AMENDMENT NO. 7 TO
                                CREDIT AGREEMENT


            THIS  AMENDMENT  NO. 7 TO  CREDIT  AGREEMENT  (the  "Amendment")  is
entered  into as of the 2nd day of  December,  1996  by and  between  PNC  BANK,
NATIONAL  ASSOCIATION,  as  Administrative  Agent  under  the  Credit  Agreement
described below, on behalf of the Lenders,  and BORDERS GROUP,  INC., a Delaware
corporation (the "Company"), on behalf of the Borrowers.

                                   WITNESSETH:

            WHEREAS,  the Borrowers,  the Lenders,  the Administrative Agent and
the Syndication  Agent have entered into that certain Credit  Agreement dated as
of March 28, 1995 (as heretofore amended, the "Agreement";  terms defined in the
Agreement, as amended hereby, which are used herein shall have the same meanings
as are set  forth in the  Agreement  for such  terms  unless  otherwise  defined
herein);

            WHEREAS, the Borrowers have requested that the Lenders amend certain
provisions of the  Agreement,  and the Lenders are willing to do so on the terms
and subject to the conditions hereinafter set forth; and

            WHEREAS,   pursuant  to  Section   12.01  of  the   Agreement,   the
Administrative  Agent,  with the written  consent of the Required  Lenders,  may
enter into  certain  prescribed  amendments  to the  Agreement  on behalf of the
Lenders, and the Company may enter into amendments of the Agreement on behalf of
the Borrowers;

            NOW,  THEREFORE,  in  consideration of the premises set forth above,
the  terms  and  conditions  contained  herein,  and  other  good  and  valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Lenders and the Borrowers hereby agree as follows:

            1.     Amendment  to  Agreement.   Upon  the  Effective  Date  (as
defined in Section 2 below), the Agreement is amended as follows:

                  a.     Clause (xiii) of the  definition of "Permitted  Lien"
in Section 1.01 is amended by deleting  the words  "Section  8.02(a)(xv)"  and
inserting in lieu thereof the following: "Section 8.02(a)(xi)".

                  b.     The definition of "Consolidated  Funded Indebtedness"
in Section 1.01 is amended by inserting the following  after "Lease  Financing
Guarantee": "or permitted by Section 8.02(c)(viii)".

                  c.     The   definition  of  "Fee  Letters"  is  amended  by
inserting the following immediately after "Syndication Agent":

                   and all other letter  agreements  between the Company and any
party  hereto  under  which the  parties  thereto  designate  that  such  letter
agreement is a fee letter for  purposes of this  Agreement,  including,  without
limitation,  the letter  agreements  dated as of November  14, 1996  between the
Company and the Administrative Agent or the Syndication Agent.

                  d.     The  definition  of "Fees" in Section 1.01 is amended
by inserting  the following  immediately  after "Usage Fee":  "the  Repurchase
Fee".

                  e.     Section  1.01 is amended by  amending  and  restating
the definitions set forth below as follows:

                         Financed  Lease shall mean a lease of real  property,
improvements on real property or real property and  improvements  thereon by the
Company  or  any  of  its   Subsidiaries   entered  into  (i)  pursuant  to  the
Participation  Agreement or (ii) in connection  with the  Supplemental  Facility
(including  without  limitation any lease with respect to Indebtedness under the
Project Loan Agreements (as defined in the Lease Credit Agreement)  purchased or
assigned as part of the Supplemental Facility).

                         Foreign  Joint Venture  shall mean  individually  and
Foreign Joint Ventures shall mean  collectively  any  corporation,  partnership,
limited liability company, joint venture or other entity (i) incorporated in any
jurisdiction  other  than a state of the  United  States  of  America  or formed
primarily  for the  purpose of doing  business  outside of the United  States of
America and (ii) in which the Company and its  Subsidiaries own less than 50% of
the  capital  stock,  partnership  interests,   membership  interests  or  other
ownership interests.

                         Lease  Financing  Payment  shall mean any  payment by
the Company or any of its Subsidiaries  (i) under the Lease Financing  Guarantee
or  any  Supplemental  Lease  Financing   Agreement  in  respect  of  Contingent
Obligations  described in Section  8.02(c)(viii) (other than in respect of Basic
Rent (as  defined  in the Lease  Credit  Agreement  and the  Supplemental  Lease
Financing  Agreements  (or  if  the  term  Basic  Rent  is  not  defined  in the
Supplemental Lease Financing Agreements, as the amount represented by Basic Rent
as  defined  in  the  Lease  Credit  Agreement  is  otherwise   defined  in  the
Supplemental Lease Financing Agreements)), (ii) to purchase or otherwise acquire
all or any portion of any  Property  subject to any Financed  Lease,  including,
without limitation,  all payments pursuant to the exercise by the Company or any
of its  Subsidiaries  of any Purchase Option (as defined in a Financed Lease) or
similar  option as provided in any  Supplemental  Lease  Financing  Agreement or
(iii)  that  constitutes  a  payment  of the  Termination  Value or the  Maximum
Residual  Guarantee  Amount (as each such term is  defined  in the Lease  Credit
Agreement  or the  Supplemental  Lease  Financing  Agreements  (or a  comparable
payment under the Supplemental Lease Financing  Agreements if such terms are not
defined therein)).

                         Lease  Financing  Rent  Expense  shall mean all Basic
Rent (as  defined  in the Lease  Credit  Agreement  and the  Supplemental  Lease
Financing  Agreements  (or  if  the  term  Basic  Rent  is  not  defined  in the
Supplemental Lease Financing Agreements, as the amount represented by Basic Rent
as  defined  in  the  Lease  Credit  Agreement  is  otherwise   defined  in  the
Supplemental  Lease  Financing  Agreements))  payable  by the  Company  and  its
Subsidiaries, as lessee or sublessee under a Financed Lease.

                         Restricted  Subsidiary  shall mean  individually  and
Restricted  Subsidiaries  shall mean  collectively any Subsidiary of the Company
(other than  Unrestricted  Subsidiaries) of which 50% or more of the outstanding
shares of capital stock, partnership interests or membership interests are owned
by the Company  (whether  directly or through  one or more  Subsidiaries  of the
Company).

                  f.     Section  1.01 is amended by inserting  the  following
definitions in their proper alphabetical sequence:

                         Capitalized  Rent Expense  shall mean an amount equal
to four times the sum of Rent Expense and Lease Financing Rent Expense.

                         Distributions  shall  have the  meaning  assigned  to
such term in Section 8.02(e).

                         Domestic  Joint Venture shall mean  individually  and
Domestic Joint Ventures shall mean  collectively any  corporation,  partnership,
limited liability company, joint venture or other entity (i) incorporated in any
state of the United  States of America for the purpose of doing  business in the
United States of America and (ii) in which the Company and its  Subsidiaries own
less than 50% of the capital stock, partnership interests,  membership interests
or other ownership interests.

                         Investments  shall have the meaning  assigned to such
term in Section 8.02(d).

                         Joint  Venture  shall mean any Foreign  Joint Venture
or Domestic  Joint  Venture,  and Joint  Ventures shall mean all Foreign Joint
Ventures and Domestic Joint Ventures.

                         Leverage  Ratio shall mean the ratio  (expressed as a
percentage)  of  Consolidated  Funded  Indebtedness  plus four times Annual Rent
Expense  plus eight times Annual Lease  Financing  Rent Expense to  Consolidated
Total  Capital plus four times Annual Rent Expense plus eight times Annual Lease
Financing Rent Expense.

                         Permitted  Joint Venture  Activity shall mean (i) any
Investment by any Borrower in any Joint Venture or any Contingent Obligations of
any Borrower in respect of any Indebtedness of any Joint Venture,  provided that
(a) the aggregate amount of all such Investments and Contingent Obligations does
not at any time exceed 15% of Consolidated Tangible Net Worth,  determined as of
the last day of the Fiscal Quarter most recently ended, (b) the aggregate amount
of all such Investments and Contingent Obligations in all Foreign Joint Ventures
does not at any time exceed 10% of Consolidated  Tangible Net Worth,  determined
as of the  last day of the  Fiscal  Quarter  most  recently  ended,  and (c) the
aggregate  amount of all such  Investments  and  Contingent  Obligations  in all
Domestic Joint Ventures does not at any time exceed 10% of Consolidated Tangible
Net Worth,  determined  as of the last day of the Fiscal  Quarter most  recently
ended and (ii) any  Contingent  Obligations  of Borrowers,  or  Indebtedness  of
Borrowers  constituting  reimbursement  obligations  under  letters  of  credit,
relating to leases executed, as lessee, by a Joint Venture,  provided,  that the
aggregate  amount of such Contingent  Obligations and Indebtedness is limited to
lease payments  (whether such amounts are fixed or percentage  rent, fees, costs
or  otherwise)  not in excess of an aggregate of (x)  $15,000,000  in any Fiscal
Year with respect to all Joint Ventures, (y) $10,000,000 in any Fiscal Year with
respect to all Foreign  Joint  Ventures and (z)  $10,000,000  in any Fiscal Year
with respect to all Domestic Joint Ventures.

                         Permitted  Restricted  Subsidiary Activity shall mean
(i)  any  Investment  by  any  Borrower  in  any  Restricted  Subsidiary  or any
Contingent  Obligations  of any Borrower in respect of any  Indebtedness  of any
Restricted  Subsidiary,  provided  that  (a) the  aggregate  amount  of all such
Investments  and  Contingent  Obligations  does  not at any time  exceed  20% of
Consolidated  Tangible  Net Worth,  determined  as of the last day of the Fiscal
Quarter most recently ended, (b) the aggregate amount of all equity  investments
and capital  contributions  made by the Borrowers in any  Restricted  Subsidiary
does not exceed 15% of  Consolidated  Tangible Net Worth,  determined  as of the
last day of the Fiscal Quarter most recently ended,  (c) the aggregate amount of
all loans or advances  by the  Borrowers  to  Restricted  Subsidiaries  does not
exceed 15% of Consolidated Tangible Net Worth,  determined as of the last day of
the Fiscal  Quarter  most  recently  ended and (d) the  aggregate  amount of all
Contingent Obligations of the Borrowers in respect of Indebtedness of Restricted
Subsidiaries does not exceed 15% of Consolidated Tangible Net Worth,  determined
as of the  last day of the  Fiscal  Quarter  most  recently  ended  and (ii) any
Contingent  Obligations of Borrowers,  or Indebtedness of Borrowers constituting
reimbursement  obligations under letters of credit, relating to leases executed,
as lessee, by a Restricted Subsidiary,  provided,  that, the aggregate amount of
such  Contingent  Obligations  and  Indebtedness  is limited  to lease  payments
(whether such amounts are fixed or percentage  rent,  fees,  costs or otherwise)
not in excess of an aggregate of  $15,000,000 in any Fiscal Year with respect to
all Restricted Subsidiaries.

                         Repurchase  Amount  shall mean  $50,000,000,  as such
amount may be reduced by the Company pursuant to Section 2.03(d).

                         Repurchase  Fee shall have the  meaning  assigned  to
such term in Section 2.03(d).

                         Supplemental   Facility   shall   have  the   meaning
assigned to such term in Section 8.02(c)(viii).

                         Supplemental  Lease Financing  Agreements  shall mean
all agreements executed in connection with the Supplemental Facility, including,
without  limitation,  any guarantee or reimbursement  obligation in respect of a
letter of credit or other  agreement under which  Contingent  Obligations of the
Borrowers are created in respect of the Supplemental Facility.

                         Unrestricted  Subsidiary shall mean  individually and
Unrestricted  Subsidiaries shall mean collectively any Subsidiary of the Company
(i) of which 80% or more of the outstanding shares of capital stock, partnership
interests or membership  interests are owned by the Company (whether directly or
through one or more  Subsidiaries of the Company) and (ii) that has executed and
delivered  a  letter  agreement  in  form  and  substance  satisfactory  to  the
Administrative  Agent  under  which  such  Subsidiary  agrees to be bound by the
provisions  of Article IX hereof,  together  with such legal  opinions and other
documents and instruments as the Administrative Agent may request.

                         Wholly-owned  Subsidiary shall mean  individually and
Wholly-owned  Subsidiaries shall mean collectively any Subsidiary of the Company
of which  all of the  outstanding  shares  of  capital  stock  or  other  equity
interests  are owned by the  Company  (whether  directly  or through one or more
Wholly-owned Subsidiaries of the Company).

                  g.     Section 2.03 is amended by adding the  following as a
new clause (d) and renumbering the existing clause (d) as clause (e):

                         (d)  Repurchase  Fee.  The  Borrowers   hereby  agree
that,  upon the purchase by the Company of any common stock of the Company,  the
Borrowers  shall have an  irrevocable  obligation  to pay to the  Administrative
Agent for the benefit of the Lenders, a nonrefundable fee (the "Repurchase Fee")
calculated on a daily basis by multiplying  .2667% per annum by the gross amount
paid by the Company  for such stock.  With  respect to each such  repurchase  of
stock,  the Repurchase Fee shall accrue from the date of any such purchase until
the later of (a) the date that is 2 years from the date of such purchase and (b)
the date on which the  Leverage  Ratio,  calculated  as of the end of any Fiscal
Quarter, is less than 60%, provided,  that in calculating the Leverage Ratio for
purposes of this Section, the Company shall be deemed to have repurchased common
stock  of the  Company  and  paid  the  full  Repurchase  Amount  therefor.  The
Repurchase Fee shall be allocated  among the Lenders in proportion to the amount
of the Commitment  provided by each Lender. Such Repurchase Fee shall be payable
in arrears on the last Business Day of each March, June,  September and December
after  the  date  hereof,   provided,  that  on  the  Expiration  Date  or  upon
acceleration  of the  Obligations,  the  Repurchase  Fee  accrued  to such  date
together with the  Repurchase  Fee that would be payable  thereafter but for the
occurrence of the Expiration Date or acceleration of the  Obligations,  shall be
immediately due and payable.  Notwithstanding the foregoing,  the amount payable
under this clause (d) by the Company on the Expiration Date or upon acceleration
of the  Obligations  shall not exceed the Repurchase Fee that otherwise would be
payable for a full Fiscal Quarter  during the two years  referred to above.  The
Company  may upon  five (5)  Business  Days  written  irrevocable  notice to the
Administrative Agent permanently reduce the Repurchase Amount in whole multiples
of $5,000,000 to an amount not less than the aggregate  amount  theretofore paid
by the Company with respect to  repurchases  of its common stock as permitted by
Section 8.02(e).

                  h. Section 6.01(j) is amended by inserting  immediately  after
the term "margin stock" the first time such term appears in the second  sentence
thereof the following:  "(other than common stock of the Company  repurchased in
accordance with Section 8.02(e))".
                  i.     Section  6.02 is  amended  by  inserting  immediately
after the reference to "12.11" the following:  "and the amendment of Schedule
6.01(c) in  connection  with any new  Subsidiary  of the Company as  permitted
herein".

                  j.     Section  8.01(j)  is  amended  and  restated  in  its
entirety as follows:

                         (j)  Use of  Proceeds.  The  Borrowers  will  use the
proceeds  of the Loans only for working  capital  purposes,  repurchases  of the
Company's  common stock in  accordance  with Section  8.02(e) and  Purchases and
Investments as permitted by this  Agreement,  and such uses shall not contravene
any applicable Law or any other provision thereof.

                  k.     Section  8.01(m)  is  amended  and  restated  in  its
entirety as follows:

                         (m)  Subsidiary  Guarantees.  If (i)  any  Restricted
Subsidiary's  total assets  determined in accordance with GAAP at the end of any
Fiscal  Quarter  constitute  more than 10% of  Consolidated  Tangible  Net Worth
determined at the end of such Fiscal Quarter or (ii) any Restricted Subsidiary's
net income  determined  in  accordance  with GAAP for any  rolling  four  Fiscal
Quarter  period  exceeds  10% of  Consolidated  Net Income for such four  Fiscal
Quarters,  the Company  shall cause such  Restricted  Subsidiary  to agree to be
bound by the  provisions of Article IX hereof and to execute a letter  agreement
to such effect in form and substance  satisfactory to the  Administrative  Agent
and to deliver such legal  opinions and other  documents and  instruments as the
Administrative Agent may request.

                  l.     Section 8.01(n) is deleted in its entirety.

                  m.     Section  8.02 is amended and restated in its entirety
as set forth in Schedule  1 hereto.

                  n. Exhibit  8.03(c) is hereby  deleted and replaced by Exhibit
8.03(c)  attached  hereto,  or such other form of compliance  certificate as the
Agents and the Company may otherwise agree from time to time.

                  o.     Section   8.03(c)  is  amended   by   inserting   the
following as a new clause (iii):

             and (iii)  describing  any  Permitted  Joint  Venture  Activity  or
Permitted  Restricted  Subsidiary  Activity  engaged in, or any  Purchase  made,
during the period covered by such financial statements.

                  p.     Section 8.03(j) is amended and restated as follows:

                   (j)  Notices  Regarding  Lease  Financing  Agreements  and
Supplemental  Lease  Financing  AgreementsNotices  Regarding  Lease Financing
Agreements and Supplemental Lease Financing Agreements.

                         (i)  promptly  upon  the   occurrence  of  any  event
requiring the Company or any  Subsidiary of the Company,  or any election by the
Company or any Subsidiary of the Company,  to make any Lease Financing  Payment,
and in any event not less than ten (10) days prior to the date of any such Lease
Financing Payment, written notice thereof setting forth the details thereof; and

                         (ii) promptly,  and in any event within five (5) days
after the occurrence thereof, written notice of any matured or unmatured default
under  the  Lease  Credit  Agreement,  the  Lease  Financing  Guarantee  or  any
Supplemental Lease Financing Agreement or any matured or unmatured default under
any Financed Lease.

                  q.     Section 8.03 of the  Agreement is amended by adding a
new clause (k) as follows:

                   (k) Notices Regarding Repurchases of Stock.  Promptly, and in
any event within five (5) Business Days,  after the repurchase by the Company of
any its common stock,  written  notice  thereof  (including the number of shares
repurchased,  the amount paid by the Company with respect to such repurchase and
the date of such repurchase).

                  r.     Section 10.01(p) is amended and restated as follows:

                   (p) Any matured  default shall have occurred  under the Lease
Credit  Agreement,  any Supplemental  Lease Financing  Agreement or any Financed
Lease, whether or not any obligations thereunder have been accelerated.

            2.     Conditions  of   Effectiveness.   The   amendments  to  the
Agreement  contained  in  Section 1 shall  become  effective  (the  "Effective
Date")  when and only when  each of the  conditions  specified  below has been
satisfied:

                  a. no  Event  of  Default  or  Potential  Default  shall  have
occurred and be continuing  on the date hereof or on the Effective  Date and the
representations  and  warranties  made in the  Agreement and in Section 3 hereof
shall be true and correct on the date hereof and on the  Effective  Date and the
Borrowers  shall have delivered to the  Administrative  Agent for the benefit of
each Lender an officer's certificate to both such effects;

                  b.     the Administrative  Agent shall have received for the
benefit of each Lender all of the following documents,  each document being in
form and substance satisfactory to the Administrative Agent:

                         (1)  written Approval Memos from the Required Banks;

                         (2)  this Amendment, duly executed by the Company;

                         (3)  the officer's  certificate  referenced in clause
a. above;

                         (4)  a consent to this Amendment  executed by each of
Borders  Properties,  Inc.  and  Waldenbooks  Properties,  Inc. in the form of
Exhibit A hereto; and

                         (5)  such   instruments,   agreements,   opinions  of
Thomas D. Carney,  General  Counsel of the  Borrowers,  and other items as the
Administrative Agent may request; and

                  c. the  Administrative  Agent shall have  received (i) for the
benefit of the  Lenders  $300,000,  which  amount  shall be  distributed  to the
Lenders that have executed and delivered  Approval  Memos to the  Administrative
Agent (and to Bankers Trust Company as Agent under the Lease Credit Agreement if
such Lender is  participating  in such lease  financing  facility) prior to 5:00
p.m. Chicago time on November 25, 1996 (such distribution shall be made based on
each such Lender's pro rata share of the total  commitments of all lenders under
the Agreement and such lease financing  facility) and (ii) the fees set forth in
the Fee Letters executed in connection with this Amendment.

            3. Representation and Warranties.  Each of the Borrowers  represents
and warrants as follows: (i) it has all necessary power and authority to execute
and deliver this Amendment and to perform its  obligations  hereunder;  (ii) the
execution,  delivery and performance of this Amendment have been duly authorized
by it; (iii) this Amendment and the Agreement, as amended hereby, constitute the
legal,  valid and  binding  obligations  of such  Borrower  and are  enforceable
against such  Borrower in  accordance  with their terms;  and (iv) the approval,
execution, delivery and performance of the terms hereof and of the Agreement, as
amended hereby, do not violate any contractual  provision to which it is a party
or by which it is or its properties are bound or any Law applicable to it.

            4.     Reference to the Effect on the Agreement.

                  a.     On the  Effective  Date:  (i) each  reference  in the
Agreement to "this  Agreement,"  "hereunder,"  "hereof,"  "herein" or words of
like import shall mean and be a reference to the  Agreement as amended  hereby
and  (ii) each  reference to the Agreement in all other Loan  Documents  shall
mean and be a reference to the Agreement, as amended hereby.

                  b.     Except as specifically  amended above,  the Agreement
and all other  Loan  Documents  shall  remain in full force and effect and are
hereby ratified and confirmed.

                  c. The execution, delivery and effectiveness of this Amendment
shall not, except as expressly  provided herein,  operate as an amendment to any
provision  of the  Agreement  nor a waiver of any right,  power or remedy of any
Lender or Agent,  nor constitute a waiver of, or consent to any departure  from,
any provision of the Agreement or any other Loan Document.

            5.     Governing  Law.  This  Amendment  shall be  governed by and
construed in  accordance  with the  internal  laws (as opposed to conflicts of
law provisions) of the State of Illinois.

            6.     Headings.  Section  headings in this Amendment are included
herein for  convenience  of reference  only and shall not constitute a part of
this Amendment for any other purpose.

            7.     Counterparts.  This  Amendment  may be  executed  by one or
more of the parties to this  Amendment on any number of separate  counterparts
and all of said counterparts  taken together shall be deemed to constitute one
and the same  instrument.  Delivery  of a duly  executed  counterpart  copy of
this Amendment may be made by telecopy.

            8.  Expenses.  The  Borrowers  will upon  demand  pay to each of the
Agents the amount of any and all  expenses,  including the  reasonable  fees and
expenses of each Agent's  attorneys (which attorneys may be an Agent's employees
to the extent agreed to in advance by Borrowers)  which any such Agent may incur
in  connection  with  the  preparation,  negotiation  and  enforcement  of  this
Amendment  and each of the  agreements,  instruments  and other  documents to be
delivered to the Agents or the Lenders in connection herewith.


                                           [Signature pages to follow]


<PAGE>






AMENDMENT NO. 7

                   IN WITNESS WHEREOF,  this Amendment has been duly executed as
of the day and year first above written.

                                           PNC BANK, NATIONAL ASSOCIATION,  as
Administrative  Agent  acting on behalf of the  Lenders  pursuant  to  Section
12.01 of the Agreement


                                           By:      _______\s\__________

                                           Title:_____________________________


                                           BORDERS  GROUP,   INC.,  acting  on
behalf of the Borrowers pursuant to Section 12.01 of the Agreement


                                           By:      _______\s\_________________

                                           Title:_____________________________







<PAGE>


                                           EXHIBIT A

                                           CONSENT

             Each of the  undersigned,  as a Guarantor under that certain Credit
Agreement dated as of March 28, 1995, among PNC Bank, National  Association,  as
Administrative Agent, Borders Group, Inc. (the "Company"), and each of the other
Borrowers and Lenders a party thereto (as heretofore  amended,  the "Agreement";
terms defined in the Agreement, as amended by Amendment No. 7 referred to below,
which are used herein shall have the meanings as are set forth in the  Agreement
for such  terms  unless  otherwise  defined  herein),  hereby  (i)  consents  to
Amendment No. 7 to Credit Agreement,  dated as of December 2, 1996,  between the
Administrative  Agent, on behalf of the Lenders,  and the Company,  on behalf of
the Borrowers (the "Amendment"),  and the amendments  contained therein and (ii)
confirms and agrees that, notwithstanding the Amendment and the effectiveness of
the amendments contained therein, the Agreement is, and shall continue to be, in
full force and effect and is hereby  confirmed  and  ratified  in all  respects,
including,  without  limitation,  each of the  undersigned's  obligations  under
Article IX thereof.  Nothing  herein is intended or shall be deemed to limit any
Agent's or Lender's  rights  under the  Agreement  to take  actions  without the
consent of the undersigned.

       Dated as of December 2, 1996

       Borders Properties, Inc.

       By: _______\s\______________

       Title: _____________________


       Waldenbooks Properties, Inc.

       By: ________\s\_____________

       Title: _____________________




<PAGE>









                                           SCHEDULE 1


             8.02 Negative CovenantsNegative  Covenants. The Borrowers,  jointly
and  severally,  covenant and agree that until  payment in full of the Loans and
interest   thereon,   expiration  or  termination  of  all  Letters  of  Credit,
satisfaction of all of the Borrowers'  Obligations  under the Loan Documents and
termination of the Commitments, the Borrowers shall comply at all times with the
following negative covenants:

                   (a)  IndebtednessIndebtedness.  Each of the  Borrowers  shall
not, and shall not permit any of its Subsidiaries to, at any time create, incur,
assume or suffer to exist any Indebtedness, except:

                               (i)  Indebtedness under the Loan Documents;

                               (ii) Indebtedness  existing on the Closing Date
as set forth on Schedule  8.02(a)  (including any extensions or renewals thereof
provided there is no increase in the amount thereof or other significant  change
in the terms thereof unless otherwise specified on Schedule 8.02(a));

                               (iii)      Capitalized   Lease  Obligations  as
and to the extent permitted under Section 8.02(o);

                               (iv) interest rate swap,  cap,  collar or floor
agreements  or  other  interest  rate   management   devices  with  any  Lender,
referencing an aggregate notional amount not to exceed,  based on the reasonable
business judgment of the Company,  the maximum  principal amount  outstanding at
any  time  of  all  Indebtedness  of  the  Company  and  its  Subsidiaries  on a
consolidated basis plus an amount equal to 30% of Capitalized Rent Expense, with
such interest rate  management  devices to be entered into for hedging  purposes
only and not for speculation;

                               (v)  Indebtedness  secured  by  Purchase  Money
Security  Interests so long as the amount of such  Indebtedness  does not exceed
the  purchase  price of the  Property  which is subject to such  Purchase  Money
Security Interests;

                               (vi) Indebtedness     of    an     Unrestricted
Subsidiary to another Unrestricted  Subsidiary or to the Company or Indebtedness
of the Company to an  Unrestricted  Subsidiary so long as such  Indebtedness  is
unsecured;

                               (vii)      Contingent  Obligations  as  and  to
the extent permitted under Section 8.02(c);

                               (viii)     obligations  of the Company to Kmart
as contemplated by the Stockholder Agreement;

                               (ix) additional  Indebtedness with an aggregate
principal amount outstanding not to exceed $6,000,000,  which is secured by real
property of the Company and its Subsidiaries; provided that the principal amount
of any such  Indebtedness  shall not  exceed the fair  market  value of the real
property securing such Indebtedness;

                               (x)  additional  unsecured  Indebtedness of the
Borrowers  with  an  aggregate  principal  amount  outstanding  not to  exceed
$15,000,000;

                               (xi) Indebtedness of  Subsidiaries  (other than
the  Borrowers) to third  parties,  so long as the holders of such  Indebtedness
have no  contractual  or  legal  recourse  to the  Company  or any of its  other
Subsidiaries,  except as otherwise permitted by this Agreement,  provided,  that
notwithstanding  any other provision in this Agreement,  the aggregate principal
amount of all Indebtedness for all such Subsidiaries (other than Indebtedness of
WPI and BPI  outstanding  as of November 30, 1996 to third parties) shall not at
any time exceed $20,000,000;

                               (xii)      Permitted     Sutro      Refinancing
Indebtedness,  so  long  as (A)  the  aggregate  principal  amount  of any  such
Indebtedness  outstanding  does  not  exceed  $36,000,000,   (B)  the  aggregate
principal amount of any such Indebtedness  incurred,  at the date of incurrence,
is at least 85% of the face value of the amount of  "Notes"  (as  defined in the
Note Put Agreements) purchased by Borders as required by Section 2.2 of the Note
Purchase  Agreements,  (C) any such  Indebtedness is incurred no sooner than the
relevant "Tenant Purchase Date" (as defined in the Note Put Agreements), (D) the
representations,  warranties and covenants  contained in the documentation  with
respect to any such Indebtedness are no more  restrictive,  as determined in the
reasonable  discretion of the  Administrative  Agent, than the  representations,
warranties or covenants hereof, (E) the maturity of any such Indebtedness is not
less than two years from the date of  incurrence,  and (F) on or before the date
of  incurrence,  the  Borrowers  shall have  delivered  to the Lenders  proforma
financial statements, in form and substance satisfactory to the Lenders, showing
that, during the term of such Indebtedness,  based on reasonable  projections of
the  financial  performance  of the  Borrowers,  the  Borrowers  will  not be in
violation of any of the financial covenants contained in Section 8.02;

                               (xiii)     other   Indebtedness   for  borrowed
money of the  Borrowers,  provided  that (A) the  terms and  conditions  of such
Indebtedness are no more restrictive than those of this Agreement,  (B) no Event
of Default or Potential  Default  would occur as a result of the  incurrence  of
such Indebtedness, (C) the interest rate on such Indebtedness (after taking into
account all other fees payable in  connection  with such  Indebtedness)  is less
than  the  interest  rate  payable  on  the  Loans,  (D)  such  Indebtedness  is
subordinated  to the Obligations  upon terms and conditions  satisfactory to the
Agents and (E) such Indebtedness is unsecured;

                               (xiv)      Indebtedness  of the Borrowers under
the Lease Financing Guarantee,  so long as the conditions specified in Section
8.02(c)(vii) have been satisfied; and

                               (xv) Indebtedness    of   the    Borrowers   in
connection with the Supplemental  Facility,  so long as the conditions specified
in clauses (A) through (E) of Section 8.02(c)(viii) have been satisfied.

                   (b) Liens.  Each of the  Borrowers  shall not,  and shall not
permit any of its Subsidiaries to, at any time create,  incur,  assume or suffer
to exist any Lien on any of its  Property now owned or  hereafter  acquired,  or
agree or become liable to do so, except Permitted Liens.

                     (c) Contingent Obligations. Each of the
Borrowers  shall not,  and shall not permit any of its  Subsidiaries  to, at any
time,  directly or indirectly,  become or be liable in respect of any Contingent
Obligations, except for:

                               (i)  Contingent  Obligations of any Borrower or
Unrestricted  Subsidiary  in  respect  of  obligations  of  the  Borrowers  or
Unrestricted Subsidiaries;

                                (ii) Permitted Lease  Contingent  Obligations,
provided that the portion of all such  Permitted  Lease  Contingent  Obligations
which constitute current  liabilities  determined and consolidated in accordance
with GAAP,  shall not exceed Fifteen  Million Dollars  ($15,000,000)  at any one
time;

                                (iii)   Contingent   Obligations   arising  by
operation of any applicable law which  individually  or in the aggregate could
not reasonably be expected to have Material Adverse Effect;

                                (iv) any Contingent  Obligations arising under
the Note Put Agreements;

                                (v) any Contingent  Obligations  arising under
any  computer  leases with respect to which Kmart is the lessee and any of the
Borrowers is the user of such computer equipment;

                                (vi) any Contingent  Obligations arising under
any of the Kmart Agreements;

                                (vii)  Contingent  Obligations  arising  under
the Lease Financing Guarantee,  provided,  however, that the aggregate amount of
Indebtedness   permitted  by  Section   8.02(a)(xiv)  the  aggregate  amount  of
Contingent Obligations permitted hereunder shall not exceed $200,000,000;

                                (viii)  Contingent  Obligations of the Company
and its  Subsidiaries  pursuant  to a facility  established  for the  purpose of
purchasing  Indebtedness  outstanding  under the  Project  Loan  Agreements  (as
defined in the  Participation  Agreement) or constructing  new retail stores for
the Borrowers  (the  "Supplemental  Facility"),  provided that (A) the aggregate
amount of  Indebtedness  permitted  by Section  8.02(a)(xv)  plus the  aggregate
amount  of  Contingent  Obligations  permitted  hereunder,   together  with  the
aggregate  amount of  Indebtedness  permitted by Section  8.02(a)(xiv)  plus the
aggregate amount of Contingent  Obligations  permitted by Section  8.02(c)(vii),
does not exceed  $250,000,000,  (B) the terms and conditions of the Supplemental
Facility  are  satisfactory  to any two of PNC Bank,  First  Chicago and Bankers
Trust  Company,  (C) no Event of Default or Potential  Default  would occur as a
result of the closing of the Supplemental Facility, (D) the maturity date of the
Indebtedness  outstanding  under the  Supplemental  Facility is not prior to the
Expiration Date and (E) the structure of such financing is substantially similar
to the  structure of the  financing  under the  Participation  Agreement,  Lease
Credit Agreement and the Lease Financing Guarantee;

                                (ix)  Contingent  Obligations  constituting  a
Permitted  Joint  Venture  Activity,  provided no Event of Default or  Potential
Default has occurred and is continuing or would result therefrom; and

                                (x)  Contingent  Obligations   constituting  a
Permitted  Restricted  Subsidiary  Activity,  provided  no Event of  Default  or
Potential Default has occurred and is continuing or would result therefrom.

                   (d) Loans and InvestmentsLoans  and Investments.  Each of the
Borrowers  shall not,  and shall not permit any of its  Subsidiaries  to, at any
time make or suffer to remain  outstanding  any loan or advance to, or purchase,
acquire or own any stock,  bonds,  notes or  securities  of, or any  partnership
interest  (whether  general or limited) in, or any other  investment or interest
in, or make any capital  contribution to, any other Person, or agree,  become or
remain liable to do any of the foregoing (collectively, "Investments"), except:

                                 (i)trade   credit   extended   on  usual  and
customary terms in the ordinary course of business;

                                 (ii)     advances   to   employees   to  meet
expenses incurred by such employees in the ordinary course of business;

                                 (iii)    Permitted Investments;

                                 (iv)     Investments  by the  Company  or any
other  Borrower  in  any  Unrestricted   Subsidiary  or  by  any  Unrestricted
Subsidiary in a Borrower or an Unrestricted  Subsidiary,  so long as any loans
or advances are unsecured;

                                 (v)Purchases  (a)  so  long  as no  Potential
Default or Event of Default  has  occurred  and is  continuing  or would  result
therefrom,  (b) to the extent that the  aggregate of all  Purchases  made in any
rolling four Fiscal Quarter period as permitted under this Section 8.02(d)(v) do
not exceed 20% of Consolidated Tangible Net Worth (determined as of the last day
of the Fiscal Quarter most recently  ended),  (c) so long as the amount equal to
(1) the  aggregate  amount of all  Purchases  made in any  rolling  four  Fiscal
Quarter period, as permitted under this Section 8.02(d)(v),  in excess of 10% of
Consolidated  Tangible  Net Worth  (determined  as of the last day of the Fiscal
Quarter most recently  ended) plus (2) all Capital  Expenditures in such rolling
four Fiscal  Quarter  period  permitted  under  Section  8.02(o) does not exceed
$150,000,000  period,  (d) so long as the  assets or  business  subject  to such
Purchase  is in  substantially  the same or a similar  type of  business  as the
Company and its  Subsidiaries  and (e) so long as the Board of  Directors of any
Person to be acquired has approved the terms of the Purchase;

                              (vi)  loans and  advances,  in addition to those
permitted under Section  8.02(d)(ii),  to employees in an aggregate  principal
amount not to exceed $10,000,000;

                              (vii) Investments  constituting  Permitted Joint
Venture  Activities,  provided  no Event of Default  or  Potential  Default  has
occurred and is continuing or would result therefrom;

                              (viii)      Investments  constituting  Permitted
Restricted  Subsidiary  Activities,  provided  no Event of Default or  Potential
Default has occurred and is continuing or would result therefrom; and

                              (ix)  repurchases of the Company's  common stock
in accordance with Section 8.02(e).

Dividends and Related Distributions. The Company shall not, and shall not permit
any of its  Subsidiaries to, make or pay, or agree to become or remain liable to
make or pay, any dividend or other  distribution of any nature (whether in cash,
property,  securities or otherwise) on account of or in respect of its shares of
capital  stock  or  partnership   interests  or  on  account  of  the  purchase,
redemption,  retirement  or  acquisition  of its  shares  of  capital  stock (or
warrants, options or rights therefor) (collectively, "Distributions"), except:

                                 (i)the   Company   may   make   open   market
repurchases  of shares of its common stock so long as the aggregate  amount paid
by the Company with respect to all such  repurchases does not at any time exceed
the  Repurchase  Amount in effect  from time to time and no Event of  Default or
Potential Default has occurred and is continuing or would result therefrom;

                                 (ii)     the  Company  may  engage  in  stock
splits (including reverse stock splits) or pay dividends in stock;

                                 (iii)    Wholly-owned  Subsidiaries  may make
Distributions to the Company or another Wholly-owned Subsidiary;

                                 (iv)     Subsidiaries        other       than
Wholly-owned  Subsidiaries  may make  Distributions so long as (a) the aggregate
amount of Distributions made by any such Subsidiary to any Person other than the
Company or a Subsidiary of the Company in any Fiscal Year does not exceed 50% of
such  Person's pro rata share (based on the  percentage of stock or other equity
interests owned by such Person) of such  Subsidiary's net income for such Fiscal
Year as determined  in accordance  with GAAP and (b) no later than ten (10) days
prior to any such  Distribution,  the Company shall have given written notice to
the Lenders and the Agents  thereof,  together with  calculations  demonstrating
that such Distribution complies with this clause (iv); and

                                 (v)      the  Company  may pay  dividends  on
its preferred  stock so long as the dividend rate on such preferred stock (after
taking into account all other fees and amounts payable on such preferred  stock)
is less than the interest rate payable on the Loans.

Liquidations,  Mergers,  Consolidations.  Each of the  Borrowers  shall not, and
shall not permit any of its Subsidiaries to, dissolve,  liquidate or wind-up its
affairs,  or become a party to any merger or  consolidation,  provided  that any
Borrower (other than the Company) may consolidate or merge into another Borrower
and any  Subsidiary of a Borrower may  consolidate or merge into any Borrower or
any  Wholly-owned  Subsidiary  of a  Borrower  so  long  as  the  Borrower  or a
Wholly-owned  Subsidiary is the surviving  corporation of such  consolidation or
merger.

Dispositions  of Assets or  Subsidiaries.  Each of the Borrowers  shall not, and
shall not  permit any of its  Subsidiaries  to,  sell,  convey,  assign,  lease,
abandon or otherwise transfer or dispose of,  voluntarily or involuntarily,  any
of its Property  (including sale,  assignment,  discount or other disposition of
accounts,  contract rights, chattel paper, equipment or general intangibles with
or  without  recourse  or any  shares of  capital  stock,  shares of  beneficial
interest or partnership interests of a Subsidiary of such Borrower), except:

                                 (i)transactions   involving   the   sale   of
inventory in the ordinary course of business;

                                 (ii)     any  sale,   transfer  or  lease  of
Property,  including  without  limitation  any store  closures,  in the ordinary
course of business  which are no longer  necessary or required in the conduct of
the Borrower's or Subsidiary's business;

                                 (iii)    any sale or  transfer of Property in
order to concurrently or subsequently lease as lessee such Property,  so long as
such sale and leaseback occurs in the ordinary course of business;

                                 (iv)     any  sale,   transfer  or  lease  of
Property,   by  any   Subsidiary  of  an   Unrestricted   Subsidiary  to  such
Unrestricted Subsidiary or another Unrestricted Subsidiary;

                                 (v)any sale,  transfer  or lease of  Property
in the ordinary  course of business which are replaced by substitute  Property
acquired or leased within the parameters of Section 8.02(o);

                                 (vi)     any  sale or  transfer  of the  real
property located in Stamford, Connecticut; and

                                 (vii)    any    transfers    to    Kmart   of
"Premises"  pursuant to the Kmart Indemnity (as such term is defined therein) if
and to the  extent  that any such  transfer  does not cause an Event of  Default
under Section 10.01(f) hereof.

Affiliate  Transactions.  Each of the Borrowers  shall not, and shall not permit
any of its Subsidiaries  to, enter into or carry out any transaction  (including
purchasing  property  or  services  from or selling  property or services to any
Affiliate of any Borrower (other than another  Borrower) or other Person) unless
such  transaction  (i) is not otherwise  prohibited by this  Agreement,  (ii) is
entered  into in the  ordinary  course  of  business  upon  fair and  reasonable
arm's-length   terms  and   conditions   which  are  fully   disclosed   to  the
Administrative Agent and (iii) is in accordance with all applicable Law.

Subsidiaries,  Partnerships  and Joint  Ventures.  Each of the Borrowers shall s
not, and shall not permit any of its  Subsidiaries to, become or agree to become
a general or limited partner, joint venturer or member in any partnership, joint
venture or limited  liability  company,  as the case may be,  provided  that the
Company  or any of its  Wholly-owned  Subsidiaries  may  own or  create  (A) any
Wholly-owned  Subsidiary,  (B) any Unrestricted  Subsidiary,  (C) any Restricted
Subsidiary  so long as (1) the aggregate of all Purchases by the Company and its
Subsidiaries of or Investments in or to such Restricted  Subsidiary is otherwise
permitted by this Agreement,  and (2) no such Restricted  Subsidiary  shall have
Indebtedness  which is  recourse to or  guaranteed  by the Company or any of its
Subsidiaries  except as otherwise  permitted by this Agreement and (D) any Joint
Venture so long as (1) the  aggregate  of all  Purchases  by the Company and its
Subsidiaries of or Investments by the Company and its  Subsidiaries in or to any
such Joint Ventures is otherwise  permitted by this  Agreement,  and (2) no such
Joint Venture shall have Indebtedness  which is recourse to or guaranteed by the
Company  or any of its  Subsidiaries  except  as  otherwise  permitted  by  this
Agreement.

                           (j)  Continuation  of or Change in  Business.  Each
of the  Borrowers  shall not, and shall not permit any of its  Subsidiaries  to,
engage in any  business  other than (a) with respect to the  Borrowers,  BPI and
WPI,  substantially  as conducted  and operated by such Person during the Fiscal
Year  prior to the  Company's  1996  Fiscal  Year and (b)  with  respect  to any
Subsidiary of a Borrower (other than WPI or BPI), substantially as conducted and
operated by a Borrower,  in a business  reasonably  incidental and complementary
thereto or in an educational related retail business.

Plans and Benefit  Arrangements.  Each of the  Borrowers  shall not, and shall
not permit any of its Subsidiaries to:

                                 (i)adopt,    sponsor,    maintain   or   make
contributions to any Plan, any Multiemployer Plan, any Multiple Employer Plan or
except as set forth on Schedule 6.01(t),  any Benefit  Arrangement that provides
benefits to retirees; or

                                 (ii)     engage in a  Prohibited  Transaction
with any  Benefit  Arrangement  which,  alone or in  conjunction  with any other
circumstances or set of circumstances  resulting in liability under ERISA, would
have a Material Adverse Effect.

Fiscal Year.  Each of the  Borrowers  shall not, and shall not permit any of its
Subsidiaries to, change its Fiscal Quarter or change its Fiscal Year.

Issuance  of  Stock.  Each of the  Borrowers  (other  than the  Company  and any
Unrestricted Subsidiary) shall not, and shall not permit any of its Subsidiaries
(other than  Unrestricted  Subsidiaries)  to, issue any additional shares of its
capital  stock or any  options,  warrants  or other  rights in respect  thereof,
except to the Company or any Wholly-owned  Subsidiary,  provided,  however, that
the Company shall not issue any preferred stock unless the dividend rate thereon
is permitted by Section 8.02(e)(v).

Changes in Organizational  Documents. Each of the Borrowers shall not, and shall
not permit any of its  Subsidiaries  to, amend in any respect its certificate of
incorporation  (including  any  provisions  or  resolutions  relating to capital
stock), by-laws or other organizational documents in the event such change would
be adverse to the Lenders.

Capital Expenditures.  Each of the Borrowers shall not, and shall not permit any
of  its   Subsidiaries   to,  make  any  payments  on  account  of  any  Capital
Expenditures,  except  to the  extent  that the  aggregate  of all such  Capital
Expenditures  do not exceed  $140,000,000  in any rolling  four  Fiscal  Quarter
period, and except to the extent that such Capital Expenditures, when aggregated
with all Purchases  permitted under Section 8.02(d)(v) during the preceding four
Fiscal  Quarters (but only to the extent the aggregate  amount of such Purchases
exceeds 10% of Consolidated Tangible Net Worth, determined as of the last day of
the Fiscal Quarter most recently ended),  do not exceed  $150,000,000.  All such
Capital  Expenditures  shall be made under usual and customary  terms and in the
ordinary course of business. For purposes of this covenant, Capital Expenditures
shall not include assets purchased or acquired,  or expenditures made in respect
of assets,  which are held for  resale in  accordance  with GAAP,  except to the
extent that such a Capital  Expenditure is made at a time when, or to the extent
that as a result of such Capital Expenditure, the aggregate value of assets held
for resale exceeds or would exceed $30,000,000.

Minimum Fixed Charge  Coverage  Ratio.  The Borrowers shall not permit the Fixed
Charge Coverage  Ratio,  calculated as of the end of each Fiscal Quarter for the
previous four Fiscal Quarters then ended, to be less than 1.45 to 1.0.

Maximum  Leverage  Ratio.  The Borrowers shall not permit the Leverage Ratio (i)
calculated  as of the end of any first or second  Fiscal  Quarter  of any Fiscal
Year to exceed 75%, (ii) calculated as of the end of any third Fiscal Quarter of
any Fiscal Year to exceed 77.5%, or (iii) calculated as of the end of any fourth
Fiscal Quarter of any Fiscal Year to exceed 72.5%, provided, that beginning with
the fourth Fiscal Quarter of the Company's 1998 Fiscal Year, the percentages set
forth in  clauses  (i),  (ii) and (iii)  above  shall be 70%,  72.5% and  67.5%,
respectively.

Minimum  Tangible  Net  Worth.  The  Borrowers  shall  not  at any  time  permit
Consolidated Tangible Net Worth to be less than the sum of (i) $470,000,000 plus
(ii) 50% of the  Consolidated  Net Income for each  Fiscal  Quarter in which net
income was earned (with no deduction for a net loss) during the period from July
29, 1996 through the last day of the Fiscal  Quarter  immediately  preceding the
date of  determination,  plus (iii) 100% of the net cash proceeds to the Company
of any public or private issuance of equity securities, minus (iv) the aggregate
amount paid by the Company with respect to any repurchase of its common stock.

Modifications  of Other  Documents.  The Borrowers shall not permit or otherwise
consent  to any  amendment  to or  modification  of any of the Kmart  Agreements
(after their respective execution),  the Stockholder Agreement, the Lease Credit
Agreement,  the Lease Financing  Guarantee,  the  Participation  Agreement,  any
Financed Lease or any other Operative  Agreement (as defined in the Lease Credit
Agreement),  any Supplemental  Lease Financing  Agreement or any of the Note Put
Agreements which could reasonably be expected to have a Material Adverse Effect,
which  would have the effect of  materially  increasing  the  obligations  of or
burdens on the Borrowers or any of their Subsidiaries  thereunder or which would
have the effect of shortening or deleting any notice or cure period provided for
therein.

Prepayment of Note Put Agreement Obligations. Each of the Borrowers shall s not,
and shall not permit any of its  Subsidiaries to, make any payment or prepayment
in respect of Borders'  obligations  under any of the Note Put Agreements at any
time before a "Tenant Purchase Date" as defined in the Note Put Agreements.

Lease Financing Payments.  Each of the Borrowers shall not, and shall not permit
any of its  Subsidiaries  to,  directly or indirectly,  make any Lease Financing
Payment,  provided,  however, that a Borrower may make a Lease Financing Payment
if (i) both before and after giving effect to such Lease Financing  Payment,  no
Event  of  Default  or  Potential   Default   exists  or  would  exist  and  the
representations and warranties  contained in Article VI are and will be true and
correct,  and the Company shall have  delivered to the  Administrative  Agent an
officer's  certificate to both such effects, (ii) the notice required by Section
8.03(j)(i) of this Agreement has been given to the Administrative Agent and each
of the Lenders,  (iii) the Company  shall have  delivered to the  Administrative
Agent no later than ten (10) days prior to the date of any such Lease  Financing
Payment  cash flow  projections  for the  twelve  months  following  such  Lease
Financing  Payment,  in  form  and  substance  reasonably  satisfactory  to  the
Administrative   Agent,   (a)  showing  that  the  Borrowers'   working  capital
requirements  and borrowing needs are not and will not be adversely  affected by
such Lease  Financing  Payment and (b)  containing  calculations  in  sufficient
detail to  demonstrate  on a pro forma  basis  compliance  as of the end of each
Fiscal  Quarter  within such twelve  month period with all  financial  covenants
contained  in Section  8.02,  (iv) after giving  effect to such Lease  Financing
Payment,  the  aggregate  amount of all  Lease  Financing  Payments  made by the
Borrowers as permitted by this Section 8.02(u) is less than  $20,000,000 and (v)
the Lease  Financing  Payment is  otherwise  permitted  by this  Agreement.  For
purposes  of  clause  (iv) of this  Section  8.02(u),  the  amount  of any Lease
Financing  Payment  made by the  Borrowers to purchase  Property  subject to any
Financed  Lease shall not be included in  determining  the  aggregate  amount of
Lease Financing Payments made by the Borrowers once all of such Property is sold
by such Borrower to any Person that is not an Affiliate of the Company.