto as Banks pursuant to Section 9.06, FLEET NATIONAL BANK, as
Administrative  Agent,  Issuing Bank and Swingline Lender,  FIRST UNION NATIONAL
BANK, as Syndication Agent and BANK OF NEW YORK, as Documentation Agent.

      The parties hereto agree as follows:

                                    ARTICLE I

                                   Definitions
                                   -----------

      SECTION 1.01.  Definitions.  The following terms, as used herein, have the
following meanings:

"Absolute  Rate Auction"  means a  solicitation  of Money Market Quotes  setting
forth Money Market Absolute Rates pursuant to Section 2.03.

"Acquisition"  means the purchase of any Equity  Interests of any Person  (other
than of Affiliates) or the purchase of all or substantially all of the assets of
any Person or division thereof.

"Administrative   Questionnaire"   means,   with   respect  to  each  Bank,   an
administrative  questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Company) duly completed by such Bank.

"Affiliate" means any Person directly or indirectly  controlling,  controlled by
or under common control with the Company.  As used in this definition,  the term
"control" means the possession,  directly or indirectly,  of the power to direct
or cause the  direction  of the  management  and  policies of a Person,  whether
through the ownership of voting securities, by contract or otherwise.

"Agent" means Fleet  National Bank in its capacity as  administrative  agent for
the Banks hereunder, and its successors in such capacity.

"Alternative  Currency"  means any currency  other than Dollars  which is freely
transferable and convertible into Dollars.

"Applicable  Lending Office" means, with respect to any Bank, (i) in the case of
its  Domestic  Loans,  its  Domestic  Lending  Office,  (ii) in the  case of its
Euro-Currency  Loans, its Euro-Currency  Lending Office and (iii) in the case of
its Money Market Loans, its Money Market Lending Office.

<PAGE>

"Applicable  Percentage"  of any Bank  means  the  percentage  of the  aggregate
Commitments represented by such Bank's Commitment.

"Asset Sale" means any sale, lease, sale and leaseback, assignment,  conveyance,
transfer  or other  disposition  ("Disposition")  of property or a series of any
such  related  Dispositions  of  property  for which the  Company  or any of its
Subsidiaries  receives  (valued at the initial  principal  amount thereof in the
case of non-cash  proceeds  consisting  of notes or other debt,  securities  and
valued at fair market value in the case of other non-cash proceeds) in excess of
$10,000,000,  except  that Asset Sale shall not include in any case (i) Sale and
Leaseback  Transactions  with  respect to (a) Just for Feet Store 209 located in
Orlando,  FL, (b) Just for Feet  Store 223  located  in  Knoxville,  TN, (c) the
Company's Gaffney, SC and Mira Loma, CA distribution  centers, (d) the Company's
Headquarters located in Mahwah, NJ and (ii) the Disposition of the Just for Feet
Headquarters located in Birmingham, AL.

"Assignee" has the meaning set forth in Section 9.06(c).

"Bank" means each bank listed on the signature pages hereof, each Assignee which
becomes a Bank pursuant to Section  9.06(c),  and their  respective  successors.
References  herein  to a Bank or Banks  may  include  the  Issuing  Banks or the
Swingline Lender or both as the context requires.

"Base Rate" means,  for any day, a rate per annum equal to the higher of (i) the
Prime  Rate for such  day and (ii) the sum of 1/2 of 1% plus the  Federal  Funds
Rate for such day. The Base Rate is not  necessarily  the lowest rate charged by
the Agent to its customers.

"Base Rate Loan" means at any time a Committed Loan outstanding  hereunder which
bears  interest  at such  time at a rate  based on the Base Rate  pursuant  to a
Notice of Committed Borrowing or Notice of Interest Rate Election or pursuant to
Article VIII.

"Base Rate Margin" has the meaning set forth in Section 2.08(a).

"Benefit  Arrangement"  means at any time an  employee  benefit  plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is  maintained  or  otherwise  contributed  to by any  member of the ERISA
Group.

"Borrower"  means the  Company or any  Eligible  Subsidiary,  as the context may
require,  and their  respective  successors,  and  "Borrowers"  means all of the
foregoing.

"Borrowing" has the meaning set forth in Section 1.03.

"Calculation  Period" means a period of four consecutive  fiscal quarters of the
Company for which financial statements have been delivered to the Agent pursuant
to Section 5.01(a) or (b).

"Capital  Expenditures" means, for any period, the additions to property,  plant
and equipment of the Company and its Consolidated  Subsidiaries for such period,
as the same are (or would be) set forth, in accordance  with generally  accepted
accounting principles, in a consolidated statement of


                                       -2-
<PAGE>

cash flows of the Company for such period;  provided  that Capital  Expenditures
shall (a) exclude any  additions to  property,  plant and  equipment  (i) to the
extent paid for with proceeds of insurance  received in respect of any casualty,
(ii) to the extent that the  consideration  therefor  consisted  of assets other
than cash, cash equivalents or obligations to pay cash or cash equivalents,  and
(iii) to the extent paid for with proceeds from the sale or other disposition of
property,  plant and  equipment  used for the same or similar  purposes  as such
additions,  and (b) include additions to property,  plant and equipment financed
by incurring Debt (including without limitation capital leases).

"Change of Control" shall be deemed to have occurred if after the Effective Date
(i) any person or group (within the meaning of Rule 13d-5 of the  Securities and
Exchange Commission as in effect on the date hereof) shall become the beneficial
owner  (within the meaning of Rule 13d-3 of such  Commission as in effect on the
date hereof) of voting securities (including any options,  rights or warrants to
purchase,  and any  securities  convertible  into or  exchangeable  for,  voting
securities)  of the  Company  representing  35% or  more  of  the  voting  power
represented by all outstanding  securities of the Company; or (ii) a majority of
the seats  (other than vacant  seats) on the board of  directors  of the Company
shall at any time be occupied by persons who were  neither (a)  nominated by the
management of the Company, nor (b) appointed by directors so nominated.

"Collateral"  means any  collateral  now or  hereafter  granted  to the Agent to
secure amounts now or hereafter due under the Loan Documents,  whether  pursuant
to the Pledge Agreement or otherwise.

"Commitments"  means,  with respect to each Bank,  the amount set forth opposite
the name of such  Bank on the  signature  pages  hereof  (or,  in the case of an
Assignee,  in its Assignment  and Assumption  Agreement) and adjusted to reflect
assignments pursuant to Section 9.06(c).

"Committed  Borrowing" means a Borrowing consisting of Committed Loans; provided
that if the Loans  constituting  any such  Borrowing or Borrowings  (or portions
thereof)  are  combined or  subdivided  pursuant  to a Notice of  Interest  Rate
Election,  the term  "Committed  Borrowing"  shall refer to all of the Committed
Loans to a single  Borrower of the same Type and having the same Interest Period
that result from such combination or subdivision as the case may be.

"Committed Exposure" means, with respect to any Bank at any time, the sum of the
aggregate  principal amount of such Bank's  Committed Loans  outstanding at such
time and its Letter of Credit Exposure and Swingline Exposure at such time.

"Committed Loan" means a loan made by a Bank pursuant to Section 2.01;  provided
that, if any such loan or loans (or portions thereof) are combined or subdivided
pursuant to a Notice of Interest Rate Election,  the term "Committed Loan" shall
refer to the combined  principal  amount  resulting from such  combination or to
each of the separate  principal amounts resulting from such subdivision,  as the
case may be.

"Company" means Footstar, Inc., a Delaware corporation, and its successors.


                                      -3-
<PAGE>

"Consolidated  Adjusted Income" means, for any period,  the consolidated  income
from  continuing  operations  before  discontinued  operations  of  the  Company
(calculated in accordance  with the  calculation of such income so designated on
the Initial Financial Statements),  adjusted for any extraordinary losses (other
than  non-cash  losses) and for any  extraordinary  gains  (other than  non-cash
gains) to the extent  deducted or added in determining  Consolidated  Net Income
for such period.

"Consolidated  EBITDA" means,  with respect to the Company and its  Consolidated
Subsidiaries for any period,  the sum (without  duplication) of (a) Consolidated
Adjusted Income for such period,  (b) Consolidated Net Interest Expense (whether
a positive or negative  number) for such period,  (c)  Federal,  state and local
income  taxes  (or  other  taxes in the  nature of  income  taxes)  deducted  in
determining  Consolidated  Adjusted Income for such period, and (d) depreciation
and amortization  deducted in determining  Consolidated Adjusted Income for such
period.

"Consolidated  EBITDAR" means,  with respect to the Company and its Consolidated
Subsidiaries for any period,  the sum (without  duplication) of (a) Consolidated
EBITDA for such  period,  and (b) Rental  Expense  for such period to the extent
deducted  in  determining  Consolidated  Adjusted  Income for such  period.  For
purposes of Section  6.03,  the  Consolidated  EBITDAR of a Subsidiary  shall be
determined based on the foregoing,  but only with respect to such Subsidiary and
its consolidated subsidiaries.

"Consolidated Net Income" means, for any period, the consolidated net income (or
loss) of the Company and its  Consolidated  Subsidiaries  for such period  after
minority interests,  determined in accordance with generally accepted accounting
principles.

"Consolidated  Net Interest  Expense"  means with respect to the Company and the
Consolidated  Subsidiaries,  for any period,  (a) interest  expense  deducted in
determining  Consolidated Adjusted Income for such period (excluding any portion
of interest  expense  representing  amortization  of  financing  costs paid in a
previous period), minus (b) interest income included in determining Consolidated
Adjusted  Income for such  period  (excluding  any  portion of  interest  income
representing accruals of amounts received in a previous period).

"Consolidated  Subsidiary"  means at any date any Subsidiary or other entity the
accounts  of which  would be  consolidated  with  those  of the  Company  in its
consolidated  financial  statements if such  statements were prepared as of such
date.

"Consolidated   Tangible  Net  Worth"   means  at  any  date  the   consolidated
stockholders' equity of the Company less its consolidated Intangible Assets, all
determined  as of such date.  For the  purposes of this  definition  "Intangible
Assets"  means  the  amount  (to  the  extent   reflected  in  determining  such
stockholders'  equity) of (i) all write-ups (other than write-ups of assets of a
going concern  business made within twelve months after the  acquisition of such
business)  subsequent to the Effective Date in the book value of any asset owned
by  the  Company  or  a  Consolidated   Subsidiary,   (ii)  all  Investments  in
unconsolidated  Subsidiaries and all equity investments in Persons which are not
Subsidiaries,  and (iii) all unamortized debt discount and expense,  unamortized
deferred charges, goodwill, purchase price premium, patents, trademarks,


                                      -4-
<PAGE>

service marks, trade names,  copyrights,  organization or developmental expenses
and other intangible assets.

"Consolidated  Total  Debt"  means at any date the Debt of the  Company  and its
Consolidated Subsidiaries, determined on a consolidated basis at such date.

"Debt" of any Person means at any date, without duplication, (i) all obligations
of such Person for borrowed money, (ii) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments,  (iii) all obligations
of such Person to pay the  deferred  purchase  price of  property  or  services,
except trade accounts  payable arising in the ordinary course of business,  (iv)
all  obligations  of such Person as lessee which are  capitalized  in accordance
with generally accepted accounting principles, (v) all Debt secured by a Lien on
any asset of such Person, whether or not such Debt is otherwise an obligation of
such Person,  (vi) all obligations created or arising under any conditional sale
or other title  retention  agreement  with respect to property  acquired by such
Person,  (vii) the face amount of all obligations of such Person,  contingent or
otherwise,  as an account party under acceptances,  letters of credit or similar
facilities, (viii) all obligations to supply funds to or in any manner to invest
in, directly or indirectly, a debtor, to purchase indebtedness, or to assure the
owner of  indebtedness  against  loss,  through an agreement to purchase  goods,
supplies or services solely for the purpose of enabling a debtor to make payment
of  indebtedness  held by such  owner or  otherwise  and (ix) all Debt of others
Guaranteed by such Person.

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

"Documentation  Agent" means Bank of New York in its  capacity as  documentation
agent for the Banks hereunder, and its successors in such capacity.

"Dollar  Amount"  means in relation to any Letter of Credit  that  provides  for
payment  of any  drawing  thereunder  in an  Alternative  Currency,  the  amount
determined as provided in Section 2.17(l).

"Dollars" and the sign "$" mean lawful money of the United States of America.

"Domestic Business Day" means any day except a Saturday,  Sunday or other day on
which  commercial  banks in New York City are  authorized  or required by law to
close.

"Domestic  Lending  Office"  means,  as to each Bank,  its office located at its
address set forth in its  Administrative  Questionnaire  (or  identified  in its
Administrative  Questionnaire  as its  Domestic  Lending  Office)  or such other
office as such Bank may hereafter  designate as its Domestic  Lending  Office by
notice to the Company and the Agent.

"Domestic Loans" means Base Rate Loans.


                                      -5-
<PAGE>

"Effective Date" means the date this Agreement  becomes  effective in accordance
with Section 3.01.

"Election to Participate" means an Election to Participate  substantially in the
form of Exhibit G hereto.

"Election to Terminate" means an Election to Terminate substantially in the form
of Exhibit H hereto.

"Eligible  Subsidiary" means any Guarantor which is a Wholly-Owned  Consolidated
Subsidiary  (or, with the consent of the Required Banks,  any other  Subsidiary)
organized under the laws of a jurisdiction  within the United States as to which
an  Election to  Participate  shall have been  delivered  to the Agent and as to
which an Election to Terminate shall not have been delivered to the Agent.

"Environmental  Laws"  means  any and all  Federal,  state,  local  and  foreign
statutes,  laws, regulations,  ordinances,  rules,  judgments,  orders, decrees,
permits, concessions, grants, franchises, licenses, agreements with Governmental
Authorities or other governmental  restrictions  binding upon the Company or any
of the Subsidiaries, as applicable, relating to the environment or to emissions,
discharges  or releases of  pollutants,  contaminants,  petroleum  or  petroleum
products,  chemicals or industrial, toxic or hazardous substances or wastes into
the  environment  including,  without  limitation,  ambient air,  surface water,
ground water,  or land, or otherwise  relating to the  manufacture,  processing,
distribution,  use,  treatment,  storage,  disposal,  transport  or  handling of
pollutants,   contaminants,   petroleum  or  petroleum  products,  chemicals  or
industrial,  toxic or  hazardous  substances  or wastes or the clean-up or other
remediation thereof.

"Equity Interests" means any and all shares, interests,  participations or other
equivalents (however designated) of capital stock, partnership interests, member
interests and any and all equivalent  ownership  interests in a Person,  and any
and all warrants, rights or options to purchase any of the foregoing, other than
equity  interests or warrants,  rights or options issued in connection  with (i)
the exercise by a present or former employee,  officer or director under a stock
incentive plan,  stock option plan or other  equity-based  compensation  plan or
arrangement  and (ii) the  Company's  Shareholder  Rights  Plan  approved by the
Company's Board of Directors on March 9, 1999.

"ERISA" means the Employee  Retirement  Income Security Act of 1974, as amended,
or any successor statute.

"ERISA Group" means the Company, any Subsidiary and all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with the Company or any Subsidiary, are
treated as a single employer under Section 414 of the Internal Revenue Code.

"Euro-Currency Business Day" means any Domestic Business Day on which commercial
banks  are  open  for  international  business  (including  dealings  in  Dollar
deposits)  in London,  and,  where


                                      -6-
<PAGE>

funds are to be paid or made  available  in an  Alternative  Currency,  on which
commercial  banks are open for domestic and  international  business  (including
dealings in deposits in such Alternative  Currency) in both London and the place
where such funds are paid or made available.

"Euro-Currency  Lending  Office" means,  as to each Bank, its office,  branch or
affiliate located at its address set forth in its  Administrative  Questionnaire
(or identified in its Administrative  Questionnaire as its Euro-Currency Lending
Office)  or such  other  office,  branch  or  affiliate  of such  Bank as it may
hereafter designate as its Euro-Currency Lending Office by notice to the Company
and the Agent.

"Euro-Currency  Loan" means at any time a Committed Loan  outstanding  hereunder
which bears  interest at such time at a rate based on the LIBOR Rate pursuant to
a Notice of Committed Borrowing or Notice of Interest Rate Election.

"Euro-Currency Margin" has the meaning set forth in Section 2.08(c).

"Event of Default" has the meaning set forth in Section 6.01.

"Existing  Credit Facility" means the Credit Agreement dated as of September 18,
1997, as amended,  among the Company,  the banks listed on the  signature  pages
thereof,  the Bank of New York,  as  Issuing  Bank,  and Morgan  Guaranty  Trust
Company of New York, as Administrative Agent and Swingline Lender.

"Facility Fee Rate" has the meaning set forth in Section 2.09(a).

"Federal Funds Rate" means,  for any day, the fluctuating  rate per annum (based
on a 360 day year and rounded  upward,  if necessary,  to the nearest 1/100th of
1%) equal to the weighted  average of the rates of interest charged on overnight
Federal  Funds  transactions  with member  banks of the Federal  Reserve  System
arranged by Federal Funds brokers on such day, as published for any day which is
a Business  Day by the Federal  Reserve  Bank of New York (or, in the absence of
such publication, as reasonably determined by the Agent).

"Feet  Acquisition"  means the  acquisition  of certain assets of Just for Feet,
Inc. and its affiliates pursuant to the Feet Purchase Agreement.

"Feet Bankruptcy  Orders" means (i) the order pursuant to Sections 105(a),  363,
365 and  1146(c)  of the  Bankruptcy  Code  authorizing  the sale of  certain of
debtor's assets, free and clear of liens, claims and encumbrances,  and (ii) the
order  pursuant to Sections 363 and 365 of the  Bankruptcy  Code and  Bankruptcy
Rule 6006, and in furtherance of sale order,  authorizing  debtors to assume and
assign certain unexpired leases for non-residential real properties to Footstar,
Inc., both dated February 25, 2000.

"Feet Purchase  Agreement" means that certain Asset Purchase Agreement among the
Company, Just for Feet, Inc. and others dated as of February 16, 2000.


                                      -7-
<PAGE>

"Financing  Transactions" means the execution and delivery of the Loan Documents
and the  performance of the  transactions  contemplated  by the Loan  Documents,
including the borrowing of the Loans and the issuance of Letters of Credit.

"Fixed Rate Loans" means  Euro-Currency  Loans or Money Market Loans  (excluding
Money Market LIBOR Loans bearing interest at the Base Rate for the reason stated
in Section 8.01) or any combination of the foregoing.

"Governmental  Authority" means any federal,  state, local or foreign government
or  political  subdivision  or any  court  or  governmental  agency,  authority,
instrumentality or regulatory body.

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

"Guarantee  Agreement"  means a  Guarantee  Agreement  among  the  Agent and the
Guarantors substantially in the form of Exhibit E-1.

"Guarantor"  means  each  Person  that  is or  becomes  party  to the  Guarantee
Agreement as a Guarantor and their respective successors.

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

"Initial Financial Statements" has the meaning set forth in Section 4.04.

"Initial  Guarantors"  means the Company,  Footaction  Center,  Inc., a New York
corporation,  Footstar  Corporation,  a Texas corporation,  Miles Shoes Meldisco
Lakewood Colorado, Inc., a Colorado corporation,  Rosedale Open Country, Inc., a
Minnesota corporation,  Mall of America Fan Club, Inc., a Minnesota corporation,
Meldisco  H.C.,  Inc.,  a  Minnesota  corporation,   Footstar  Center,  Inc.,  a
California corporation, Feet Center, Inc., an Arizona corporation,  Nevada Feet,
Inc., a Nevada corporation and Feet of Colorado, Inc., a Colorado corporation.

"Intercompany  Notes" means any promissory notes issued by the Company or any of
its Subsidiaries in favor of or held by the Company or any of its  Subsidiaries,
evidencing,  debt and other monetary obligations now or hereafter owing from the
Company or any Subsidiary to the Company or any Subsidiary.


                                      -8-
<PAGE>

"Interest  Coverage Ratio" means, for any period,  the ratio of (i) Consolidated
EBITDAR for such period to (ii) the sum without  duplication of (A) consolidated
interest  expense for such period,  and (B) Rental  Expense for such period;  in
each case of (A) and (B) to the  extent  deducted  in  determining  Consolidated
Adjusted Income for such period.

"Interest Period" means: (1) with respect to each Euro-Currency Loan, the period
commencing on the date specified in the applicable Notice of Borrowing or Notice
of Interest Rate Election and ending one, two,  three or six months  thereafter,
as the  applicable  Borrower  may elect in such Notice of Borrowing or Notice of
Interest Rate Election; provided that:

            (a) any Interest  Period which would otherwise end on a day which is
      not a Euro-Currency  Business Day shall be extended to the next succeeding
      Euro-Currency Business Day unless such Euro-Currency Business Day falls in
      another  calendar  month,  in which case such Interest Period shall end on
      the next preceding Euro-Currency Business Day;

            (b) any  Interest  Period  which  begins  on the last  Euro-Currency
      Business  Day of a  calendar  month  (or on a day for  which  there  is no
      numerically  corresponding  day in the  calendar  month at the end of such
      Interest  Period)  shall,  subject to clause  (c)  below,  end on the last
      Euro-Currency Business Day of a calendar month; and

            (c)  any  Interest  Period  which  would  otherwise  end  after  the
      Termination Date shall end on the Termination Date.

      (2) with respect to each Base Rate Borrowing, the period commencing on the
      date of such Borrowing and ending 30 days thereafter; provided that:

            (a) subject to clause (b) below,  any  Interest  Period  which would
      otherwise end on a day which is not a Euro-Currency  Business Day shall be
      extended to the next succeeding Euro-Currency Business Day; and

            (b)  any  Interest  Period  which  would  otherwise  end  after  the
      Termination Date shall end on the Termination Date.

      (3) with respect to each Money Market LIBOR Loan, the period commencing on
      the date of  Borrowing  specified  in the  applicable  Money  Market Quote
      Request  and  ending  such  whole  number  of  months  thereafter  as  the
      applicable  Borrower may elect in accordance  with Section 2.03;  provided
      that:

            (a) any Interest  Period which would otherwise end on a day which is
      not a Euro-Currency  Business Day shall be extended to the next succeeding
      Euro-Currency Business Day unless such Euro-Currency Business Day falls in
      another  calendar  month,  in which case such Interest Period shall end on
      the next preceding Euro-Currency Business Day;


                                      -9-
<PAGE>

            (b) any  Interest  Period  which  begins  on the last  Euro-Currency
      Business  Day of a  calendar  month  (or on a day for  which  there  is no
      numerically  corresponding  day in the  calendar  month at the end of such
      Interest  Period)  shall,  subject to clause  (c)  below,  end on the last
      Euro-Currency Business Day of a calendar month; and

            (c)  any  Interest  Period  which  would  otherwise  end  after  the
      Termination Date shall end on the Termination Date.

      (4) with  respect  to each Money  Market  Absolute  Rate Loan,  the period
      commencing  on the date of  Borrowing  specified in the  applicable  Money
      Market Quote  Request and ending such number of days  thereafter  (but not
      less than 6 days) as the applicable  Borrower may elect in accordance with
      Section 2.03; provided that:

            (a) subject to clause (b) below,  any  Interest  Period  which would
      otherwise end on a day which is not a Euro-Currency  Business Day shall be
      extended to the next succeeding Euro-Currency Business Day; and

            (b)  any  Interest  Period  which  would  otherwise  end  after  the
      Termination Date shall end on the Termination Date.

      (5) with respect to each Swingline Loan, the period commencing on the date
      of such Loan and ending such number of days  thereafter (but not exceeding
      14 days) as the applicable  Borrower may elect in accordance  with Section
      2.04; provided that:

            (a) any Interest  Period which would otherwise end on a day which is
      not a Euro-Currency  Business Day shall be extended to the next succeeding
      Euro-Currency Business Day; and

            (b)  any  Interest  Period  which  would  otherwise  end  after  the
      Termination Date shall end on the Termination Date.

"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended,  or
any successor statute.

"Investment"  means any  investment in any Person,  whether by means of share or
other Equity  Interest  purchase,  capital  contribution,  loan,  advance,  time
deposit or otherwise.

"Issuing  Bank" means Fleet  National  Bank or any other Bank  designated by the
Company,  in each case, in its capacity as the issuer of Letters of Credit,  and
their successors in such capacity.

"Issuing Bank Agreement" has the meaning set forth in Section 2.17(m).

"Kmart  Agreement" means the Master Agreement dated as of June 9, 1995,  between
Kmart  Corporation  and the Company (as successor to Melville  Corporation),  as
amended by the


                                      -10-
<PAGE>

Agreement  dated  as of  March  25,  1996,  among  Kmart  Corporation,  Melville
Corporation, Kmart Properties, Inc. and the Company.

"Letter of Credit" means any letter of credit  issued  pursuant to Section 2.17.
Each letter of credit that is, as of the Effective Date, a "Letter of Credit" as
defined in, and is outstanding  under,  the Existing  Credit  Agreement shall be
deemed  for  all  purposes  of the  Loan  Documents  to  have  been  issued  and
outstanding  pursuant to Section 2.17 on the Effective  Date and to constitute a
Letter of Credit.

"Letter  of Credit  Disbursement"  means a payment or  disbursement  made by the
Issuing Bank pursuant to a Letter of Credit.

"Letter  of  Credit  Exposure"  means at any  time the sum of (i) the  aggregate
undrawn  amount of all  outstanding  Letters of Credit  plus (ii) the  aggregate
amount of all Letter of Credit  Disbursements not yet reimbursed by the Borrower
as provided in Section 2.17. The Letter of Credit Exposure shall be expressed in
Dollars,  determined  as provided  in Section  2.17(l) in the case of any amount
thereof denominated in an Alternative Currency. The Letter of Credit Exposure of
any Bank at any time  shall  mean its  Applicable  Percentage  of the  aggregate
Letter of Credit Exposure at such time.

"Level I Pricing  Period"  means (a) if the  Company's  Index  Debt is not being
rated by both S&P and Moody's,  any period during which the  Company's  Leverage
Ratio for the most recent  Calculation  Period is less than 0.50;  or (b) if the
Company's  Index Debt is being rated by both S&P and Moody's,  any period during
which the  Company's  Index Debt is rated BBB or better by S&P or Baa2 or better
by  Moody's;  provided,  however,  in the event the  Index  Debt of the  Company
receives a split rating from S&P and Moody's,  the Pricing Period shall be based
upon (i) the  Pricing  Period  pertaining  to the higher of such  ratings in the
event such ratings are one level apart,  and (ii) the Pricing Period  pertaining
to the level  immediately  below the level of the higher of such  ratings in the
event such ratings are two or more levels apart.  Any such period referred to in
clause (a) above  shall  commence on (and  include)  the date of delivery to the
Agent of financial  statements  demonstrating that such period has commenced and
shall  terminate on (and exclude) the date of delivery to the Agent of financial
statements demonstrating that such period has terminated.

"Level II Pricing  Period"  means (a) if the  Company's  Index Debt is not being
rated by both S&P and Moody's,  any period during which the  Company's  Leverage
Ratio for the most  recent  Calculation  Period is 0.50 or greater but less than
0.75 or (b) if the Company's  Index Debt is being rated by both S&P and Moody's,
any period during which the Company's Index Debt is rated BBB- by S&P or Baa3 by
Moody's; provided,  however, in the event the Index Debt of the Company receives
a split rating from S&P and Moody's,  the Pricing Period shall be based upon (i)
the Pricing  Period  pertaining  to the higher of such ratings in the event such
ratings are one level apart, and (ii) the Pricing Period pertaining to the level
immediately  below the level of the  higher of such  ratings  in the event  such
ratings are two or more levels apart.  Any such period referred to in clause (a)
above  shall  commence  on (and  include)  the date of  delivery to the Agent of
financial  statements  demonstrating  that such period has  commenced  and shall
terminate  on

                                      -11-
<PAGE>

(and  exclude)  the  date of  delivery  to the  Agent  of  financial  statements
demonstrating that such period has terminated.

"Level III Pricing  Period" means (a) if the  Company's  Index Debt is not being
rated by both S&P and Moody's,  any period during which the  Company's  Leverage
Ratio for the most  recent  Calculation  Period is 0.75 or greater but less than
1.50 or (b) if the Company's  Index Debt is being rated by both S&P and Moody's,
any period during which the  Company's  Index Debt is rated BB+ by S&P or Ba1 by
Moody's; provided,  however, in the event the Index Debt of the Company receives
a split rating from S&P and Moody's,  the Pricing Period shall be based upon (i)
the Pricing  Period  pertaining  to the higher of such ratings in the event such
ratings are one level apart, and (ii) the Pricing Period pertaining to the level
immediately  below the level of the  higher of such  ratings  in the event  such
ratings are two or more levels apart.  Any such period referred to in clause (a)
above  shall  commence  on (and  include)  the date of  delivery to the Agent of
financial  statements  demonstrating  that such period has  commenced  and shall
terminate  on (and  exclude)  the date of  delivery  to the  Agent of  financial
statements demonstrating that such period has terminated.

"Level IV Pricing Period" means any period that is not a Level I Pricing Period,
a Level II Pricing Period or a Level III Pricing Period.

"Leverage Ratio" means, at any time, the ratio of (i) Consolidated Total Debt at
such time to (ii) Consolidated EBITDA for the most recent Calculation Period.

"LIBOR  Auction" means a solicitation of Money Market Quotes setting forth Money
Market Margins based on the LIBOR Rate pursuant to Section 2.03.

"LIBOR Base Rate" means with respect to each Interest Period for a Euro-Currency
Loan, that rate per annum (rounded upward,  if necessary,  to the nearest 1/32nd
of one percent) which represents the offered rate for deposits in U.S.  Dollars,
for a period of time  comparable to such Interest  Period,  which appears on the
Telerate  page 3750 (or the successor or  replacement  thereof) as of 11:00 a.m.
(London time) on that day that is two Euro-Currency  Business Days preceding the
first day of such Interest Period; provided, however, that if the rate described
above  does  not  appear  on the  Telerate  System  on any  applicable  interest
determination  date,  the LIBOR Base Rate for such Interest  Period shall be the
rate (rounded  upwards as described above, if necessary) for deposits in dollars
for a period  substantially  equal to such Interest  Period shown on the Reuters
Page "LIBO" (or such other page as may replace the LIBO Page on that service for
the purpose of displaying  such rates),  as of 11:00 a.m.  (London Time) on that
day that is two  Euro-Currency  Business  Days  prior to the  beginning  of such
Interest Period. If both the Telerate and Reuters systems are unavailable,  then
the LIBOR Base Rate for any Interest  Period will be  determined on the basis of
the offered rates for deposits in U.S.  Dollars for a period of time  comparable
to such  Interest  Period  which are  offered by four major  banks in the London
interbank market at  approximately  11:00 a.m. (London time) on that day that is
two Euro-Currency Business Days preceding the first day of such Interest Period,
as  selected by the Agent.  The  principal  London  office of each of four major
London  banks will be  requested  to provide a quotation  of its Dollar  deposit
offered rate. If at least two such quotations are


                                      -12-
<PAGE>

provided,  the rate for that date will be the arithmetic mean of the quotations.
If fewer than two quotations  are provided as requested,  the rate for that date
will be  determined  on the basis of the rates  quoted  for loans in  Dollars to
leading  European banks for a period of time  comparable to such Interest Period
offered by major banks in New York City at  approximately  11:00 a.m.  (New York
City) time on that day that is two  Euro-Currency  Business  Days  preceding the
first day of such  Interest  Period.  In the  event  that the Agent is unable to
obtain any such  quotation as provided  above,  it will be deemed that the LIBOR
Base Rate for the proposed Interest Period cannot be determined and is therefore
unavailable.  The Agent  shall give notice to the Company of the LIBOR Base Rate
as determined  for each  Euro-Currency  Loan and such notice shall be conclusive
and binding, absent manifest error.

"LIBOR  Rate"  means  with  respect  to each day  during  each  Interest  Period
pertaining to a Euro-Currency  Loan, a rate per annum determined for such day in
accordance with the following  formula  (rounded  upward,  if necessary,  to the
nearest 1/16th of 1%):

                                 LIBOR Base Rate
                        ---------------------------------
                        1.00 - LIBOR Reserve Requirements

"LIBOR  Reserve  Requirements"  means for any day as applied to a  Euro-Currency
Loan, the aggregate  (without  duplication) of the maximum rates (expressed as a
decimal  fraction)  of  reserve  requirements  in effect on such day  (including
basic,  supplemental,  marginal and emergency  reserves under any regulations of
the Board of  Governors  of the  Federal  Reserve  System or other  Governmental
Authority  having  jurisdiction  with  respect  thereto)  dealing  with  reserve
requirements  prescribed  for  eurocurrency  funding  (currently  referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member
bank of the Federal Reserve System.

"Lien" means,  with respect to any asset, any mortgage,  lien,  pledge,  charge,
security  interest or encumbrance of any kind, or any other type of preferential
arrangement that has the practical effect of a security interest,  in respect of
such asset.  For the purposes of this  Agreement,  the Company or any Subsidiary
shall be deemed to own  subject  to a Lien any asset  which it has  acquired  or
holds subject to the interest of a vendor or lessor under any  conditional  sale
agreement,  capital lease or other title  retention  agreement  relating to such
asset.

"Loan" means a Domestic Loan, a Euro-Currency  Loan, a Swingline Loan or a Money
Market Loan and "Loans" means any combination of the foregoing.

"Loan  Documents"  means this  Agreement,  the Guarantee  Agreement,  the Pledge
Agreement,  the  Notes,  any  Election  to  Participate  and  any  Issuing  Bank
Agreement.

"Managing Agents" means Credit Suisse First Boston and Bank of America,  N.A. in
their capacity as managing agents for the Banks hereunder,  and their respective
successors in such capacity.

"Margin Stock" has the meaning given to such term under Regulation U.


                                      -13-
<PAGE>

"Material Adverse Effect" means (i) a materially adverse effect on the business,
operations  or  financial   condition  of  the  Company  and  its   Consolidated
Subsidiaries  considered as a whole, (ii) material  impairment of the ability of
the Company or any Subsidiary to perform any of its  obligations  under any Loan
Document to which it is or will be a party, or (iii) material  impairment of the
rights  of or  benefits  available  to the  Agent or the  Banks  under  any Loan
Document.

"Material  Debt" means Debt (other than the Notes) of the Company  and/or one or
more  of  its  Subsidiaries,  arising  in  one  or  more  related  or  unrelated
transactions,   in  an  aggregate   principal   amount  equal  to  or  exceeding
$25,000,000.

"Material  Plan"  means at any time a Plan or Plans  having  aggregate  Unfunded
Liabilities in excess of $25,000,000.

"Material  Subsidiary" means a Subsidiary of the Company that, as of the time of
determination  of  whether  such  Subsidiary  is a  "Material  Subsidiary",  (a)
accounted  on a  consolidated  basis for 10% or more of the  total  sales of the
Company and its Consolidated Subsidiaries for the most recent Calculation Period
or accounted on a consolidated  basis for 10% or more of the total assets of the
Company and its Consolidated Subsidiaries as of the most recent date for which a
consolidated  balance  sheet of the  Company  has been  delivered  to the  Agent
pursuant to Section 5.01, or (b) owns legally or beneficially  Equity  Interests
in any Material Subsidiary.

"Money Market Absolute Rate" has the meaning set forth in Section 2.03(d).

"Money  Market  Absolute  Rate  Loan"  means a loan made or to be made by a Bank
pursuant to an Absolute Rate Auction.

"Money Market  Lending  Office"  means,  as to each Bank,  its Domestic  Lending
Office  or such  other  office,  branch  or  affiliate  of  such  Bank as it may
hereafter  designate as its Money Market Lending Office by notice to the Company
and the  Agent;  provided  that any Bank may from  time to time by notice to the
Company and the Agent  designate  separate Money Market Lending  Offices for its
Money Market LIBOR Loans,  on the one hand,  and its Money Market  Absolute Rate
Loans,  on the other  hand,  in which  case all  references  herein to the Money
Market Lending Office of such Bank shall be deemed to refer to either or both of
such offices, as the context may require.

"Money  Market LIBOR Loan" means a loan made or to be made by a Bank pursuant to
a LIBOR Auction (including such a loan bearing interest at the Base Rate for the
reason stated in Section 8.01).

"Money  Market Loan" means a Money Market LIBOR Loan or a Money Market  Absolute
Rate Loan.

"Money Market Margin" has the meaning set forth in Section 2.03(d).


                                      -14-
<PAGE>

"Money  Market  Quote"  means an offer by a Bank to make a Money  Market Loan in
accordance with Section 2.03.

"Money Market Quote  Request" means a request by a Borrower to the Banks to make
Money Market Loans in accordance with Section 2.03(b).

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

"Multiemployer  Plan" means at any time an employee  pension benefit plan within
the  meaning  of  Section  4001(a)(3)  of ERISA to which any member of the ERISA
Group is then making or  accruing an  obligation  to make  contributions  or has
within the  preceding  five plan years made  contributions,  including for these
purposes  any Person  which ceased to be a member of the ERISA Group during such
five year period.

"Net Cash  Proceeds"  means (a) in connection  with any Asset Sale, all proceeds
thereof in the form of cash and Temporary Cash  Investments  (including any such
proceeds received by way of deferred payment of principal  pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise, but
only  as and  when  received)  of  such  Asset  Sale,  net of  attorney's  fees,
accountant's  fees,  investment  banking fees, amounts required to be applied to
the repayment of Debt (including principal,  interest, premium and penalties, if
any) secured by a Lien  expressly  permitted  hereunder on any asset that is the
subject of such Asset Sale (other than any Lien pursuant to a Loan Document) and
other customary fees and expenses actually incurred in connection  therewith and
net of taxes paid or  reasonably  estimated  to be  payable as a result  thereof
(after taking into account any  available tax credits or deductions  and any tax
sharing  arrangements);  (b) in  connection  with any  issuance  or sale of Debt
securities or instruments or the incurrence of loans (other than  Borrowings and
Loans  hereunder and Debt  expressly  permitted  under Section  5.16),  all such
proceeds in the form of cash received from such issuance or  incurrence,  net of
attorney's  fees,  investment  banking  fees,  accountant's  fees,  underwriting
discounts  and  commissions  and  other  customary  fees and  expenses  actually
incurred in connection therewith.

"Note"  means a  promissory  note of a  Borrower  substantially  in the  form of
Exhibit A hereto, evidencing the obligation of such Borrower to repay Loans made
to it, and "Notes" means any or all of such promissory notes issued hereunder.

"Notice of  Borrowing"  means a Notice of  Committed  Borrowing  (as  defined in
Section  2.02) or a Notice of Money  Market  Borrowing  (as  defined  in Section
2.03(f)).

"Notice of Interest Rate Election" has the meaning set forth in Section 2.07.

"Notice of Reinvestment"  means a written notice executed by the chief financial
officer of the  Company  stating  that no Event of Default has  occurred  and is
continuing  and that the Company  intends and expects to reinvest in  accordance
with the terms of this Agreement all or a specified


                                      -15-
<PAGE>

portion of the Net Cash Proceeds of an Asset Sale in the business of the Company
and its Subsidiaries.

"Obligations" has the meaning set forth in the Guarantee Agreement.

"Parent" means, with respect to any Bank, any Person controlling such Bank.

"Participant" has the meaning set forth in Section 9.06(b).

"PBGC" means the Pension Benefit Guaranty  Corporation or any entity  succeeding
to any or all of its functions under ERISA.

"Person" means an individual, a corporation,  a partnership,  an association,  a
trust or any other entity or organization, including a Governmental Authority.

"Plan"  means  at any  time an  employee  pension  benefit  plan  (other  than a
Multiemployer  Plan)  which is  covered  by Title IV of ERISA or  subject to the
minimum  funding  standards  under Section 412 of the Internal  Revenue Code and
either (i) is maintained,  or  contributed  to, by any member of the ERISA Group
for  employees  of any member of the ERISA  Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for  employees  of any Person which
was at such time a member of the ERISA Group.

"Pledge  Agreement"  means a Pledge and Security  Agreement among the Agent, the
Company,  the  Borrowers,  the Guarantors  and any other  Subsidiary  owning any
Equity  Interest  in any  Material  Subsidiary  or any  Borrower  or  Guarantor,
substantially in the form of Exhibit E-2, under which certain Equity  Interests,
Intercompany Notes, if any, and accounts from Affiliates and general intangibles
and contract rights relating to such accounts are pledged to the Agent.

"Pricing  Period" means a Level I Pricing Period,  a Level II Pricing Period,  a
Level III Pricing Period, or a Level IV Pricing Period.

"Prime Rate" means the rate of interest  publicly  announced  by Fleet  National
Bank from time to time as its Prime Rate.

"Regulation  U" means  Regulation  U of the Board of  Governors  of the  Federal
Reserve System, as in effect from time to time.

"Reinvestment  Deferred Amount" means with respect to any Asset Sale for which a
Notice of  Reinvestment  has been  delivered,  the  aggregate  Net Cash Proceeds
received  by the  Company  or any of its  Eligible  Subsidiaries  in  connection
therewith  that are not  intended  to be applied  to prepay  the Loans  pursuant
hereto as a result of the delivery of a Notice of Reinvestment.

"Reinvestment  Prepayment Amount" means with respect to any Asset Sale for which
a Notice of Reinvestment has been delivered,  the  Reinvestment  Deferred Amount
relating thereto less any


                                      -16-
<PAGE>

amount  expended prior to the relevant  Reinvestment  Prepayment Date to acquire
assets to be used in the business of the Company and its Subsidiaries.

"Reinvestment  Prepayment Date" means with respect to any Asset Sale for which a
Notice of Reinvestment has been delivered, the earlier of (a) the date occurring
twelve  months after such Asset Sale and (b) the date on which the Company shall
have  determined  not to, or shall have  otherwise  ceased to,  reinvest  in the
business  of  the  Company  and  its  Subsidiaries  all or  any  portion  of the
applicable Reinvestment Deferred Amount.

"Rental  Expense" means for any period,  all  obligations in respect of base and
contingent rent paid or due by the Borrowers or any of their Subsidiaries during
such period under any rental  agreements or leases of real or personal  property
(other than  capitalized  leases)  excluding  "License Fees",  "Excess Fees" and
"Miscellaneous Expense Fees" as defined under the Kmart Agreement.

"Required  Banks"  means  at any  time  Banks  having  greater  than  50% of the
aggregate  amount of the  Commitments  or, if the  Commitments  shall  have been
terminated,  Banks with  Committed  Exposure and Money Market Loans  aggregating
greater than 50% of the sum of the Committed  Exposure and the aggregate  unpaid
principal amount of the Money Market Loans at such time.

"Restricted  Payment" means (i) any dividend or other distribution on any shares
of the capital stock of the Company or any Subsidiary  (except dividends payable
solely in shares of its  capital  stock) or (ii) any  payment  on account of the
purchase, redemption, retirement or acquisition of (a) any shares of the capital
stock of the Company or any Subsidiary or (b) any option, warrant or other right
to acquire shares of the capital stock of the Company or any Subsidiary.

"Revolving Credit Period" means the period from and including the Effective Date
to but excluding the Termination Date.

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

"Sale and  Leaseback  Transaction"  means any  arrangement,  entered into by the
Company or a  Subsidiary,  directly or  indirectly,  with any Person  whereby it
shall  sell or  transfer  any  asset,  real or  personal,  whether  now owned or
hereafter acquired, and thereafter rent or lease such asset.

"Subsidiary"  means any  corporation  or other  entity now existing or hereafter
formed of which  securities or other ownership  interests having ordinary voting
power to elect a majority of the board of directors or other persons  performing
similar functions are at the time directly or indirectly owned by the Company.

"Swingline  Exposure"  means at any time the aggregate  principal  amount of all
Swingline Loans outstanding at such time. The Swingline  Exposure of any Bank at
any time shall mean its Applicable  Percentage of the Swingline Exposure at such
time.


                                      -17-
<PAGE>

"Swingline  Lender"  means Fleet  National  Bank,  in its  capacity as lender of
Swingline Loans hereunder, and its successors in such capacity.

"Swingline  Loan" means a loan made by the Swingline  Lender pursuant to Section
2.04.

"Syndication  Agent"  means  First  Union  National  Bank  in  its  capacity  as
syndication agent for the Banks hereunder, and its successors in such capacity.

"Temporary Cash  Investment"  means any Investment in (i) direct  obligations of
the United States or any agency thereof, or obligations guaranteed by the United
States or any agency thereof,  (ii)  commercial  paper rated at least A-1 by S&P
and P-1 by Moody's,  (iii) money market preferred  securities that mature within
49 days and that are  rated  at  least AA by S&P and Aa by  Moody's,  (vi)  time
deposits  with any bank or trust  company  located  in the Cayman  Islands,  the
Bahamas  or  Nassau,  provided  the short  term debt  rating of such bank or its
parent or such trust  company or its parent is rated at least A-1 by S&P and P-1
by Moody's,  (v) adjustable rate industrial  revenue bonds that mature within 91
days and the credit enhancement for which is provided by a financial institution
whose  long term debt is rated at least AA by S&P and Aa by  Moody's,  (vi) time
deposits with,  including  certificates of deposit issued by, any office located
in the United States of any bank or trust  company which is organized  under the
laws of the United  States or any state  thereof  and has  capital,  surplus and
undivided  profits   aggregating  at  least  $500,000,000  or  (vii)  repurchase
agreements with respect to securities described in clause (i) above entered into
with an office of a bank or trust  company  meeting the  criteria  specified  in
clause (vi) above;  provided in each case that,  unless  otherwise  specifically
provided,  such Investment  matures within one year from the date of acquisition
thereof by the Company or a Subsidiary or, in the case of Section  2.17(k),  the
Agent.

"Termination  Date" means the third  anniversary  of the Effective  Date, or, if
such day is not a Euro-Currency Business Day, the next succeeding  Euro-Currency
Business Day, unless such  Euro-Currency  Business Day falls in another calendar
month,  in  which  case  the  Termination  Date  shall  be  the  next  preceding
Euro-Currency Business Day.

"Total  Commitments" means at any time the sum of the Banks' Commitments at such
time.

"Type" has the meaning set forth in Section 1.03.

"Unfunded  Liabilities"  means, with respect to any Plan at any time, the amount
(if any) by which (i) the value of all  benefit  liabilities  under  such  Plan,
determined on a plan termination  basis using the assumptions  prescribed by the
PBGC for purposes of Section  4044 of ERISA,  exceeds (ii) the fair market value
of all  Plan  assets  allocable  to such  liabilities  under  Title  IV of ERISA
(excluding any accrued but unpaid contributions),  all determined as of the then
most  recent  valuation  date for such Plan,  but only to the  extent  that such
excess  represents  a potential  liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.

"United States" means the United States of America, including the States and the
District of Columbia, but excluding its territories and possessions.


                                      -18-
<PAGE>

"Wholly-Owned  Consolidated Subsidiary" means any Consolidated Subsidiary all of
the  shares of  capital  stock or other  ownership  interests  of which  (except
directors'  qualifying  shares) are at the time directly or indirectly  owned by
the Company.

      SECTION  1.02.  Accounting  Terms  and  Determinations.  (a) When  used in
Sections 5.17, 5.18 and 5.19 hereof,  generally accepted accounting  principles,
whether  directly or indirectly  through  reference to a  capitalized  term used
therein,   means  (i)  principles   that  are  consistent  with  the  principles
promulgated  or  adopted by the  Financial  Accounting  Standards  Board and its
predecessors,  in effect for the fiscal year ended on January 1, 2000,  and (ii)
to the extent  consistent with such principles,  the accounting  practice of the
Borrower  reflected in its Initial  Financial  Statements,  and (b) when used in
general, generally accepted accounting principles, other than as provided above,
means  principles  that are (i) consistent  with the  principles  promulgated or
adopted by the Financial Accounting Standards Board and its predecessors,  as in
effect from time to time,  and (ii)  consistently  applied  with past  financial
statements of the Company  adopting the same  principles,  provided that in each
case  referred  to  in  this  definition  of  "generally   accepted   accounting
principles"  a certified  public  accountant  would,  insofar as the use of such
accounting  principles is pertinent,  be in a position to deliver an unqualified
opinion  (other than a  qualification  regarding  changes in generally  accepted
accounting  principles) as to financial statements in which such principles have
been properly applied.

      SECTION 1.03.  Types of  Borrowings.  Borrowings  and Loans  hereunder are
distinguished  by "Type".  The Type of a Loan  refers to whether  such Loan is a
Base Rate Loan, a  Euro-Currency  Loan,  a Swingline  Loan, a Money Market LIBOR
Loan, or a Money Market  Absolute Rate Loan.  The term  "Borrowing"  denotes the
aggregation  of  Loans  of one or more  Banks  to be made to a  single  Borrower
pursuant  to  Article  II on a single  date and for a  single  Interest  Period.
Borrowings are classified for purposes of this Agreement  either by reference to
the  pricing  of  Loans   comprising  such  Borrowing  (e.g.,  a  "Euro-Currency
Borrowing" is a Borrowing  comprised of Euro-Currency  Loans) or by reference to
the  provisions  of Article II under which  participation  therein is determined
(i.e.,  a "Committed  Borrowing" is a Borrowing  under Section 2.01 in which all
Banks participate in proportion to their Commitments, a "Money Market Borrowing"
is a Borrowing under Section 2.03 in which the Bank  participants are determined
on the  basis of their  bids  and a  Swingline  Borrowing  is a  Borrowing  of a
Swingline Loan).

                                   ARTICLE II

                                   The Credits
                                   -----------

      SECTION  2.01.  Commitments  to Lend.  (a)  Committed  Loans.  During  the
Revolving Credit Period each Bank severally  agrees, on the terms and conditions
set forth in this Agreement,  to lend to the Company or any Eligible  Subsidiary
Committed  Loans from time to time in  amounts  that will not result in (i) such
Bank's  Committed  Exposure at any time exceeding its  Commitments at such time,
and (ii) the sum of the Letter of Credit  Exposure and the  aggregate  principal
amount of all outstanding Loans at any time exceeding the Total


                                      -19-
<PAGE>

Commitments.  Within the  foregoing  limits,  a Borrower  may borrow  under this
subsection,  repay, or to the extent permitted by Section 2.12, prepay Committed
Loans and  reborrow at any time during the  Revolving  Credit  Period under this
subsection (a). All Committed Loans shall be made in Dollars. The Commitments on
the date of this Agreement total in the aggregate $325,000,000.

      (b) Borrowings  Ratable.  Each Borrowing  under this Section 2.01 shall be
made from the Banks ratably in proportion to their respective Commitments.

      SECTION 2.02.  Notice of Committed  Borrowings.  A Borrower shall give the
Agent notice (a "Notice of Committed  Borrowing") not later than 11:00 A.M. (New
York  City  time)  on the date (a) of any Base  Rate  Borrowing,  and (b)  three
Euro-Currency Business Days before any Euro-Currency Borrowing, specifying:

            (i) the date of such Borrowing,  which shall be a Domestic  Business
      Day in the case of a Domestic Borrowing or a Euro-Currency Business Day in
      the case of a Euro-Currency Borrowing;

            (ii)  the  aggregate  amount  of  such  Borrowing,  which  shall  be
      $5,000,000  or a larger  multiple of $500,000  (except that any  Committed
      Borrowing  may be in an aggregate  amount equal to the excess of the Total
      Commitments  over  the  sum  of  the  aggregate  principal  amount  of all
      outstanding Loans and the Letter of Credit Exposure);

            (iii)  whether the Loans  comprising  such  Borrowing are to be Base
      Rate Loans or Euro-Currency Loans; and

            (iv) in the case of a Euro-Currency  Borrowing,  the duration of the
      Interest  Period  applicable  thereto,  subject to the  provisions  of the
      definition of Interest Period.

      SECTION 2.03. Money Market Borrowings.

      (a) The Money Market Option. In addition to Committed  Borrowings pursuant
to Section 2.01,  any Borrower  may, as set forth in this  Section,  request the
Banks from time to time  during the  Revolving  Credit  Period to make offers to
make Money  Market  Loans to such  Borrower.  The Banks  may,  but shall have no
obligation  to,  make such  offers  and the  Borrower  may,  but  shall  have no
obligation to, accept any such offers in the manner set forth in this Section.

      (b) Money Market Quote Request.  When a Borrower  wishes to request offers
to make Money Market Loans under this Section, it shall transmit to the Agent by
telex or facsimile  transmission a Money Market Quote Request  substantially  in
the form of Exhibit B hereto so as to be received no later than 11:00 A.M.  (New
York City  time)  (x) three  Euro-Currency  Business  Days  prior to the date of
Borrowing  proposed  therein,  in the case of a LIBOR  Auction for Money  Market
Loans to be made in Dollars or (y) one  Domestic  Business Day prior to the date
of Borrowing proposed therein, in the case of an Absolute Rate Auction for Money
Market Loans to


                                      -20-
<PAGE>


be made in Dollars (or, in any case,  such other time or date as the Company and
the Agent shall have  mutually  agreed upon and shall have notified to the Banks
not later than the date of the Money  Market  Quote  Request for the first LIBOR
Auction or  Absolute  Rate  Auction  for which such  change is to be  effective)
specifying:

            (i) the proposed date of Borrowing,  which shall be a  Euro-Currency
      Business Day in the case of a LIBOR Auction or a Domestic  Business Day in
      the case of an Absolute Rate Auction,

            (ii) the aggregate amount of such Borrowing  (expressed in Dollars),
      which shall be $5,000,000 or a larger multiple of $500,000,

            (iii) the  currency in which the  proposed  Borrowing is to be made,
      which shall be Dollars,

            (iv) the duration of the Interest Period applicable thereto, subject
      to the provisions of the definition of Interest Period, and

            (v) whether the Money  Market  Quotes  requested  are to set forth a
      Money Market Margin or a Money Market Absolute Rate.

      A Borrower may request offers to make Money Market Loans for more than one
      Interest Period in a single Money Market Quote Request. The Borrower shall
      pay to the  Agent  for its  account  within  ten  days of  being  invoiced
      therefor,  a nonrefundable  competitive bid fee in the amount of $650 with
      respect to each Money Market Quote Request.

      (c) Invitation  for Money Market Quotes.  Promptly upon receipt of a Money
Market  Quote  Request,  the Agent shall send to the Banks by telex or facsimile
transmission an Invitation for Money Market Quotes  substantially in the form of
Exhibit C  hereto,  which  shall  constitute  an  invitation  by the  applicable
Borrower to each Bank to submit Money Market  Quotes  offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance with
this Section.

      (d)  Submission  and  Contents of Money Market  Quotes.  (i) Each Bank may
submit a Money Market Quote  containing  an offer or offers to make Money Market
Loans in response to any Invitation  for Money Market Quotes.  Each Money Market
Quote must  comply  with the  requirements  of this  subsection  (d) and must be
submitted  to the  Agent by  telex  or  facsimile  transmission  at its  offices
specified in or pursuant to Section 9.01 not later than (x) 10:00 A.M. (New York
City time) on the second  Euro-Currency  Business Day prior to the proposed date
of  Borrowing,  in the case of a LIBOR Auction for Money Market Loans to be made
in  Dollars  or (y) 10:00  A.M.  (New York City  time) on the  proposed  date of
Borrowing,  in the case of an Absolute Rate Auction for Money Market Loans to be
made in Dollars (or, in any case, such other time or date as the Company and the
Agent shall have mutually  agreed and shall have notified to the Banks not later
than the date of the Money Market Quote  Request for the first LIBOR  Auction or
Absolute Rate Auction for which such change is to be effective); provided

                                      -21-
<PAGE>

that Money Market Quotes  submitted by the Agent (or any affiliate of the Agent)
in the capacity of a Bank may be submitted,  and may only be  submitted,  if the
Agent or such  affiliate  notifies the  applicable  Borrower of the terms of the
offer or offers  contained  therein not later than fifteen  minutes prior to the
latest time that Money Market Quotes may be submitted by other Banks as provided
above.  Subject to Articles  III and VI, any Money Market Quote so made shall be
irrevocable  except  with  the  written  consent  of  the  Agent  given  on  the
instructions of the applicable Borrower.

            (ii) Each Money Market Quote shall be in  substantially  the form of
      Exhibit D hereto and shall in any case specify:

                  (A) the proposed date of Borrowing,

                  (B) the  principal  amount of the Money  Market Loan for which
            each  such  offer  is  being  made  (expressed  in  Dollars),  which
            principal amount (x) may be greater than or less than the Commitment
            of the quoting Bank,  (y) must be  $1,000,000  or a larger  multiple
            thereof and (z) may not exceed the principal  amount of Money Market
            Loans for which offers were requested,

                  (C) the  currency of the Money Market Loan for which each such
            offer is being made, which shall be in Dollars,

                  (D) in the case of a LIBOR Auction,  the margin above or below
            the applicable  LIBOR Rate (the "Money Market  Margin")  offered for
            each such Money Market Loan,  expressed as a percentage  (rounded to
            the nearest 1/10,000th of 1%) to be added to or subtracted from such
            LIBOR Rate,

                  (E) in the  case of an  Absolute  Rate  Auction,  the  rate of
            interest per annum  (rounded to the nearest  1/10,000th  of 1%) (the
            "Money  Market  Absolute  Rate")  offered for each such Money Market
            Loan, and

                  (F) the identity of the quoting Bank.

            A Money Market Quote may set forth up to five separate offers by the
            quoting Bank with respect to each Interest  Period  specified in the
            related Invitation for Money Market Quotes.

            (iii) Any Money Market Quote shall be disregarded if it:

                  (A) is not  substantially  in conformity with Exhibit D hereto
            or does not specify all of the  information  required by  subsection
            (d)(ii);

                  (B) contains qualifying, conditional or similar language;


                                      -22-
<PAGE>

                  (C)  proposes  terms  other than or in  addition  to those set
            forth in the applicable Invitation for Money Market Quotes; or

                  (D) arrives after the time set forth in subsection (d)(i).

      (e) Notice to Borrower.  The Agent shall  promptly  notify the  applicable
Borrower of the terms (x) of any Money Market Quote  submitted by a Bank that is
in accordance with subsection (d) and (y) of any Money Market Quote that amends,
modifies  or is  otherwise  inconsistent  with a  previous  Money  Market  Quote
submitted by such Bank with respect to the same Money Market Quote Request.  Any
such subsequent Money Market Quote shall be disregarded by the Agent unless such
subsequent Money Market Quote is submitted solely to correct a manifest error in
such former Money Market Quote.  The Agent's notice to the  applicable  Borrower
shall specify (A) the aggregate principal amount of Money Market Loans for which
offers have been  received  for each  Interest  Period  specified in the related
Money Market  Quote  Request,  (B) the  respective  principal  amounts and Money
Market Margins or Money Market  Absolute  Rates,  as the case may be, so offered
and (C) if applicable,  limitations on the aggregate  principal  amount of Money
Market  Loans for which offers in any single Money Market Quote for any Interest
Period may be accepted.

      (f) Acceptance and Notice by Borrower. Not later than 11:00 A.M. (New York
City time) on (x) the second  Euro-Currency  Business  Day prior to the proposed
date of  Borrowing,  in the case of a LIBOR Auction for Money Market Loans to be
made  in  Dollars  or (y) the  proposed  date of  Borrowing,  in the  case of an
Absolute  Rate  Auction for Money Market Loans to be made in Dollars (or, in any
case,  such other time or date as the Company and the Agent shall have  mutually
agreed upon and shall have  notified to the Banks not later than the date of the
Money Market Quote  Request for the first LIBOR Auction or Absolute Rate Auction
for which such change is to be effective),  the applicable Borrower shall notify
the Agent of its  acceptance or  non-acceptance  of the offers so notified to it
pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of
Money Market Borrowing") shall specify the aggregate  principal amount of offers
for each Interest Period that are accepted, expressed in Dollars. The applicable
Borrower may accept any Money  Market Quote for any Interest  Period in whole or
in part; provided that:

                  (i)  the  aggregate  principal  amount  of each  Money  Market
            Borrowing may not exceed the applicable amount set forth in, and the
            currency  thereof  must be the  currency  set forth in, the  related
            Money Market Quote Request,

                  (ii) the principal  amount of each Money Market Borrowing must
            be $5,000,000 or a larger multiple of $500,000,

                  (iii)  acceptance  of offers  may only be made on the basis of
            ascending  Money Market Margins or Money Market  Absolute  Rates, as
            the case may be, and

                  (iv) a Borrower  may not accept any offer that is described in
            subsection  (d)(iii)  or that  otherwise  fails to  comply  with the
            requirements of this Agreement.

                                      -23-
<PAGE>

      (g) Allocation by Agent.  If offers are made by two or more Banks with the
same Money Market Margins or Money Market  Absolute  Rates,  as the case may be,
for a greater  aggregate  principal  amount  than the amount in respect of which
such offers are accepted for the related Interest  Period,  the principal amount
of Money  Market  Loans in respect of which such  offers are  accepted  shall be
allocated by the Agent among such Banks as nearly as possible  (in  multiples of
such number, not greater than $1,000,000,  as the Agent may deem appropriate) in
proportion to the aggregate principal amounts of such offers.  Determinations by
the Agent of the pro rata amounts of Money Market Loans shall be  conclusive  in
the absence of manifest error.

      SECTION 2.04.  Swingline Loans. (a) During the Revolving Credit Period the
Swingline  Lender  agrees,  on the  terms  and  conditions  set  forth  in  this
Agreement,  to lend to any  Borrower  from  time to time  amounts  that will not
result in (i) the aggregate  principal amount of outstanding  Swingline Loans at
any time exceeding $50,000,000, or (ii) the sum of the Letter of Credit Exposure
and  the  aggregate  principal  amount  of all  outstanding  Loans  at any  time
exceeding the Total Commitments. All Swingline Loans shall be made in Dollars.

      (b) In order to request a  Swingline  Loan,  a Borrower  shall  notify the
Agent of such  request not later than 1:00 P.M.  (New York City time) on the day
of a proposed  Swingline  Loan,  specifying  the proposed date (which shall be a
Domestic  Business Day) and amount of the requested  Swingline Loan (which shall
be $1,000,000 or a larger multiple of $100,000) and the duration of the Interest
Period  applicable  thereto,  subject to the definition of Interest Period.  The
Agent will promptly advise the Swingline Lender of any such notice received from
a Borrower. The Swingline Lender shall make each Swingline Loan available to the
applicable  Borrower by means of a credit to the general  deposit account of the
Company  with the  Swingline  Lender  by 3:00 P.M.  (New York City  time) on the
requested  date of such  Swingline  Loan (and if the  applicable  Borrower is an
Eligible  Subsidiary,  the  Company  shall  make such  funds  available  to such
Borrower).

      (c) The  Swingline  Lender  may by written  notice  given to the Banks not
later than 10:00 A.M., New York City time, on any Domestic  Business Day require
the Banks to acquire  participations on such Business Day in all or a portion of
the Swingline Loans outstanding.  Such notice shall specify the aggregate amount
of  Swingline  Loans  in  which  the  Banks  will  acquire  participations.   In
furtherance of the foregoing,  each Bank hereby  absolutely and  unconditionally
agrees,  upon receipt of notice as provided above, to pay to the Agent,  for the
account of the  Swingline  Lender,  such Bank's  Applicable  Percentage  of such
Swingline Loan or Loans.  Each Bank  acknowledges and agrees that its obligation
to acquire  participations  in  Swingline  Loans  pursuant to this  paragraph is
absolute  and  unconditional  and  shall  not be  affected  by any  circumstance
whatsoever,  including the occurrence and  continuance of a Default or reduction
or  termination  of the  Commitments,  and that each such payment  shall be made
without any offset,  abatement,  withholding or reduction whatsoever;  provided,
however,  that a Bank  shall not be  required  to acquire a  participation  in a
Swingline  Loan pursuant to this  paragraph if (i) a Default shall have occurred
and was  continuing at the time such  Swingline Loan was made and (ii) such Bank
shall have notified the Swingline Lender in writing,  not less than one Domestic
Business Day before such Swingline Loan was made, that such Default has occurred
and that such Bank

                                      -24-
<PAGE>

will  not  participate  in any  Swingline  Loans  made  while  such  Default  is
continuing.  Each Bank shall comply with its obligation  under this paragraph by
wire transfer of immediately  available funds, in the same manner as provided in
Section  2.05 with  respect to Loans made by such Bank (and  Section  2.05 shall
apply,  mutatis mutandis,  to the payment  obligations of the Banks).  The Agent
shall notify the Company of any  participations  in any Swingline  Loan acquired
pursuant to this paragraph.  Any amounts  received by the Swingline  Lender from
any  Borrower  (or other  party on  behalf  of any  Borrower)  in  respect  of a
Swingline  Loan after receipt by the Swingline  Lender of the proceeds of a sale
of  participations  therein  shall be promptly  remitted to the Agent;  any such
amounts  received by the Agent  shall be  promptly  remitted by the Agent to the
Banks that shall have made their payments  pursuant to this paragraph and to the
Swingline Lender, as their interests may appear.  The purchase of participations
in a Swingline Loan pursuant to this paragraph  shall not relieve the applicable
Borrower of any default in the payment thereof.

      SECTION  2.05.  Notice to Banks;  Funding of Loans.  (a) Upon receipt of a
Notice of Borrowing,  the Agent shall promptly  notify each Bank of the contents
thereof and of such Bank's share (if any) of such  Borrowing  and such Notice of
Borrowing shall not thereafter be revocable by the applicable Borrower.

      (b) Not later  than  12:00  Noon (New York City  time) on the date of each
Borrowing,  each Bank  participating  therein shall make  available its share of
such  Borrowing,  in Federal or other funds  immediately  available  in New York
City,  to the Agent at its address  specified  in or pursuant to Section 9.01 to
the account of the Agent at such place as shall have been  notified by the Agent
to the Banks by not less than five Domestic  Business  Days' notice.  Unless the
Agent determines that any applicable  condition specified in Article III has not
been  satisfied,  the  Agent  will  make the  funds so  received  from the Banks
available to the Company at the Agent's aforesaid address (and if the applicable
Borrower is an Eligible Subsidiary,  the Company shall make such funds available
to such Borrower).

      (c) If an  Issuing  Bank has not  received  from the  relevant  Borrower a
payment required by Section 2.17(g) to be made to such Issuing Bank by 1:00 P.M.
(New York City time) on the date on which such  payment is due,  as  provided in
Section 2.17(g), such Issuing Bank shall promptly notify the Agent thereof (and,
if the  unreimbursed  Letter of Credit  Disbursement  was made in an Alternative
Currency,  the Dollar Amount thereof) and,  promptly  following  receipt of such
notice, the Agent will notify each Bank of the Letter of Credit Disbursement and
such Bank's  Applicable  Percentage of such Letter of Credit  Disbursement.  Not
later than 4:00 P.M.  (New York City  time) on such  date,  each Bank shall make
available   such  Bank's   Applicable   Percentage  of  such  Letter  of  Credit
Disbursement  (in  Dollars,  in the amount  determined  as  provided  in Section
2.17(l)  if such  Letter  of  Credit  Disbursement  was  made in an  Alternative
Currency),  in Federal or other funds immediately available in New York City, to
the Agent at its address specified in or pursuant to Section 9.01, and the Agent
will promptly make such funds  available to such Issuing Bank.  Thereafter,  any
payments  made by the  applicable  Borrower  in respect of such Letter of Credit
Disbursement  shall be paid to the Agent in Dollars (and such Issuing Bank shall
promptly  remit such payments to the Agent if received by such Issuing Bank) and
the Agent  will  promptly  remit to each Bank that  shall  have made such  funds
available its Applicable  Percentage of any amounts subsequently received by the
Agent  from such  Issuing


                                      -25-
<PAGE>

Bank or the applicable Borrower in respect of such Letter of Credit Disbursement
(excluding interest for the account of such Issuing Bank for the period prior to
the date that such Bank shall have made such funds available).

      (d) If any Bank  (including  the  Swingline  Lender) makes a new Loan to a
Borrower  hereunder on a day on which such  Borrower is to repay all or any part
of an outstanding  Loan  denominated  in the same currency from such Bank,  such
Bank shall apply the proceeds of its new Loan to make such repayment and only an
amount equal to the  difference  (if any) between the amount being  borrowed and
the amount  being  repaid  shall be made  available by such Bank to the Agent as
provided in subsection (c) of this Section,  or remitted by such Borrower to the
Agent as provided in Section 2.13, as the case may be.

      (e) Unless the Agent shall have  received  notice from a Bank prior to the
date of any Borrowing, or prior to the time of any required payment by such Bank
in  respect  of a Letter  of Credit  Disbursement,  that such Bank will not make
available to the Agent such Bank's share of such Borrowing or payment, the Agent
may assume that such Bank has made such share available to the Agent on the date
of such  Borrowing  or payment in  accordance  with  subsection  (b) or (c),  as
applicable,  of this  Section  2.05 and the Agent  may,  in  reliance  upon such
assumption,  make available to the applicable Borrower or the applicable Issuing
Bank,  as the case may be, on such date a  corresponding  amount.  If and to the
extent that such Bank shall not have so made such share  available to the Agent,
such Bank and such Borrower  severally  agree to repay to the Agent forthwith on
demand such  corresponding  amount together with interest thereon,  for each day
from the date such  amount is made  available  by the Agent  until the date such
amount is  repaid to the  Agent,  at (i) in the case of a  Borrower,  a rate per
annum  equal to the  higher of the  Federal  Funds  Rate and the  interest  rate
applicable  thereto pursuant to Section 2.08 or Section 2.17(g),  as applicable,
and (ii) in the case of such Bank,  the  Federal  Funds  Rate.  In the case of a
Borrowing, if such Bank shall repay to the Agent such corresponding amount, such
amount so repaid shall  constitute  such Bank's Loan included in such  Borrowing
for purposes of this Agreement.

      SECTION 2.06.  Notes. (a) The Loans of each Bank to each Borrower shall be
evidenced  by a single Note of such  Borrower  payable to the order of such Bank
for the account of its Applicable Lending Office.

      (b) Each Bank may, by notice to a Borrower and the Agent, request that its
Loans to such  Borrower of a particular  Type be evidenced by a separate Note of
such Borrower.  Each such Note shall be in  substantially  the form of Exhibit A
hereto with  appropriate  modifications  to reflect  the fact that it  evidences
solely  Loans of the relevant  Type.  Each  reference  in this  Agreement to the
"Note" of such Bank shall be deemed to refer to and  include  any or all of such
Notes, as the context may require.

      (c) Upon  receipt of each  Bank's  Note  pursuant  to  Section  3.01(b) or
3.03(a),  the Agent shall forward such Note to such Bank. Each Bank shall record
the date, amount, Type and maturity of each Loan made by it to each Borrower and
the date and amount of each  payment of  principal  made by such  Borrower  with
respect thereto, and may, in connection with any transfer

                                      -26-
<PAGE>

of any of its Notes,  endorse on the schedule forming a part thereof appropriate
notations to evidence the foregoing  information  with respect to each such Loan
of such Borrower then outstanding;  provided that (and each Borrower understands
and  agrees  that)  the  failure  of any Bank to make any  such  recordation  or
endorsement shall not affect the obligations of any Borrower  hereunder or under
the Notes.  Each Bank is hereby  irrevocably  authorized  by each Borrower to so
endorse its Note and to attach to and make a part of its Note a continuation  of
any such schedule as and when required.

      SECTION  2.07.  Interest  Rate  Elections.  (a) The initial  Type of Loans
comprising each Committed  Borrowing,  and the duration of the initial  Interest
Period applicable thereto if they are initially Euro-Currency Loans, shall be as
specified  in the  applicable  Notice of  Borrowing.  Thereafter,  the  relevant
Borrower  may from time to time elect to change or continue  the Type of, or the
duration  of the  Interest  Period  applicable  to,  the Loans  included  in any
Committed  Borrowing  (excluding  overdue  Loans and subject in each case to the
provisions of the definition of Interest Period and Article VIII), as follows:

            (i) if such Loans are Base Rate Loans,  such  Borrower  may elect to
      designate such Loans as  Euro-Currency  Loans,  may elect to continue such
      Loans as Base Rate Loans for an additional  Interest Period,  or may elect
      to  designate  such  Loans  as any  combination  of Base  Rate  Loans  and
      Euro-Currency Loans;

            (ii) if such Loans are Euro-Currency  Loans, such Borrower may elect
      to  designate  such Loans as Base Rate Loans,  may elect to continue  such
      Loans as Euro-Currency  Loans for an additional  Interest  Period,  or may
      elect to designate  such Loans as any  combination  of Base Rate Loans and
      Euro-Currency Loans.

Notwithstanding  the  foregoing,  no Borrower  may elect an Interest  Period for
Euro-Currency  Loans  unless  the  aggregate  outstanding  principal  amount  of
Euro-Currency  Loans  (including any such  Euro-Currency  Loans made pursuant to
Section  2.01 on the date that such  Interest  Period is to begin) to which such
Interest Period will apply is $5,000,000 or any larger multiple of $500,000.

      (b) Any election  permitted by  subsection  (a) of this Section may become
effective on any Euro-Currency Business Day specified by the applicable Borrower
(the  "Election   Date");   provided  that,  with  respect  to  any  outstanding
Euro-Currency  Loan,  the  applicable  Borrower may not specify an Election Date
that is other  than the last day of the  Interest  Period  therefor.  Each  such
election  shall be made by the  applicable  Borrower by  delivering  a notice (a
"Notice of Interest Rate  Election") to the Agent not later than 11:00 A.M. (New
York City time) on (x) the Election  Date,  if all the  resulting  Loans will be
Base Rate Loans and (y) the date three  Euro-Currency  Business  Days before the
Election Date, if the resulting  Loans will include  Euro-Currency  Loans.  Each
Notice of Interest Rate Election  shall specify with respect to the  outstanding
Loans to which such notice applies:

            (i) the Election Date;


                                      -27-
<PAGE>

            (ii) if the Type of Loan is to be changed, the new Type of Loan and,
      if such new Type is a Euro-Currency Loan, the duration of the new Interest
      Period applicable thereto;

            (iii) if such  Loans  are  Euro-Currency  Loans and the Type of such
      Loans is to be continued for an additional or different  Interest  Period,
      the duration of such additional or different Interest Period; and

            (iv) if such Loans are to be  designated  as a  combination  of Base
      Rate Loans or Euro-Currency  Loans,  the information  specified in clauses
      (i) through (iii) above as to each  resulting  Borrowing and the aggregate
      amount of each such Borrowing.

Each  Interest  Period  specified in a Notice of Interest  Rate  Election  shall
comply with the  provisions of the  definition  of Interest  Period and the last
sentence of subsection (a) of this Section.

      (c) Upon receipt of a Notice of Interest  Rate  Election,  the Agent shall
promptly  notify each Bank of the  contents  thereof and of such Bank's share of
such  Borrowing  and such  notice  shall  not  thereafter  be  revocable  by the
applicable Borrower.

      (d) If a Borrower  (i) fails to deliver a timely  Notice of Interest  Rate
Election  to the  Agent  electing  to  continue  or  change  the Type of, or the
duration  of the  Interest  Period  applicable  to,  the Loans  included  in any
Committed  Borrowing  as provided in this  Section and (ii) has not  theretofore
delivered a notice of prepayment  relating to such  Committed  Loans,  then such
Borrower  shall be deemed to have  given  the  Agent a Notice of  Interest  Rate
Election  electing  to change  the Type of such Loans to (or  continue  the Type
thereof as) Base Rate Loans,  with an Interest Period commencing on the last day
of the then current Interest Period.

      SECTION 2.08.  Interest Rates. (a) Each Base Rate Loan shall bear interest
on the outstanding  principal  amount  thereof,  for each day from the date such
Loan is made until it becomes due or is converted to a Loan of another  Type, at
a rate per annum equal to the Base Rate for such day plus the Base Rate  Margin.
Such interest shall be payable for each Interest  Period on the last day thereof
and, with respect to the principal  amount of any Base Rate Loan  converted to a
Euro-Currency Loan, on the date such Base Rate Loan is so converted. Any overdue
principal of or interest on any Base Rate Loan shall bear  interest,  payable on
demand,  for each day until paid at a rate per annum equal to the sum of 2% plus
the rate otherwise applicable to such Base Rate Loan for such day.

      "Base Rate Margin" applicable to any Base Rate Loan outstanding on any day
      until the date that  financial  statements  for the fiscal  quarter ending
      September  30,  2000 are  required  to be  delivered  pursuant  to Section
      5.01(b) (whether or not so delivered) shall be .50%, and, thereafter shall
      mean:

      (i) if such day falls within a Level I Pricing Period, then 0.00%;


                                      -28-
<PAGE>

      (ii) if such day falls within a Level II Pricing Period, then 0.25%;

      (iii) if such day falls within a Level III Pricing Period, then 0.50%; or

      (iv) if such day falls within a Level IV Pricing Period, then 0.75%.

      (b)  Each  Euro-Currency  Loan  shall  bear  interest  on the  outstanding
principal  amount thereof,  for each day during each Interest Period  applicable
thereto,  at a rate per annum equal to the sum of the  Euro-Currency  Margin for
such day plus the LIBOR Rate applicable to such Interest  Period.  Such interest
shall be payable for each  Interest  Period on the last day thereof and, if such
Interest Period is longer than three months,  at intervals of three months after
the first day thereof. Any overdue principal of or interest on any Euro-Currency
Loan shall bear interest, payable on demand, for each day from and including the
date payment thereof was due to but excluding the date of actual  payment,  at a
rate per annum equal to 2% plus the sum of the Euro-Currency Margin for the same
day plus the London  Interbank  Offered Rate applicable to such Loan on the date
such payment was due (or, if the  circumstances  described in Section 8.01 shall
exist,  at a rate per annum equal to the sum of 2% plus the rate  applicable  to
Base Rate Loans for such day).

      "Euro-Currency Margin" applicable to any Euro-Currency Loan outstanding on
      any day until the date that  financial  statements  for the fiscal quarter
      ending September 30, 2000 are required to be delivered pursuant to Section
      5.01(b)  (whether or not so  delivered)  shall be 1.50%,  and,  thereafter
      shall mean:

            (i) if such day falls within a Level I Pricing Period, then 0.90%;

            (ii) if such day falls within a Level II Pricing Period, then 1.25%;

            (iii) if such day falls within a Level III Pricing Period, then
            1.50%; or

            (iv) if such day falls within a Level IV Pricing Period, then 1.65%.

      (c)  Subject to Section  8.01,  each  Money  Market  LIBOR Loan shall bear
interest on the outstanding  principal  amount thereof,  for the Interest Period
applicable  thereto,  at a rate per annum equal to the sum of the LIBOR Rate for
such Interest  Period plus (or minus) the Money Market Margin quoted by the Bank
making such Loan in  accordance  with Section 2.03.  Each Money Market  Absolute
Rate Loan shall bear interest on the outstanding  principal amount thereof,  for
the Interest Period applicable  thereto,  at a rate per annum equal to the Money
Market  Absolute  Rate quoted by the Bank making  such Loan in  accordance  with
Section  2.03.  Such interest  shall be payable for each Interest  Period on the
last day thereof and, if such Interest  Period is longer than three  months,  at
intervals of three months after the first day thereof.  Any overdue principal of
or interest on any Money Market Loan shall bear interest, payable on demand, for
each day  until  paid at a rate per  annum  equal to the sum of 2% plus the Base
Rate plus the Base Rate Margin for such day.


                                      -29-
<PAGE>

      (d) Each Swingline Loan shall bear interest on the  outstanding  principal
amount thereof,  for each day during the Interest Period applicable  thereto, at
such rate per annum as shall be agreed to in writing by the applicable  Borrower
and the  Swingline  Lender with  respect to such  Swingline  Loan or, if no such
agreement  shall be made,  at a rate per  annum  equal to the Base Rate plus the
Base Rate Margin for such day. Such interest  shall be payable for each Interest
Period on the last day  thereof.  Any  overdue  principal  of or interest on any
Swingline Loan shall bear interest,  payable on demand,  for each day until paid
at a rate per  annum  equal to the sum of 2% plus the  higher of (i) the rate of
interest  applicable to such  Swingline  Loan prior to default and (ii) the Base
Rate plus the Base Rate Margin for such day.

      (e) The Agent shall  determine each interest rate  applicable to the Loans
hereunder  pursuant to the terms  hereof.  The Agent shall give prompt notice to
the  applicable  Borrower and the Banks of each rate of interest so  determined,
and its  determination  thereof  shall be  conclusive in the absence of manifest
error.

      SECTION 2.09.  Fees.  (a) Facility Fee. The Company shall pay to the Agent
for the account of the Banks ratably a facility fee at the  applicable per annum
Facility Fee Rate.  Such  facility fee shall accrue (i) from and  including  the
Effective  Date to but  excluding  the date on which the  Commitments  expire or
terminate,  on the daily actual amount of the Total Commitments (whether used or
unused) and (ii) from and including the date on which the Commitments  expire or
terminate to but  excluding  the date on which there ceases to be any  Committed
Exposure,  on the daily average aggregate amount of the total Committed Exposure
of the Banks.  The Agent shall  determine the Facility Fee Rate  applicable from
time to time in accordance with the terms of this  Agreement;  provided that the
Facility Fee Rate shall be .25% for the period from the  Effective  Date through
the date that financial  statements for the fiscal quarter ending  September 30,
2000 are required to be delivered pursuant to Section 5.01(b) (whether or not so
delivered).  Thereafter,  the  "Facility  Fee Rate"  applicable on any day shall
mean:

            (i) if such day falls within a Level I Pricing Period, then 0.225%;

            (ii) if such day falls within a Level II Pricing Period, then 0.25%;

            (iii) if such day falls within a Level III Pricing Period, then
            0.25%; or

            (iv) if such day falls within a Level IV Pricing Period, then 0.35%.

      (b) Payments.  Accrued fees under this Section shall be payable  quarterly
in arrears on (i) the last day of March,  June,  September  and December in each
year,  commencing  on the first such date that occurs on or after the  Effective
Date,  (ii) the date on which the  Commitments  expire or terminate and (iii) if
any Committed Exposure remains after the date on which the Commitments expire or
terminate,  the date on which there  ceases to be any  Committed  Exposure.  The
Agent shall  determine  the amount of accrued  fees  payable  hereunder  on each
payment date and notify the Company thereof.


                                      -30-
<PAGE>

      SECTION  2.10.  Termination  or Reduction of  Commitments.  (a) During the
Revolving Credit Period,  the Company may, upon at least three Domestic Business
Days' notice to the Agent, terminate at any time, or proportionately permanently
reduce from time to time by an  aggregate  amount of  $10,000,000  or any larger
multiple of $1,000,000, the aggregate amount of the Commitments in excess of the
sum of the Letter of Credit  Exposure and the  aggregate  outstanding  principal
amount of the Loans.

      (b) The Commitments shall terminate on the Termination Date.

      SECTION  2.11.  Maturity of Loans.  (a) The  Committed  Loans of each Bank
shall  mature,  and the  principal  amount  thereof  shall  be due and  payable,
together with accrued interest thereon, on the Termination Date.

      (b) Each  Money  Market  Loan and  Swingline  Loan shall  mature,  and the
principal  amount  thereof  shall  be due and  payable,  together  with  accrued
interest  thereon,  on the last day of the Interest  Period  applicable  to such
Loan.

      SECTION 2.12.  Prepayments.  (a) Subject to subsection (d) of this Section
and Section  2.14, a Borrower  may,  upon at least one Domestic  Business  Day's
notice  (or,  in the case of a  Committed  Borrowing  of Fixed Rate  Loans,  two
Domestic Business Days' notice) to the Agent, prepay any Committed Borrowing (or
any Money Market Borrowing bearing interest based upon the Base Rate pursuant to
Section  8.01) of such  Borrower  in whole at any time,  or from time to time in
part in amounts  aggregating  $5,000,000 or any larger multiple of $500,000,  by
paying the principal amount to be prepaid together with accrued interest thereon
to the date of  prepayment.  Each such optional  prepayment  shall be applied to
prepay ratably the Loans of the several Banks included in such Borrowing.

      (b) A Borrower may, upon notice to the Agent prior to 12:00 Noon (New York
City time) on the date of prepayment  (which shall be a Domestic  Business Day),
prepay any Swingline Loan of such Borrower in whole at any time, or from time to
time in part in amounts  aggregating  $1,000,000  or any multiple of $100,000 in
excess  thereof,  by paying the  principal  amount to be prepaid  together  with
accrued interest thereon to the date of prepayment.

      (c) Unless the Required Banks shall otherwise  consent in writing,  if any
Debt shall be incurred  (excluding any  Borrowings  and Loans  hereunder and any
Debt  permitted  under Section 5.16 of this  Agreement) by the Company or any of
its  Subsidiaries,  an amount equal to 50% of the Net Cash Proceeds  thereof (or
100% thereof if an Event of Default then exists) shall be delivered to the Agent
within  three  Domestic  Business  Days  after  the  date  of such  issuance  or
incurrence to be applied pro rata towards the prepayment of the Committed  Loans
as set forth  herein.  Unless the  Required  Banks  shall  otherwise  consent in
writing,  if the  Company  or any of its  Subsidiaries  shall  receive  Net Cash
Proceeds  from any Asset Sale,  an amount equal to 50% of the Net Cash  Proceeds
thereof (or 100% thereof if an Event of Default then exists)  shall be delivered
to the Agent within three  Domestic  Business Days after such date of receipt to
be applied  towards the  prepayment of the Committed  Loans as set forth herein,
unless a Notice of


                                      -31-
<PAGE>

Reinvestment  has  been  delivered  relating  thereto;  provided,  that  (i) the
aggregate  Net Cash  Proceeds  of Asset  Sales  that  may be  excluded  from the
foregoing mandatory  prepayment  requirement pursuant to Notices of Reinvestment
shall not exceed $30,000,000 in any fiscal year of the Company, and (ii) on each
Reinvestment  Prepayment  Date, an amount equal to the  Reinvestment  Prepayment
Amount with respect to the relevant  Asset Sale shall be applied pro rata toward
the prepayment of the Committed Loans as set forth herein.  Prepayments required
under this Section  2.12(c) shall be applied to pay down Committed  Loans and to
permanently reduce the Total Commitments but not below $300,000,000.

      (d) No Borrower may prepay all or any portion of the  principal  amount of
any Money  Market Loan (other than a Money Market Loan  bearing  interest  based
upon the Base Rate pursuant to Section  8.01) without the prior written  consent
of the Bank holding such Money Market Loan.

      (e) If at any time,  whether  as a result of an  adjustment  to the Dollar
Amount of any Letter of Credit Exposure  denominated in an Alternative  Currency
or for any other reason,  (i) the aggregate  principal amount of all outstanding
Loans exceeds the Total Commitments,  (ii) the aggregate principal amount of all
outstanding Swingline Loans exceeds $50,000,000,  (iii) the sum of the Letter of
Credit  Exposure  exceeds  $50,000,000,  or (iv) the sum of the Letter of Credit
Exposure and the aggregate principal amount of all outstanding Loans exceeds the
Total Commitments,  then the Borrowers shall prepay immediately  Swingline Loans
or Committed  Loans in a principal  amount  sufficient  to  eliminate  each such
excess.  If such  prepayments  shall not be  sufficient  to  eliminate  any such
excess, then Section 2.17(k) shall apply.

      (f) The Borrowers  shall repay the Committed Loans and the Swingline Loans
on each date the Total  Commitments  are reduced  hereunder  pursuant to Section
2.10 in an amount sufficient to cause all outstanding Committed Loans, Letter of
Credit  Exposure  and  Swingline  Loans to be less  than or  equal to the  Total
Commitments as so reduced.

      (g) Upon receipt of a notice of prepayment  pursuant to this Section,  the
Agent shall promptly  notify each Bank (or, in the case of a Swingline Loan, the
Swingline  Lender) of the contents  thereof and of such Bank's  ratable share of
such  prepayment  and such  notice  shall not  thereafter  be  revocable  by the
applicable Borrower.

      SECTION 2.13. General  Provisions as to Payments.  (a) Except as otherwise
expressly  provided herein, all payments to be made by any Borrower hereunder or
under the Notes in Dollars shall be made not later than 1:00 P.M. (New York City
time) on the date when due, in Federal or other funds  immediately  available in
New York City,  to the Agent at its  address  referred to in Section  9.01.  The
Agent  will  promptly  distribute  to each Bank its  ratable  share of each such
payment received by the Agent for the account of the Banks.

      (b) All  payments to be made by any Borrower  hereunder in an  Alternative
Currency pursuant to Section 2.17(l) shall be made in such Alternative  Currency
in such  funds as may then be  customary  for the  settlement  of  international
transactions  in such  Alternative  Currency for the account of the Issuing Bank
pursuant to Section 2.17(l) at such time and at such place as shall


                                      -32-
<PAGE>

have been notified by the Issuing Bank to such Borrower and the applicable Banks
by not less  than four  Euro-Currency  Business  Days'  notice.  The Agent  will
promptly  cause any such payments for the account of any Bank to be  distributed
to the Bank entitled thereto in like funds.

      (c)  Whenever  any payment of  principal  of, or interest on, the Domestic
Loans or any Money Market  Absolute  Rate Loans or of fees shall be due on a day
which is not a Domestic  Business  Day,  the date for payment  thereof  shall be
extended  to the next  succeeding  Domestic  Business  Day.  If the date for any
payment of  principal is extended by  operation  of law or  otherwise,  interest
thereon shall be payable for such extended time.

      (d) Unless the Agent shall have received notice from the relevant Borrower
prior to the date on which any payment is due to the Banks  hereunder  that such
Borrower  will not make such  payment in full,  the Agent may  assume  that such
Borrower  has made such  payment in full to the Agent on such date and the Agent
may, in reliance upon such  assumption,  cause to be distributed to each Bank on
such due date an amount  equal to the amount  then due such Bank.  If and to the
extent that such Borrower  shall not have so made such payment,  each Bank shall
repay to the Agent  forthwith  on demand such amount  distributed  to such Bank,
together  with  interest  thereon,  for each day from the date  such  amount  is
distributed  to such Bank  until the date such Bank  repays  such  amount to the
Agent, at the Federal Funds Rate.

      (e) All payments  hereunder  shall be made without setoff or  counterclaim
and shall be made in Dollars except as expressly provided in Section 2.17(l).

      SECTION  2.14.  Funding  Losses.  If any  Borrower  makes any  payment  of
principal  with  respect to any Fixed Rate Loan  (pursuant  to Article II, VI or
VIII or  otherwise)  on any day other than the last day of the  Interest  Period
applicable thereto, or the end of an applicable period fixed pursuant to Section
2.08(d),  or if any  Borrower  fails to borrow any Fixed Rate Loans after notice
has been given to any Bank in  accordance  with Section  2.05(a) or to change or
continue the Type of, or the duration of the Interest Period  applicable to, any
Fixed Rate Loans  after  notice  has been given to any Bank in  accordance  with
Section  2.07(c),  such Borrower shall  reimburse each Bank within 15 days after
demand for any  resulting  loss or expense  incurred by it (or by an existing or
prospective  Participant in the related Loan) including (without limitation) any
loss  incurred  in  obtaining,  liquidating  or  employing  deposits  from third
parties,  but excluding  loss of margin for the period after any such payment or
failure  to  borrow;  provided  that  such  Bank  shall  have  delivered  to the
applicable  Borrower a  certificate  as to the  amount of such loss or  expense,
which  certificate  shall be  conclusive in the absence of manifest  error.  For
purposes of this Section,  any Swingline  Loan bearing  interest at a fixed rate
shall be deemed to be a Fixed Rate Loan.

      SECTION  2.15.  Computation  of Interest and Fees.  Interest  based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 or 366 days
and paid for the  actual  number of days  elapsed  (including  the first day but
excluding  the last day).  All other  interest and fees shall be computed on the
basis  of a year of 360 days and paid  for the  actual  number  of days  elapsed
(including the first day but excluding the last day).


                                      -33-
<PAGE>

      SECTION 2.16. Judgment Currency. If for the purposes of obtaining judgment
in any court it is necessary to convert a sum due from any Borrower hereunder or
under any of the Notes in the currency  expressed to be payable  herein or under
the Notes (the "specified  currency") into another currency,  the parties hereto
agree,  to the fullest extent that they may  effectively do so, that the rate of
exchange  used  shall  be  that at  which  in  accordance  with  normal  banking
procedures  the Agent could  purchase  the  specified  currency  with such other
currency  at the  Agent's  Boston  office  on  the  Euro-Currency  Business  Day
preceding  that on which  final  judgment  is  given.  The  obligations  of each
Borrower in respect of any sum due to any Bank or the Agent  hereunder  or under
any Note  shall,  notwithstanding  any  judgment  in a  currency  other than the
specified  currency,  be discharged only to the extent that on the Euro-Currency
Business Day following receipt by such Bank or the Agent (as the case may be) of
any sum adjudged to be so due in such other  currency such Bank or the Agent (as
the case may be) may in accordance with normal banking  procedures  purchase the
specified  currency  with such other  currency;  if the amount of the  specified
currency so  purchased is less than the sum  originally  due to such Bank or the
Agent,  as the case may be, in the  specified  currency,  the  Borrower  that is
liable for the  relevant  payment  agrees,  to the  fullest  extent  that it may
effectively  do so,  as a  separate  obligation  and  notwithstanding  any  such
judgment,  to indemnify such Bank or the Agent, as the case may be, against such
loss, and if the amount of the specified  currency so purchased  exceeds (a) the
sum  originally  due to any  Bank or the  Agent,  as the  case  may  be,  in the
specified  currency  and (b) any amounts  shared with other Banks as a result of
allocations  of such  excess as a  disproportionate  payment  to such Bank under
Section 9.04,  such Bank or the Agent,  as the case may be, agrees to remit such
excess to such Borrower.

      SECTION 2.17. Letters of Credit. (a) Any Borrower may request the issuance
of Letters of Credit by any Issuing Bank, in a form reasonably acceptable to the
Agent and such Issuing Bank,  appropriately  completed,  for the account of such
Borrower,  at any time and from time to time during the Revolving Credit Period;
provided  that any Letter of Credit shall be issued only if, and each request by
any  Borrower  for the  issuance  of any  Letter  of  Credit  shall be  deemed a
representation  and warranty of the Company and such Borrower that,  immediately
following  the issuance of any such Letter of Credit,  (i) the sum of the Letter
of Credit Exposure and the aggregate  principal amount of all outstanding  Loans
shall not exceed the Total Commitments, (ii) the Letter of Credit Exposure shall
not exceed  $50,000,000,  and (iii) if such  Letter of Credit  provides  for the
payment of drawings in an Alternative  Currency,  the aggregate Dollar Amount of
all outstanding Letter of Credit Exposure denominated in Alternative  Currencies
shall not exceed $50,000,000.

      (b) Each  Letter of Credit  shall  provide  for  payment  of all  drawings
thereunder in Dollars or, subject to Section 2.17(l), an Alternative Currency.

      (c) Each  issuance  of any  Letter of Credit  shall be made on such  prior
notice from the  applicable  Borrower to the Issuing Bank as shall be acceptable
to such Issuing  Bank  specifying  the date of issuance,  the date on which such
Letter of Credit is to expire  (which shall not be later than the earlier of (i)
the date that is one Domestic  Business Day prior to the  Termination  Date, and
(ii)  subject to  renewal,  the date one year  after the date of such  Letter of
Credit,  or, if such  Letter of Credit is issued to a  beneficiary  outside  the
United States, the date that is five Domestic


                                      -34-
<PAGE>

Business Days prior to the  Termination  Date),  the amount and currency of such
Letter of Credit,  the name and  address of the  beneficiary  of such  Letter of
Credit,  whether such Letter of Credit is a  documentary  or stand-by  Letter of
Credit,  the purpose of such Letter of Credit, and such other information as may
be necessary or  desirable to complete  such Letter of Credit.  The Issuing Bank
will give the Agent  prompt  notice of the issuance and amount of each Letter of
Credit  issued  by it,  the  currency  thereof  (and,  if  such  currency  is an
Alternative  Currency,  the Dollar  Amount  thereof) and the  expiration of such
Letter of Credit. The Issuing Bank will give the Agent and the Company (i) daily
notice of the  aggregate  amount  available  to be drawn  under all  outstanding
Letters of Credit issued by it, (ii) a quarterly summary indicating,  on a daily
basis during such quarter, the issuance of any Letter of Credit issued by it and
the amount thereof,  the expiration of any such Letter of Credit and any payment
on drafts  presented  under  such  Letters  of  Credit  and (iii) in the case of
Letters of Credit denominated in an Alternative Currency, periodic notice of the
Dollar  Amount  thereof as  contemplated  by Section  2.17(l).  The Agent  shall
promptly provide the Banks with copies of such reports.

      (d) The Issuing Bank, by the issuance of such Letter of Credit and without
any  further  action on the part of such  Issuing  Bank or the Banks in  respect
thereof,  hereby  grants to each Bank,  and each Bank hereby  acquires  from the
Issuing  Bank,  a  participation  in such Letter of Credit  equal to such Bank's
Applicable  Percentage of the aggregate  amount available to be drawn under such
Letter of Credit,  effective  upon the  issuance  of such  Letter of Credit.  In
consideration  and in furtherance of the foregoing,  each Bank hereby absolutely
and  unconditionally  agrees to pay to the Agent, on behalf of the Issuing Bank,
in accordance  with Section  2.05(c) and, if applicable  subsection  (l) of this
Section, such Bank's Applicable Percentage of each Letter of Credit Disbursement
made by the Issuing Bank and not reimbursed by the relevant Borrower when due in
accordance  with  subsection (g) of this Section;  provided that the Banks shall
not be obligated to make any such payment with respect to any wrongful Letter of
Credit  Disbursement  made  as a  result  of the  gross  negligence  or  willful
misconduct of the Issuing Bank.

      (e) Each Bank  acknowledges  and  agrees  that its  obligation  to acquire
participations  pursuant to subsection (d) above in respect of Letters of Credit
is absolute  and  unconditional  and shall not be  affected by any  circumstance
whatsoever, including the occurrence and continuance of a Default, and that each
such  payment  shall be made  without  any  offset,  abatement,  withholding  or
reduction whatsoever (subject only to the proviso in subsection (d) above).

      (f) During the Revolving  Credit Period,  the Company shall pay (i) to the
Agent quarterly in arrears for the account of the Banks ratably (A) a fee at the
per annum rate equal to the Euro-Currency Margin on the aggregate undrawn amount
of all  outstanding  Letters  of  Credit  on each day that are in the  nature of
standby  Letters  of Credit and (B) a fee at the per annum rate equal to 33 1/3%
of the  Euro-Currency  Margin  on the  aggregate  undrawn  amount  of all  other
outstanding Letters of Credit on each day and (ii) to the Issuing Bank quarterly
in arrears for the account of the Issuing  Bank,  a fronting fee equal to 0.125%
of the aggregate  undrawn  amount of all  outstanding  Letters of Credit on each
day. Accrued fees under this subsection shall be calculated by the Agent (in the
case of fees  payable  pursuant to clause (i) above) or the  applicable  Issuing
Bank (in the case of fees payable to it pursuant to clause (ii) above) and shall
be payable  quarterly in arrears on the last day of March,  June,  September and
December in each year and on


                                      -35-
<PAGE>

the  Termination  Date  (or  any  earlier  date on  which  the  Commitments  are
terminated).  The  Agent (in the case of fees  payable  pursuant  to clause  (i)
above) or the Issuing Bank (in the case of fees payable to it pursuant to clause
(ii)  above)  will  notify the  Company of the  amount of accrued  fees  payable
hereunder on each payment date. In addition to the foregoing, the Borrower shall
pay directly to the Issuing Bank, for its account,  the Issuing Bank's customary
processing and  documentation  fees in connection with the issuance or amendment
of or  payment  on any Letter of  Credit,  payable  within 15 days after  demand
therefor by the Issuing Bank.

      (g) If the Issuing  Bank shall pay any draft  presented  under a Letter of
Credit,  the Borrower shall pay directly to such Issuing Bank an amount equal to
the amount of such draft  before 2:00 P.M.  (New York City time),  on the day on
which the  Issuing  Bank  shall  have  notified  the  Company  (as  provided  in
subsection (j) below) that payment of such draft will be made; provided that, if
the Company shall not have received  notice of such draft before 10:00 A.M. (New
York  City  time) on the date  that  payment  of such  draft is made,  then such
payment  may be  made by  such  Borrower  to the  Issuing  Bank on the  Domestic
Business Day immediately  following the date of receipt by the Company of notice
of such draft,  together  with interest (at a rate per annum equal to the sum of
the  Euro-Currency  Margin at the time plus the rate  determined  by the Issuing
Bank to be equal to the rate per annum at which deposits in the same currency as
such draft are then being  offered to the Issuing  Bank in the London  interbank
market for a period of one month) on the amount of such draft from and including
the date such  draft was paid by the  Issuing  Bank to but  excluding  such next
Domestic  Business Day. If the Borrower shall fail to pay any amount required to
be paid by it under this  subsection  when due,  such unpaid  amount  shall bear
interest, for each day from and including the due date to but excluding the date
of payment, at a rate per annum equal to the interest rate applicable to overdue
Base Rate Loans.

      (h) Each Borrower's obligation to reimburse Letter of Credit Disbursements
as  provided  in  subsection  (g) above  shall be  absolute,  unconditional  and
irrevocable and shall be performed strictly in accordance with the terms of this
Agreement under any and all circumstances whatsoever, and irrespective of:

            (i) any lack of validity or  enforceability  of any Letter of Credit
      or any Loan Document;

            (ii) the  existence  of any claim,  setoff,  defense or other  right
      which any  Borrower,  any  Subsidiary  or any other Person may at any time
      have against the beneficiary under any Letter of Credit, the Issuing Bank,
      the  Agent  or any  Bank or any  other  Person  in  connection  with  this
      Agreement,  any other Loan  Document  or any other  related  or  unrelated
      agreement or transaction;

            (iii) any draft or other document presented under a Letter of Credit
      proving to be forged,  fraudulent,  invalid or insufficient in any respect
      or any statement therein being untrue or inaccurate in any respect;


                                      -36-
<PAGE>

            (iv)  payment by the Issuing  Bank under a Letter of Credit  against
      presentation  of a draft or other  document which does not comply with the
      terms of such Letter of Credit, subject to subsection (i) below; and

            (v) any  other  act or  omission  or delay of any kind or any  other
      circumstance  or event  whatsoever,  whether or not  similar to any of the
      foregoing  and  whether  or not  foreseeable,  that  might,  but  for  the
      provisions  of  this  subsection  (h),  constitute  a legal  or  equitable
      discharge of any Borrower's obligations hereunder.

      (i) None of the Banks  (including  any Issuing Bank) nor the Agent nor any
of their  officers  or  directors  or  employees  or  agents  shall be liable or
responsible by reason of or in connection  with (and the Company shall indemnify
and hold  harmless  each of the Banks,  the  Issuing  Bank,  the Agent and their
officers,  directors,  employees  and  agents  from  and  against  any  and  all
liabilities, losses, damages, costs and expenses, including, without limitation,
reasonable  fees and  disbursements  of  counsel,  arising  by  reason  of or in
connection with) the execution and delivery or transfer of or payment or failure
to pay under any  Letter of  Credit,  including  without  limitation  any of the
circumstances  enumerated  in  subsection  (h) above,  as well as (i) any error,
omission,  interruption or delay in transmission or delivery of any messages, by
mail, cable, telegraph,  telex or otherwise, (ii) any error in interpretation of
technical  terms,  (iii) any loss or delay in the  transmission  of any document
required  in  order to make a  drawing  under a Letter  of  Credit,  or (iv) any
consequences  arising  from  causes  beyond  the  control of the  Issuing  Bank,
including  without  limitation any government  acts, or any other  circumstances
whatsoever  in making or  failing  to make  payment  under any Letter of Credit;
provided  that the Company  shall not be required to indemnify  the Issuing Bank
for any claims, damages, losses, liabilities,  costs or expenses, and a Borrower
shall have a claim for direct (but not consequential)  damage suffered by it, to
the extent found by a court of competent jurisdiction to have been caused by (x)
the willful  misconduct or gross  negligence of the Issuing Bank in  determining
whether a request  presented  under any Letter of Credit  issued by it  complied
with the terms of such Letter of Credit or (y) the Issuing Bank's failure to pay
under  any  Letter of Credit  issued  by it after  the  presentation  to it of a
request  strictly  complying  with the terms and  conditions  of such  Letter of
Credit.  Nothing in this  subsection (i) is intended to limit the obligations of
any  Borrower  under any other  provision of this  Agreement.  To the extent the
Company does not indemnify the Issuing Bank as required by this subsection,  the
Banks  agree to do so  ratably  in  accordance  with  their  Commitments.  It is
expressly  understood  and agreed that,  for purposes of  determining  whether a
wrongful  payment under a Letter of Credit resulted from an Issuing Bank's gross
negligence or willful  misconduct,  the Issuing Bank may accept  documents  that
appear  on  their  face  to be in  order,  without  responsibility  for  further
investigation,  regardless of any notice or  information to the contrary and, in
making any payment  under any Letter of Credit (A) an Issuing  Bank's  exclusive
reliance on the documents  presented to it under such Letter of Credit as to any
and all matters set forth therein, including reliance on the amount of any draft
presented  under  such  Letter of  Credit,  whether or not the amount due to the
beneficiary  thereunder  equals the amount of such draft and  whether or not any
document  presented  pursuant to such Letter of Credit proves to be insufficient
in any material  respect,  if such  document on its face appears to be in order,
and whether or not any other statement or any other document  presented pursuant
to such Letter of Credit proves to be forged or invalid or any statement therein
proves to be


                                      -37-
<PAGE>

inaccurate or untrue in any respect  whatsoever and (B) any noncompliance in any
immaterial  respect of the documents  presented under such Letter of Credit with
the terms  thereof  shall,  in each case,  be deemed not to  constitute  willful
misconduct or gross negligence of the Issuing Bank.

      (j) The  Issuing  Bank shall,  promptly  following  its  receipt  thereof,
examine all  documents  purporting  to  represent  a demand for payment  under a
Letter of Credit  issued by it. The  Issuing  Bank shall as promptly as possible
give telephonic notification,  confirmed by telex or telecopy, to the Agent, the
Company and the  applicable  Borrower of such demand for payment and whether the
Issuing Bank has made or will make a Letter of Credit  Disbursement  thereunder,
provided  that the failure to give such notice shall not relieve any Borrower of
its obligation to reimburse any such Letter of Credit Disbursement in accordance
with this Section. The Agent shall promptly give each Bank notice thereof.

      (k) If at any time,  as a result of an  adjustment to the Dollar Amount of
any outstanding Letter of Credit Exposure denominated in an Alternative Currency
or otherwise, after giving effect to any prepayment of Loans required to be made
pursuant to Section  2.12(c),  the sum of the Letter of Credit  Exposure and the
aggregate   principal  amount  of  all  outstanding   Loans  exceeds  the  Total
Commitments,  or the Letter of Credit  Exposure  exceeds  $50,000,000,  then the
Company  shall  provide  cash  collateral  in  respect  of the  Letter of Credit
Exposure as provided  below in an amount  equal to such excess;  provided  that,
solely for purposes of determining whether the Company is in compliance with the
foregoing  requirements of this subsection (k), the Total  Commitments  shall be
deemed to be  increased  by the amount of any cash  collateral  then held by the
Agent pursuant to this subsection (k). In the event that the Company is required
pursuant to the terms of this Agreement to provide cash collateral in respect of
the Letter of Credit Exposure,  the Company shall deposit in an account with the
Agent,  for the benefit of the Banks  (including the Issuing Bank), an amount in
cash  equal to (x) in the  case of a  deposit  required  pursuant  to the  first
sentence of this subsection  (k), the amount  specified  therein,  or (y) in the
case of a deposit required as a result of an Event of Default, the entire Letter
of Credit  Exposure.  Such deposit shall be held by the Agent as collateral  for
the payment and performance of the  Obligations.  The Agent shall have exclusive
dominion and control,  including the exclusive  right of  withdrawal,  over such
account.  Other than any interest  earned on the  investment of such deposits in
Temporary Cash  Investments,  which  investments shall be made at the option and
sole but  reasonable  discretion  of the  Agent,  such  deposits  shall not bear
interest.  Interest or profits,  if any, on such investments shall accumulate in
such account. Moneys in such account shall automatically be applied by the Agent
to reimburse  the Issuing Banks for Letter of Credit  Disbursements  and, if the
maturity of the Loans has been accelerated,  to satisfy the Obligations.  If the
Company is required to provide an amount of cash collateral  hereunder  pursuant
to the first sentence of this subsection (k), the Agent shall return such amount
(to the extent not applied as aforesaid)  to the Company,  from time to time, to
the extent that doing so would not give rise to an obligation on the part of the
Company to provide additional cash collateral pursuant to such sentence.  If the
Company  is  required  to provide an amount of cash  collateral  hereunder  as a
result of an Event of  Default,  such  amount  (to the  extent  not  applied  as
aforesaid) shall be returned to the Company within three Domestic  Business days
after all  Events of Default  have been  cured or  waived,  and if prior to such
return the amount of the Letter of Credit Exposure is reduced, any

                                      -38-
<PAGE>

excess of the  amount  deposited  (to the extent not  applied as  aforesaid  and
disregarding  interest or profits on investments) over the reduced amount of the
Letter of Credit  Exposure shall be returned to the Company  promptly after such
reduction  gives rise to such  excess.  Notwithstanding  the  foregoing,  if any
Obligation  payable by any  Borrower  hereunder  is due and  payable but remains
unpaid at the time that the Agent  would  otherwise  be  required  to return any
amount of cash  collateral to the Company  hereunder,  the Agent may retain such
cash  collateral  and apply the  amounts  retained to the payment of such unpaid
Obligation.

      (l) Any Borrower may request the issuance of a Letter of Credit  providing
for the payment of drawings in an Alternative  Currency subject to the terms and
conditions  of  this  subsection  (l),  in  addition  to  the  other  conditions
applicable to the issuance of Letters of Credit  hereunder.  The issuance of any
such Letter of Credit  shall be subject to the approval of the Issuing Bank that
is  requested  to issue such  Letter of Credit.  If any such Letter of Credit is
issued, the following provisions shall apply:

            (i) For purposes of  determining  the Letter of Credit  Exposure and
      for purposes of calculating fees payable under Section 2.17(f), the amount
      of  such  Letter  of  Credit  and of any  unreimbursed  Letter  of  Credit
      Disbursements  in respect thereof shall be deemed to be, as of any date of
      determination,  the Dollar Amount thereof at such date. The initial Dollar
      Amount of any such  Letter of Credit  shall be  determined  by the Issuing
      Bank that shall have  issued such Letter of Credit on the date of issuance
      thereof and adjusted from time to time thereafter as provided  below.  The
      Dollar Amount of each such Letter of Credit  outstanding shall be adjusted
      by the  Issuing  Bank that shall have  issued such Letter of Credit on the
      15th day and the last day of each  calendar  month (or, if any such day is
      not a  Euro-Currency  Business Day, on the next  succeeding  day that is a
      Euro-Currency  Business Day). If a Letter of Credit  Disbursement  is made
      under any such  Letter of  Credit,  the  Dollar  Amount of such  Letter of
      Credit  Disbursement  shall be  determined  by the Issuing Bank that shall
      have  issued  such Letter of Credit on the date that such Letter of Credit
      Disbursement is made. The Issuing Bank shall make each such  determination
      to be made by it by  calculating  the  amount  in  Dollars  that  would be
      required  in order  for the  Issuing  Bank to  purchase  an  amount of the
      applicable Alternative Currency equal to the amount of the relevant Letter
      of Credit or unreimbursed Letter of Credit  Disbursement,  as the case may
      be, on the date of  determination  at such Issuing Bank's spot buying rate
      for Dollars against such  Alternative  Currency as of  approximately  9:00
      a.m. (New York City time) on such date of determination.  The Issuing Bank
      shall notify the Agent and the Company promptly of each such Dollar Amount
      determined  by it, on the date that such  determination  is required to be
      made.

            (ii)  Subject  to  paragraph  (iv)  below,  the  obligation  of  the
      applicable Borrower to reimburse the Issuing Bank for any Letter of Credit
      Disbursement under any such Letter of Credit, and to pay interest thereon,
      shall be payable only in the Alternative  Currency in which such Letter of
      Credit  Disbursement  is made,  and shall not be  discharged  by paying an
      amount in Dollars or any other  currency;  provided  that the Issuing Bank
      may agree,  in its sole  discretion,  to accept  reimbursement  in another
      currency,  but any such agreement  shall not affect the obligations of the
      Banks or the


                                      -39-
<PAGE>

      relevant   Borrower  under   paragraphs  (iii)  and  (iv)  below  if  such
      reimbursement is not actually made to such Issuing Bank when due.

            (iii)  The  obligations  of each Bank  under  Sections  2.05(c)  and
      2.17(d) to pay its  Applicable  Percentage of any  unreimbursed  Letter of
      Credit  Disbursement under any such Letter of Credit shall be payable only
      in Dollars and shall be in an amount equal to such  Applicable  Percentage
      of the Dollar Amount of such  unreimbursed  Letter of Credit  Disbursement
      determined as provided in clause (i) above.  Under no circumstances  shall
      the provisions  hereof  permitting the issuance of Letters of Credit in an
      Alternative  Currency  be  construed,  by  implication  or  otherwise,  as
      imposing any  obligation  upon any Bank to make any Loan or other  payment
      under any Loan  Document,  or to accept any payment from the  Borrowers in
      respect of any Obligations,  in any currency other than Dollars,  it being
      understood  that the parties intend all  Obligations to be denominated and
      payable  only in Dollars  except as expressly  provided in paragraph  (ii)
      above.

            (iv)  If and  to the  extent  that  any  Bank  pays  its  Applicable
      Percentage of any  unreimbursed  Letter of Credit  Disbursement  under any
      such Letter of Credit,  then,  notwithstanding  paragraph (ii) above,  the
      obligation  of the  applicable  Borrower to reimburse  the portion of such
      Letter of Credit  Disbursement  funded by such Bank shall be converted to,
      and shall be payable  only in,  Dollars (in an amount  equal to the Dollar
      amount funded by such Bank as provided  above) and shall not be discharged
      by  paying  an amount in any  other  currency.  Interest  accrued  on such
      unreimbursed  Letter of Credit  Disbursement  to and excluding the date of
      such  payment  by such Bank  shall be for the  account  of the  applicable
      Issuing Bank and be payable in the applicable  Alternative  Currency,  but
      interest  thereafter  shall accrue on the Dollar  amount owed to such Bank
      and shall be payable in Dollars.

      SECTION 2.18. Not Used.

      SECTION  2.19.  Eligible  Subsidiaries.  The Company may from time to time
cause any  Wholly-Owned  Consolidated  Subsidiary  (or,  with the consent of the
Required  Banks,  any other  Subsidiary)  to  become  eligible  to borrow  under
Sections 2.01, 2.03 and 2.04 or to have Letters of Credit issued for its account
under Section 2.17 by delivering  to the Agent an Election to  Participate  with
respect to such  Subsidiary and by causing such Subsidiary to become a Guarantor
under the Guarantee  Agreement  and a Grantor under the Pledge  Agreement and by
causing the owner of Equity  Interests  in such  Subsidiary  to become a Grantor
under the Pledge Agreement.  The eligibility of any such Subsidiary to borrow or
to have  Letters of Credit  issued for its  account  under said  Sections  shall
terminate when the Agent  receives a Notice of Termination  with respect to such
Subsidiary.  Each Election to  Participate  delivered to the Agent shall be duly
executed on behalf of the relevant Subsidiary and the Company, and each Election
to  Terminate  delivered  to the Agent  shall be duly  executed on behalf of the
Company,  in such number of copies as the Agent may request.  The delivery of an
Election to Terminate shall not affect any obligation of the relevant Subsidiary
theretofore incurred.  The Agent shall promptly give notice to the Banks and the
Issuing  Bank of its  receipt of any  Election  to  Participate  or  Election to
Terminate.


                                      -40-
<PAGE>

                                   ARTICLE III

                                   Conditions

      SECTION 3.01. Effectiveness. The obligation of the Banks to make Loans and
of the  Issuing  Banks to issue  Letters of Credit  under this  Agreement  shall
become  effective on the date that each of the following  conditions  shall have
been satisfied (or waived in accordance with Section 9.05):

      (a)  receipt  by the Agent of  counterparts  hereof  signed by each of the
parties hereto (or, in the case of any party as to which an executed counterpart
shall not have been received, receipt by the Agent in form satisfactory to it of
telegraphic, telex or other written confirmation from such party of execution of
a counterpart hereof by such party);

      (b) receipt by the Agent for the  account of each Bank of a duly  executed
Note of the Company dated on or before the  Effective  Date  complying  with the
provisions of Section 2.06;

      (c) receipt by the Agent of counterparts of the Guarantee Agreement,  duly
executed by the Initial Guarantors and of the Pledge Agreement, duly executed by
the Borrowers, the Initial Guarantors and owners of Equity Interests in Material
Subsidiaries,  together with UCC-1 financing statements,  stock certificates and
stock powers required thereunder;

      (d) receipt by the Agent of a  certificate  signed by the chief  financial
officer,  treasurer,  assistant  treasurer or controller of the Company, in each
case being authorized to do so, dated the Effective Date, to the effect that (i)
no Default has occurred and is continuing as of the Effective Date, and (ii) the
representations and warranties of the Company set forth in Article IV hereof are
true in all material respects on, and as of, the Effective Date;

      (e) receipt by the Agent of all fees and other compensation payable to the
Agent  and the  Banks  on or  prior  to the  Effective  Date  pursuant  to their
agreements  with  the  Company  (which  may be paid out of the  initial  Loans),
including  reimbursement of all reasonable  out-of-pocket  expenses of the Agent
payable by the Company in accordance with this Agreement for which invoices have
been presented;

      (f)  receipt  by the Agent of (i) an opinion  of Marc G.  Schuback,  Esq.,
counsel  for the  Company  and its  Subsidiaries  which are  parties to the Loan
Documents,  substantially in the form of Exhibit F-1 hereto, and (ii) an opinion
of Pitney,  Hardin,  Kipp & Szuch,  counsel for the Company and its Subsidiaries
which are parties to the Loan  Documents,  substantially  in the form of Exhibit
F-2  hereto,  in each case  covering  such  additional  matters  relating to the
Financing Transactions as the Required Banks may reasonably request;

      (g)  receipt  by  the  Agent  of all  documents  and  certificates  it may
reasonably  request  relating  to the  existence  of the Company and the Initial
Guarantors,  the corporate  authority for and the validity of this Agreement and
the other Loan  Documents,  the accuracy of the


                                      -41-
<PAGE>

representations  and  warranties  contained in this Agreement and the other Loan
Documents  on the  Effective  Date,  the  Financing  Transactions  and any other
matters  relevant hereto or thereto,  all in form and substance  satisfactory to
the Agent;

      (h) the Existing  Credit  Agreement and all commitments  thereunder  shall
have been terminated,  all amounts  outstanding or accrued thereunder shall have
been paid in full  (which  may be paid out of the  initial  Loans) and the Agent
shall have received evidence reasonably satisfactory to it of such termination;

      (i) the Agent shall have received  insurance  certificates  satisfying the
requirements of the Loan Documents; and

      (j) the Agent shall have received reasonably satisfactory written evidence
(including  satisfactory  supporting schedules and other data) that the ratio of
Consolidated Total Debt as of the Effective Date to Consolidated  EBITDA for the
most recently ended period of four  consecutive  fiscal  quarters of the Company
and its Subsidiaries after giving effect to the Feet Acquisition does not exceed
1.75:1.00;

provided  that this  Agreement  shall not become  effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later than
May 31, 2000. The Agent shall  promptly  notify the Company and the Banks of the
Effective  Date,  and such notice shall be conclusive and binding on all parties
hereto.

      SECTION 3.02. Each Credit Event. The obligation of any Bank to make a Loan
on the occasion of any  Borrowing and of the Issuing Bank to issue any Letter of
Credit is subject to the satisfaction of the following conditions:

      (a) receipt by the Agent of a Notice of  Borrowing  as required by Section
2.02 or 2.03, receipt by the Swingline Lender of a notice requesting a Swingline
Loan as required by Section 2.04 or receipt by the applicable  Issuing Bank of a
notice requesting issuance of a Letter of Credit as required by Section 2.17(c),
as applicable;

      (b) the fact that,  immediately  after such  Borrowing  or the issuance of
such  Letter  of  Credit,  the  sum of the  aggregate  principal  amount  of all
outstanding  Loans and the Letter of Credit  Exposure shall not exceed the Total
Commitments;

      (c) the fact that,  immediately  before and after  such  Borrowing  or the
issuance  of such  Letter of Credit,  no  Default  shall  have  occurred  and be
continuing; and

      (d) the fact that the  representations and warranties of the Company (and,
if other than the Company,  the relevant  Borrower)  contained in this Agreement
and the other Loan Documents shall be true in all material respects on and as of
the date of such Borrowing or issuance of such Letter of Credit.


                                      -42-
<PAGE>

Each  Borrowing  hereunder  and the issuance of each Letter of Credit  hereunder
shall be deemed to be a  representation  and  warranty  by the  Company  and the
relevant  Borrower  on the date of such  Borrowing  or  issuance as to the facts
specified in clauses (b), (c) and (d) of this Section.

      SECTION 3.03. Borrowings by Eligible  Subsidiaries;  Letters of Credit for
Eligible Subsidiaries. The obligation of any Bank to make a Loan to any Eligible
Subsidiary and of any Issuing Bank to issue any Letter of Credit for the account
of any Eligible  Subsidiary  are subject to the  satisfaction  of the  following
further conditions:

      (a)  receipt  by the  Agent of  Annex I to the  Guarantee  Agreement  duly
executed  by such  Eligible  Subsidiary,  under which such  Eligible  Subsidiary
becomes a  Guarantor,  and, in the case of a Loan,  receipt by the Agent for the
account of each Bank of a duly executed Note of such Eligible Subsidiary,  dated
on or before the date of the first Loan to such  Subsidiary  and complying  with
the provisions of Section 2.06;

      (b)  receipt by the Agent of a  Supplement  to the Pledge  Agreement  duly
executed by such Eligible  Subsidiary  and the owner of all Equity  Interests in
such  Eligible  Subsidiary,  in each case as a Grantor,  under  which such owner
pledges to and grants to the Agent a security  interest in all Equity  Interests
of such Eligible  Subsidiary,  together with UCC-1 financing  statements,  stock
certificates and stock powers required thereunder;

      (c)  receipt  by the Agent of one or more  opinions  of  counsel  for such
Eligible Subsidiary and the owner of its Equity Interests, reasonably acceptable
to the Agent,  which  taken  together  cover the  matters set forth in Exhibit I
hereto; and

      (d) receipt by the Agent of all documents which it may reasonably  request
relating to the existence of such Eligible  Subsidiary,  the corporate authority
for and the validity of the Election to Participate of such Eligible Subsidiary,
this  Agreement,   the  Note  and  the  Guarantee  Agreement  of  such  Eligible
Subsidiary,  and any other matters relevant  thereto,  all in form and substance
reasonably satisfactory to the Agent.

                                   ARTICLE IV

                         Representations and Warranties

      The Company represents and warrants that:

      SECTION 4.01.  Corporate Existence and Power. The Company is a corporation
duly  incorporated,  validly existing and in good standing under the laws of the
State of Delaware,  and has all corporate  powers and all material  governmental
licenses,  authorizations,  consents  and  approvals  required  to  carry on its
business as now conducted.

      SECTION 4.02. Corporate and Governmental Authorization;  No Contravention.
The  execution,  delivery  and  performance  by  each of the  Borrowers  and the
Guarantors  of each  Loan  Document  to which it is or is to be a party  and the
Financing Transactions are within its

                                      -43-
<PAGE>

corporate powers,  have been duly authorized by all necessary  corporate action,
require  no  action  by or in  respect  of, or  filing  with,  any  Governmental
Authority or official  thereof (other than such as have been duly taken or made)
or consent of any third party and do not  contravene,  or  constitute  a default
under,  any provision of applicable  law or regulation or of the  certificate of
incorporation  or by-laws of any Borrower or any Guarantor or of any  indenture,
agreement,  judgment, injunction, order, decree or other instrument binding upon
any Borrower or any  Guarantor or result in the  creation or  imposition  of any
Lien  on  any  asset  of  the  Company  or  any   Subsidiary,   except  for  any
contraventions  or  defaults  under  such  indentures,   agreements,  judgments,
injunctions,  orders, decrees or other instruments or the creation or imposition
of any such Liens that,  individually or in the aggregate,  would not constitute
an Event of Default under  Section 5.10 and would not  reasonably be expected to
have a Material Adverse Effect. All requisite Governmental Authorities and other
third parties required to approve or consent to the Financing Transactions or to
the Feet Acquisition  have approved or consented  thereto to the extent required
(without the imposition of any materially burdensome condition or qualification)
and all such approvals or consents are in full force and effect,  all applicable
appeal periods shall have expired,  and there exists no governmental or judicial
action,  actual or to the  knowledge  of the Company,  threatened,  that has, or
would have, a  reasonable  likelihood  of  restraining,  preventing  or imposing
materially  burdensome  conditions on any of the Financing  Transactions  or the
Feet Acquisition.

      SECTION  4.03.  Binding  Effect.  This  Agreement  constitutes a valid and
binding  agreement  of each of the  Borrowers,  and the other Loan  Documents to
which the  Borrower  or any of the  Guarantors  is a party,  when  executed  and
delivered in accordance with this Agreement,  will constitute  valid and binding
agreements  and  obligations of each Borrower and each Guarantor that is a party
thereto,  in each case  enforceable  in  accordance  with its terms,  subject to
applicable  bankruptcy,  insolvency and similar laws affecting creditors' rights
generally and equitable principles of general applicability.

      SECTION 4.04. Financial Information.  (a) The Company has delivered to the
Agent  and  the  Banks  copies  of the  following  (collectively,  the  "Initial
Financial  Statements"):  (i) The consolidated  balance sheet of the Company and
its consolidated Subsidiaries as of January 1, 2000 and the related consolidated
statements  of  operations,  shareholders'  equity and cash flows for the fiscal
year then ended,  reported on by and  accompanied by an unqualified  report from
KPMG  LLP,  and  (ii)  the  unaudited  balance  sheet  of the  Company  and  its
consolidated Subsidiaries as at April 1, 2000 a copy of which has been delivered
to each of the Banks,  fairly  present in all material  respects,  in conformity
with generally  accepted  accounting  principles,  the financial position of the
Company as of such date and its  results of  operations  and cash flows for such
fiscal periods.

      (b) The pro forma  consolidated  condensed balance sheet of the Company as
of the effective date of the Feet  Acquisition,  after giving effect thereto,  a
copy of which has been  delivered to each of the Banks,  fairly  presents in all
material respects,  in conformity with generally accepted accounting  principles
applied on a basis  consistent  with the  financial  statements  referred  to in
subsection (a) of this Section, the financial position of the Company as of such
date after giving effect to the Feet Acquisition.


                                      -44-
<PAGE>

      (c) Since January 1, 2000,  there has been no material  adverse  change in
the  business,  operations  or  financial  condition  of  the  Company  and  its
Consolidated Subsidiaries, considered as a whole.

      (d) The  Company  has  reviewed  the  projections  for  future  results of
operations  of the  Company  and its  Consolidated  Subsidiaries  for the period
commencing fiscal year 2000 through fiscal year 2003, dated as of March 17, 2000
(the "Projections"), and the Company hereby certifies to the Agent and the Banks
that the Projections were made in good faith upon reasonable  assumptions at the
time of their  preparation,  which  assumptions are still reasonable on the date
hereof. The Company knows of no reason why such Projections,  when considered as
whole, are not true and correct in all material respects.

      SECTION 4.05.  Litigation.  There is no (i)  injunction,  stay,  decree or
order of any Governmental  Authority or (ii) action,  suit or proceeding pending
against,  or to the knowledge of the Company,  threatened  against or affecting,
the Company or any  Subsidiary  before any  Governmental  Authority  or official
thereof in which there is a reasonable  probability of an adverse decision which
would  reasonably be expected to have a Material  Adverse Effect or which in any
manner draws into question the validity of the Feet Acquisition,  this Agreement
or any other Loan Document.

      SECTION 4.06.  Compliance  with ERISA.  Except to the extent that all such
failures to fulfill  any such  obligations  or comply  with any such  provisions
would not reasonably be expected to have a Material Adverse Effect,  each member
of the ERISA Group has  fulfilled  its  obligations  under the  minimum  funding
standards of ERISA and the  Internal  Revenue Code with respect to each Plan and
is in  compliance  in  all  material  respects  with  the  presently  applicable
provisions  of ERISA and the  Internal  Revenue  Code with respect to each Plan.
Except to the extent that all such waivers,  failures and liabilities  would not
reasonably be expected to have a Material Adverse Effect, no member of the ERISA
Group has (i) sought a waiver of the minimum funding  standard under Section 412
of the  Internal  Revenue  Code in respect of any Plan,  (ii) failed to make any
contribution or payment to any Plan or  Multiemployer  Plan or in respect of any
Benefit  Arrangement,  or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other  security  under  ERISA or the  Internal  Revenue  Code or (iii)
incurred  any  liability  under Title IV of ERISA other than a liability  to the
PBGC for premiums under Section 4007 of ERISA.

      SECTION 4.07. Environmental Matters. The Company and its Subsidiaries have
complied in all respects  with all  Federal,  state,  local and other  statutes,
ordinances, orders, judgments, rulings and regulations relating to environmental
pollution  or to  environmental  regulation  or  control,  except to the  extent
failure to so comply would not reasonably be expected to have a Material Adverse
Effect.  Neither the  Company  nor any  Subsidiary  has  received  notice of any
failure so to comply which alone or together  with any other such failure  would
reasonably be expected to result in a Material Adverse Effect. The facilities of
the Company and its  Subsidiaries do not manage or handle any hazardous  wastes,
hazardous substances, hazardous


                                      -45-
<PAGE>

materials,  toxic substances or toxic pollutants, as those terms are used in the
Resource Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Superfund Amendments and Reauthorization Act
of 1986, the Hazardous Materials Transportation Act, the Toxic Substance Control
Act,  the Clean Air Act or the Clean  Water  Act,  in  violation  thereof  or in
violation  of any  regulations  promulgated  pursuant  thereto  or of any  other
applicable  law where such  violation  would  reasonably  be expected to result,
individually or together with other violations, in a Material Adverse Effect.

      SECTION 4.08.  Taxes. (a) The Company and its  Subsidiaries  have filed or
there has otherwise  been filed all United States Federal income tax returns and
all other  material tax returns  which are required to be filed by them and have
paid or there has otherwise  been paid all taxes shown to be due on such returns
or pursuant to any  assessment  received the Company or any  Subsidiary,  except
where  the same is  being  or will be  contested  in good  faith by  appropriate
proceedings.  The charges, accruals and reserves on the books of the Company and
the Subsidiaries in respect of taxes or other  governmental  charges are, in the
opinion of the Company, adequate.

      (b) Except as disclosed in its Election to Participate, there are no Taxes
or Other Taxes (as defined in Section  8.04(a))  imposed on (by  withholding  or
otherwise) any payment to be made by any Eligible  Subsidiary pursuant hereto or
on its  Notes,  or is  imposed  on or by virtue of the  execution,  delivery  or
enforcement of its Election to Participate or of its Notes.

      SECTION  4.09.  Subsidiaries.  Each of the Eligible  Subsidiaries  and the
Guarantors  is a corporation  duly  incorporated,  validly  existing and in good
standing  under  the  laws of its  jurisdiction  of  incorporation,  and has all
corporate  powers  and  governmental  licenses,  authorizations,   consents  and
approvals  required to carry on its business as now conducted,  except where the
failure to have such corporate powers,  licenses,  authorizations,  consents and
approvals  would not  reasonably  be  expected to have,  individually  or in the
aggregate,  a Material  Adverse  Effect.  Each of the Company's  other corporate
Subsidiaries is a corporation  duly  incorporated,  validly existing and in good
standing  under  the  laws of its  jurisdiction  of  incorporation,  and has all
corporate powers and all  governmental  licenses,  authorizations,  consents and
approvals  required  to carry on its  business as now  conducted,  except to the
extent that all failures to comply with the  foregoing  would not  reasonably be
expected to have, in the aggregate,  a Material  Adverse  Effect.  Each Eligible
Subsidiary is a Wholly-Owned  Consolidated Subsidiary (unless otherwise approved
by the  Required  Banks).  All of the Material  Subsidiaries  existing as of the
Effective Date are listed on Schedule 4.09,  indicating in each case their state
of  incorporation  and the owner(s) of all Equity Interests  thereof.  As of the
Effective  Date there are not any  Material  Subsidiaries  which are not Initial
Guarantors.

      SECTION 4.10. Not an Investment  Company or Holding  Company.  Neither any
Borrower nor any Guarantor is an "investment  company" within the meaning of the
Investment  Company Act of 1940, as amended,  or a "holding  company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.


                                      -46-
<PAGE>

      SECTION 4.11. Full  Disclosure.  All information  heretofore  furnished in
writing by the Company or any  Subsidiary  to the Agent or any Bank for purposes
of or in  connection  with  this  Agreement,  any  other  Loan  Document  or the
Financing  Transactions  was, and all such  information  hereafter  furnished in
writing by the  Company or any  Subsidiary  to the Agent or any Bank will be, in
each case considered as a whole,  true and accurate in all material  respects on
the date as of which such  information  is stated or certified.  The Company has
disclosed  to the  Banks in  writing  any and all  facts  which  materially  and
adversely  affect  or may  affect  (to  the  extent  that  the  Company  can now
reasonably  foresee),  the business,  operations  or financial  condition of the
Company and its Consolidated Subsidiaries, considered as a whole, or the ability
of the  Company to perform  its  obligations  hereunder  or under any other Loan
Document.

      SECTION 4.12. Compliance with Laws and Agreements. Neither the Company nor
any  Subsidiary  is in violation of any law, rule or  regulation,  or in default
with respect to any judgment, writ, injunction or decree applicable to it of any
Governmental Authority,  where such violation or default (individually or in the
aggregate)  would reasonably be expected to result in a Material Adverse Effect.
Neither  the Company nor any  Subsidiary  is in default in any manner  under any
provision of any indenture or other agreement or instrument  evidencing Debt, or
any other  agreement or  instrument to which it is a party or by which it or any
of  its  properties  or  assets  are  or  may  be  bound,   where  such  default
(individually  or in the aggregate)  would reasonably be expected to result in a
Material Adverse Effect. Each of the Kmart Agreement and each material agreement
contemplated by the Kmart Agreement and entered into in connection  therewith is
in full force and effect and no  default  exists  thereunder  on the part of the
Company or any of its  Affiliates  or, to the knowledge of the Company or any of
its Subsidiaries, on the part of Kmart Corporation or any of its affiliates. The
Company  has been  assigned  all of the right,  title and  interest  of Melville
Corporation  under the Kmart  Agreement  and the Company has not assigned any of
such right,  title and  interest  thereunder  to any  Person.  No  inventory  is
directly  purchased  by any of the  Subsidiaries  which  are  not  Borrowers  or
Guarantors other than pursuant to agreements with Affiliates which are Borrowers
and Guarantors  hereunder and such  Subsidiaries  do not incur any Debt or trade
liabilities  with  respect  to  their  respective   inventories,   except  trade
liabilities owed to such Affiliates which are Borrowers or Guarantors hereunder.
No  amendment  has been made to the Kmart  Agreement  not  permitted  under this
Agreement.

      SECTION  4.13.  Governmental  Approvals.  As of the  Effective  Date,  all
material consents and approvals of, and material filings and registrations with,
and all other material  actions in respect of, all  Governmental  Authorities or
any other Person  required in order to  consummate  the  Financing  Transactions
shall have been obtained,  given,  filed or taken and shall be in full force and
effect.

      SECTION  4.14.  Feet  Acquisition;  Title to  Properties . The Company has
consummated the Feet  Acquisition  substantially in accordance with the terms of
the Feet Purchase  Agreement and the Feet Bankruptcy Orders. The Company and its
Consolidated  Subsidiaries own or have the lawful right to use all of the assets
reflected in the consolidated balance sheet of the Company as at January 1, 2000
or  acquired  since that date  (except  property  and assets  sold or  otherwise
disposed of in the ordinary  course of business since that date),  subject to no
Liens except as permitted under Section 5.10.


                                      -47-
<PAGE>

      SECTION 4.15. Franchises,  Patents,  Copyrights, etc.. The Company and its
Subsidiaries  possess or have the lawful right to use all  franchises,  patents,
copyrights,  trademarks, tradenames, licenses and permits, and rights in respect
of the foregoing,  adequate for the conduct of its business substantially as now
conducted without known conflict with any rights of others.

      SECTION 4.16.  Security.  The Guarantee Agreement and the Pledge Agreement
are in full force and effect and the Pledge  Agreement is effective to create in
favor  of the  Agent,  for  the  benefit  of the  Banks,  a  legally  valid  and
enforceable  first  priority,  perfected  security  interest  in the  collateral
described therein which constitutes  without  limitation all Equity Interests of
all Material Subsidiaries, Borrowers and Guarantors, all Intercompany Notes, and
all Affiliate  receivables and general  intangibles and contract rights relating
to such receivables owed to any Material Subsidiary or Borrower or Guarantor and
all proceeds thereof.

                                    ARTICLE V

                                    Covenants

The Company  agrees that, so long as any Bank has any  Commitment or any Loan or
Letter of Credit  Disbursement or accrued interest thereon remains unpaid or any
Letter of Credit remains outstanding:

      SECTION 5.01.  Information.  The Company will deliver to each of the Banks
(directly or through the Agent, in which case the Agent will thereafter  deliver
copies thereof to the Banks):

      (a) as soon as available  and in any event within 90 days after the end of
each fiscal year of the Company, a consolidated balance sheet of the Company and
its Consolidated  Subsidiaries as of the end of such fiscal year and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
such fiscal year, setting forth in each case in comparative form the figures for
the previous  fiscal year, all reported on by KPMG or other  independent  public
accountants  of  nationally  recognized  standing in accordance  with  generally
accepted accounting principles;

      (b) as soon as available  and in any event within 45 days after the end of
each  of the  first  three  quarters  of each  fiscal  year  of the  Company,  a
consolidated  balance sheet of the Company and its Consolidated  Subsidiaries as
of  the  end  of  such  quarter  and  the  related  consolidated  statements  of
operations,  stockholders'  equity and cash flows for such  quarter  and for the
portion of the Company's  fiscal year ended at the end of such quarter,  setting
forth in each case in comparative form the figures for the corresponding quarter
and the  corresponding  portion  of the  Company's  previous  fiscal  year,  all
certified   (subject  to  normal   year-end   adjustments)  as  to  fairness  of
presentation,  generally accepted  accounting  principles and consistency by the
chief financial officer or chief accounting officer of the Company;

      (c) simultaneously  with the delivery of each set of financial  statements
referred to in clauses (a) and (b) above, a certificate  of the chief  financial
officer or the chief accounting officer


                                      -48-
<PAGE>

of the Company (i) setting forth in reasonable detail the calculations  required
to establish  whether the Company was in  compliance  with the  requirements  of
Sections 5.09,  5.10,  5.11,  5.16, 5.17, 5.18 and 5.19 of this Agreement on the
date of such financial  statements,  (ii) setting forth in reasonable detail the
calculations  required  to  establish  the  Company's  Leverage  Ratio  for  the
Calculation  Period ended on the date of the most recent  balance sheet included
in such financial statements, (iii) stating whether any Default exists hereunder
on the date of such certificate  and, if any Default then exists,  setting forth
the details  thereof  and the action  which the Company is taking or proposes to
take with  respect  thereto,  (iv) stating  whether,  since the date of the most
recent financial statements previously delivered pursuant to this Section, there
has been any material  change in the generally  accepted  accounting  principles
applied in the  preparation  of such  statements,  and, if so,  describing  such
change and (v) stating  whether there is any Material  Subsidiary  that is not a
Guarantor;

      (d) simultaneously  with the delivery of each set of financial  statements
referred to in clause (a) above, a statement of the firm of  independent  public
accountants  which  reported on such  statements as to (i) whether  anything has
come to their attention to cause them to believe that any Default existed on the
date of such  statements and (ii) confirming the  calculations  set forth in the
officer's certificate delivered  simultaneously therewith pursuant to clause (c)
above;  provided that the foregoing  shall not be construed to require that such
accountants conduct any investigation outside the regular course of their audit;

      (e) within five days after the chief executive  officer,  president or any
financial  officer of the Company  obtains  knowledge  of any  Default,  if such
Default is then continuing,  a certificate of the chief financial officer or the
chief  accounting  officer of the Company  setting forth the details thereof and
the action which the Company is taking or proposes to take with respect thereto;

      (f) promptly upon the mailing  thereof to the  shareholders of the Company
generally,  copies of all financial statements,  reports and proxy statements so
mailed;

      (g)  promptly  upon  the  filing  thereof,   copies  of  all  registration
statements  (other than the exhibits thereto and any registration  statements on
Form S-8 or its  equivalent)  and reports on Forms 10-K,  10-Q and 8-K (or their
equivalents) which the Company shall have filed with the Securities and Exchange
Commission;

      (h) if and when any member of the ERISA  Group (i) gives or is required to
give notice to the PBGC of any "reportable event" (as defined in Section 4043 of
ERISA) with respect to any Plan which might constitute grounds for a termination
of such Plan under Title IV of ERISA,  or knows that the plan  administrator  of
any Plan has given or is required to give notice of any such reportable event, a
copy of the notice of such reportable event given or required to be given to the
PBGC;  (ii) receives  notice of complete or partial  withdrawal  liability under
Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated,  a copy of such notice;  (iii) receives notice
from  the  PBGC  under  Title IV of ERISA  of an  intent  to  terminate,  impose
liability  (other than for premiums  under Section 4007 of ERISA) in respect of,
or appoint a trustee to administer any Plan, a copy of such notice; (iv)


                                      -49-
<PAGE>

applies for a waiver of the minimum  funding  standard  under Section 412 of the
Internal Revenue Code, a copy of such application; (v) gives notice of intent to
terminate  any Plan under  Section  4041(c) of ERISA,  a copy of such notice and
other  information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or Multiemployer Plan or in respect
of any  Benefit  Arrangement  or makes  any  amendment  to any  Plan or  Benefit
Arrangement  which has resulted or could reasonably be expected to result in the
imposition of a Lien or the posting of a bond or other  security,  a certificate
of the chief financial  officer or the chief  accounting  officer of the Company
setting  forth  details as to such  occurrence  and  action,  if any,  which the
Company or applicable member of the ERISA Group is required or proposes to take;

      (i) within ten days after (A) any ratings of the Company's  Index Debt, if
rated by S&P and Moody's and,  (B) once rated by S&P and Moody's,  any change in
the rating of either such rating agency; and

      (j) from time to time such additional  information regarding the financial
position or business of the Company and the  Subsidiaries  as the Agent,  at the
request of any Bank, may reasonably request.

      SECTION 5.02. Payment of Obligations.  The Company will pay and discharge,
and will  cause  each of its  Subsidiaries  to pay and  discharge,  at or before
maturity, all their respective material obligations and liabilities,  including,
without limitation,  tax liabilities,  except where the same may be contested in
good faith by appropriate  proceedings,  and will maintain,  and will cause each
Subsidiary  to  maintain,  in  accordance  with  generally  accepted  accounting
principles, appropriate reserves for the accrual of any of the same.

      SECTION 5.03.  Maintenance  of Property;  Insurance.  (a) The Company will
keep, and will cause each of its Subsidiaries to keep, all property necessary in
its  business  in good  working  order  and  condition,  ordinary  wear and tear
excepted.

      (b) The Company will maintain,  and will cause each of its Subsidiaries to
maintain,  insurance in such amounts and against such risks as is customary  for
companies in the same or similar businesses, in each case with financially sound
and reputable insurers.

      SECTION  5.04.  Conduct of Business  and  Maintenance  of  Existence.  The
Company will continue,  and will cause each of its Subsidiaries to continue,  to
engage in business of the same general type as now  conducted by the Company and
its  Subsidiaries,  and will preserve,  renew and keep in full force and effect,
and will  cause each of its  Subsidiaries  to  preserve,  renew and keep in full
force and effect,  their  respective  corporate  existence and their  respective
rights,  privileges and franchises  necessary or desirable in the normal conduct
of business;  provided that nothing in this Section 5.04 shall  prohibit (i) any
merger of any Subsidiary of the Company permitted by Section 5.11(a) or (ii) the
termination of the corporate  existence of any Subsidiary if the Company in good
faith  determines  that such  termination is in the best interest of the Company
and is not materially  disadvantageous to the Banks. The Company and each of its
direct and indirect Subsidiaries will cause their respective direct and indirect
Subsidiaries to


                                      -50-
<PAGE>

make  dividends,  distributions  and other  payments to the Company from time to
time as may be necessary to ensure that the  Borrowers  and the  Guarantors  are
able to pay all obligations,  whether now existing or hereafter arising,  of the
Borrowers  and the  Guarantors  under  the Loan  Documents  as and when the same
become due.

      SECTION 5.05.  Compliance  with Laws.  The Company will comply,  and cause
each of its Subsidiaries to comply, in all material respects with all applicable
laws,  ordinances,  rules,  regulations,  and  requirements of any  Governmental
Authority (including,  without limitation,  Environmental Laws and ERISA and the
rules and  regulations  thereunder)  except where the  necessity  of  compliance
therewith is contested in good faith by appropriate proceedings.

      SECTION 5.06. Inspection of Property,  Books and Records. The Company will
keep, and will cause each of its  Subsidiaries  to keep,  proper books of record
and  account  in which  full,  true  and  correct  entries  shall be made of all
dealings  and  transactions  in relation to its  business  and  activities.  The
Company  will  permit,  and  will  cause  each of its  Subsidiaries  to  permit,
representatives  of any Bank at such Bank's expense to (a) visit and inspect any
of their respective properties, (b) examine and make abstracts from any of their
respective books and records and (c) discuss their respective affairs,  finances
and accounts with their respective  officers and independent  public accountants
as often as may reasonably be desired; provided that the exercise by any Bank of
its rights under this  sentence  shall  require  reasonable  prior notice to the
Company and shall be  conducted  during  normal  business  hours in a reasonable
manner so as not to disrupt the normal conduct of the Company's business.

      SECTION 5.07.  Additional  Guarantors.  If at any time after the Effective
Date any Subsidiary (other than (a) a Guarantor or (b) any Subsidiary  organized
outside  the United  States  that does not  Guarantee  any  Indebtedness  of the
Company) is or becomes a Material Subsidiary or a Borrower, the Company,  within
45 days of such  Subsidiary  becoming  a Material  Subsidiary,  or prior to such
Subsidiary  becoming a Borrower,  as applicable,  will cause such  Subsidiary to
become a Guarantor pursuant to the Guarantee Agreement and will cause the Equity
Interests of such Subsidiary to be pledged pursuant to the Pledge Agreement.

      SECTION 5.08. Amendment of Certain Documents.  The Company will not permit
any  amendment  or  modification  to be made to its or any of its  Subsidiaries'
charter or other organizational documents, unless such amendment or modification
does not materially adversely affect each of the Borrowers and the Guarantors or
materially  adversely  affect the rights of the Banks under the Loan  Documents.
The Company will not permit any amendment or  modification to be made to, or any
waiver of its rights or the rights of any Subsidiary  under, the Kmart Agreement
and  material  agreements  entered  into in  connection  therewith,  unless such
amendment,  modification  or waiver  does not  materially  adversely  affect the
Borrowers and the Guarantors  taken as a whole or adversely affect the rights of
the Banks under the Loan Documents.

      SECTION 5.09.  Investments,  Acquisitions.  Neither the Company nor any of
its  Subsidiaries  will make or acquire any Investment in any Person or make any
Acquisition other than:


                                      -51-
<PAGE>

      (a)  Investments  existing  on the  date  hereof  by the  Company  and its
Subsidiaries  in their  Subsidiaries  and  Investments  by the  Company  and its
Subsidiaries  after the date hereof in Consolidated  Subsidiaries of the Company
in furtherance of the Company's business, provided all Material Subsidiaries are
then Guarantors hereunder and all Equity Interests of all Material  Subsidiaries
are then pledged pursuant to the Pledge Agreement;

      (b) Temporary Cash Investments;

      (c) loans  made by the  Meldisco  Corporations  (as  defined  in the Kmart
Agreement) to Kmart  Corporation,  in an aggregate  amount up to 49% of the cash
balances of the Meldisco  Corporations  exceeding  $1,000,000 as required by the
Kmart Agreement;

      (d) any  Acquisition  provided  (i) no Event of  Default  exists  or would
reasonably  be likely to result  therefrom,  (ii)  after  giving  effect to such
Acquisition,  the Company will be in compliance  with the provisions of Sections
5.16,  5.17,  5.18 and  5.19,  both  before,  and  after  giving  effect to such
Acquisition  calculated  on a pro  forma  basis  as of the end and for the  most
recently ended four-quarter period prior to the date of such Acquisition,  (iii)
the target of such  Acquisition is engaged in lines of business similar to those
of the Company and its  Subsidiaries,  and (iv) the aggregate  consideration for
all Acquisitions in any fiscal year of the Company does not exceed $125,000,000;
provided,  however,  the  common  capital  stock of the  Company  may be used as
consideration for such Acquisitions and shall not be included in, or subject to,
such $125,000,000 limitation;

      (e)  Investments  existing  as of the date  hereof  in  Persons  listed in
Schedule 5.09;

      (f)  Investments  acquired by any Borrower or Guarantor in  furtherance of
their  business  for which the Company and its  Subsidiaries  made no  pecuniary
Investment,  but which were acquired in exchange for the granting of licenses or
other  interests   relating  to  intangible   assets  of  the  Company  and  its
Subsidiaries; and

      (g) any cash, loan, advance or similar pecuniary Investment by the Company
not  otherwise  permitted by the  foregoing  clauses of this Section  (including
without  limitation  Investments after the date hereof in Subsidiaries which are
not Consolidated  Subsidiaries) if, immediately after such Investment is made or
acquired,  the  aggregate  net book value of all  Investments  permitted by this
clause (g) does not exceed 15% of the Company's Consolidated Tangible Net Worth.

      SECTION  5.10.  Negative  Pledge.  Neither  the  Company  nor  any  of its
Subsidiaries  will  create,  assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except the following:

      (a) Liens  existing on the date of this  Agreement  identified on Schedule
5.10 securing only the  obligations  identified on such  Schedule,  all of which
must constitute Debt or other obligations permitted hereunder;


                                      -52-
<PAGE>

      (b) any Lien securing  Debt  permitted  under  Section  5.16,  provided no
Default  exists  at the  time of the  incurrence  or  assumption  thereof  under
Sections  5.16,  5.17,  5.18 or 5.19 or would  reasonably  be  likely  to result
therefrom,  on any real or personal property of any corporation  permitted to be
acquired after the date hereof existing at the time such  corporation  becomes a
Subsidiary and not created in contemplation of such event;

      (c) any Lien securing  Debt  permitted  under  Section  5.16,  provided no
Default  exists  at the  time of the  incurrence  or  assumption  thereof  under
Sections  5.16,  5.17,  5.18 or 5.19 or would  reasonably  be  likely  to result
therefrom,  on any real or personal property of any corporation  permitted to be
acquired after the date hereof  existing at the time such  corporation is merged
or  consolidated  with or into the  Company or a  Subsidiary  and not created in
contemplation of such event;

      (d) any Lien securing  Debt  permitted  under  Section  5.16,  provided no
Default  exists  at the  time of the  incurrence  or  assumption  thereof  under
Sections  5.16,  5.17,  5.18 or 5.19 or would  reasonably  be  likely  to result
therefrom,  existing on any real or personal  property  permitted to be acquired
after the date  hereof  prior to the  acquisition  thereof  by the  Company or a
Subsidiary and not created in contemplation of such acquisition;

      (e)  any  Lien on real  property  and  improvements  thereto  or  personal
property (other than inventory)  securing Debt permitted under Section  5.16(e),
provided no Default exists at the time of the  incurrence or assumption  thereof
under Sections 5.16,  5.17, 5.18 or 5.19 or would reasonably be likely to result
therefrom,  (including any Lien on any such asset sold and thereafter  rented or
leased pursuant to a Sale and Leaseback  Transaction  permitted  hereunder which
results in a capitalized lease in accordance with generally accepted  accounting
principles);

      (f)  any  Lien  arising  out of the  refinancing,  extension,  renewal  or
refunding  of any Debt  secured by any Lien  permitted  by any of the  foregoing
clauses of this Section;  provided  that such Debt is not increased  (except for
the capitalization of interest) and is not secured by any additional assets;

      (g) Liens for taxes not delinquent or being contested in good faith and by
appropriate proceedings;

      (h) deposits or pledges to secure obligations under workers' compensation,
social security or similar laws, or under unemployment insurance;

      (i) mechanics', workers', materialmen's, warehousemen's, lessor's or other
like  Liens  arising  in  the  ordinary  course  of  business  with  respect  to
obligations which are not due or which are being contested in good faith;

      (j) Liens arising in the ordinary  course of its business which (i) do not
secure  Debt  or any  monetary  obligation  and  (ii)  do  not in the  aggregate
materially  detract  from the value of its assets or  materially  impair the use
thereof in the operation of its business; and


                                      -53-
<PAGE>

      (k) Liens not otherwise permitted by the foregoing clauses of this Section
securing  Debt  permitted  under  Section  5.16 or  other  monetary  obligations
permitted  hereunder of the Company or any Subsidiary in an aggregate  principal
amount at any time  outstanding not to exceed 10% of the Company's  Consolidated
Tangible Net Worth,  provided no Default exists at the time of the incurrence or
assumption  thereof under Sections 5.16,  5.17, 5.18 or 5.19 or would reasonably
be likely to result therefrom.

      SECTION 5.11. Consolidations, Mergers and Sales of Assets. (a) Neither the
Company nor any of its  Subsidiaries  will consolidate or merge with or into any
other Person, except that if, after giving effect thereto, no Default shall have
occurred and be continuing, (i) any Subsidiary of the Company may be merged into
the Company if the Company is the surviving  corporation and (ii) any Subsidiary
of the Company may merge with any other corporation  (other than the Company) if
the surviving corporation is a Subsidiary.

      (b) Neither the Company nor any of its  Subsidiaries  will sell,  lease or
otherwise  transfer  any  asset,  except:  (i)  sales or other  dispositions  of
facilities  excluded from the  definition of Asset Sale or the facilities of the
Company or Thom McAn located at Morrow,  Georgia,  Tifton, Georgia and Aulander,
North Carolina, (ii) inventory and equipment in the ordinary course of business,
(iii)  transfers  made as  Investments  permitted by Section 5.09 or  Restricted
Payments  permitted by Section  5.15,  and (iv)  pursuant to Sale and  Leaseback
Transactions of a Borrower or a Guarantor and other transfers that do not have a
materially adverse effect on the business,  assets or financial condition of the
Company or any of the Material  Subsidiaries,  provided that the aggregate  fair
market value of all assets  transferred  in reliance upon this clause (iv) shall
not  exceed  15% of the  Company's  Consolidated  Tangible  Net  Worth  from the
Effective Date through the date of such Sale and Leaseback  Transaction or other
transfer; in all such cases subject to the provisions of Section 2.12(c) (except
to the extent such assets are excluded from the definition of Asset Sale).

      SECTION 5.12.  Use of Proceeds and Letters of Credit.  The proceeds of the
Loans  will be used  to pay off  outstanding  Debt  under  the  Existing  Credit
Agreement and for working capital and general corporate  purposes of the Company
and its  Subsidiaries.  Letters of Credit will be issued only as (a) documentary
Letters  of Credit  used only to  support  obligations  of the  Company  and its
Subsidiaries  related to the purchase of  inventory  in the  ordinary  course of
business or (b) standby  Letters of Credit used to support other  obligations of
the Company  and its  Subsidiaries.  None of such  proceeds of the Loans will be
used, directly or indirectly, for the purpose, whether immediate,  incidental or
ultimate, of buying or carrying any Margin Stock.

      SECTION 5.13. Transactions with Affiliates. The Company will not, nor will
it permit any of its  Subsidiaries  to,  directly or indirectly,  enter into any
transaction,  including  any  purchase,  sale,  lease or exchange of property or
rendering of services, with or for the benefit of any Affiliate,  other than (a)
any such  transaction  expressly  permitted  by this  Agreement  (including  any
Investment  in an Affiliate  expressly  permitted  under  Section  5.09),  which
transaction  in the Company's  reasonable  judgment is upon fair and  reasonable
terms and no less favorable to the Borrowers and the Guarantors  than they would
obtain in a comparable arm's-


                                      -54-
<PAGE>

length  transaction  with a Person not an Affiliate,  (b) any such  transactions
where each of the parties  thereto is either the Company or a Subsidiary,  which
transaction  in the Company's  reasonable  judgment is upon fair and  reasonable
terms and no less favorable to the Borrowers and the Guarantors  than they would
obtain in a comparable arm's-length  transaction with a Person not an Affiliate,
or (c) any  transaction  entered into by the Company or any Subsidiary  which is
(i) otherwise  permitted  under this  Agreement,  (ii) in the ordinary course of
business of such entity's  business and (iii) upon fair and reasonable  terms no
less favorable to such entity than it would obtain in a comparable  arm's-length
transaction  with a Person not an Affiliate.  The Company will not permit any of
its Affiliates to incur any Debt or trade liability  (whether on open account or
otherwise) in connection with the purchase of inventory  except for amounts owed
from time to time to Footstar Corporation.

      SECTION 5.14.  Restrictions Affecting  Subsidiaries.  The Company will not
create, incur, permit or suffer to exist any agreement or other arrangement that
prohibits,  restricts or imposes any condition  upon the ability or right of any
Subsidiary to pay dividends or other distributions with respect to any shares of
its  capital  stock or to make or repay  loans or advances to the Company or any
other   Subsidiary;   provided  that  (a)  the  foregoing  shall  not  apply  to
restrictions or conditions  imposed by law, (b) the foregoing shall not apply to
restrictions  and conditions  existing on the Effective Date that are identified
in  Schedule  5.14 and (c) the  foregoing  shall not  apply to normal  financial
covenants entered into by a Subsidiary in connection with the incurrence of Debt
of such Subsidiary  otherwise  permitted under this Agreement provided that such
financial covenants,  at the time entered into, could not reasonably be expected
to impair any Subsidiary's ability to pay normal dividends in the amounts and at
the times that the Company would have expected such Subsidiary to be able to pay
in the ordinary course.

      SECTION  5.15.  Restricted  Payments.  Neither  the Company nor any of its
Subsidiaries  will declare or make, or agree to declare or make,  any Restricted
Payment,  other than (a) Restricted  Payments paid to a Borrower or a Guarantor,
(b)  provided  no Event of Default  exists or would  reasonably  be  expected to
result  therefrom,   Restricted  Payments  for  the  purpose  of  the  Company's
repurchasing shares of its common stock in bona fide arms length transactions on
the open  market or  otherwise  in an  aggregate  amount not to exceed (i) up to
$100,000,000  in the aggregate  from the Effective Date through the date of such
purchase,  plus (ii) up to  $20,000,000  in the  aggregate  per  fiscal  quarter
beginning  with the third  fiscal  quarter  of 2001 and in each  fiscal  quarter
thereafter if (after  giving effect to all such stock  purchases on a historical
pro forma basis) the Company's Leverage Ratio (calculated on such historical pro
forma basis) for the Calculation Period immediately preceding the fiscal quarter
in which such purchase is made was less than 1.25, and (c)  Restricted  Payments
to the extent  required to be paid to Kmart  Corporation  under the terms of the
Kmart Agreement.

      SECTION  5.16.  Debt.  The  Company  will  not,  nor  will it  permit  any
Subsidiary to,  create,  assume or otherwise be or become liable with respect to
any Debt, except:

      (a) Debt of the Company and the Eligible  Subsidiaries in respect of their
Loans;


                                      -55-
<PAGE>

      (b)  Debt  of the  Guarantors  in  respect  of the  Guarantees  under  the
Guarantee Agreement;

      (c) Debt owed by any  Subsidiary  to the Company or to another  Subsidiary
which is a Borrower or a Guarantor;

      (d)  Debt of any  Borrower  or  Guarantor  incurred  pursuant  to Sale and
Leaseback Transactions permitted by Section 5.11(b);

      (e) purchase money Debt of the Company or a Subsidiary which is a Borrower
or a Guarantor  secured by the  Company's or such  Subsidiary's  real estate and
improvements  thereto and  purchase  money Debt of the  Company or a  Subsidiary
secured by the  Company's or such  Subsidiary's  equipment,  in each case to the
extent permitted by Section  5.10(e);  provided such Debt is incurred within 180
days  of the  purchase  of such  real  estate,  improvements  or  equipment,  as
applicable,  and that the principal amount of any Debt incurred pursuant to this
clause (e) may not exceed the purchase  price of such real estate,  improvements
or equipment, as applicable, securing such Debt; and

      (f)  Debt  of the  Company  and its  Subsidiaries  who  are  Borrowers  or
Guarantors not otherwise  permitted by the foregoing  clauses of this Section in
an aggregate principal amount at any time outstanding not to exceed $100,000,000
in  aggregate  principal  amount,  provided (i) all Debt covered by this Section
5.16(f)  other  than the sum of the face  amount of letters of credit and unpaid
reimbursement  obligations  relating  to  letters  of credit  shall  not  exceed
$50,000,000  in the aggregate at any time,  (ii) no Debt covered by this Section
5.16(f)  contains  covenants  more  restrictive  on  the  Company  or any of its
Subsidiaries  than the covenants in this Agreement,  and (iii) immediately after
such  incurrence of Debt,  and after giving effect thereto on a pro forma basis,
no Default then exists.

      SECTION 5.17. Leverage Ratio. The Leverage Ratio will not exceed 1.75:1.00
at any time.

      SECTION 5.18.  Interest  Coverage Ratio. The Interest  Coverage Ratio will
not be less than 2.00:1.00 for any Calculation Period.

      SECTION 5.19. Maximum Capital Expenditures. Neither the Company nor any of
its  Subsidiaries  shall make or agree to make,  or incur any  obligations  with
respect to, any Capital Expenditures (excluding Capital Expenditures incurred in
connection  with  Acquisitions)  in excess of the  maximum  amounts set forth on
Schedule 5.19 for the fiscal years listed thereon,  plus the unused portion,  if
any, of the maximum Capital  Expenditures  amount for the immediately  preceding
fiscal  year (in either  case,  the  "Carryforward  Amount").  For  purposes  of
determining the  Carryforward  Amount in any fiscal year,  Capital  Expenditures
shall first be applied to reduce any  Carryforward  Amount from the  immediately
preceding fiscal year and then to reduce the maximum amount specified herein.

                                      -56-
<PAGE>

                                   ARTICLE VI

                                    Defaults

      SECTION 6.01.  Events of Default.  If one or more of the following  events
("Events of Default") shall have occurred and be continuing:

      (a) (i) any Borrower  shall fail to pay when due any principal on any Loan
or any reimbursement obligation in respect of a Letter of Credit Disbursement or
(ii) any Borrower shall fail to pay interest on any Loan, or any Borrower or any
Guarantor  shall fail to pay any fees or any other amount  payable  hereunder or
under any other Loan Document within five days of the time such amount is due;

      (b) the Company shall fail to observe or perform any covenant contained in
Section 5.01(e) or any of Sections 5.08 to 5.19, inclusive;

         (c) any Borrower or any Guarantor shall fail to observe or perform any
covenant or agreement contained in any Loan Document (other than those covered
by clause (a) or (b) above) for 30 days after written notice thereof has been
given to the Company by the Agent at the request of any Bank; except that such
30 day period shall be reduced to 15 days for the Company's or its Subsidiary's
failure to perform or observe Section 5.06(a) or 5.06(b) with respect to any
Bank if the Agent in its reasonable judgment concurs with such Bank that such
failure constitutes Default;

      (d) any representation,  warranty,  certification or statement made by any
Borrower or any Guarantor in this Agreement or any other Loan Document or in any
certificate,  financial  statement or other document  delivered pursuant to this
Agreement or any other Loan Document  shall prove to have been  incorrect in any
material respect when made (or deemed made);

      (e) the  Company  or any  Subsidiary  shall  fail to make any  payment  in
respect of any Material Debt when due or within any applicable grace period;

      (f) any event or condition  shall occur which results in the  acceleration
of the maturity of any Material Debt or  termination  of the Kmart  Agreement or
enables (or,  with the giving of notice or lapse of time or both,  would enable)
the  holder  of such  Debt or any  Person  acting  on such  holder's  behalf  to
accelerate  the  maturity  thereof or,  under  circumstances  in the nature of a
default,  to require the prepayment or repurchase  thereof prior to the maturity
thereof, or enables Kmart Corporation to terminate the Kmart Agreement;

      (g) the Company or, subject to Section 6.03, any Subsidiary shall commence
a voluntary case or other  proceeding  seeking  liquidation,  reorganization  or
other  relief  with  respect  to  itself  or its  debts  under  any  bankruptcy,
insolvency  or other  similar  law now or  hereafter  in effect or  seeking  the
appointment  of a trustee,  receiver,  liquidator,  custodian  or other  similar
official of it or any substantial part of its property,  or shall consent to any
such relief or to the  appointment of or taking  possession by any such official
in an involuntary case or other


                                      -57-
<PAGE>

proceeding  commenced  against  it, or shall make a general  assignment  for the
benefit of  creditors,  or shall fail  generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing;

      (h) an involuntary case or other proceeding shall be commenced against the
Company  or,  subject to  Section  6.03,  any  Subsidiary  seeking  liquidation,
reorganization  or other  relief  with  respect  to it or its  debts  under  any
bankruptcy,  insolvency  or other  similar  law now or  hereafter  in  effect or
seeking the appointment of a trustee, receiver,  liquidator,  custodian or other
similar  official  of it or any  substantial  part  of its  property,  and  such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 60 days;  or an order for relief shall be entered  against the Company
or, subject to Section 6.03, any Subsidiary under the federal bankruptcy laws as
now or hereafter in effect;

      (i) any member of the ERISA  Group shall fail to pay when due an amount or
amounts  aggregating in excess of $20,000,000  which it shall have become liable
to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
shall be filed  under  Title IV of ERISA by any member of the ERISA  Group,  any
plan  administrator  or any  combination  of the  foregoing;  or the PBGC  shall
institute proceedings under Title IV of ERISA to terminate,  to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer any Material Plan; or a condition  shall
exist  by  reason  of which  the  PBGC  would  be  entitled  to  obtain a decree
adjudicating  that any Material Plan must be terminated;  or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5)  of ERISA,  with  respect to, one or more  Multiemployer  Plans which
could cause one or more  members of the ERISA  Group to incur a current  payment
obligation in excess of $20,000,000;

      (j) one or more  judgments  or  orders  for the  payment  of  money  in an
aggregate amount in excess of $20,000,000  shall be rendered against the Company
or any Subsidiary or a combination  thereof and shall continue  unsatisfied  and
unstayed  for a period of 30 days,  or any action  shall be  legally  taken by a
judgment  creditor  to levy upon  assets or  properties  of the  Company  or any
Subsidiary to enforce any such judgment;

      (k) a Change of Control shall occur; or

      (l) the  Guarantee of any Guarantor  under the Guarantee  Agreement or the
obligations of the Company or any of its Subsidiaries under the Pledge Agreement
shall cease to be, or shall be asserted by such Guarantor, Company or Subsidiary
not to be,  a valid  and  binding  obligation  of  such  Guarantor,  Company  or
Subsidiary,  except as expressly  contemplated by the Guarantee Agreement or the
Pledge Agreement;

then,  and in every  such  event,  the Agent  may,  or upon the  request  of the
Required Banks, the Agent shall, by notice to the Company: (i) declare the Loans
and Notes of all Borrowers  (together with accrued interest  thereon) to be, and
the Loans and Notes  (together with accrued  interest  thereon) shall  thereupon
become,  immediately due and payable  without  presentment,  demand,  protest or
other notice of any kind, all of which are hereby waived by each Borrower,


                                      -58-
<PAGE>

(ii) terminate the Commitments and they shall thereupon terminate, (iii) require
cash  collateral as  contemplated  by Section 2.17(k) in an amount not exceeding
the  Letter  of  Credit  Exposure,  or (iv) any  combination  of the  foregoing;
provided,  that (A) upon the occurrence of an Event of Default  specified in (g)
or (h) above with respect to the Company,  without notice to any Borrower or any
act by the  Agent  or the  Banks,  the  Loans  and the  Notes  of all  Borrowers
(together  with accrued  interest  thereon) shall  automatically  become due and
payable,  without presentment,  demand, protect or other notice of any kind, all
of which are hereby waived,  the Commitments shall be automatically  terminated,
and the Borrowers shall be required to provide,  immediately, cash collateral as
contemplated  by  Section  2.17(k)  in an amount  equal to the  Letter of Credit
Exposure, and (B) upon the occurrence of an Event of Default specified in (g) or
(h) above  with  respect  to any  Eligible  Subsidiary,  without  notice to such
Eligible Subsidiary or any act by the Agent or the Banks, the Loans and Notes of
such  Eligible  Subsidiary   (together  with  accrued  interest  thereon)  shall
automatically  become due and payable without  presentment,  demand,  protest or
other notice of any kind,  all of which are hereby  waived,  the  eligibility of
such  Eligible  Subsidiary to borrow or to have Letters of Credit issued for its
account shall thereupon terminate, and the Eligible Subsidiary shall be required
to provide,  immediately,  cash collateral as contemplated by Section 2.17(k) in
an amount equal to the Letter of Credit  Exposure  for Letters of Credit  issued
for the account of such Eligible Subsidiary.

      SECTION  6.02.  Default.  The Agent shall give notice to the Company under
Section  6.01(c)  promptly  upon being  requested to do so by any Bank and shall
thereupon notify all the Banks thereof.

      SECTION 6.03. Exclusion of Immaterial Subsidiaries. Solely for purposes of
determining  whether a Default has  occurred  under clause (g) or (h) of Section
6.01, any reference in any such clause to any  "Subsidiary"  shall be deemed not
to include any Subsidiary  affected by any event or circumstance  referred to in
any such  clause  that (a) is not an  Eligible  Subsidiary  or a  Borrower  or a
Guarantor,  (b) is not a Material  Subsidiary  (determined  for this  purpose as
though each reference to "10%" in the definition of Material  Subsidiary  were a
reference to "5%") and (c) did not, for the most recent Calculation Period, have
Consolidated  EBITDAR in an amount  exceeding 5% of the  Company's  Consolidated
EBITDAR for such  period;  provided  that (i) if it is necessary to exclude more
than one  Subsidiary  from  clause (g) or (h) of Section  6.01  pursuant to this
Section in order to avoid a Default thereunder,  all excluded Subsidiaries shall
be considered to be a single consolidated Subsidiary for purposes of determining
whether the conditions  specified in clauses (b) and (c) above are satisfied and
(ii) a Subsidiary shall not be excluded from clauses (g) and (h) of Section 6.01
if such Subsidiary  holds rights under any long-term  contracts for the purchase
of inventory accounting for more than 5% of the total inventory purchased by the
Company and its Subsidiaries during the most recent Calculation Period.

                                   ARTICLE VII

                                   The Agents

      SECTION  7.01.  Appointment  and  Authorization.   Each  Bank  irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under


                                      -59-
<PAGE>

this Agreement and the other Loan Documents as are delegated to the Agent by the
terms  hereof  or  thereof,  together  with all such  powers  as are  reasonably
incidental thereto.

      SECTION 7.02.  Agent and  Affiliates.  Fleet  National Bank shall have the
same rights and powers  under this  Agreement as any other Bank and may exercise
or refrain from  exercising the same as though it were not the Agent,  and Fleet
National Bank and its  affiliates may accept  deposits from,  lend money to, and
generally  engage in any kind of business with the Company or any  Subsidiary or
Affiliate of the Company as if it were not the Agent hereunder.

      SECTION 7.03.  Action by Agent.  The  obligations  of the Agent under this
Agreement or any other Loan Documents are only those  expressly set forth herein
or therein.  Without  limiting the generality of the foregoing,  the Agent shall
not be  required  to take any  action  with  respect to any  Default,  except as
expressly provided in Article VI.

      SECTION 7.04.  Consultation with Experts. The Agent may consult with legal
counsel (who may be counsel for the Company), independent public accountants and
other  experts  selected  by it and shall not be liable for any action  taken or
omitted  to be taken by it in good faith in  accordance  with the advice of such
counsel, accountants or experts.

      SECTION  7.05.  Liability  of  Agent.  Neither  the  Agent  nor any of its
directors,  officers,  agents, or employees shall be liable for any action taken
or not taken by it in connection herewith (i) with the consent or at the request
of the  Required  Banks or (ii) in the  absence of its own gross  negligence  or
willful misconduct. Neither the Agent nor any of its directors, officers, agents
or employees  shall be  responsible  for or have any duty to ascertain,  inquire
into or verify (i) any statement,  warranty or representation made in connection
with this Agreement or any other Loan Document or any borrowing hereunder;  (ii)
the  performance  or  observance  of any of the  covenants or  agreements of the
Company or the Eligible  Subsidiaries;  (iii) the  satisfaction of any condition
specified in Article III,  except  receipt of items  required to be delivered to
the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement,
the other  Loan  Documents  or any other  instrument  or  writing  furnished  in
connection  herewith or  therewith.  The Agent shall not incur any  liability by
acting in reliance upon any notice,  consent,  certificate,  statement, or other
writing (which may be a bank wire, telex or similar  writing)  believed by it in
good faith to be genuine or to be signed by the proper party or parties.

      SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with
its  Commitment,  indemnify  the  Agent (to the  extent  not  reimbursed  by the
Borrowers) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from the Agent's
gross  negligence or willful  misconduct)  that the Agent may suffer or incur in
connection with this Agreement or any other Loan Document or any action taken or
omitted  by  the  Agent   hereunder   or   thereunder.   If  a  Bank  makes  any
indemnification payment to the Agent pursuant to this Section and thereafter the
Agent  receives  payment  from any  Borrower in respect of the same  indemnified
amount,  the Agent shall  reimburse such Bank to the extent of its ratable share
of such payment received by the Agent.


                                      -60-
<PAGE>

      SECTION  7.07.  Credit  Decision.  Each  Bank  acknowledges  that  it has,
independently  and without  reliance upon the Agent or any other Bank, and based
on such  documents and  information as it has deemed  appropriate,  made its own
credit  analysis  and  decision  to enter  into this  Agreement.  Each Bank also
acknowledges that it will,  independently and without reliance upon the Agent or
any other Bank,  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 any action under this Agreement.

      SECTION 7.08.  Successor Agent. The Agent may resign at any time by giving
at least 15 days prior written notice thereof to the Banks and the Company. Upon
any such  resignation,  the  Required  Banks  shall  have the right to appoint a
successor  Agent approved by the Company (such  approval not to be  unreasonably
withheld);  provided  that no approval of the Company  shall be  necessary if an
Event of Default has occurred  and is  continuing.  If no successor  Agent shall
have been so appointed by the Required  Banks and, if required,  approved by the
Company  and shall  have  accepted  such  appointment,  within 30 days after the
retiring  Agent gives notice of  resignation,  then the  retiring  Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a commercial bank
organized or licensed  under the laws of the United  States of America or of any
State thereof and having a combined capital and surplus of at least $50,000,000.
Upon the  acceptance  of its  appointment  as Agent by a successor  Agent,  such
successor Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring  Agent,  and the retiring  Agent shall be  discharged
from  its  duties  and  obligations.  After  any  retiring  Agent's  resignation
hereunder as Agent, the provisions of this Article shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent.

      SECTION 7.09. Agent's Fees. The Company shall pay to the Agent for its own
account fees in the amounts and at the times previously  agreed upon between the
Company and the Agent.

      SECTION 7.10.  Sub-Agents;  Issuing Bank;  Swingline Lender. The Agent may
perform any of its  obligations  and  exercise  any of its rights under the Loan
Documents by or through  sub-agents.  The  provisions  of this Article VII shall
inure to the benefit of any  sub-agent  of the Agent,  the Issuing  Bank and the
Swingline  Lender in the same manner and to the same extent as they inure to the
benefit of the Agent.

      SECTION 7.11.  Documentation Agent; Syndication Agent and Managing Agents.
Neither  the  Documentation  Agent nor the  Syndication  Agent nor either of the
Managing  Agents  shall have any  duties or  responsibilities  hereunder  in its
capacity as such.

                                  ARTICLE VIII

                             Change in Circumstances

      SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If
on or prior to the first day of any Interest Period for any Fixed Rate Borrowing
Banks having 50% or more of the aggregate  amount of the Commitments  advise the
Agent that the LIBOR Rate as


                                      -61-
<PAGE>

determined by the Agent, will not adequately and fairly reflect the cost to such
Banks of funding their  Euro-Currency Loans for such Interest Period or that the
LIBOR Base Rate is unavailable, the Agent shall forthwith give notice thereof to
the Company and the Banks,  whereupon  until the Agent notifies the Company that
the  circumstances  giving  rise to such  suspension  no longer  exist,  (i) the
obligations of the Banks to make Euro-Currency  Loans or to convert  outstanding
Committed  Loans  into  Euro-Currency  Loans  shall  be  suspended,   (ii)  each
outstanding  Committed Loan shall be converted into a Base Rate Loan on the last
day of the then current Interest Period applicable thereto, and (iii) unless the
applicable  Borrower  notifies  the Agent at least two  Domestic  Business  Days
before the date of any Fixed Rate  Borrowing for which a Notice of Borrowing has
previously  been given  that it elects  not to borrow on such date,  (x) if such
Borrowing is a Euro-Currency Borrowing such Borrowing shall instead be made as a
Base Rate Borrowing and (y) if such Borrowing is a Money Market LIBOR Borrowing,
the Money Market LIBOR Loans  comprising  such Borrowing shall bear interest for
each day from and  including  the first day to but excluding the last day of the
Interest  Period  applicable  thereto at the Base Rate plus the Base Rate Margin
for such day.

      SECTION 8.02. Illegality.  If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation,  or any change  therein,  or
any change in the  interpretation or administration  thereof by any governmental
authority,  central bank or comparable agency charged with the interpretation or
administration  thereof, or compliance by any Bank (or its Euro-Currency Lending
Office) with any request or  directive  (whether or not having the force of law)
of any such authority,  central bank or comparable agency shall make it unlawful
or  impossible  for any  Bank (or its  Euro-Currency  Lending  Office)  to make,
maintain  or fund its  Euro-Currency  Loans  and such Bank  shall so notify  the
Agent,  the Agent shall forthwith give notice thereof to the other Banks and the
Company,  whereupon  until such Bank notifies the Company and the Agent that the
circumstances  giving rise to such suspension no longer exist, the obligation of
such Bank to make Euro-Currency Loans to any Borrower shall be suspended. Before
giving  any  notice to the  Agent  pursuant  to this  Section,  such Bank  shall
designate a different  Euro-Currency  Lending  Office if such  designation  will
avoid the need for giving  such  notice and will not,  in the  judgment  of such
Bank, be otherwise  disadvantageous  to such Bank. If such Bank shall  determine
that it may not lawfully  continue to maintain  and fund any of its  outstanding
Euro-Currency  Loans to any  Borrower to  maturity  and shall so specify in such
notice,  such Borrower  shall  immediately  prepay in full the then  outstanding
principal amount of each such Euro-Currency Loan, together with accrued interest
thereon. Concurrently with prepaying each such Euro-Currency Loan, such Borrower
shall  borrow a Base Rate Loan in an equal  principal  amount from such Bank (on
which interest and principal shall be payable contemporaneously with the related
Euro-Currency  Loans of the other  Banks),  and such Bank shall make such a Base
Rate Loan.

      SECTION 8.03.  Increased Cost and Reduced  Return.  (a) If on or after (x)
the date hereof,  in the case of any  Committed  Loan or any  obligation to make
Committed  Loans, or (y) the date of any related Money Market Quote, in the case
of  any  Money  Market  Loan,  the  adoption  of any  applicable  law,  rule  or
regulation,  or any change in any  applicable  law, rule or  regulation,  or any
change in the  interpretation  or  administration  thereof  by any  governmental
authority,  central bank or comparable agency charged with the interpretation or
administration  thereof,  or compliance by

                                      -62-
<PAGE>

any Bank (or its  Applicable  Lending  Office)  with any  request  or  directive
(whether  or not  having the force of law) of any such  governmental  authority,
central bank or comparable  agency shall impose,  modify or deem  applicable any
reserve,   special  deposit,   insurance   assessment  or  similar   requirement
(including,  without  limitation,  any such requirement  imposed by the Board of
Governors  of the Federal  Reserve  System,  but  excluding  with respect to any
Euro-Currency  Loan, any LIBOR Reserve  Requirement upon which the LIBOR Rate is
based)  against  assets  of,  deposits  with or for the  account  of,  or credit
extended by, any Bank (or its Applicable  Lending Office) or shall impose on any
Bank (or its  Applicable  Lending  Office)  or on the United  States  market for
certificates  of  deposit  or the London  interbank  market any other  condition
affecting  its Fixed Rate Loans or its  obligation to make such Fixed Rate Loans
and the result of any of the  foregoing is to increase the cost to such Bank (or
its Applicable  Lending  Office) of making or maintaining any Fixed Rate Loan to
any Borrower,  or to reduce the amount of any sum received or receivable by such
Bank (or its Applicable  Lending Office) under this Agreement or under its Notes
with  respect  thereto,  by an  amount  reasonably  deemed  by  such  Bank to be
material,  then,  within 15 days  after  demand by such Bank  setting  forth the
circumstances  giving  rise to such  demand and a  calculation  of the amount or
amounts  demanded  (with a copy to the Agent),  such Borrower  shall pay to such
Bank such  additional  amount or amounts as will  compensate  such Bank for such
increased cost or reduction.

      (b) If any Bank shall have  determined  that,  after the date hereof,  the
adoption of any applicable law, rule or regulation  regarding  capital adequacy,
or any change therein,  or any change in the  interpretation  or  administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration  thereof,  or any request or directive
regarding  capital adequacy (whether or not having the force of law) of any such
authority,  central bank or comparable  agency,  has or would have the effect of
reducing  the rate of  return  on  capital  of such  Bank (or its  Parent)  as a
consequence  of such Bank's  obligations  hereunder  to a level below that which
such Bank (or its Parent)  could have  achieved but for such  adoption,  change,
request or directive  (taking into  consideration  its policies  with respect to
capital  adequacy) by an amount  deemed by such Bank to be  material,  then from
time to time,  within 15 days  after  demand  by such  Bank  (with a copy to the
Agent),  the Company shall pay to such Bank such additional amount or amounts as
will compensate such Bank (or its Parent) for such reduction.

      (c) Each Bank will promptly  notify the Company and the Agent of any event
of which it has knowledge,  occurring after the date hereof,  which will entitle
such  Bank to  compensation  pursuant  to this  Section  and  will  designate  a
different Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Bank,  be  otherwise  disadvantageous  to such Bank. A  certificate  of any Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it  hereunder  shall be  conclusive  in the  absence of
manifest  error.  In determining  such amount,  such Bank may use any reasonable
averaging and attribution methods.

      (d)  Failure or delay on the part of a Bank or an  Issuing  Bank to demand
compensation  pursuant to this  Section  shall not  constitute  a waiver of such
Bank's  or such  Issuing  Bank's,  as the case  may be,  right  to  demand  such
compensation; provided that the Company shall not be


                                      -63-
<PAGE>

required to  compensate a Bank or an Issuing  Bank  pursuant to this Section for
any increased costs or reduced returns  incurred more than 270 days prior to the
date such Bank or such Issuing  Bank,  as the case may be,  notifies the Company
thereof  and  of  such  Bank's  or  such  Issuing  Bank's   intention  to  claim
compensation  therefor;  provided  further  that, if the change in law or in the
application  of law giving rise to such  increased  costs or reduced  returns is
retroactive,  than the  270-day  period  referred  to above shall be extended to
include the period of retroactive effect thereof.

      (e) The  provisions of this Section also shall inure to the benefit of the
Issuing Bank in its capacity as such.

      SECTION  8.04.  Taxes.  (a) For  purposes  of this  Section  8.04(a),  the
following terms have the following meanings:

      "Taxes"  means  any and all  present  or  future  taxes,  duties,  levies,
      imposts,  deductions,  charges or withholdings with respect to any payment
      by any  Borrower  pursuant to this  Agreement  or under any Note,  and all
      liabilities with respect  thereto,  including any taxes,  duties,  levies,
      imposts,  deductions,  charges or withholdings with respect to any payment
      by a Borrower other than the Company that would not have been imposed on a
      payment by the Company,  but excluding  (i) in the case of each Bank,  the
      Issuing Bank and the Agent,  taxes imposed on its income, and franchise or
      similar  taxes  imposed on it, by a  jurisdiction  under the laws of which
      such  Bank,  the  Issuing  Bank or the  Agent  (as the case  may  be),  is
      organized or in which its principal executive office is located or, in the
      case of each Bank, in which its Applicable Lending Office is located, (ii)
      in the case of each Bank,  the Issuing Bank and the Agent,  taxes  imposed
      solely by reason of such Bank,  the Issuing Bank or the Agent (as the case
      may be) doing business in the  jurisdiction  imposing such tax, other than
      as a result of this Agreement or any Note or any transaction  contemplated
      hereby  (including  the  negotiation of any of the foregoing) and (iii) in
      the case of each Bank,  any  withholding  tax imposed on such payments but
      only at a rate equal to the United States  withholding  tax that such Bank
      is (or would be)  subject to on such  payments  by the Company at the time
      such Bank first becomes a party to this Agreement.

      "Other Taxes" means any present or future stamp or  documentary  taxes and
      any other excise or property taxes,  or similar  charges or levies,  which
      arise from any payment made pursuant to this  Agreement or under any Notes
      or from the  execution or delivery of, or otherwise  with respect to, this
      Agreement or any Note.

      (b) Any and all  payments  by any  Borrower  to or for the  account of any
Bank,  any Issuing  Bank or the Agent  hereunder or under any Note shall be made
without deduction for any Taxes or Other Taxes;  provided that, if such Borrower
shall be  required  by law to  deduct  any  Taxes or Other  Taxes  from any such
payments,  (i) the sum payable  shall be  increased  as  necessary so that after
making all required deductions  (including  deductions  applicable to additional
sums payable under this  Section) such Bank,  such Issuing Bank or the Agent (as
the case may be) receives an amount equal to the sum it would have  received had
no such deductions


                                      -64-
<PAGE>

been made,  (ii) such Borrower shall make such  deductions,  (iii) such Borrower
shall pay the full amount deducted to the relevant  taxation  authority or other
authority in accordance with applicable law and (iv) such Borrower shall furnish
to the Agent,  at its address  referred to in Section  9.01,  the  original or a
certified copy of a receipt evidencing payment thereof.

      (c) Each Borrower  agrees to indemnify each Bank, the Issuing Bank and the
Agent  for  the  full  amount  of  Taxes  or  Other  Taxes  (including,  without
limitation,  any Taxes or Other Taxes  imposed or  asserted  on amounts  payable
under this  Section)  paid by such Bank,  such Issuing Bank or the Agent (as the
case may be) and any  liability  (including  penalties,  interest and  expenses)
arising therefrom or with respect thereto.  This  indemnification  shall be paid
within 15 days after such Bank,  such Issuing Bank or the Agent (as the case may
be) makes demand therefor. After any Bank, any Issuing Bank or the Agent (as the
case may be)  learns  of the  imposition  of Taxes or Other  Taxes,  such  Bank,
Issuing Bank and the Agent (as the case may be) will act in good faith  promptly
to notify the relevant Borrower of its obligations hereunder.

      (d) Each Bank  organized  under  the laws of a  jurisdiction  outside  the
United  States on or prior to the date of its  execution  and  delivery  of this
Agreement in the case of each Bank listed on the  signature  pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other  Bank,
and from time to time  thereafter  if requested in writing by the Company or the
relevant  Borrower  (but only so long as such Bank remains  lawfully  able to do
so),  shall provide the Company or the relevant  Borrower and the Agent with the
appropriate  form or forms  (including  any  forms  required  to  replace  forms
previously  provided  because  of a change  in a Bank's  place of  organization,
principal  office or Applicable  Lending Office,  or in the event that any forms
are  no  longer  valid  because  of  their  expiration  or a  change  in  law or
regulations,  other appropriate evidence of exemption or reduction as reasonably
requested by the relevant  Borrower),  certifying  that such Bank is entitled to
benefits  under an income tax treaty to which the United States is a party which
exempts the Bank from  withholding  tax imposed by the United  States or reduces
the rate of withholding  tax (if any) on payments of interest for the account of
such Bank or certifying that the income receivable pursuant to this Agreement is
otherwise not subject to such withholding tax.

      (e) For any period with  respect to which a Bank has failed to provide the
Company or the Agent with the  appropriate  form as required by Section  8.04(d)
(unless such failure is due to a change in treaty,  law or regulation  occurring
subsequent  to the  date on  which  such  form  originally  was  required  to be
provided),  such Bank shall not be entitled  to  indemnification  under  Section
8.04(b) or (c) with  respect to the  withholding  taxes that would not have been
imposed  if such  form  had been  provided;  provided  that if a Bank,  which is
otherwise  exempt from or subject to a reduced rate of withholding  tax, becomes
subject to Taxes  because of its failure to deliver a form  required  hereunder,
the  relevant  Borrower  shall  take such  steps as such Bank  shall  reasonably
request to assist such Bank to recover such Taxes.

      (f) If any  Borrower is required to pay  additional  amounts to or for the
account of any Bank  pursuant  to this  Section,  then such Bank will change the
jurisdiction of its Applicable  Lending Office if such change (i) will eliminate
or reduce any such additional payment which


                                      -65-
<PAGE>

may  thereafter  accrue and (ii) in the judgment of such Bank,  is not otherwise
disadvantageous to such Bank.

      (g) If a Bank,  an  Issuing  Bank or the  Agent  shall  receive  a  refund
(including  any offset or credit) from a taxation  authority (as a result of any
error in the  imposition of Taxes or Other Taxes by such taxation  authority) of
any Taxes or Other Taxes paid by any  Borrower  pursuant  to Section  8.04(b) or
(c),  such Bank,  Issuing Bank or the Agent (as the case may be) shall  promptly
pay to the relevant Borrower the amount so received, with interest received from
the taxation authority with respect to such refund.

      SECTION 8.05.  Base Rate Loans  Substituted for Affected Fixed Rate Loans.
If (i) the  obligation of any Bank to make  Euro-Currency  Loans to any Borrower
has been  suspended  pursuant  to  Section  8.02 or (ii)  any Bank has  demanded
compensation  from the Company or any other  Borrower under Section 8.03 or 8.04
with respect to its Euro-Currency  Loans and the Company shall, by at least five
Euro-Currency  Business Days' prior notice to such Bank through the Agent,  have
elected  that the  provisions  of this Section  shall apply to such Bank,  then,
unless and until such Bank  notifies the Company that the  circumstances  giving
rise to such suspension or demand for compensation no longer apply:

      (a) all Loans which would otherwise be made by such Bank as  Euro-Currency
Loans shall be made instead as Base Rate Loans (on which  interest and principal
shall be  payable  contemporaneously  with the  related  Fixed Rate Loans of the
other Banks), and

      (b) after each of its Euro-Currency Loans has been repaid, all payments of
principal  which would otherwise be applied to repay such Fixed Rate Loans shall
be applied to repay its Base Rate Loans instead.

      SECTION 8.06.  Other Costs. If the cost to any Bank or any Issuing Bank of
making or maintaining any Loan to, or issuing or  participating in any Letter of
Credit for the account of, an Eligible Subsidiary is increased, or the amount of
any sum received or receivable by any Bank (or its Applicable Lending Office) or
any  Issuing  Bank is reduced by an amount  deemed by such Bank or such  Issuing
Bank to be  material,  by reason of the fact that such  Eligible  Subsidiary  is
incorporated  in, or conducts  business  in, a  jurisdiction  outside the United
States,  such Eligible  Subsidiary  shall indemnify such Bank for such increased
cost or reduction  within 15 days after  demand by such Bank  setting  forth the
circumstances  giving rise to such demand and the  calculation  of the amount or
amounts  demanded  (with a copy to the Company and the Agent).  A certificate of
such Bank  claiming  compensation  under  this  Section  and  setting  forth the
additional  amount or amounts to be paid to it hereunder  shall be conclusive in
the absence of manifest error.

      SECTION 8.07.  Substitution  of Bank. If (i) the obligation of any Bank to
make or maintain Euro-Currency Loans has been suspended pursuant to Section 8.02
or (ii) any Bank has demanded  compensation  under  Section 8.03 or is receiving
increased payments or  indemnification  payments under Section 8.04 or 8.06, the
Company shall have the right to seek a bank or banks ("Substitute Banks"), which
may be one or more of the Banks or one or more other


                                      -66-
<PAGE>

banks  satisfactory  to the Agent,  to purchase  all (but not less than all) the
Notes and the  participations in the Letter of Credit Exposure of such Bank (the
"Affected  Bank") and, if the Company  locates a Substitute  Bank,  the Affected
Bank shall,  upon payment to it of the purchase  price agreed between it and the
Substitute Bank (or,  failing such agreement,  a purchase price in the amount of
the outstanding  principal  amount of its Loans and accrued  interest thereon to
the date of  payment  plus the  Affected  Bank's  Applicable  Percentage  of all
unreimbursed  Letter  of  Credit  Disbursements)  plus any  amount  (other  than
principal  and  interest)  then due to it or accrued for its account  hereunder,
assign all its rights and obligations  under this Agreement and the Notes to the
Substitute   Bank,  and  the  Substitute  Bank  shall  assume  such  rights  and
obligations,  whereupon  the  Substitute  Bank  shall  be a Bank  party  to this
Agreement  and  shall  have  all the  rights  and  obligations  of a  Bank.  Any
assignment  by an Affected  Bank  pursuant to this Section shall be treated as a
prepayment of the Affected Bank's Fixed Rate Loans for purposes of Section 2.14.

                                   ARTICLE IX

                                  Miscellaneous

      SECTION 9.01. Notices.  All notices,  requests and other communications to
any party hereunder shall be in writing  (including bank wire, telex,  facsimile
transmission  or similar  writing) and shall be given to such party:  (x) in the
case of any Borrower,  the Issuing Bank, the Swingline  Lender or the Agent,  at
its address or its  telecopy or telex  number set forth on the  signature  pages
hereof  (or,  in  the  case  of an  Eligible  Subsidiary,  in  its  Election  to
Participate or, in the case of any Issuing Bank, in its Issuing Bank Agreement),
(y) in the case of any Bank,  at its address or its telecopy or telex number set
forth in its Administrative Questionnaire, or (z) in the case of any party, such
other  address or other  telecopy  or telex  number as such party may  hereafter
specify  for the  purpose  by notice to the  Agent  and the  Company.  Each such
notice,  request  or  other  communication  shall be  effective  (i) if given by
telecopy or telex, when such telecopy or telex is transmitted to the telecopy or
telex  number  specified  in this Section and the  appropriate  confirmation  of
receipt or  answerback  is received,  (ii) if given by mail, 72 hours after such
communication  is  deposited  in the mails with  first  class  postage  prepaid,
addressed as aforesaid or (iii) if given by any other means,  when  delivered at
the address specified in this Section;  provided that notices to the Agent under
Article II or Article VIII shall not be effective until received.

      SECTION  9.02. No Waivers.  No failure or delay by the Agent,  any Issuing
Bank or any Bank in exercising any right, power or privilege  hereunder or under
any other Loan Document  shall operate as a waiver  thereof nor shall any single
or partial  exercise  thereof  preclude any other or further exercise thereof or
the exercise of any other  right,  power or  privilege.  The rights and remedies
herein  provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

      SECTION 9.03. Expenses; Indemnification. (a) The Company shall pay (i) all
reasonable  out-of-pocket  expenses  of the Agent  and (in the case of  expenses
relating  to any  Letter  of  Credit)  the  Issuing  Bank,  including  fees  and
disbursements of special counsel for the Agent, in


                                      -67-
<PAGE>

connection  with the preparation  and  administration  of this Agreement and the
other Loan  Documents,  any waiver or consent  hereunder  or  thereunder  or any
amendment hereof or thereof or any Default or alleged Default hereunder and (ii)
if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by
the  Agent,  the  Issuing  Bank and each  Bank,  including  reasonable  fees and
disbursements  of  counsel,  in  connection  with  such  Event  of  Default  and
collection,  bankruptcy,  insolvency and other enforcement proceedings resulting
therefrom.

      (b) The Company  agrees to indemnify the Agent,  the Issuing Bank and each
Bank, their respective affiliates and the respective directors, officers, agents
and  employees  of the  foregoing  (each an  "Indemnitee")  and hold  each  such
Indemnitee harmless from and against any and all liabilities,  losses,  damages,
costs and expenses of any kind  (including  any of the foregoing with respect to
Environmental  Laws  applicable  to the Company or any  Subsidiary),  including,
without limitation,  the reasonable fees and disbursements of counsel, which may
be actually  incurred by such Indemnitee in connection  with any  investigative,
administrative or judicial  proceeding  (whether or not such Indemnitee shall be
designated a party thereto) brought or threatened  relating to or arising out of
the Loan Documents or any actual or proposed use of proceeds of Loans or Letters
of Credit  hereunder;  provided  that no  Indemnitee  shall have the right to be
indemnified  hereunder  for its own gross  negligence  or willful  misconduct as
determined by a court of competent jurisdiction.

      SECTION  9.04.  Setoffs.  (a)  Each  Bank  agrees  that  if it  shall,  by
exercising any right of setoff or counterclaim or otherwise,  receive payment of
a  proportion  of the  aggregate  amount of its  claims in  respect of Letter of
Credit  Disbursements  and  principal  and interest due with respect to any Note
held by it which is greater  than the  proportion  received by any other Bank in
respect  of the  aggregate  amount  of  claims  in  respect  of Letter of Credit
Disbursements  and  principal  and interest due with respect to any Note held by
such other Bank, the Bank receiving such  proportionately  greater payment shall
purchase  such  participations  in the  claims  in  respect  of Letter of Credit
Disbursements  and Notes held by the other  Banks,  and such  other  adjustments
shall be made, as may be required so that all such payments of claims in respect
of Letter of Credit  Disbursements and of principal and interest with respect to
the Notes held by the Banks shall be shared by the Banks pro rata; provided that
nothing in this Section shall impair the right of any Bank to exercise any right
of setoff or  counterclaim  it may have and to apply the amount  subject to such
exercise  to  the  payment  of   indebtedness  of  a  Borrower  other  than  its
indebtedness  under the Loan  Documents.  Each Borrower  agrees,  to the fullest
extent it may  effectively  do so under  applicable  law,  that any  holder of a
participation  in a claim in respect of a Letter of Credit  Disbursement or in a
Note,  whether or not  acquired  pursuant  to the  foregoing  arrangements,  may
exercise rights of setoff or counterclaim  and other rights with respect to such
participation  as  fully  as if such  holder  of a  participation  were a direct
creditor of the Borrower in the amount of such participation.

      (b) In addition to any rights and  remedies of the Banks  provided by law,
each Bank shall have the right,  without  prior notice the Company or any of its
Subsidiaries,  any such notice being expressly waived to the extent permitted by
applicable  law, upon any amount  becoming due and payable by the Company or any
of its Subsidiaries  hereunder (whether at the stated maturity,  by acceleration
or otherwise) or under any of the other Loan  Documents,  after


                                      -68-
<PAGE>

acceleration of the Obligations hereunder has occurred and is continuing, to set
off and appropriate and apply against such amount any and all deposits  (general
or special,  time or demand,  provisional  or final),  in any currency,  and any
other credits,  indebtedness  or claims,  in any currency,  in each case whether
direct or indirect,  absolute or contingent,  matured or unmatured,  at any time
held or owing by such Bank or any branch or agency  thereof to or for the credit
or the  account of the Company or any of its  Subsidiaries,  as the case may be,
and  whether  or not such Bank is  otherwise  fully  secured.  Each Bank  agrees
promptly  to  notify  the  Company  and the  Agent  after  any such  setoff  and
application  made by such Bank,  provided,  that the failure to give such notice
shall not affect the validity of such setoff and application. ANY AND ALL RIGHTS
TO REQUIRE THE AGENT TO  EXERCISE  ITS RIGHTS OR  REMEDIES  WITH  RESPECT TO ANY
OTHER COLLATERAL  WHICH SECURES ANY OF THE OBLIGATIONS  PRIOR TO THE EXERCISE BY
THE BANKS OF THEIR RIGHT OF SET-OFF  UNDER THIS  SECTION  ARE HEREBY  KNOWINGLY,
VOLUNTARILY  AND  IRREVOCABLY  WAIVED.  Notwithstanding  the  foregoing  in this
Section  9.04(b),  the  rights of the Agent  and each of the  Banks  under  this
Section  9.04(b)  are in  addition  to any and all  other  rights  and  remedies
(including, without limitation, other rights of set-off) which the Agent or such
Bank may have at law or in equity.

      SECTION 9.05.  Amendments and Waivers.  Any provision of this Agreement or
any other Loan Document may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by, or approved in writing by, the Company
and the Required  Banks (and, if the rights or duties of the Agent,  any Issuing
Bank or the Swingline Lender are affected thereby,  by the Agent or such Issuing
Bank or the  Swingline  Lender,  as the case may be);  provided (a) that no such
amendment or waiver shall,  unless signed by, or approved in writing by, all the
Banks  affected  thereby (i)  increase or decrease  the  Commitment  of any Bank
(except for a ratable  decrease in the  Commitments of all Banks) or an increase
in the Total Commitments or subject any Bank to any additional obligation,  (ii)
reduce  the  principal  of or rate of  interest  on any  Loan or any  claim  for
reimbursement  of a Letter of Credit  Disbursement or any fees hereunder,  (iii)
postpone  the date  fixed for any  payment  of  principal  (but not a  mandatory
prepayment) of or interest on any Loan or for any  reimbursement  of a Letter of
Credit Disbursement or for payment of any fees hereunder or for any reduction or
termination of any Commitment,  (iv) change the percentage of the Commitments or
of the aggregate  unpaid  principal amount of the Notes, or the number of Banks,
which  shall be required  for the Banks or any of them to take any action  under
this Section or any other  provision of this  Agreement,  (v) change the ratable
treatment of the Banks under any provision of this  Agreement  that provides for
such ratable treatment,  (vi) release any Guarantor from its Guarantee under the
Guarantee  Agreement,  except that a Guarantor that is a Subsidiary but is not a
Material Subsidiary at the time of the proposed release may be released from its
Guarantee under the Guarantee  Agreement with the written consent or approval of
the Required Banks, or (vii) release all or substantially all of the Collateral;
except the consent of no more than the Required  Banks shall be required for any
such  release if at the time thereof the  Company's  Index Debt is rated BBB- or
better by S&P or Baa3 or better by Moody's.

      SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto,  and their
respective successors and


                                      -69-
<PAGE>

assigns,  except that no Borrower  may assign or  otherwise  transfer any of its
rights under this Agreement without the prior written consent of all Banks.

      (b)  Any  Bank  may at any  time  grant  to one or  more  banks  or  other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans or its participations in Letters of Credit or any of its
rights and/or obligations hereunder. In the event of any such grant by a Bank of
a  participating  interest to a  Participant,  whether or not upon notice to the
Borrowers and the Agent, such Bank shall remain  responsible for the performance
of its obligations hereunder,  and the Borrowers and the Agent shall continue to
deal solely and directly  with such Bank in  connection  with such Bank's rights
and obligations under this Agreement.  Any agreement  pursuant to which any Bank
may grant  such a  participating  interest  shall  provide  that such Bank shall
retain the sole right and  responsibility  to enforce  the  obligations  of each
Borrower  hereunder  including,  without  limitation,  the right to approve  any
amendment,  modification  or waiver of any  provision  of this  Agreement or any
other Loan Document; provided that such participation agreement may provide that
such Bank will not agree to any  modification,  amendment or waiver described in
clause (i),  (ii),  (iii) or (iv) (but, in the case of clause (iv),  only to the
extent such  modification,  amendment or waiver would affect any  requirement of
approval by all Banks of the matters  referred to in such clauses (i),  (ii) and
(iii)) of Section 9.05  without the consent of the  Participant.  The  Borrowers
agree that each Participant  shall, to the extent provided in its  participation
agreement,  be entitled  to the  benefits  of Article  VIII with  respect to its
participating  interest.  An assignment or other transfer which is not permitted
by  subsection  (c) or (d) below  shall be given  effect  for  purposes  of this
Agreement only to the extent of a participating  interest  granted in accordance
with this subsection (b).

      (c) Any  Bank  may at any  time  assign  to one or  more  banks  or  other
institutions  (each an "Assignee")  all, or a proportionate  part of all, of its
rights and  obligations  under this  Agreement and the Notes,  and such Assignee
shall  assume  such  rights  and  obligations,  pursuant  to an  assignment  and
acceptance  executed by such  Assignee and such  transferor  Bank in the form of
Exhibit J hereto,  with (and  subject  to) the written  consent of the  Company,
which consent  shall not be  unreasonably  withheld  (unless an Event of Default
exists in which case no consent of the Company  shall be  required),  the Agent,
which  consent  shall not be  unreasonably  withheld,  the Issuing  Bank,  which
consent  shall not be  unreasonably  withheld and the  Swingline  Lender,  which
consent  shall not be  unreasonably  withheld;  provided  that if an Assignee is
another Bank or an affiliate of any Bank, no such consent shall be required; and
provided further that each assignment shall be in a minimum amount of $5,000,000
or, if less, the balance of the transferor Bank's Commitment. Upon execution and
delivery of such instrument  (including by the Company,  the Agent,  the Issuing
Bank and the Swingline  Lender,  if their consent is required as provided above)
and payment by such Assignee to such  transferor  Bank of an amount equal to the
purchase  price agreed  between such  transferor  Bank and such  Assignee,  such
Assignee  shall be a Bank party to this  Agreement and shall have all the rights
and  obligations of a Bank with a Commitment as set forth in such  instrument of
assumption,  and the  transferor  Bank shall be  released  from its  obligations
hereunder to a  corresponding  extent,  and no further  consent or action by any
party shall be required.  Upon the  consummation  of any assignment  pursuant to
this subsection (c), the transferor Bank, the Agent and the Borrowers shall make
appropriate  arrangements so that, if required,  a new Note for each Borrower is
issued to the Assignee. In


                                      -70-
<PAGE>

connection with any such assignment,  the transferor Bank shall pay to the Agent
an administrative fee for processing such assignment in the amount of $2,500. If
the Assignee is not incorporated  under the laws of the United States of America
or a state thereof,  it shall, prior to the first date on which interest or fees
are  payable  hereunder  for its  account,  deliver to the Company and the Agent
certification as to exemption from deduction or withholding of any United States
federal income taxes in accordance with Section 8.04.

      (d) Any Bank may at any time assign all or any portion of its rights under
this Agreement and its Note to a Federal Reserve Bank. No such assignment  shall
release the transferor Bank from its obligations hereunder.

      (e) No Assignee,  Participant  or other  transferee  of any Bank's  rights
shall be entitled to receive any greater payment under Section 8.03 or 8.04 than
such Bank  would  have been  entitled  to  receive  with  respect  to the rights
transferred,  unless such  transfer  is made with the  Company's  prior  written
consent or by reason of the  provisions of Section 8.02,  8.03 or 8.04 requiring
such Bank to  designate a different  Applicable  Lending  Office  under  certain
circumstances  or at a time when the  circumstances  giving rise to such greater
payment did not exist.

      (f) Notwithstanding anything to the contrary contained herein, any Bank (a
"Granting  Bank") may grant to a special  purpose  funding  vehicle  one hundred
percent  (100%)  of the  outstanding  capital  stock  of  which is owned by such
Granting Bank (an "SPC"), identified as such in writing from time to time by the
Granting Bank to the Agent, and the Company,  the option to provide any Borrower
all or any part of any Loan that such Granting Bank would otherwise be obligated
to make to such Borrower  pursuant to this Agreement;  provided that (i) nothing
herein shall constitute a commitment by any SPC to make any Loan, and (ii) if an
SPC elects not to exercise such option or otherwise  fails to provide all or any
part of such Loan, the Granting Bank shall be obligated to timely make such Loan
pursuant to the terms hereof. The making of an advance by an SPC hereunder shall
utilize the Commitment of the Granting Bank to the same extent,  and as if, such
Loans were made by such Granting  Bank.  Each party hereto hereby agrees that no
SPC shall be liable for any indemnity or similar payment  obligation  under this
Agreement  (all  liability  for which shall remain with the Granting  Bank).  In
furtherance of the foregoing,  each party hereto hereby agrees (which  agreement
shall survive the termination of this Agreement) that, prior to the date that is
one year and one day after the  payment  in full of all  outstanding  commercial
paper or other senior indebtedness of any SPC, it will not institute against, or
join  any  other  person  in  instituting  against,  such  SPC  any  bankruptcy,
reorganization,  arrangement,  insolvency or liquidation  proceedings  under the
laws of the United States or any State thereof; provided,  however, the Granting
Bank  agrees  that  notwithstanding  the  above,  any  such or other  action  or
proceeding may be brought  against the Granting Bank without regard to such time
period. In addition,  notwithstanding anything to the contrary contained in this
Section  9.06(f),  any SPC may with the prior written consent of the Company and
the Agent and without paying any processing fee therefor, assign as security all
or a portion of its  interests in any Loan to the Granting  Bank or to any other
financial  institutions  (consented  to by the  Company  and  Agent in  writing)
providing  liquidity  and/or credit support to or for the account of such SPC to


                                      -71-
<PAGE>

support the funding or maintenance of such Loans.  This Section  9.06(f) may not
be amended without the written consent of any applicable SPC.

      SECTION 9.07.  Collateral.  Each of the Banks  represents to the Agent and
each of the other  Banks  that it in good faith is not  relying  upon any Margin
Stock as collateral in the extension or maintenance  of the credit  provided for
in this Agreement.

      SECTION 9.08.  Governing Law;  Submission to Jurisdiction.  This Agreement
and each Note shall be governed by and construed in accordance  with the laws of
the  State  of New  York.  Each  Borrower  hereby  submits  to the  nonexclusive
jurisdiction  of the United States  District Court for the Southern  District of
New York and the  District  of  Massachusetts  and of any New York  State  court
sitting in New York City or any  Massachusetts  state court for  purposes of all
legal  proceedings  arising  out  of  or  relating  to  this  Agreement  or  the
transactions  contemplated  hereby.  Each Borrower  irrevocably  waives,  to the
fullest  extent  permitted by law, any  objection  which it may now or hereafter
have to the laying of the venue of any such  proceeding  brought in such a court
and any claim that any such proceeding  brought in such a court has been brought
in an inconvenient forum.

      SECTION 9.09. Counterparts;  Integration.  This Agreement may be signed in
any number of  counterparts,  each of which shall be an original,  with the same
effect as if the  signatures  thereto and hereto were upon the same  instrument.
This Agreement  constitutes  the entire  agreement and  understanding  among the
parties hereto and supersedes any and all prior  agreements and  understandings,
oral or written, relating to the subject matter hereof.

      SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS,  THE AGENT, THE
ISSUING BANKS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL  PROCEEDING  ARISING OUT OF OR RELATING TO THIS  AGREEMENT,
THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.

      SECTION 9.11.  Confidentiality.  Each of the Agent,  the Issuing Banks and
the Banks agrees to maintain the  confidentiality of the Information (as defined
below),  except that Information may be disclosed (a) to its and its Affiliates'
directors,  officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be  informed of the  confidential  nature of such  Information  and
instructed to keep such Information  confidential),  (b) to the extent requested
by any regulatory authority,  (c) to the extent otherwise required by applicable
laws and  regulations  or by any subpoena or similar legal  process,  (d) to any
other  party to this  Agreement,  (e) in  connection  with the  exercise  of any
remedies hereunder or any suit, action or proceeding  relating to this Agreement
or the enforcement of rights hereunder,  (f) subject to an agreement  containing
provisions  substantially the same as those of this Section,  to any Assignee of
or Participant in, or any prospective  Assignee of or Participant in, any of its
rights or obligations under this Agreement,  (g) with the consent of the Company
or (h) to the extent such Information (i) becomes publicly  available other than
as a result of a breach of this Section or (ii) becomes  available to the Agent,
any Issuing Bank or any Bank on a nonconfidential basis from a source


                                      -72-
<PAGE>

other than the Company or any  Subsidiary.  For the  purposes  of this  Section,
"Information" means all information  received in writing from the Company or any
Subsidiary relating to the Company or any Subsidiary or their businesses,  other
than any such  information  that is available to the Agent,  any Issuing Bank or
any Bank on a  nonconfidential  basis prior to  disclosure by the Company or any
Subsidiary;  provided that, in the case of  non-financial  information  received
from the Company or any Subsidiary  after the date hereof,  such  information is
clearly identified at the time of delivery as confidential.  Any Person required
to maintain the confidentiality of Information as provided in this Section shall
be considered  to have complied with its  obligation to do so if such Person has
exercised  the same  degree  of care to  maintain  the  confidentiality  of such
Information as such Person would accord to its own confidential information.

      SECTION  9.12.  Replacement  Note.  Upon  receipt  of an  appropriate  and
reasonably  acceptable  affidavit of an officer of the  affected  Bank as to the
loss, theft, destruction or mutilation of any Note or of any other Loan Document
which is not of public  record  and,  in the case of any such  mutilation,  upon
surrender and cancellation of such Note or other Loan Document, the Company will
issue,  in lieu thereof,  a replacement  Note or other Loan Document in the same
principal  amount  (as to any Note) and in any event of like tenor and upon such
issuance the original Note or other Loan Document shall be deemed cancelled.  In
connection with any such issuance of a replacement  Note or other Loan Document,
the affected Bank shall issue a written  indemnification in favor of the Company
with  respect to such lost Note or other  Loan  Document  in form and  substance
reasonably satisfactory to the Company.

      SECTION 9.13. Usury,  etc.. All agreements  between any one or more of the
Borrowers or any  Guarantor  (on the one hand) and the Agent or any of the Banks
(on the other hand) relating to the Financing  Transactions are hereby expressly
limited  so that in no  contingency  or event  whatsoever,  whether by reason of
acceleration  of  maturity of the Notes or  otherwise,  shall the amount paid or
agreed to be paid for the use or the forbearance of the Debt  represented by any
Note exceed the maximum  permissible under applicable law. In this regard, it is
expressly  agreed that it is the intent of the Borrowers,  the  Guarantors,  the
Agent and the Banks, in the execution,  delivery and acceptance of the Notes, to
contract in strict  compliance with the laws of the State of New York. If, under
any circumstances whatsoever, performance or fulfillment of any provision of any
of the Notes or any of the other Loan Documents at the time such provision is to
be  performed  or  fulfilled  shall  involve  exceeding  the  limit of  validity
prescribed  by  applicable  law,  then  the  obligation  so to be  performed  or
fulfilled shall be reduced automatically to the limits of such validity,  and if
under any circumstances  whatsoever the Agent or any Bank should ever receive as
interest an amount which would exceed the highest lawful rate, such amount which
would be excessive  interest  shall be applied to the reduction of the principal
balance  evidenced  by the  Notes  and  not  to the  payment  of  interest.  The
provisions  of this Section  9.13 shall  control  every other  provision of this
Agreement and of each Note.  The  invalidity or  unenforceability  of any one or
more  phrases,  clauses  or  sections  of this  Agreement  shall not  affect the
validity or enforceability of the remaining portions of it.


                                      -73-
<PAGE>

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

                               FOOTSTAR, INC.

                               By:      /s/ Carlos Alberini
                                        ----------------------------------------
                                        Name:  Carlos Alberini
                                        Title: Senior Vice President and Chief
                                               Financial Officer
                                               933 MacArthur Boulevard
                                               Mahwah, NJ  07430
                                               Attention of: Carlos Alberini
                                               Telecopy number: (201)934-6761

                               FLEET NATIONAL BANK,
                               as Administrative Agent, Issuing Bank and
                               Swingline Lender

                               By:  /s/ Stephen Garvin
                                    --------------------------------------------
                                    Name:  Stephen Garvin
                                    Title: Director

                               FIRST UNION NATIONAL BANK,
                               as Syndication Agent

                               By:  /s/ Irene Rosen Marks
                                    --------------------------------------------
                                    Name:  Irene Rosen Marks
                                    Title: Vice President

                               BANK OF NEW YORK,
                               as Documentation Agent

                               By:  /s/ Lucille Cuttone
                                    --------------------------------------------
                                    Name:  Lucille Cuttone
                                    Title: Assistant Vice President

                               CREDIT SUISSE FIRST BOSTON,
                               as Managing Agent

                               By:  /s/ Kristin Lepri            /s/ Bill O'Daly
                                    --------------------         ---------------
                                    Name:  Kristin Lepri         Bill O'Daly
                                    Title: Associate             Vice President

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

                               By:  /s/ Timothy H. Spanos
                                    --------------------------------------------
                                    Name:  Timothy H. Spanos
                                    Title: Managing Director

                       (signatures continued on next page)

<PAGE>

Commitments:

$66,000,000.00                 FLEET NATIONAL BANK, as a Bank

                               By:      /s/ Stephen Garvin
                                    --------------------------------------------
                                    Name:  Stephen Garvin
                                    Title: Director

$44,000,000.00                 FIRST UNION NATIONAL BANK, as a Bank

                               By:      /s/ Irene Rosen Marks
                                    --------------------------------------------
                                    Name:  Irene Rosen Marks
                                    Title: Vice President

$44,000,000.00                 BANK OF NEW YORK, as a Bank

                               By:      /s/ Lucille Cuttone
                                    --------------------------------------------
                                    Name:  Lucille Cuttone
                                    Title: Assistant Vice President

$34,000,000.00                 CREDIT SUISSE FIRST BOSTON, as a Bank

                               By:      /s/ Kristin Lepri        /s/ Bill O'Daly
                                    ---------------------        ---------------
                                    Name:  Kristin Lepri         Bill O'Daly
                                    Title: Associate             Vice President

$34,000,000.00                 BANK OF AMERICA, N.A., as a Bank

                               By:      /s/ Timothy H. Spanos
                                    --------------------------------------------
                                    Name:  Timothy H. Spanos
                                    Title: Managing Director

                       (signatures continued on next page)

<PAGE>

$18,000,000.00                 NATIONAL CITY BANK, as a Bank

                               By:      /s/ Thomas J. McDonnell
                                    --------------------------------------------
                                    Name:  Thomas J. McDonnell
                                    Title: Vice President

$18,000,000.00                 PNC BANK, NATIONAL ASSOCIATION,
                               as a Bank

                               By:      /s/ Michael Richards
                                    --------------------------------------------
                                    Name:  Michael Richards
                                    Title: Vice President

$14,000,000.00                 THE CHASE MANHATTAN BANK, as a Bank

                               By:      /s/ Andrea Johnson
                                    --------------------------------------------
                                    Name:  Andrea Johnson
                                    Title: Vice President

$14,000,000.00                 FIRSTAR BANK, N.A., as a Bank

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

$14,000,000.00                 BANCO POPULAR DE PUERTO RICO,
                               as a Bank

                               By:      /s/ Hector A. Vina
                                    --------------------------------------------
                                    Name:  Hector A. Vina
                                    Title: Vice President

                               By:      /s/ John Incandela
                                    --------------------------------------------
                                    Name:  John Incandela
                                    Title: Senior Vice President

                       (signatures continued on next page)

<PAGE>

$10,000,000.00                  BANK OF HAWAII, as a Bank

                                By:      /s/ Donna R. Parker
                                    --------------------------------------------
                                     Name:  Donna R. Parker
                                     Title: Vice President

$10,000,000.00                  SUMMIT BANK, as a Bank

                                By:      /s/ Miguel J. Medida
                                    --------------------------------------------
                                     Name:  Miguel J. Medida
                                     Title: Vice President

$5,000,000.00                   HIBERNIA NATIONAL BANK, as a Bank

                                By:      /s/ Laura Watts
                                    --------------------------------------------
                                     Name:  Laura Watts
                                     Title: Assistant Vice President

                                By:
                                     Name:
                                     Title:
</TEXT>
</DOCUMENT>
