<PAGE>

                                                                    EXHIBIT 10.7

                              AMENDED AND RESTATED
                    INDEMNIFICATION IMPLEMENTATION AGREEMENT

      This Amended and Restated Indemnification Implementation Agreement ("this
Agreement") is entered into as of April 20, 1994 by and between Thrifty PayLess
Holdings, Inc. (formerly TCH Corporation), a Delaware corporation ("TPH"), and
United Merchandising Corp., a California corporation (and successor by merger to
the rights and obligations of Big 5 Holdings, Inc., a Delaware corporation)
("UMC"). All capitalized terms used but not elsewhere defined in this Agreement
shall have the meanings set forth in the Glossary attached to, and forming part
of, this Agreement.

                                    RECITALS

      The purpose of this Agreement is to implement and supplement, as between
TPH and UMC, the provisions of the Acquisition Agreements relating to PE
Indemnification Claims. In particular, this Agreement is intended to supplement:

            (a)   those provisions of the Big 5 Agreement which preclude UMC
                  from asserting its PE Indemnification Claims against PE
                  directly and requires them to be asserted exclusively through
                  TPH as Agent; and

            (b)   those provisions of the Acquisition Agreements that impose
                  dollar limitations on PE Indemnification Claims, specifically
                  the Minimum PE Claim Amount and the Maximum PE Claim
                  Limitations.

      This Agreement is not intended to affect or modify either Party's rights
or obligations with respect to indemnifications for Federal Tax Liability,
Indemnified Other Income Tax Liability or ERISA Liability, as such terms are
defined, and because such matters are governed by, the Tax Indemnity Agreement
referred to in the Acquisition Agreements.

                                    ARTICLE 1
                PROVISIONS RELATING TO PE INDEMNIFICATION CLAIMS

      1.1 Right to Assert PE Indemnification Claim.

            1.1.1 The Parties acknowledge that the Minimum PE Claim Amount is
applicable to the PE Indemnification Claims of both of them in the aggregate
(including, in case of TPH, "Gart Claims and "MC Claims" as defined in the
Allocation


<PAGE>

Agreement), as well as of each of them individually, so that the failure of
either Party to assert a PE Indemnification Claim against PE may have the
practical effect of delaying or precluding the ability of the other Party to
assert against PE a separate PE Indemnification Claim that does not itself
result in the Minimum PE Claim Amount being exceeded.

            1.1.2 The Parties further acknowledge that the Maximum PE Claim
Limitations are applicable to the PE Indemnification Claims of both Parties in
the aggregate, as well as of each of them individually, so that the assertion by
either of them of a PE Indemnification Claim against PE may have the practical
effect of limiting the amount of, or precluding the assertion of, PE
Indemnification Claims the other Party may otherwise have against PE.

            1.1.3 Notwithstanding Sections l.1.1 and 1.1.2 or this Agreement,
but subject to Section 1.2 of this Agreement, each Party shall be free to
determine for itself whether or not to assert on its own behalf any PE
Indemnification Claim and shall have no contractual, fiduciary or other
obligation to the other with respect to any such determination except for those
contractual obligations expressly set forth below in this Agreement.

      1.2 Agency of TPH with Respect to UMC's PE Indemnification Claims.

            1.2.1 Pursuant to Section 5.5(b) of the Big 5 Agreement, UMC hereby
appoints TPH as its exclusive agent and attorney-in-fact (the "Agent"), with no
power of substitution or re-delegation, for the purpose of making, pursuing,
settling, compromising, negotiating with PE with respect to, and otherwise
disposing of all of BFH's PE Indemnification Claims. UMC further agrees that all
of its PE Indemnification Claims shall be asserted on its behalf by the Agent.
However, the foregoing appointment, and the powers of the Agent, are expressly
subject to the other provisions of this Section 1.2.

            1.2.2 UMC shall have the right to direct the Agent as to all aspects
of its activities as Agent (including, without limitation, the selection of
counsel) and the Agent shall take no action except as expressly directed or
approved in writing by UMC. Without limiting the foregoing:

            (a)   as promptly as practicable, and in no event later than three
                  Business Days, after receipt thereof from UMC, the Agent shall
                  execute such documents as UMC shall direct in writing for the
                  purpose of asserting a PE Indemnification Claim against PE on
                  behalf of UMC (an "Agency Claim") and forward such documents
                  to PE in the manner specified in the Thrifty Agreement;


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            (b)   the Agent shall promptly comply with all further written
                  instructions from UMC relating to the prosecution of an Agency
                  Claim, including, without limitation, instructions as to
                  amendments, modifications and supplements thereto, any
                  settlement or compromise thereof, any arbitration of a dispute
                  with PE with respect thereto, and the execution and filing or
                  delivery of any documents in connection therewith;

            (c)   the Agent shall not amend, modify, supplement, settle,
                  compromise or discharge an Agency Claim without the prior
                  written consent of UMC;

            (d)   the Agent shall immediately remit to UMC all monies or
                  property it receives from PE or any third party that were paid
                  or delivered to it as payment (in whole or in part) of an
                  Agency Claim; and

            (a)   the Agent shall keep UMC apprised on a current basis of all
                  developments regarding a pending Agency Claim.

            1.2.3 UMC shall reimburse all of TPH's reasonable and documented
out-of-pocket costs and expenses incurred in the performance of its duties as
Agent (including, without limitation, reasonable attorneys' fees) ("Agent
Expenses"). Agent Expenses shall be billed no more frequently than monthly and
shall be payable by UMC within ten Business Days of billing. UMC shall have the
right to request reasonably detailed substantiation of any Agent Expense and the
purpose for which it was incurred. In addition, UMC shall indemnify and hold the
Agent and its directors, officers, shareholders, agents and representatives
harmless from and against any and all losses, damages, liabilities, claims,
demands, judgments and settlements of any nature resulting from or arising out
of its conduct as Agent ("Agent Losses"). Notwithstanding the foregoing,
however, UMC shall have no reimbursement or indemnification obligation to the
extent that an Agent Expense or an Agent Loss is determined, by agreement
between the Parties or by arbitration pursuant to Article 3 of this Agreement,
to have been caused by the Agent's gross negligence or willful misconduct.

            1.2.4 TPH shall indemnify and hold harmless UMC and its directors,
officers, shareholders, agents and representatives from and against any and all
losses, damages, liabilities, claims, demands, judgments, settlements, costs and
expenses of any nature resulting from or arising out of any action taken by it
as Agent without prior written authorization from, or in violation of written
instructions received from, UMC or otherwise in violation of the terms of


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the agency created by this Section 1.2 ("Principal Losses") to the extent that a
Principal Loss is determined, by agreement between the Parties or by arbitration
pursuant to Article 3 of this Agreement, to have been caused by the Agent's
gross negligence or willful misconduct.

            1.2.5 In the event of any dispute between the Parties as to the
appropriate allocation of out-of-pocket costs and expenses or losses, damages,
liabilities, claims, demands or settlements, in any case incurred in connection
with their respective PE Indemnification Claims (collectively "Claim Costs"),
such dispute shall be determined by mutual agreement between the Parties or, if
they are unable to agree within thirty days of either Party giving written
notice under this Agreement of its desire to engage in negotiations over the
allocation of such Claim Costs, by arbitration pursuant to Article 3 of this
Agreement.

      1.3 Payment of PE Indemnification Claims. Without limiting Section 1.2.4
of this Agreement, but subject to Section 1.5 of this Agreement, TPH shall have
no obligation to make any payment from its own funds to UMC in respect of any of
UMC's PE Indemnification Claims and UMC's sole remedy in respect thereof shall
be to pursue such PE Indemnification Claims directly against PE (or its
successors and assigns) through TPH as Agent. Without limiting Section 1.2.3 of
this Agreement, UMC shall have no obligation to make any payment from its own
funds to TPH in respect of TPH's PE Indemnification Claims and TPH's sole remedy
in respect thereof shall be to pursue such PE Indemnification Claims directly
against PE (or its successors or assigns).

      1.4 Notice of Certain Matters. Without limiting the Agent's obligations
under Section 1.2.2(e) of this Agreement, each Party shall give the other prompt
written notice of the assertion and disposition of PE Indemnification Claims and
keep the other Party promptly apprised of material developments with respect
thereto, subject to its right to preserve the attorney/client and other
privileges. However, no failure by either Party to comply with its obligations
under this section 1.4 shall impair its rights against the other Party under
this Agreement.

      1.5 Certain Effects of Amendatory Agreement. Each of the Parties
acknowledges that, pursuant to the Amendatory Agreement, certain claims that
would or might otherwise have been PE Indemnification Claims have been
irrevocably waived and released in favor of PE and, as a result, will not give
rise to Indemnification Re-Allocation Claims under this Agreement. Neither Party
shall have any rights or remedies against the other Party under this Agreement
as a result of the execution, delivery or performance of the Amendatory
Agreement by TPH, all of which rights and remedies (if any) are hereby fully and
irrevocably waived and released.


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                                    ARTICLE 2
           PROVISIONS RELATING TO INDEMNIFICATION RE-ALLOCATION CLAIMS

      2.1 General Provisions.

            2.1.1 It is not the intention of the Parties that either of them
should be substituted for PE as indemnitor vis-a-vis the other or otherwise be
subject to unlimited liability with respect to any Indemnification Re-Allocation
Claim the other may have. Rather, it is their intention that, except for the
provisions for re-allocation of Final PE Recoveries expressly set forth in this
Article 2, neither of them should have any recourse against the other, any
subsidiary of the other or any director, officer, shareholder, agent or
representative of the other or of the other's, respective subsidiaries solely on
the basis that an otherwise-valid claim against PE is precluded by a Maximum PE
Claim Limitation.

            2.1.2 In Order to give effect to the re-allocation provisions, of
this Article 2, TPH and UMC shall establish an intercompany account (the
"Intercompany Indemnity Re-Allocation Account"). Each of TPH and UMC shall
designate from time to time one of its officers to collaborate with the other's
designated officer for the purpose of documenting all transactions in the
Intercompany Indemnity Re-Allocation Account and verifying the accuracy thereof
on a periodic basis.

            2.1.3 The only amounts which shall be subject to re-allocation
pursuant to this Article 2 shall be Final PE Recoveries. Each of TPH and UMC
shall notify the other of the receipt of Final PE Recoveries, which shall be
recorded in the Intercompany Indemnity Re-Allocation Account.

            2.1.4 In the event that either Party, pursuant to this Article 2,
wishes to assert an Indemnification Re-Allocation Claim, it shall give notice to
the other Party of such Indemnification Re-Allocation Claim, setting forth with
reasonable particularity the basis therefor, and shall, without having to waive
any attorney/client or other privilege and subject to its right to require
reasonable protection with respect to confidential information and any
confidentiality obligations it may have under applicable law or contracts to
which it is a party, furnish to the other such additional information about the
nature, basis and value of Indemnification Re-Allocation Claim as the other may
reasonably request. All defenses which would have been available to PE (other
than the preclusive effect of the applicable Maximum PE Claim Limitation) shall
be available to either Party in any dispute involving an Indemnification
Re-Allocation Claim by the other Party.

            2.1.5 Upon the resolution, as between the Parties, of any
Indemnification Re-Allocation Claim, by agreement or


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arbitration, if the outcome of such resolution is that a re-allocation of any
Final PE Recoveries is required an appropriate entry shall be made in the
Intercompany Indemnity Re-Allocation Account. Subject to Section 2.1.6 of this
Agreement, all amounts which either Party may owe to the other Party as a result
of the resolution of Indemnification Re-Allocation Claims shall be netted
against one another on the last day of each calendar quarter and whichever Party
is determined to owe the other Party any amount as a result of such calculation
shall pay the amount within ten Business Days.

            2.1.6 Notwithstanding any other provision of this Article 2, neither
Party shall be required to make any payment to the other in respect of any
Indemnification Re-Allocation Claims unless and until the aggregate of all
Indemnification Re-Allocation Claims which have been resolved adversely to that
Party and which, but for this Section 2.1.6, would have resulted in an
obligation of that Party to pay any amount to the other under Section 2.1.5 of
this Agreement, exceeds $125,000 (the "Minimum Re-Allocation Claim Amount").
However:

            (a)   the foregoing requirement relating to the Minimum
                  Re-Allocation Claim Amount shall not toll any statutory,
                  contractual or equitable statute of limitation or other time
                  bar relating to the initial assertion of an Indemnification
                  Re-Allocation Claim by one Party against the other pursuant to
                  Section 2.1.4 of this Agreement nor prevent either Party from
                  asserting or prosecuting against the other to final resolution
                  an Indemnification Re-Allocation Claim;

            (b)   all recoveries to which either Party becomes entitled, but for
                  the Minimum Re-Allocation Claim Amount as a result of the
                  resolution of an Indemnification Re-Allocation Claim shall be
                  recorded in the Intercompany Indemnity Re-Allocation Amount;
                  and

            (c)   once such recoveries of either Party exceed the Minimum
                  Re-Allocation Claim Amount, that Party shall be entitled, as
                  soon as payment becomes due from the other pursuant to Section
                  2.1.5 of the Agreement, to be paid the full amount of the
                  recoveries to which it has become entitled, not only the
                  portion thereof in excess of the Minimum Re-Allocation Claim
                  Amount.

      2.2 Entitlement to Assert Indemnification Re-Allocation Claims


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<PAGE>

            2.2.1 Subject to the other provisions of this Article 2, UMC shall
be entitled to assert all of its Indemnification Re-Allocation Claims against
TPH, including Potential Indemnification Re-Allocation Claims.

            2.2.2 Subject to the other provisions of this Article 2, but
notwithstanding any provision thereof to the contrary, the only Indemnification
Re-Allocation Claims which TPH shall be entitled to assert against BFH shall be
Potential Indemnification Re-Allocation Claims.

            2.2.3 Notwithstanding any other provision of this Article 2, to the
extent that the subsequent adverse disposition of one or more PE Indemnification
Claims pending against PE, and being disputed by it, at the time either Party
asserts against the other Party a Potential Indemnification Re-Allocation Claim
results in the claimant Party becoming entitled, under the applicable
Acquisition Agreement, to assert such Potential Indemnification Re-Allocation
Claim against PE as a PE Indemnification Claim:

            (a)   such Party shall cease to be entitled to pursue such Potential
                  Indemnification Re-Allocation Claim against the other Party;

            (b)   if such Potential Indemnification Re-Allocation Claim has by
                  then been resolved in favor of the claimant Party, the entry
                  in the Intercompany Indemnification Re-Allocation Account
                  reflecting such resolution shall be reversed and any payment
                  made to the claimant Party on account thereof by the other
                  Party shall be immediately repaid; and

            (c)   such Potential Indemnification Re-Allocation Claim may not
                  thereafter be reasserted against the other Party (although the
                  foregoing shall not impair the claimant Party's right to
                  assert any other Indemnification Re-Allocation Claim against
                  the other Party to the extent otherwise permitted by this
                  Article 2).

      2.3 Calculation of Re-Allocations of Final PE Recoveries

            2.3.1 Whenever a re-allocation is required with respect to Final PE
Recoveries under Sections 2.1 and 2.2 of this Agreement as a result of the
resolution in favor of the claimant Party of an Indemnification Re-Allocation
Claim (a "Re-Allocable Claim"), the amount of the re-allocation shall be
calculated on the following basis:

            (a)   First: a determination shall be made as to which Maximum PE
                  Claim Limitation precluded (or potentially precludes) the
                  assertion of such


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                  Indemnification Re-Allocation Claim directly against PE as a
                  PE Indemnification Claim.

            (b)   Second: all Final PE Recoveries theretofore realized by TPH
                  shall be aggregated with all re-allocations to which TPH has
                  theretofore become entitled in respect of previously-asserted
                  and resolved Potential Indemnification Re-Allocation Claims
                  which have not been reversed under Section 2.2.3 of this
                  Agreement.

            (c)   Third: all Final PE Recoveries theretofore realized by UMC
                  shall be aggregated with all re-allocations to which UMC has
                  theretofore become entitled in respect of previously-asserted
                  and resolved Indemnification Re-Allocation Claims which have
                  not been reversed under Section 2.2.3 of this Agreement.

            (d)   Fourth: The amount of the Re-Allocable Claim shall be added to
                  the aggregate amount determined with respect to the successful
                  claimant under (b) or (c), as applicable.

            (e)   Fifth: the aggregate amounts determined under (b) or (c), as
                  applicable, with respect to the non-claimant shall be added
                  together and aggregated with the amount determined under (d).

            (f)   Sixth: the amount determined under (d) shall be divided by the
                  total amount determined with respect to the successful
                  claimant under (e) to determine the total amount of the
                  successful claimant's resolved Indemnification Claims as a
                  percentage of the total amount of all resolved Indemnification
                  Claims.

            (g)   Seventh: the percentage determined under (f) shall be
                  multiplied by the amount of the applicable Maximum PE Claim
                  Limitation determined under (a).

            (h)   Eighth: to the extent that the amount determined under (g)
                  exceeds the actual amount of Final PE Recoveries theretofore
                  realized by the successful claimant, such excess shall
                  constitute the amount of the re-allocation required as a
                  result of the Re-Allocable Claim and the successful claimant
                  shall be entitled to receive, in accordance with section 2.1.5
                  of this Agreement, a payment from the other Party in such
                  amount.


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<PAGE>

            2.3.2 For illustrative purposes only, the following examples of the
calculation specified in Section 2.3.1 of this Agreement are set forth below:

                                  FIRST EXAMPLE

            (a)   The applicable Maximum PE Claim Limitation is the general
                  $25,000,000 limitation specified in Section 5.5(b) of the
                  Thrifty Agreement (as made applicable to the Big 5 Agreement
                  by Section 5.5(b) thereof and as preserved by Section 3(a) of
                  the Amendatory Agreement with respect to the PE
                  Indemnification Claims expressly excluded by said Section 3(a)
                  from the release set forth therein).

            (b)   TPH has heretofore realized Final PE Recoveries of $15 million
                  and no Potential Indemnification Re-Allocation Claims have
                  been made by it.

            (c)   UMC has heretofore realized Final PE Recoveries of $10 million
                  and no Indemnification Re-Allocation Claims have been made by
                  it except for the Re-Allocable Claim that is the subject of
                  this example, which is in the amount of $3 million.

            (d)   The sum of the Re-Allocable Claim and UMC's Final PE
                  recoveries is $13 million.

            (e)   The total amounts determined under (b) and (d) is $28 million.

            (f)   The amount determined under (d) (namely $13 million), divided
                  by the total amount determined under (e) (namely $28 million)
                  computes to a percentage of 46.43%.

            (g)   46.43% of the applicable Maximum PE Claim Limitation of $25
                  million equals $11,607,500.

            (h)   $11,607,500 exceeds UMC's actual Final PE Recoveries of $10
                  million by $1,607.500. Accordingly, subject to possible
                  further re-allocations pursuant to this Article 2, an entry
                  shall be made in the Intercompany Indemnity Re-Allocation
                  Account to reflect UMC's entitlement, at the next payment date
                  applicable under Section 2.1.5 of this Agreement, to be paid
                  by TPH $1,607,500.


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<PAGE>

                                 SECOND EXAMPLE

            (a)   The applicable Maximum PE Claim Limitation is the $40,000,000
                  limitation specified in Section 5.5(b) of the Thrifty
                  Agreement (as made applicable to the Big 5 Agreement by
                  Section 5.5(b) thereof and as preserved by Section 3(a) of
                  the Amendatory Agreement with respect to the PE
                  Indemnification Claims expressly excluded by said Section 3(a)
                  from the release set forth therein) with respect to Section
                  2.19(b) of the Thrifty Agreement (as made applicable to the
                  Big 5 Agreement by Section 2.9 thereof).

            (b)   TPH has heretofore realized Final PE Recoveries of $30 million
                  and no Potential Indemnification Re-Allocation claims have
                  been made by it.

            (c)   UMC has heretofore realized Final PE Recoveries of $10 million
                  and no Indemnification Re-Allocation Claims have been made by
                  it except for the Re-Allocable Claim that is the subject of
                  this example, which is in the amount of $8 million.

            (d)   The sum of the Re-Allocable Claim and UMC's Final PE
                  recoveries is $18 million.

            (e)   The total amount determined under (b) and (d) is $48 million.

            (f)   The amount determined under (d) (namely $18 million), divided
                  by the total amount determined under (e) (namely $48 million)
                  computes to a percentage of 37.5%.

            (g)   37.5% of the applicable Maximum PE Claim Limitation of $40
                  million equals $15,000,000.

            (h)   $15,000,000 exceeds UMC's actual Final PE Recoveries of $10
                  million by $5,000,000. Accordingly, subject to possible
                  further re-allocations pursuant to this Article 2, an entry
                  shall be made in the Intercompany Indemnity Re-Allocation
                  Account to reflect UMC' s entitlement, at the next payment
                  date applicable under Section 2.1.5 of this Agreement, to be
                  paid by TPH $5,000,000.

            2.3.3 In the event that Final PE Recoveries are realized with
respect to a PE Indemnification Claim which is, or is claimed by either Party to
be, attributable to both Parties, the allocation of such Final PE Recoveries
between


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<PAGE>

the Parties shall be as determined by mutual agreement between the Parties or,
if they are unable to agree within thirty days of either Party giving written
notice under this Agreement of its desire to engage in negotiations upon the
allocation of such Final PE Recoveries, by arbitration pursuant to Article 3 of
this Agreement.

                                    ARTICLE 3
                                   ARBITRATION

      3.1 Agreement to Arbitrate Disputes.

            3.1.2 Subject to Section 3.1.2 of this Agreement, any and all
disputes between the Parties arising out of or relating to a claim by either
Party against the other Party pursuant to this Agreement shall be finally
settled by arbitration in the City of Los Angeles, California in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect (except as otherwise specified below in this Article 3), and judgment
upon the award rendered by the Arbitrator(s) may be entered in any court having
jurisdiction thereof. The Parties hereby submit to the in personam jurisdiction
of the Superior Court of the State of California for purposes of confirming any
such award and entering judgment thereon.

            3.1.2 Notwithstanding Section 3.3.1 of this Agreement, neither Party
may initiate any arbitration under this Article 3 more frequently than once in
any twelve-month period measured from the date of this Agreement and subsequent
anniversaries thereof, and all claims and disputes then pending between the
Parties and covered by said Section 3.3.1 shall be consolidated and arbitrated
in a single arbitration proceeding; provided, however, that either Party may
initiate any arbitration under this Article 3 at any time when either (i) such
Party seeks arbitration with respect to one or more claims or disputes which,
individually or in the aggregate, involve at least $2 million, as determined by
a signed certification accompanying its notice of intent to arbitrate and
setting forth its good faith estimate of the aggregate amount of such claim(s)
or dispute(s) and the basis for such estimate, or (ii) such Party's ability
effectively to present its case could be materially adversely affected by any
delay in the initiation of such arbitration and such Party so states in a signed
certification accompanying its notice of intent to arbitrate and setting forth
the nature of such material adverse effect.

      3.2 Certain Rules Governing Arbitration. Notwithstanding anything to
the contrary which may now or hereafter be contained in the Commercial
Arbitration Rules of the American Arbitration Association:


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<PAGE>

            3.2.1 Any arbitration under this Article 3 shall be conducted before
one or more arbitrators (an "Arbitrator"). Arbitrators shall be compensated for
their services at a rate to be determined by the American Arbitration
Association in the event the Parties are not able to agree upon the rate of
compensation. Arbitrators shall be chosen in accordance with the following
provisions:

            (a)   In the event the Parties agree on the designation of a single
                  Arbitrator within ten Business Days from the date when the
                  Party initiating an arbitration files and delivers a notice of
                  intent to arbitrate, such arbitration shall be conducted by
                  such single Arbitrator.

            (b)   In the event the Parties fail to agree upon the designation of
                  a single Arbitrator within the period of the ten Business Days
                  specified in Section 3.2.1(a) of this Agreement, than: (i)
                  each Party shall have the right, within a further period of
                  ten Business Days, to designate one Arbitrator and if, within
                  such period, either Party has failed to appoint an Arbitrator,
                  the American Arbitration Association shall make the
                  appointment; and (ii) the two Arbitrators designated pursuant
                  to clause (ii) above shall agree upon and designate a third
                  Arbitrator within five Business Days from the date of the
                  designation of the later-designated of such two Arbitrators
                  and if they fail to do so the American Arbitration Association
                  shall appoint the third Arbitrator.

            3.2.2 In any arbitration proceedings under this Article 3:

            (a)   all testimony of witnesses shall be taken under oath;

            (b)   it is specifically contemplated and agreed by the Parties that
                  the provisions of Section 1283.05 of the California Code of
                  Civil Procedure, as presently in force, be incorporated into
                  and made a part of, and be applicable to, the arbitration
                  agreement set forth in this Article 3;

            (c)   without limiting the generality of Section 3.2.2(c) of this
                  Agreement, neither Party shall object to the issuance of
                  orders by the Arbitrator(s) granting access to relevant books
                  and records of PE and compelling relevant testimony from PE to
                  the extent such orders are


                                      -12-
<PAGE>

                  permissible under said Section 1283.05 and the relevant
                  information is not otherwise available to the applicable
                  Party; and

            (d)   upon conclusion of any arbitration proceedings under this
                  Article 3, the Arbitrator(s) shall render findings of fact and
                  conclusions of law in a written opinion setting forth the
                  basis and reasons for any decision reached and deliver such
                  documents to each Party along with a signed copy of the award
                  in accordance with Section 1283.6 of the California Code of
                  Civil Procedure.

      3.3 Certain Powers of Arbitrators.

            3.3.1 Arbitrators shall have the power to issue any award, and order
any relief, which they adjudge appropriate to give effect to their findings as
to the purpose of this Agreement and to effect a fair and equitable resolution
of the dispute. However, they shall not have the power to award any punitive
damages and the limitations set forth on their powers in Sections 3.3.2 and
3.4.2 shall also apply.

            3.3.2 Arbitrators shall not have the power to alter, amend or
otherwise affect the provisions of this Article 3.

      3.4 Costs of Arbitration.

            3.4.1 The prevailing Party shall be entitled to recover all costs
incurred in preparation for and as a result of any arbitration pursuant to this
Article 3, including without limitation filing fees, attorneys' fees, the
compensation to be paid to the Arbitrator(s) in any such arbitration and costs
of transcripts.

            3.4.2 In an award of any such costs, Arbitrators shall not have
power or competence to allocate between the Parties expenses, fees or shares of
Arbitrators' compensation except as provided in Section 3.4.1 of this Agreement.

                                    ARTICLE 4
                                  MISCELLANEOUS

      4.1 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given upon receipt if delivered
personally or sent by facsimile transmission (receipt of which is confirmed) or
by courier service promising overnight delivery (with delivery confirmed the
next day) or three Business Days after deposit in the U.S. mails, first class
postage prepaid. Notices to either Party shall be addressed as follows:

To TPH:                 Thrifty PayLess Holdings, Inc.


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<PAGE>

                        9275 SW Peyton Lane
                        Wilsonville, Oregon 97070
                        Attention:  Chief Financial Officer
                        Facsimile: (503) 685-6064

To UMC:                 United Merchandising Corp.
                        2525 East El Segundo Boulevard
                        El Segundo, California 90245
                        Attention: Kathleen Reid-Seidner, Esq.
                                   General Counsel
                        Facsimile: (310) 297-7592

In Each Case
With Copies To:         Leonard Green & Partners
                        333 South Grand Avenue
                        Suite 5400
                        Los Angeles, California 90071
                        Attention: Jonathan D. Sokoloff
                        Facsimile: (213) 625-2043

                                       and

                        Irell & Manella
                        333 South Hope Street, 33rd Floor
                        Los Angeles, California 90071
                        Attention: Edmund N. Kaufman, Esq.
                        Facsimile: (213) 229-0515

Either Party may from time to time change its address for the purpose of notices
by a similar notice specifying the new address but no such change shall be
effective as against the other Party until such other Party shall have actually
received it.

      4.2 Entire Agreement.

            4.2.1 Subject to Section 4.2.2 of this Agreement, this Agreement
(including the Glossary) contains the entire agreement between the Parties with
respect to the subject matter of this Agreement and supersedes all written or
verbal representations, warranties, commitments and other understandings prior
to the date of this Agreement.

            4.2.2 All rights and obligations existing between the Parties,
immediately prior to the effectiveness of this Agreement, pursuant to the terms
of the Indemnification Implementation Agreement dated as of September 25, 1992
(the "Original Agreement") between TPH and BFH (including the rights and
obligations to which UNC succeeded upon the merger of BFH with and into UMC) are
hereby expressly preserved and made subject to the terms of the Agreement as if
they arose hereunder and all actions taken by either Party (or by BFH as
predecessor to UMC) under the Original Agreement shall, to the


                                      -14-
<PAGE>

extent they were effective under the Original Agreement for all purposes
continue to be effective hereunder.

      4.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

      4.4 Severability. If any provision of this Agreement shall be held to be,
or shall hereafter become, unenforceable or invalid by any court of competent
jurisdiction or as a result of future legislative action, such holding or action
shall be strictly construed and shall not alter the enforceability, validity or
effect of any other provision hereof.

      4.5 Assignability. This Agreement shall be binding upon and shall inure to
the benefit of the successors and assigns of the Parties. However, neither this
Agreement nor any right or obligation hereunder may be assigned by either Party
without the prior written consent of the other.

      4.6 Captions. The descriptive headings herein are inserted for convenience
only and are intended to be part of or to affect the meaning or interpretation
of this Agreement.

      4.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to any
principles of conflict of laws.

      4.8 Amendment and Waiver. This Agreement may be amended, modified or
supplemented only by an instrument in writing signed by both Parties. No waiver
by either Party of any of the provisions of this Agreement shall be effective
unless set forth in writing and executed by the Party so waiving.

      4.9 Confidentiality. Each Party shall maintain, and instruct its agents
and representatives to maintain, as confidential information both the existence
and terms of this Agreement except to the extent that such information (a) was
known by a third party recipient when received, (b) is or hereafter becomes
lawfully obtainable from other sources, (c) as may otherwise be required by law
or (d) to the extent such duty as to confidentiality is waived in writing by the
other Party; provided, however, that (i) the existence and terms of this
Agreement may be made known to the "Lender Parties" as defined in the Credit
Agreement dated as of the date hereof among TPI and the other parties set forth
therein, and (ii) the existence of this Agreement may be made known to PE.


                                      -15-
<PAGE>

      4.10 Acknowledgment. UMC hereby acknowledges the fact that, in connection
with a distribution by TPH to its stockholders of the stock of Gart Sports
Company, a Delaware corporation ("GSC") that will own all of the outstanding
stock of Gart Bros. Sporting Goods Company, a Colorado corporation ("Gart"), and
MC Sports Company, a Delaware corporation ("MCSC") that will own all of the
outstanding stock of Michigan Sporting Goods Distributors, Inc., a Michigan
corporation ("MC"), TPH, GSC and MCSC are concurrently herewith entering into an
Indemnification Allocation Agreement (the "Allocation Agreement") pursuant to
which TPH is conferring on GSC and MSCS, respectively, all of TPH's beneficial
interest in the economic benefit of "Gart Claims" and "MC Claims" (as therein
defined), and agreeing to act as agent for GSC and MCSC in pursuing such claims
against PE. It is expressly agreed that nothing contained in the Allocation
Agreement shall amend or modify, impair any rights or either Party under, or
give rise to any claim by either Party against the other under or with respect
to, this Agreement.

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

THRIFTY PAYLESS                              UNITED MERCHANDISING CORP.
  HOLDINGS, INC.


By: /s/ Daniel A. Seigel                     By: /s/ Kathleen Reid-Seidner
   -----------------------------                -----------------------------
   Name: Daniel A. Seigel                       Name: Kathleen Reid-Seidner
   Title: President                             Title: Vice President and
                                                       Secretary


                                      -16-
<PAGE>

                                    GLOSSARY

      Each capitalized term used and not defined in this Agreement shall have
the meaning set forth below or, in the case of a capitalized terms not listed
below, the meaning set forth in the Thrifty Agreement, and in each case shall
include the plural as well as the singular.

      "Acquisition Agreements" means the Big 5 Agreement and the Thrifty
Agreement.

      "Allocation Agreement" has the meaning set forth in Section 4.9 of this
Agreement.

      "Amendatory Agreement" means the Agreement and Release dated as of March
11, 1994 among PE, TPH, TPI and UMC.

      "Agency Claim" has the meaning set forth in Section 1.2.2(a) of this
Agreement.

      "Agent" has the meaning set forth in Section 1.2.1 of this Agreement.

      "Agent Expenses" has the meaning set forth in Section 1.2.4 of this
Agreement.

      "Agent Losses" has the meaning set forth in Section 1.2.4 of this
Agreement.

      "Arbitrator" has the meaning set forth in Section 3.2.1 of this Agreement.

      "Big 5 Agreement" means the Purchase and Sale Agreement dated as of
May 22, 1992 by and between Big 5 Holdings, Inc., a Delaware corporation, PE and
Thrifty Corporation, a California corporation, as amended, (including pursuant
to the Amendatory Agreement) through and including the date of this Agreement
and as affected and interpreted (other than by way of amendment) by the
Amendatory Agreement.

      "Claim Costs" has the meaning set forth in Section 1.2.5 at this
Agreement.

      "Final PE Recoveries" means amounts which either TPH or BFH have recovered
from PE in respect of PE Indemnification Claims and as to which any dispute with
PE has been finally resolved by arbitration, agreement or the preclusive effect
of any statutory, contractual or equitable statute of limitation or time bar.

      "GSC" has the meaning set forth in Section 4.9 of this Agreement.


                                      -17-
<PAGE>

      "Indemnification Claim" means an Indemnification Re-Allocation Claim and a
PE Indemnification Claim.

      "Indemnification Re-Allocation Claim" means a claim which one party has
against the other Party, the sole remedy for which is re-allocation of Final PE
Recoveries under Article 2 of this Agreement, to assert a claim (or a portion of
a claim) which would be assertable against PE as a PE Indemnification Claim but
for the fact that such assertion is precluded by a Maximum Claim Limitation. A
claim which is precluded from assertion against PE by any other bar, including,
without limitation, any statutory, contractual or equitable statute of
limitation or time bar, shall not constitute an Indemnification Re-Allocation
Claim. A Potential Indemnification Re-Allocation Claim shall constitute an
Indemnification Re-Allocation Claim except as otherwise provided in Section
2.2.3 of this Agreement.

      "Intercompany Indemnity Re-Allocation Account" has the meaning set forth
in Section 2.1.2 of this Agreement.

      "Maximum PE Claim Limitation" means, with respect to any claim for
indemnification that would otherwise be a PE Indemnification Claim, the
limitation on the aggregate amount of claims of that category for which PE is
required to provide indemnification under Article 5 of the Thrifty Agreement
that is applicable under section 5.5 of the Thrifty Agreement (as made
applicable to the Big 5 Agreement by Section 5.5(b) thereof).

      "MCSC" has the meaning set forth in Section 4.9 of this Agreement.

      "Maximum Re-Allocation Claim Amount" has the meaning set forth in Section
2.1.6 of this Agreement.

      "Minimum PE Claim Amount" means the amount of $1,500,000 specified in
Section 5.5(a) of the Thrifty Agreement and Section 5.5(a)(i) of the Big 5
Agreement (in each case, as amended by Section 4(d) of the Amendatory Agreement)
as the minimum aggregate amount of PE Indemnification Claims which must be
exceeded before PE is required to indemnify either TPH under Article 5 of the
Thrifty Agreement or UMC under Article 5 of the Big 5 Agreement.

      "Party" means either TPH or UMC as a party to this Agreement.

      "PE" means Pacific Enterprises, a California corporation.

      "PE Indemnification Claim" means a claim arising against PE either (i) by
TPH under Article 5 of the Thrifty Agreement or (ii) by UMC under Article 5 of
the Big 5 Agreement, but


                                      -18-
<PAGE>

does not, under either clause (i) or clause (ii) of this definition, include an
Indemnification Re-Allocation Claim.

      "Potential Indemnification Re-Allocation Claim" means a claim (or a
portion of a claim): (i) the assertion of which against PE is potentially
precluded by a Maximum PE Claim Limitation as a result of the aggregate amount
of all other PE Indemnification Claims of TPH and UMC which are subject to the
same applicable Maximum PE Claim Limitation and which are pending against PE and
being disputed by it at the time the status of such claim is required to be
determined under Article 2 of this Agreement; but (ii) which has not by then
become definitively precluded by such Maximum PE Claim Limitation because the
final resolution of much pending PE Indemnification Claims has not yet occurred.
However: (a) no such claim (or portion of a claim) is a Potential
Indemnification Re-Allocation Claim during any period when it is in fact being
asserted against PE; and (b) no claim of TPH arising under Section 5.2(c) of the
Thrifty Agreement shall constitute a Potential Indemnification Re-Allocation
Claim.

      "Preserved UMC Claims" bee the meaning set forth in Section 1.5.2 of this
Agreement.

      "Principal Lones" has the meaning set forth in Section 1.2.5 of this
Agreement.

      "Re-Allocable Claim" has the meaning set forth in Section 2.3.1 of this
Agreement.

      "Thrifty Agreement" means the Purchase and Sale Agreement dated as of May
22, 1992 by and between TPH and PE, as amended (including pursuant to the
Amendatory Agreement) through and including the date of this Agreement and as
affected and interpreted (other than by way of amendment) by the Amendatory
Agreement.

      "TPI" means Thrifty PayLess, Inc. (formerly Thrifty Holdings, Inc.), a
California corporation.