<PAGE>

                                CREDIT AGREEMENT

                                      among

                      FURNITURE BRANDS INTERNATIONAL, INC.,

                      BROYHILL FURNITURE INDUSTRIES, INC.,

                        LANE FURNITURE INDUSTRIES, INC.,

                     THOMASVILLE FURNITURE INDUSTRIES, INC.,

                                 VARIOUS BANKS,

                         CREDIT LYONNAIS CHICAGO BRANCH,
                             as DOCUMENTATION AGENT,

                               NATIONSBANK, N.A.,
                              as SYNDICATION AGENT,

                                       and

                             BANKERS TRUST COMPANY,
                             as ADMINISTRATIVE AGENT
                    ----------------------------------------

                          Dated as of November 17, 1994

                                       and

                  Amended and Restated as of December 29, 1995

                                   and further

                  Amended and Restated as of September 6, 1996

                                   and further

                    Amended and Restated as of June 27, 1997

                                   and further

                    Amended and Restated as of July 14, 1998




<PAGE>

                                TABLE OF CONTENTS


                                                                           Page



SECTION 1.Amount and Terms of Credit..........................................1

         1.01 The Commitments..................................................1
         1.02 Minimum Amount of Each Borrowing.................................4
         1.03 Notice of Borrowing..............................................4
         1.04 Disbursement of Funds............................................5
         1.05 Notes............................................................5
         1.06 Conversions......................................................6
         1.07 Pro Rata Borrowings..............................................7
         1.08 Interest.........................................................7
         1.09 Interest Periods.................................................8
         1.10 Increased Costs, Illegality, etc.................................9
         1.11 Compensation....................................................11
         1.12 Change of Lending Office........................................11
         1.13 Replacement of Banks............................................12

SECTION 2.Letters of Credit..................................................13

         2.01 Letters of Credit..............................................13
         2.02 Minimum Stated Amount..........................................14
         2.03 Letter of Credit Requests......................................14
         2.04 Letter of Credit Participations................................15
         2.05 Agreement to Repay Letter of Credit Drawings and 
              Acceptance Payments............................................17
         2.06 Increased Costs................................................18

SECTION 3.Commitment Commission; Fees; Reductions of Commitment..............19

         3.01 Fees 19
         3.02 Voluntary Termination of Unutilized Commitments................20
         3.03 Mandatory Reduction of Commitments.............................21

SECTION 4.Prepayments; Payments; Taxes.......................................21

         4.01 Voluntary Prepayments..........................................21
         4.02 Mandatory Repayments, Cash Collateralizations and
              Commitment Reductions..........................................22
         4.03 Method and Place of Payment....................................25
         4.04 Net Payments...................................................25

SECTION 5.Conditions Precedent to the Fourth Restatement Effective 
          Date...............................................................27

         5.01 Execution of Agreement; Notes..................................27
         5.02 Fees, etc......................................................28
         5.03 Opinions of Counsel............................................28
         5.04 Corporate Documents; Proceedings; etc..........................28
         5.05 Collective Bargaining Agreements; Permitted Debt
              Agreements; Tax Sharing Agreements.............................28
         5.06 Solvency; Environmental Analyses; Insurance Matters............29
         5.07 Subsidiary Guaranty............................................29
         5.08 Pledge Agreement...............................................29
         5.09 Security Agreement.............................................29
         5.10 Receivables Facility...........................................30

<PAGE>

         5.11 Consent Letter.................................................31
         5.12 Adverse Change; Governmental Approvals; etc....................31
         5.13 Litigation.....................................................32
         5.14 Financial Statements; Pro Forma Financial Statements; 
              Projections....................................................32
         5.15 Refinancing; Existing Credit Agreement; etc....................32
         5.16 Officers Certificate...........................................32
         5.17 Mortgage Amendments; etc.......................................32

SECTION 6.Conditions Precedent to All Credit Events..........................33

         6.01 No Default; Representations and Warranties.....................33
         6.02 Notice of Borrowing; Letter of Credit Request..................33

SECTION 7.Representations, Warranties and Agreements.........................33

         7.01 Corporate Status...............................................34
         7.02 Corporate Power and Authority..................................34
         7.03 No Violation...................................................34
         7.04 Governmental Approvals.........................................34
         7.05 Financial Statements; Financial Condition;
              Undisclosed Liabilities; Projections; etc......................35
         7.06 Litigation.....................................................36
         7.07 True and Complete Disclosure...................................36
         7.08 Use of Proceeds; Margin Regulations............................37
         7.09 Tax Returns and Payments.......................................37
         7.10 Compliance with ERISA..........................................38
         7.11 The Security Documents.........................................39
         7.12 Representations and Warranties in Other Documents..............40
         7.13 Properties.....................................................40
         7.14 Capitalization.................................................40
         7.16 Compliance with Statutes, etc..................................41
         7.17 Investment Company Act.........................................41
         7.18 Public Utility Holding Company Act.............................41
         7.19 Environmental Matters..........................................41
         7.20 Labor Relations................................................42
         7.21 Patents, Licenses, Franchises and Formulas.....................42
         7.22 Indebtedness...................................................42
         7.23 Transaction....................................................43
         7.24 Receivables Subsidiary.........................................43

SECTION 8.Affirmative Covenants..............................................43

         8.01 Information Covenants..........................................43
         8.02 Books, Records and Inspections.................................46
         8.03 Maintenance of Property; Insurance.............................47
         8.04 Corporate Franchises...........................................48
         8.05 Compliance with Statutes, etc..................................48
         8.06 Compliance with Environmental Laws.............................48
         8.07 ERISA..........................................................49
         8.08 End of Fiscal Years; Fiscal Quarters...........................50
         8.09 Performance of Obligations.....................................50
         8.10 Payment of Taxes...............................................50
         8.11 Additional Security; Further Assurances; Required 
              Appraisals.....................................................51
         8.12 Interest Rate Protection.......................................53
         8.13 Ownership of Subsidiaries......................................53
         8.14 Permitted Acquisitions.........................................53
         8.15 Maintenance of Corporate Separateness..........................54
         8.16 Cash Management System.........................................54
         8.17 Margin Stock...................................................54


<PAGE>

SECTION 9.Negative Covenants.................................................54

         9.01 Liens..........................................................54
         9.02 Consolidation, Merger, Purchase or Sale of Assets, etc.........57
         9.03 Dividends......................................................59
         9.04 Indebtedness...................................................59
         9.05 Investments; etc...............................................60
         9.06 Transactions with Affiliates and Unrestricted Subsidiaries.....62
         9.07 Capital Expenditures...........................................63
         9.08 Consolidated Net Interest Coverage Ratio.......................63
         9.09 Maximum Leverage Ratio.........................................63
         9.10 Limitation on  Modifications  of and Payments on 
              Indebtedness and Qualified  Preferred  Stock;  
              Modifications  of  Certificate  of Incorporation,  
              By-Laws and Certain Other  Agreements;  Surviving
              Guaranty Payments, etc.........................................64
         9.11 Limitation on Creation or Acquisition of Subsidiaries
              and Restricted Subsidiaries....................................65
         9.12 Limitation  on Issuance of Capital Stock.......................65
         9.13 Business.......................................................66
         9.14 Limitation on Certain Restrictions on
               Subsidiaries..................................................66

SECTION 10.Events of Default.................................................66

         10.01 Payments......................................................66
         10.02 Representations, etc..........................................67
         10.03 Covenants.....................................................67
         10.04 Default Under Other Agreements................................67
         10.05 Bankruptcy, etc...............................................67
         10.06 ERISA.........................................................68
         10.07 Security Documents............................................68
         10.08 Subsidiary Guaranty...........................................68
         10.09 Judgments.....................................................69
         10.10 Change of Control.............................................69
         10.11 Tax Sharing Agreement.........................................69

SECTION 11.Definitions and Accounting Terms..................................69

         11.01 Defined Terms.................................................70
SECTION 12.The Agents.......................................................101

         12.01 Appointment..................................................101
         12.02 Nature of Duties.............................................101
         12.03 Lack of Reliance on the Administrative Agent, the 
               Documentation Agent and the Syndication Agent................101
         12.04 Certain Rights of the Administrative Agent, the 
               Documentation Agent and the Syndication Agent................102
         12.05 Reliance.....................................................102
         12.06 Indemnification..............................................102
         12.07 The Administrative Agent, the Documentation Agent 
               and the Syndication Agent in its Individual Capacity
                  103................
         12.08 Holders......................................................103
         12.09 Resignation by the Agents....................................103

SECTION 13.Miscellaneous....................................................104

         13.01 Payment of Expenses, etc.....................................104
         13.02 Right of Setoff..............................................105
         13.03 Notices......................................................105
         13.04 Benefit of Agreement.........................................106

<PAGE>

         13.05 No Waiver; Remedies Cumulative...............................107
         13.06 Payments Pro Rata............................................108
         13.07 Calculations; Computations...................................108
         13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; 
               WAIVER OF JURY TRIAL.........................................109
         13.09 Counterparts.................................................110
         13.10 Effectiveness................................................110
         13.11 Headings Descriptive.........................................110
         13.12 Amendment or Waiver; etc.....................................110
         13.13 Survival.....................................................112
         13.14 Domicile of Loans............................................112
         13.15 Limitation on Additional Amounts, etc........................112
         13.16 Confidentiality..............................................113
         13.17 Register.....................................................113
         13.18 Addition of New Banks; etc...................................114
         13.19 Post Closing Actions.........................................114
         13.20 Release of Mortgages.........................................115
         13.21 Judgment Currency............................................116



<PAGE>

SCHEDULE I                 Commitments
SCHEDULE II                Bank Addresses
SCHEDULE III               Existing Mortgaged Properties
SCHEDULE IV                Undisclosed Liabilities
SCHEDULE V                 Tax Matters
SCHEDULE VI                Subsidiaries
SCHEDULE VII               Existing Indebtedness
SCHEDULE VIII              Insurance
SCHEDULE IX                Existing Liens
SCHEDULE X                 Existing Investments
SCHEDULE XI                Existing Transactions
SCHEDULE XII               Existing Letters of Credit
SCHEDULE XIII              Certain Restrictions on Subsidiaries
SCHEDULE XIV               ERISA Matters
SCHEDULE XV                Leases Guarantied Under Surviving Guaranties
SCHEDULE XVI               Excluded Assets

EXHIBIT A                  Notice of Borrowing
EXHIBIT B-1                Term Note
EXHIBIT B-2                Revolving Note
EXHIBIT B-3                Swingline Note
EXHIBIT C-1                Letter of Credit Service Agreement
EXHIBIT C-2                Trade Letter of Credit Request
EXHIBIT C-3                Standby Letter of Credit Request
EXHIBIT D                  Section 4.04(b)(ii) Certificate
EXHIBIT E                  Opinion of General Counsel of Credit Parties
EXHIBIT F                  Officers' Certificate
EXHIBIT G                  Solvency Certificate
EXHIBIT H                  Fourth Amended and Restated Subsidiary Guaranty
EXHIBIT I                  Fourth Amended and Restated Pledge Agreement
EXHIBIT J                  Fourth Amended and Restated Security Agreement
EXHIBIT K                  Consent Letter
EXHIBIT L                  Assignment and Assumption Agreement


--------
1     Schedule prepared as at Fourth Amendment Effective Date.
<PAGE>


     CREDIT AGREEMENT, dated as of November 17, 1994, as amended and restated as
of December 29, 1995,  as further  amended and restated as of September 6, 1996,
as further  amended and restated as of June 27, 1997, and as further amended and
restated as of July 14, 1998,  among  FURNITURE  BRANDS  INTERNATIONAL,  INC., a
Delaware corporation ("Furniture Brands"), BROYHILL FURNITURE INDUSTRIES,  INC.,
a North Carolina corporation  ("Broyhill"),  LANE FURNITURE INDUSTRIES,  INC., a
Delaware  corporation  ("Lane"),   THOMASVILLE  FURNITURE  INDUSTRIES,  INC.,  a
Delaware corporation ("Thomasville" and together with Furniture Brands, Broyhill
and Lane, each a "Borrower,"  and,  collectively,  the  "Borrowers"),  the Banks
party  hereto  from  time to  time,  CREDIT  LYONNAIS  CHICAGO  BRANCH  ("Credit
Lyonnais"),  as  Documentation  Agent,  NATIONSBANK,  N.A.  ("NationsBank"),  as
Syndication  Agent,  and BANKERS TRUST  COMPANY,  as  Administrative  Agent (all
capitalized  terms  used  herein and  defined  in Section 11 are used  herein as
therein defined).

                              W I T N E S S E T H :


     WHEREAS,  the Borrowers,  the Existing Banks, the Documentation  Agent, the
Syndication Agent and the Administrative  Agent are party to a Credit Agreement,
dated as of November 17, 1994,  as amended and restated as of December 29, 1995,
as further  amended and restated as of September 6, 1996 and as further  amended
and restated as of June 27, 1997 (as in effect  immediately  prior to the Fourth
Restatement Effective Date, the "Existing Credit Agreement");

     WHEREAS,  the parties hereto wish to amend and restate the Existing  Credit
Agreement in the form of this Agreement;

     NOW, THEREFORE, the parties hereto agree that the Existing Credit Agreement
shall be and hereby is amended and restated in its entirety as follows:

     SECTION 1. Amount and Terms of Credit.

     1.01 The Commitments.  (a) Subject to and upon the terms and conditions set
forth in the Existing  Credit  Agreement,  each  Existing  Bank with a Term Loan
Commitment  pursuant to the Existing Credit Agreement  severally agreed to make,
on the Third Restatement Effective Date, a term loan or term loans (each a "Term
Loan" and collectively the "Term Loans") to the Borrowers,  which Term Loans (i)
are  outstanding  on the  Fourth  Restatement  Effective  Date in the  principal
amounts  for the  various  Banks as set forth  opposite  their  names  under the
heading "Outstanding  Principal Amount of Term Loans" in Schedule I hereto, (ii)
shall,  at the  option of the  Borrowers,  be  maintained  as Base Rate Loans or
Eurodollar  Loans (with any  Interest  Periods  applicable  thereto  immediately
before the occurrence of the Fourth Restatement Effective Date to continue to be
applicable  thereto  until the  expiration  thereof),  provided  that  except as
otherwise  specifically  provided in Section 1.10(b),  all Term Loans comprising
the same Borrowing  shall at all times be of the same Type and (iii)  constitute
joint  and  several  obligations  of  each  of  the  Borrowers.   The  aggregate
outstanding principal amount of Term Loans of each Bank, as at the date provided
in  Schedule  I, is  accurately  set forth in Schedule I. The Term Loans of each
Bank  outstanding  immediately  prior to the Fourth  Restatement  Effective Date
shall remain  outstanding  after giving  effect to the  occurrence of the Fourth


                                      -1-
<PAGE>

Restatement  Effective  Date, and shall in no way be affected as a result of the
occurrence of the Fourth  Restatement  Effective Date.  Once repaid,  Term Loans
incurred hereunder may not be reborrowed.

     (b) Subject to and upon the terms and  conditions  set forth  herein,  each
Bank severally  agrees, at any time and from time to time on and after the Third
Restatement  Effective  Date and prior to the Revolving  Loan Maturity  Date, to
make a  revolving  loan or  revolving  loans  (each,  a  "Revolving  Loan"  and,
collectively, the "Revolving Loans") to the Borrowers, which Revolving Loans (i)
shall, at the option of the Borrowers,  be Base Rate Loans or Eurodollar  Loans,
provided that except as otherwise  specifically provided in Section 1.10(b), all
Revolving Loans  comprising the same Borrowing shall at all times be of the same
Type,  (ii) may be repaid  and  reborrowed  in  accordance  with the  provisions
hereof,  (iii)  shall  not  exceed  for any  Bank at any time  outstanding  that
aggregate  principal amount which,  when added to the product of (x) such Bank's
Adjusted Percentage and (y) the sum of (I) the aggregate amount of all Letter of
Credit  Outstandings  (exclusive  of Unpaid  Drawings  which are repaid with the
proceeds  of,  and  simultaneously   with  the  incurrence  of,  the  respective
incurrence  of Revolving  Loans) at such time and (II) the  aggregate  principal
amount of all Swingline  Loans  (exclusive  of Swingline  Loans which are repaid
with the proceeds of, and simultaneously  with the incurrence of, the respective
incurrence  of Revolving  Loans) then  outstanding,  equals the  Revolving  Loan
Commitment of such Bank at such time, (iv) shall not exceed for all Banks at any
time  outstanding that aggregate  principal amount which,  when added to (x) the
aggregate  amount  of all  Letter of Credit  Outstandings  (exclusive  of Unpaid
Drawings  which are repaid with the  proceeds  of, and  simultaneously  with the
incurrence  of, the respective  incurrence of Revolving  Loans) at such time and
(y)  the  aggregate  principal  amount  of all  Swingline  Loans  (exclusive  of
Swingline Loans which are repaid with the proceeds of, and  simultaneously  with
the  incurrence  of,  the  respective   incurrence  of  Revolving   Loans)  then
outstanding,  equals the Total  Revolving Loan  Commitment at such time, and (v)
shall be the joint and  several  obligations  of each of the  Borrowers.  On and
immediately after the occurrence of the Fourth  Restatement  Effective Date, the
Revolving  Loan  Commitment for each Bank shall be the amount set forth opposite
such  Bank's  name in  Schedule  I hereto  directly  below the  column  entitled
"Revolving  Loan  Commitment"  (as same  may be (x)  reduced  from  time to time
pursuant to Sections  3.02,  3.03,  4.02 and/or 10 or (y) adjusted  from time to
time as a result of assignments to or from such Bank pursuant to Section 1.13 or
13.04(b)),  such that the Total  Revolving  Loan  Commitment  (as of the  Fourth
Restatement Effective Date) shall represent an increase of $125,000,000 over the
Total Revolving Loan Commitment as in effect  immediately  before the occurrence
of the Fourth Restatement  Effective Date. In connection with such increase,  on
the Fourth  Restatement  Effective  Date the  Borrowers  shall repay in full all
Revolving  Loans then  outstanding  (although  Revolving  Loans may be  incurred
hereunder  on the  Fourth  Restatement  Effective  Date in  accordance  with the
provisions   hereof,  so  that  the  Banks  participate  in  each  Borrowing  of
outstanding  Revolving  Loans  pro rata on the  basis of  their  Revolving  Loan
Commitments (as in effect on the Fourth Restatement  Effective Date) as provided
herein),  it being  understood  and agreed that the Borrowers  shall jointly and
severally  pay all  breakage or similar  costs of the type  described in Section
1.11 incurred by the Banks in connection  with any repayment or  reborrowing  of
Revolving Loans.

     (c) Subject to and upon the terms and conditions  herein set forth, BTCo in
its individual  capacity agrees to make at any time and from time to time on and
after the Third  Restatement  Effective  Date and prior to the Swingline  Expiry
Date,  a revolving  loan or  revolving  loans  (each,  a  "Swingline  Loan" and,
collectively, the "Swingline Loans") to the Borrowers, which Swingline Loans (i)
shall be made  and  maintained  as Base  Rate  Loans,  (ii)  may be  repaid  and


                                      -2-
<PAGE>

reborrowed in accordance with the provisions  hereof,  (iii) shall not exceed in
aggregate  principal  amount at any time  outstanding,  when  combined  with the
aggregate  principal amount of all Revolving Loans made by Non-Defaulting  Banks
then  outstanding and the Letter of Credit  Outstandings at such time, an amount
equal to the Adjusted Total Revolving Loan Commitment at such time (after giving
effect to any reductions to the Adjusted Total Revolving Loan Commitment on such
date),  (iv)  shall not exceed at any time  outstanding  the  Maximum  Swingline
Amount  and (v)  shall  be the  joint  and  several  obligations  of each of the
Borrowers.

     (d) On any Business Day, BTCo may, in its sole  discretion,  give notice to
the Banks that its outstanding  Swingline Loans shall be funded with a Borrowing
of  Revolving  Loans  (provided  that such  notice  shall be deemed to have been
automatically  given  upon the  occurrence  of a Default  or an Event of Default
under Section 10.05 or upon the exercise of any of the remedies  provided in the
last  paragraph of Section  10), in which case a Borrowing  of  Revolving  Loans
constituting  Base Rate Loans (each such  Borrowing,  a  "Mandatory  Borrowing")
shall be made on the  immediately  succeeding  Business  Day by all Banks with a
Revolving  Loan  Commitment  (without  giving effect to any  reductions  thereto
pursuant  to the last  paragraph  of Section  10) pro rata based on each  Bank's
Adjusted  Percentage  (determined before giving effect to any termination of the
Revolving Loan Commitments pursuant to the last paragraph of Section 10) and the
proceeds  thereof  shall be  applied  directly  to BTCo to  repay  BTCo for such
outstanding  Swingline Loans. Each such Bank hereby  irrevocably  agrees to make
Revolving  Loans upon one  Business  Day's  notice  pursuant  to each  Mandatory
Borrowing in the amount and in the manner  specified in the  preceding  sentence
and on the date specified in writing by BTCo notwithstanding that (i) the amount
of the Mandatory Borrowing may not comply with the minimum amount for Borrowings
otherwise required hereunder, (ii) whether any conditions specified in Section 6
are then satisfied,  (iii) whether a Default or an Event of Default then exists,
(iv)  the date of such  Mandatory  Borrowing  and (v) the  amount  of the  Total
Revolving  Loan  Commitment or the Adjusted Total  Revolving Loan  Commitment at
such  time;  provided  that,  in no event  shall such Bank be  required  to make
Revolving Loans in excess of such Bank's Revolving Loan Commitment. In the event
that any Mandatory Borrowing cannot for any reason be made on the date otherwise
required above (including,  without limitation,  as a result of the commencement
of a proceeding under the Bankruptcy Code with respect to any of the Borrowers),
then each such Bank hereby  agrees that it shall  forthwith  purchase (as of the
date the Mandatory Borrowing would otherwise have occurred, but adjusted for any
payments  received  from the  Borrowers  on or after such date and prior to such
purchase) from BTCo such  participations  in the outstanding  Swingline Loans as
shall be necessary to cause such Banks to share in such Swingline  Loans ratably
based upon their  respective  Adjusted  Percentages  (determined  before  giving
effect to any termination of the Revolving Loan Commitments pursuant to the last
paragraph  of  Section  10),  provided  that  (x) all  interest  payable  on the
Swingline  Loans shall be for the account of BTCo until the date as of which the
respective  participation  is  required  to be  purchased  and,  to  the  extent
attributable to the purchased participation, shall be payable to the participant
from and after  such  date and (y) at the time any  purchase  of  participations
pursuant  to this  sentence  is  actually  made,  the  purchasing  Bank shall be
required to pay BTCo interest on the principal amount of participation purchased
for each day from and including the day upon which the Mandatory Borrowing would
otherwise  have  occurred  to  but  excluding  the  date  of  payment  for  such
participation,  at the overnight Federal Funds Rate for the first three days and
at the rate  otherwise  applicable  to Revolving  Loans  maintained as Base Rate
Loans hereunder for each day thereafter.



                                      -3-
<PAGE>

     1.02 Minimum Amount of Each Borrowing.  The aggregate  principal  amount of
each  Borrowing  under a Tranche  shall be not less than the  Minimum  Borrowing
Amount for such Tranche  and, if greater,  shall be in the  applicable  integral
multiple set forth in the definition of Minimum Borrowing Amount,  provided that
Mandatory  Borrowings  shall be made in the amounts required by Section 1.01(d).
More than one Borrowing  may occur on the same date,  but at no time shall there
be outstanding more than twelve Borrowings of Eurodollar Loans.

     1.03 Notice of Borrowing.  (a) Whenever the Borrowers desire to incur Loans
under any Tranche  (excluding  Borrowings of Swingline Loans and Revolving Loans
incurred pursuant to Mandatory Borrowings),  an Authorized Representative of the
Borrowers shall give the Administrative  Agent at its Notice Office at least one
Business  Day's prior  written  (or  telephonic  notice  promptly  confirmed  in
writing)  notice of each Base Rate Loan and at least three  Business Days' prior
written (or  telephonic  notice  promptly  confirmed in writing)  notice of each
Eurodollar  Loan to be made  hereunder,  provided  that any such notice shall be
deemed to have been given on a certain day only if given before 11:00 A.M.  (New
York time) (or before  12:00 Noon (New York time) in the case of a Borrowing  of
Base Rate Loans) on such day. Each such written  notice or written  confirmation
of  telephonic  notice  (each a "Notice  of  Borrowing"),  except  as  otherwise
expressly  provided in Section 1.10,  shall be irrevocable and shall be given by
the Borrowers in the form of Exhibit A,  appropriately  completed to specify the
aggregate  principal  amount of the Loans to be made pursuant to such Borrowing,
the date of such Borrowing (which shall be a Business Day) and whether the Loans
being made  pursuant to such  Borrowing  are to be initially  maintained as Base
Rate Loans or Eurodollar  Loans and, if Eurodollar  Loans,  the initial Interest
Period to be applicable  thereto.  The Administrative  Agent shall promptly give
each Bank notice of such proposed Borrowing,  of such Bank's proportionate share
thereof and of the other matters required by the immediately  preceding sentence
to be specified in the Notice of Borrowing.

     (b) (i)  Whenever  the  Borrowers  desire to make a Borrowing  of Swingline
Loans hereunder,  an Authorized  Representative of the Borrowers shall give BTCo
not later than 12:00 Noon (New York time) on the date that a  Swingline  Loan is
to be made, written notice or telephonic notice promptly confirmed in writing of
each Swingline Loan to be made hereunder.  Each such notice shall be irrevocable
and specify in each case (A) the date of  Borrowing  (which  shall be a Business
Day) and (B) the aggregate  principal  amount of the Swingline  Loans to be made
pursuant to such Borrowing.

          (ii) Mandatory  Borrowings  shall be made upon the notice specified in
     Section 1.01(d), with each Borrower irrevocably agreeing, by its incurrence
     of any Swingline  Loan,  to the making of the  Mandatory  Borrowings as set
     forth in Section 1.01(d).

     (c) Without in any way limiting the  obligation of the Borrowers to confirm
in writing any telephonic notice of any Borrowing,  the Administrative Agent may
act without  liability  upon the basis of telephonic  notice of such  Borrowing,
believed  by the  Administrative  Agent in good  faith to be from an  Authorized
Representative of any Borrower prior to receipt of written confirmation. In each
such case, each Borrower  hereby waives the right to dispute the  Administrative
Agent's record of the terms of such telephonic notice of such Borrowing.

     1.04 Disbursement of Funds.  Except as otherwise  specifically  provided in
the immediately succeeding sentence, no later than 12:00 Noon (New York time) on
the date  specified in each Notice of Borrowing (or (x) in the case of Swingline


                                      -4-
<PAGE>

Loans,  not later than 2:00 P.M. (New York time) on the date specified  pursuant
to Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, not later than
12:00 Noon (New York time) on the date specified in Section 1.01(d)),  each Bank
will make available its pro rata portion of each such Borrowing  requested to be
made on such date (or in the case of Swingline Loans,  BTCo shall make available
the full amount  thereof).  All such amounts shall be made  available in Dollars
and in immediately  available funds at the Payment Office of the  Administrative
Agent, and the Administrative  Agent will make available to the Borrowers at the
Payment  Office the  aggregate  of the  amounts so made  available  by the Banks
(prior  to 1:00  P.M.  (New York  time))  on such  day,  to the  extent of funds
actually  received  by the  Administrative  Agent  prior to 12:00 Noon (New York
time) on such day). Unless the Administrative  Agent shall have been notified by
any Bank prior to the date of  Borrowing  that such Bank does not intend to make
available to the Administrative Agent such Bank's portion of any Borrowing to be
made on such date, the  Administrative  Agent may assume that such Bank has made
such amount available to the Administrative  Agent on such date of Borrowing and
the Administrative  Agent may, in reliance upon such assumption,  make available
to the Borrowers a corresponding  amount. If such corresponding amount is not in
fact made available to the Administrative Agent by such Bank, the Administrative
Agent shall be entitled to recover such corresponding amount on demand from such
Bank. If such Bank does not pay such  corresponding  amount  forthwith  upon the
Administrative  Agent's demand therefor, the Administrative Agent shall promptly
notify  the  Borrowers  to  immediately  pay such  corresponding  amount  to the
Administrative Agent. The Administrative Agent shall also be entitled to recover
on demand from such Bank or the Borrowers,  as the case may be, interest on such
corresponding  amount in  respect  of each day from the date such  corresponding
amount was made available by the Administrative Agent to the Borrowers until the
date such corresponding  amount is recovered by the  Administrative  Agent, at a
rate per annum equal to (i) if recovered from such Bank,  the overnight  Federal
Funds  Rate  and (ii) if  recovered  from the  Borrowers,  the rate of  interest
applicable to the respective Borrowing,  as determined pursuant to Section 1.08.
Nothing  in this  Section  1.04  shall be  deemed to  relieve  any Bank from its
obligation  to make  Loans  hereunder  or to  prejudice  any  rights  which  the
Borrowers  may have  against any Bank as a result of any failure by such Bank to
make Loans  hereunder.  

     1.05 Notes.  (a) The  Borrowers'  obligation  to pay the  principal of, and
interest on, the Loans made by each Bank shall be  evidenced  (i) if Term Loans,
by a promissory note duly executed and delivered by the Borrowers  substantially
in the form of Exhibit B-1,  with blanks  appropriately  completed in conformity
herewith  (each, a "Term Note" and,  collectively,  the "Term  Notes"),  (ii) if
Revolving  Loans,  by a  promissory  note duly  executed  and  delivered  by the
Borrowers  substantially  in the form of Exhibit B-2, with blanks  appropriately
completed in conformity herewith (each a "Revolving Note" and, collectively, the
"Revolving  Notes") and (iii) if  Swingline  Loans,  by a  promissory  note duly
executed and  delivered by the  Borrowers  substantially  in the form of Exhibit
B-3, with blanks appropriately  completed in conformity herewith (the "Swingline
Note").

     (b) The  Term  Note  issued  to each  Bank  shall  (i) be  executed  by the
Borrowers,  (ii) be payable to such Bank or its registered  assigns and be dated
the Third Restatement Effective Date (or, in the case of Term Notes issued after
the Third  Restatement  Effective Date, be dated the date of issuance  thereof),
(iii) be in a stated  principal amount equal to the Term Loans made by such Bank
on such date and be payable in the principal  amount of the Term Loans evidenced
thereby,  (iv)  mature on the Term Loan  Maturity  Date,  (v) bear  interest  as
provided in the  appropriate  clause of Section 1.08 in respect of the Base Rate
Loans and  Eurodollar  Loans,  as the case may be,  evidenced  thereby,  (vi) be
subject to  voluntary  prepayment  as  provided  in Section  4.01 and  mandatory


                                      -5-
<PAGE>

repayment  as provided in Section  4.02 and (vii) be entitled to the benefits of
this Agreement and the other Credit Documents.

     (c) The  Revolving  Note  issued to each Bank shall (i) be  executed by the
Borrowers,  (ii) be payable to such Bank or its registered  assigns and be dated
the Third Restatement  Effective Date (or, in the case of Revolving Notes issued
after the  Third  Restatement  Effective  Date,  be dated  the date of  issuance
thereof),  (iii) be in a stated  principal  amount equal to the  Revolving  Loan
Commitment of such Bank and be payable in the principal  amount of the Revolving
Loans  evidenced  thereby,  (iv) mature on the Revolving Loan Maturity Date, (v)
bear interest as provided in the  appropriate  clause of Section 1.08 in respect
of the Base  Rate  Loans and  Eurodollar  Loans,  as the case may be,  evidenced
thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01 and
mandatory  repayment  as provided  in Section  4.02 and (vii) be entitled to the
benefits of this Agreement and the other Credit Documents.

     (d)  The  Swingline  Note  issued  to BTCo  shall  (i) be  executed  by the
Borrowers,  (ii) be payable to BTCo or its  registered  assigns and be dated the
Fourth Restatement  Effective Date (or, in the case of any Swingline Note issued
after the  Fourth  Restatement  Effective  Date,  be dated the date of  issuance
thereof),  (iii) be in a stated principal amount equal to the Maximum  Swingline
Amount and be payable in the principal amount of the outstanding Swingline Loans
evidenced  thereby from time to time, (iv) mature on the Swingline  Expiry Date,
(v) bear  interest  as  provided in the  appropriate  clause of Section  1.08 in
respect of the Base Rate Loans  evidenced  thereby  and (vi) be  entitled to the
benefits of this Agreement and the other Credit Documents.

     (e) Each Bank will note on its  internal  records  the  amount of each Loan
made by it and each payment in respect thereof and will prior to any transfer of
any of its Notes endorse on the reverse side thereof the  outstanding  principal
amount of Loans  evidenced  thereby.  Failure to make any such  notation  or any
error in any such  notation  or  endorsement  shall not  affect  the  Borrowers'
obligations in respect of such Loans.

     1.06  Conversions.  The Borrowers shall have the option to convert,  on any
Business Day occurring  after the Fourth  Restatement  Effective  Date, all or a
portion  equal  to at least  the  applicable  Minimum  Borrowing  Amount  of the
outstanding  principal  amount of Loans made pursuant to one or more  Borrowings
(so long as of the same  Tranche) of one or more Types of Loans into a Borrowing
(of the same  Tranche)  of  another  Type of Loan,  provided  that (i) except as
otherwise  provided in Section  1.10(b),  Eurodollar Loans may be converted into
Base Rate Loans only on the last day of an Interest  Period  applicable  thereto
and no partial  conversion  of  Eurodollar  Loans shall  reduce the  outstanding
principal amount of such Eurodollar Loans made pursuant to a single Borrowing to
less than the Minimum Borrowing Amount applicable thereto,  (ii) Base Rate Loans
may only be converted into Eurodollar Loans if no Default or Event of Default is
in existence on the date of the conversion, (iii) no conversion pursuant to this
Section 1.06 shall result in a greater number of Borrowings of Eurodollar  Loans
than is  permitted  under  Section  1.02 and  (iv)  Swingline  Loans  may not be
converted  pursuant to this Section 1.06. Each such conversion shall be effected
by the Borrowers by giving the  Administrative  Agent at its Notice Office prior
to 12:00 Noon (New York time) at least three Business Days' prior notice (each a
"Notice of Conversion")  specifying the Loans to be so converted,  the Borrowing
or  Borrowings  pursuant to which such Loans were made and,  if to be  converted


                                      -6-
<PAGE>

into Eurodollar Loans, the Interest Period to be initially  applicable  thereto.
The Administrative Agent shall give each Bank prompt notice of any such proposed
conversion affecting any of its Loans.

     1.07 Pro Rata Borrowings.  All Borrowings of Term Loans and Revolving Loans
under this  Agreement  shall be incurred from the Banks pro rata on the basis of
their Term Loan Commitments and Revolving Loan Commitments,  as the case may be,
provided  that all  Borrowings  of Revolving  Loans made pursuant to a Mandatory
Borrowing  shall be  incurred  from  the  Banks  pro rata on the  basis of their
Adjusted Percentages. It is understood that no Bank shall be responsible for any
default by any other Bank of its  obligation  to make Loans  hereunder  and that
each  Bank  shall be  obligated  to make  the  Loans  provided  to be made by it
hereunder,  regardless  of the  failure  of any  other  Bank to make  its  Loans
hereunder.

     1.08  Interest.  (a) The  Borrowers  jointly  and  severally  agree  to pay
interest in respect of the unpaid  principal  amount of each Base Rate Loan from
the date the  proceeds  thereof are made  available to the  Borrowers  until the
earlier of (i) the maturity  (whether by acceleration or otherwise) of such Base
Rate Loan and (ii) the  conversion  of such Base Rate Loan to a Eurodollar  Loan
pursuant to Section 1.06, at a rate per annum which shall be equal to the sum of
the Applicable Margin plus the Base Rate in effect from time to time.

     (b) The Borrowers jointly and severally agree to pay interest in respect of
the unpaid  principal  amount of each Eurodollar Loan from the date the proceeds
thereof  are made  available  to the  Borrowers  until  the  earlier  of (i) the
maturity (whether by acceleration or otherwise) of such Eurodollar Loan and (ii)
the conversion of such  Eurodollar  Loan to a Base Rate Loan pursuant to Section
1.06 or 1.10,  as  applicable,  at a rate per annum  which  shall,  during  each
Interest Period applicable thereto, be equal to the sum of the Applicable Margin
plus the Eurodollar Rate for such Interest Period.

     (c) Overdue principal and, to the extent permitted by law, overdue interest
in respect of each Loan and any other overdue amount payable hereunder shall, in
each case,  bear interest at a rate per annum equal to the greater of (x) 2% per
annum in excess of the rate otherwise applicable to Base Rate Loans from time to
time  and (y) the rate  which is 2% in  excess  of the rate  then  borne by such
Loans,  in each case with such  interest  to be payable  on a joint and  several
basis by the Borrowers on demand.

     (d)  Accrued  (and  theretofore  unpaid)  interest  shall be payable (i) in
respect of each Base Rate Loan,  quarterly in arrears on each Quarterly  Payment
Date, (ii) in respect of each Eurodollar  Loan, on the last day of each Interest
Period  applicable  thereto and, in the case of an Interest  Period in excess of
three months,  on each date occurring at three month  intervals  after the first
day of such Interest  Period,  (iii) in respect of each Eurodollar  Loan, on any
repayment or prepayment (on the amount repaid or prepaid) and (iv) in respect of
each Loan, at maturity  (whether by  acceleration  or otherwise) and, after such
maturity, on demand.

     (e) Upon each Interest  Determination Date, the Administrative  Agent shall
determine the  Eurodollar  Rate for the respective  Interest  Period or Interest
Periods and shall promptly notify the Borrowers and the Banks thereof. Each such
determination  shall, absent manifest error, be final and conclusive and binding
on all parties hereto.

     1.09  Interest  Periods.  At the time the  Borrowers  give  any  Notice  of
Borrowing  or Notice of  Conversion  in respect of the making of, or  conversion
into, any Eurodollar Loan (in the case of the initial Interest Period applicable


                                      -7-
<PAGE>

thereto) or on the third  Business  Day prior to the  expiration  of an Interest
Period  applicable  to  such  Eurodollar  Loan  (in the  case of any  subsequent
Interest  Period),  the  Borrowers  shall have the right to elect,  by having an
Authorized  Representative of the Borrowers give the Administrative Agent notice
thereof,  the interest  period (each an "Interest  Period")  applicable  to such
Eurodollar Loan, which Interest Period shall, at the option of the Borrowers, be
a one, two, three or six-month period, provided that:

          (i) all  Eurodollar  Loans  comprising a Borrowing  shall at all times
     have the same Interest Period;

          (ii)  the  initial  Interest  Period  for any  Eurodollar  Loan  shall
     commence on the date of Borrowing of such  Eurodollar  Loan  (including the
     date of any  conversion  thereto from a Loan of a different  Type) and each
     Interest  Period  occurring  thereafter in respect of such  Eurodollar Loan
     shall  commence  on the day on which  the next  preceding  Interest  Period
     applicable thereto expires;

          (iii) if any Interest Period relating to a Eurodollar Loan begins on a
     day for which there is no  numerically  corresponding  day in the  calendar
     month at the end of such Interest Period, such Interest Period shall end on
     the last Business Day of such calendar month;

          (iv) if any Interest Period would  otherwise  expire on a day which is
     not a  Business  Day,  such  Interest  Period  shall  expire  on  the  next
     succeeding Business Day; provided, however, that if any Interest Period for
     a Eurodollar Loan would  otherwise  expire on a day which is not a Business
     Day but is a day of the month after which no further Business Day occurs in
     such  month,  such  Interest  Period  shall  expire  on the next  preceding
     Business Day;

          (v) no  Interest  Period may be selected at any time when a Default or
     an Event of Default is then in existence;

          (vi) no Interest  Period in respect of any Borrowing of any Tranche of
     Loans shall be selected which extends  beyond the respective  Maturity Date
     for such Tranche of Loans; and

          (vii) it is  understood  that in respect  of Term  Loans  that  remain
     outstanding  immediately  after  giving  effect to the  Fourth  Restatement
     Effective  Date  pursuant  to  Section  5.15  (ii),  the  Interest  Periods
     applicable  thereto  shall  continue to apply thereto until the last day of
     such Interest Period.

     If upon the expiration of any Interest Period  applicable to a Borrowing of
Eurodollar  Loans,  the Borrowers have failed to elect,  or are not permitted to
elect,  a new  Interest  Period to be  applicable  to such  Eurodollar  Loans as
provided  above,  the Borrowers  shall be deemed to have elected to convert such
Eurodollar  Loans into Base Rate Loans  effective as of the  expiration  date of
such current Interest Period.

     1.10 Increased Costs, Illegality, etc. (a) In the event that any Bank shall
have determined (which  determination shall, absent manifest error, be final and
conclusive  and binding upon all parties  hereto but, with respect to clause (i)
below, may be made only by the Administrative Agent):



                                      -8-
<PAGE>

          (i) on any Interest  Determination Date that, by reason of any changes
     arising after the Fourth Restatement Effective Date affecting the interbank
     Eurodollar  market,  adequate and fair means do not exist for  ascertaining
     the applicable interest rate on the basis provided for in the definition of
     Eurodollar Rate; or

          (ii) at any time,  that  such  Bank  shall  incur  increased  costs or
     reductions in the amounts received or receivable  hereunder with respect to
     any Eurodollar Loan because of (x) any change since the Fourth  Restatement
     Effective  Date in any  applicable law or  governmental  rule,  regulation,
     order,  guideline or request (whether or not having the force of law) or in
     the interpretation or administration thereof and including the introduction
     of any  new law or  governmental  rule,  regulation,  order,  guideline  or
     request,  such as, for  example,  but not  limited  to: (A) a change in the
     basis of taxation of payment to any Bank of the principal of or interest on
     such  Eurodollar Loan or any other amounts  payable  hereunder  (except for
     changes  in the rate of tax on, or  determined  by  reference  to,  the net
     income or net profits of such Bank,  or any  franchise tax based on the net
     income or net profits of such Bank,  in either case pursuant to the laws of
     the United States of America,  the jurisdiction in which it is organized or
     in which its principal  office or applicable  lending  office is located or
     any subdivision thereof or therein), but without duplication of any amounts
     payable in respect of Taxes pursuant to Section 4.04(a), or (B) a change in
     official  reserve  requirements,  but,  in all events,  excluding  reserves
     required under  Regulation D to the extent  included in the  computation of
     the  Eurodollar  Rate  and/or  (y) other  circumstances  since  the  Fourth
     Restatement  Effective Date affecting such Bank or the interbank Eurodollar
     market or the position of such Bank in such market (except as a result of a
     deterioration in the  creditworthiness  of such Bank subsequent to the date
     hereof); or

          (iii) at any time,  that the making or  continuance  of any Eurodollar
     Loan has been made (x) unlawful by any law or governmental rule, regulation
     or order,  (y)  impossible by compliance by any Bank in good faith with any
     governmental   request  (whether  or  not  having  force  of  law)  or  (z)
     impracticable  as a result of a  contingency  occurring  after  the  Fourth
     Restatement  Effective  Date which  materially  and  adversely  affects the
     interbank Eurodollar market;

then, and in any such event, such Bank (or the Administrative Agent, in the case
of clause (i) above)  shall  promptly  give notice (by  telephone  confirmed  in
writing) to the Borrowers  and,  except in the case of clause (i) above,  to the
Administrative  Agent of such  determination  (which  notice the  Administrative
Agent shall promptly transmit to each of the other Banks). Thereafter (x) in the
case of clause (i) above,  Eurodollar  Loans shall no longer be available  until
such time as the Administrative  Agent notifies the Borrowers and the Banks that
the  circumstances  giving  rise to such notice by the  Administrative  Agent no
longer exist,  and any Notice of Borrowing or Notice of Conversion  given by the
Borrowers  with  respect to  Eurodollar  Loans which have not yet been  incurred
(including by way of conversion) shall be deemed rescinded by the Borrowers, (y)
in the case of clause (ii) above, the Borrowers  jointly and severally agree to,
subject to the  provisions of Section 13.15 (to the extent  applicable),  pay to
such Bank, upon written demand therefor, such additional amounts (in the form of
an  increased  rate of,  or a  different  method  of  calculating,  interest  or
otherwise  as such  Bank in its sole  discretion  shall  determine)  as shall be
required to  compensate  such Bank for such  increased  costs or  reductions  in
amounts received or receivable  hereunder (a written notice as to the additional
amounts  owed to such  Bank,  showing  the  basis for the  calculation  thereof,
submitted to the  Borrowers by such Bank in good faith  shall,  absent  manifest
error, be final and conclusive and binding on all the parties hereto) and (z) in


                                      -9-
<PAGE>

the case of clause  (iii)  above,  the  Borrowers  shall take one of the actions
specified in Section  1.10(b) as promptly as possible and, in any event,  within
the time period required by law. Each of the Administrative  Agent and each Bank
agrees that if it gives notice to the  Borrowers of any of the events  described
in clause (i) or (iii) above, it shall promptly notify the Borrowers and, in the
case of any such Bank, the Administrative  Agent, if such event ceases to exist.
If any such event  described in clause (iii) above ceases to exist as to a Bank,
the obligations of such Bank to make  Eurodollar  Loans and to convert Base Rate
Loans into Eurodollar  Loans on the terms and conditions  contained herein shall
be reinstated.

     (b) At any time that any Eurodollar  Loan is affected by the  circumstances
described in Section 1.10(a)(ii) or (iii), the Borrowers may (and in the case of
a  Eurodollar   Loan  affected  by  the   circumstances   described  in  Section
1.10(a)(iii)  shall)  either (x) if the affected  Eurodollar  Loan is then being
made initially or pursuant to a conversion,  cancel the respective  Borrowing by
giving the Administrative  Agent telephonic notice (confirmed in writing) on the
same  date  that  the  Borrowers  were  notified  by the  affected  Bank  or the
Administrative  Agent  pursuant  to Section  1.10(a)(ii)  or (iii) or (y) if the
affected Eurodollar Loan is then outstanding, upon at least three Business Days'
written notice to the Administrative Agent, require the affected Bank to convert
such Eurodollar Loan into a Base Rate Loan, provided that, if more than one Bank
is  affected  at any time,  then all  affected  Banks must be  treated  the same
pursuant to this Section 1.10(b).

     (c) If at any time  after the date of this  Agreement  any Bank  determines
that the  introduction  of or any change in any applicable  law or  governmental
rule, regulation, order, guideline,  directive or request (whether or not having
the force of law) concerning  capital adequacy,  or any change in interpretation
or  administration  thereof  by any  governmental  authority,  central  bank  or
comparable  agency,  will have the  effect of  increasing  the amount of capital
required  or  expected  to  be  maintained  by  such  Bank  or  any  corporation
controlling  such  Bank  based  on the  existence  of  such  Bank's  Commitments
hereunder or its obligations hereunder, then the Borrowers jointly and severally
agree, subject to the provisions of Section 13.15 (to the extent applicable), to
pay to such Bank, upon its written demand therefor,  such additional  amounts as
shall be  required to  compensate  such Bank or such other  corporation  for the
increased  cost to such Bank or such other  corporation  or the reduction in the
rate of  return  to such  Bank or such  other  corporation  as a result  of such
increase of capital. In determining such additional amounts,  each Bank will act
reasonably  and in good faith and will use  averaging  and  attribution  methods
which  are  reasonable,   provided  that  such  Bank's   reasonable  good  faith
determination  of compensation  owing under this Section  1.10(c) shall,  absent
manifest  error,  be final and conclusive and binding on all the parties hereto.
Each Bank, upon determining that any additional amounts will be payable pursuant
to this Section  1.10(c),  will give written  notice  thereof to the  Borrowers,
which notice shall show the basis for calculation of such additional amounts.

     1.11  Compensation.  The Borrowers jointly and severally agree,  subject to
the provisions of Section 13.15 (to the extent  applicable),  to compensate each
Bank,  upon its written  request  (which  request  shall set forth the basis for
requesting  such  compensation),   for  all  reasonable  losses,   expenses  and
liabilities  (including,  without  limitation,  any loss,  expense or  liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Bank to fund its  Eurodollar  Loans but  excluding  any loss of
anticipated  profit)  which such Bank may sustain:  (i) if for any reason (other


                                      -10-
<PAGE>

than a default  by such Bank or the  Administrative  Agent) a  Borrowing  of, or
conversion  from or into,  Eurodollar  Loans does not occur on a date  specified
therefor  in a Notice  of  Borrowing  or Notice of  Conversion  (whether  or not
withdrawn by the  Borrowers or deemed  withdrawn  pursuant to Section  1.10(a));
(ii) if any repayment  (including any repayment made pursuant to Section 4.02 or
as a  result  of an  acceleration  of  the  Loans  pursuant  to  Section  10) or
conversion of any of its Eurodollar Loans occurs on a date which is not the last
day of an Interest Period with respect  thereto;  (iii) if any prepayment of any
of its  Eurodollar  Loans  is not  made on any date  specified  in a  notice  of
prepayment  given by the  Borrowers;  or (iv) as a consequence  of (x) any other
default by the  Borrowers to repay its Loans when  required by the terms of this
Agreement  or any Note held by such Bank or (y) any  election  made  pursuant to
Section 1.10(b).

     1.12 Change of Lending Office. Each Bank agrees that upon the occurrence of
any event giving rise to the operation of Section 1.10(a)(ii) or (iii),  Section
1.10(c),  Section 2.06 or Section 4.04 with  respect to such Bank,  it will,  if
requested by the Borrowers,  use reasonable  efforts  (subject to overall policy
considerations  of such Bank) to designate  another lending office for any Loans
or Letters of Credit affected by such event,  provided that such  designation is
made on such terms that such Bank and its  lending  office  suffer no  economic,
legal or regulatory disadvantage, with the object of avoiding the consequence of
the event giving rise to the operation of such Section.  Nothing in this Section
1.12 shall affect or postpone  any of the  obligations  of the  Borrowers or the
rights of any Bank provided in Sections 1.10, 2.06 and 4.04.

     1.13  Replacement  of Banks.  (x) If any Bank becomes a Defaulting  Bank or
otherwise defaults in its obligations to make Loans or fund Unpaid Drawings, (y)
upon the  occurrence  of any  event  giving  rise to the  operation  of  Section
1.10(a)(ii) or (iii), Section 1.10(c), Section 2.06 or Section 4.04 with respect
to any Bank which results in such Bank charging to the Borrowers increased costs
in excess of those being generally charged by the other Banks or (z) as provided
in  Section  13.12(b)  in the case of certain  refusals  by a Bank to consent to
certain proposed  changes,  waivers,  discharges or terminations with respect to
this  Agreement  which have been approved by the Required  Banks,  the Borrowers
shall have the right,  if no Default or Event of Default will exist  immediately
after giving  effect to the  respective  replacement,  to replace such Bank (the
"Replaced Bank") with one or more other Eligible Transferee or Transferees, none
of whom  shall  constitute  a  Defaulting  Bank at the time of such  replacement
(collectively,   the   "Replacement   Bank")   reasonably   acceptable   to  the
Administrative  Agent, provided that (i) at the time of any replacement pursuant
to this  Section  1.13,  the  Replacement  Bank  shall  enter  into  one or more
Assignment and Assumption  Agreements pursuant to Section 13.04(b) (and with all
fees  payable  pursuant to said Section  13.04(b) to be paid by the  Replacement
Bank)  pursuant  to  which  the  Replacement  Bank  shall  acquire  all  of  the
Commitments and outstanding  Loans of, and  participations  in Letters of Credit
by,  the  Replaced  Bank  and,  in  connection  therewith,  shall pay to (x) the
Replaced  Bank in respect  thereof  an amount  equal to the sum of (A) an amount
equal to the principal of, and all accrued interest on, all outstanding Loans of
the Replaced  Bank,  (B) an amount equal to all Unpaid  Drawings  that have been
funded by (and not  reimbursed  to) such Replaced  Bank,  together with all then
unpaid interest with respect thereto at such time and (C) an amount equal to all
accrued,  but  theretofore  unpaid,  Fees owing to the Replaced Bank pursuant to
Section  3.01 and (y) BTCo an  amount  equal to such  Replaced  Bank's  Adjusted
Percentage  (for this  purpose,  determined  as if the  adjustment  described in
clause (y) of the immediately  succeeding sentence had been made with respect to
such  Replaced  Bank) of (1) any Unpaid  Drawing  (which at such time remains an


                                      -11-
<PAGE>

Unpaid  Drawing)  and (2) any portion of any  Swingline  Loan for which BTCo has
given a notice of a Mandatory  Borrowing  pursuant  to Section  1.01(d) and such
Replaced  Bank has not  provided  a  Revolving  Loan which it was  obligated  to
provide to the extent such amount was not  theretofore  funded by such  Replaced
Bank,  and (ii) all  obligations  of the  Borrowers  owing to the Replaced  Bank
(other than those (a)  specifically  described in clause (i) above in respect of
which the assignment  purchase price has been, or is concurrently being, paid or
(b)  relating  to any  Tranche of Loans  and/or  Commitments  of the  respective
Replaced  Bank  which  will  remain  outstanding  after  giving  effect  to  the
respective replacement) shall be paid in full to such Replaced Bank concurrently
with such  replacement.  Upon the  execution of the  respective  Assignment  and
Assumption  Agreements,  the  payment of amounts  referred to in clauses (i) and
(ii) above  and,  if so  requested  by the  Replacement  Bank,  delivery  to the
Replacement  Bank of the  appropriate  Notes executed by the Borrowers,  (x) the
Replacement Bank shall become a Bank hereunder and the Replaced Bank shall cease
to  constitute  a  Bank  hereunder,   except  with  respect  to  indemnification
provisions under this Agreement (including,  without limitation,  Sections 1.10,
1.11, 2.06, 4.04, 13.01 and 13.06), which shall survive as to such Replaced Bank
and (y) in the case of a replacement of a Defaulting Bank with a  Non-Defaulting
Bank, the Adjusted  Percentages of the Banks shall be automatically  adjusted at
such  time to  give  effect  to such  replacement  (and  to give  effect  to the
replacement of a Defaulting Bank with one or more Non-Defaulting Banks).

     SECTION 2. Letters of Credit.

     2.01  Letters of Credit.  (a) Subject to and upon the terms and  conditions
herein set forth,  the Borrowers may request that any Issuing Bank issue, at any
time and from time to time on and after the Third Restatement Effective Date and
prior to the Revolving Loan Maturity Date, for the joint and several  account of
the  Borrowers,  one or more  irrevocable  letters  of credit or, in the case of
Trade  Letters of Credit,  through the  creation  thereunder  by the  respective
Issuing  Bank of  acceptances  or any other  customary  agreement  or method for
providing  for deferred  payment under  letters of credit  ("Acceptances"),  and
otherwise in a form  customarily used by such Issuing Bank or in such other form
as has been approved by such Issuing Bank (each such letter of credit, a "Letter
of Credit") in support of  obligations  described in the  definitions of Standby
Letter of Credit or Trade  Letter  of Credit  and any other  obligations  of the
Borrowers or any of their Restricted Subsidiaries that are reasonably acceptable
to the  Administrative  Agent and otherwise  permitted to exist pursuant to this
Agreement.  On the Fourth  Restatement  Effective Date, all Existing  Letters of
Credit  shall be deemed to have been issued under this  Agreement  and shall for
all purposes constitute "Letters of Credit" hereunder.

     (b)  Letters of Credit may be issued at the  request  of the  Borrowers  in
Dollars or any Alternate Currency.

     (c) Each Issuing Bank may agree,  in its sole  discretion,  and BTCo hereby
agrees  that in the event a  requested  Letter of Credit is not issued by one of
the other Issuing Banks, it will (subject to the terms and conditions  contained
herein),  at any time and from time to time on or after  the  Third  Restatement
Effective  Date and prior to the  Revolving  Loan Maturity  Date,  following its
receipt of the respective Letter of Credit Request, issue for the account of the
Borrowers one or more Letters of Credit in support of such obligations described
in the definitions of Standby Letter of Credit and Trade Letter of Credit of the
Borrowers  or any of their  Restricted  Subsidiaries  as is  permitted  to exist
pursuant to this Agreement  without giving rise to a Default or Event of Default
hereunder,  provided  that  the  respective  Issuing  Bank  shall  be  under  no


                                      -12-
<PAGE>

obligation to issue any Letter of Credit of the types  described above if at the
time of such issuance:

          (i) any order,  judgment or decree of any  governmental  authority  or
     arbitrator  shall  purport by its terms to enjoin or restrain  such Issuing
     Bank  from  issuing  such  Letter  of  Credit  or  any  requirement  of law
     applicable to such Issuing Bank or any request or directive (whether or not
     having the force of law) from any governmental  authority with jurisdiction
     over such  Issuing Bank shall  prohibit,  or request that such Issuing Bank
     refrain from, the issuance of letters of credit generally or such Letter of
     Credit in particular or shall impose upon such Issuing Bank with respect to
     such  Letter of Credit any  restriction  or reserve or capital  requirement
     (for which such Issuing Bank is not otherwise compensated) not in effect on
     the date hereof,  or any  unreimbursed  loss, cost or expense which was not
     applicable,  in effect or known to such  Issuing Bank as of the date hereof
     and which such Issuing Bank in good faith deems material to it; or

          (ii) such Issuing Bank shall have received  notice from any Bank prior
     to the  issuance  of such  Letter of Credit  of the type  described  in the
     penultimate sentence of Section 2.03(b).

     (d) Notwithstanding the foregoing,  (i) no Letter of Credit shall be issued
the Stated  Amount of which,  when  added to the  Letter of Credit  Outstandings
(exclusive of Unpaid  Drawings which are repaid on the date of, and prior to the
issuance of, the  respective  Letter of Credit) at such time would exceed either
(x)  $60,000,000  or (y) when  added to the  aggregate  principal  amount of all
Revolving Loans made by Non-Defaulting  Banks and then outstanding and Swingline
Loans then  outstanding,  an amount equal to the Adjusted  Total  Revolving Loan
Commitment  at such  time,  (ii) no Letter of Credit  denominated  in a currency
other than Dollars shall be issued the Stated Amount of which, when added to the
Letter of Credit Outstandings  (exclusive of Unpaid Drawings which are repaid on
the date of, and prior to the issuance of, the  respective  Letter of Credit) at
such time in respect of Letters of Credit issued in currency other than Dollars,
would  exceed  $5,000,000  unless the  Administrative  Agent and the  respective
Issuing Bank consents  thereto,  (iii) no Acceptance shall be created the Stated
Amount of which, when added to the amount of all Acceptances outstanding at such
time,  would exceed  $15,000,000,  (iv) each Letter of Credit shall by its terms
terminate or be terminable by the Issuing Bank on such date that would result in
all drawings  thereunder,  or any Acceptances created  thereunder,  being funded
pursuant to the terms thereof prior to (x) (A) in the case of Standby Letters of
Credit,  the date which occurs 12 months after the date of the issuance  thereof
(although any such Letter of Credit may be extendible for successive  periods of
up to 12 months,  but not beyond the  Revolving  Loan  Maturity  Date,  on terms
acceptable  to the Issuing Bank thereof) and (B) in the case of Trade Letters of
Credit,  the date which occurs six months (or up to one year with the consent of
the respective  Issuing Bank) after the date of the issuance  thereof or (y) (A)
in the case of Standby  Letters of Credit,  the date which is five Business Days
prior to the  Revolving  Loan Maturity Date and (B) in the case of Trade Letters
of Credit,  the date which is thirty  Business Days prior to the Revolving  Loan
Maturity  Date and (v) in the event that the  Borrower  requests  that the Trade
Letter of Credit be issued on an  Acceptance  basis,  the Trade Letter of Credit
shall be issued at a tenor for no less than 30 days.

     2.02  Minimum  Stated  Amount.  The Stated  Amount of each Letter of Credit
shall be not less than  $10,000 or such lesser  amount as is  acceptable  to the
respective Issuing Bank.



                                      -13-
<PAGE>

     2.03 Letter of Credit  Requests.  (a) Whenever any Borrower  desires that a
Letter of Credit be issued by the Administrative Agent as Issuing Bank, it shall
have (i) executed and  delivered the Letter of Credit  Service  Agreement in the
form of Exhibit C-1 attached hereto (as amended,  modified or supplemented  from
time to time, the "Letter of Credit Service Agreement"),  which Letter of Credit
Service  Agreement shall be in full force and effect and (ii) made a request for
the issuance of such Letter of Credit in accordance with the terms of the Letter
of Credit Service  Agreement.  Whenever any Borrower desires that a Trade Letter
of Credit be issued by an Issuing Bank other than the  Administrative  Agent, it
shall have (x)  executed  and  delivered  to the  respective  Issuing Bank (with
copies having been sent to the Administrative Agent) at least five Business Days
prior to the issuance  thereof (or such shorter  period as may be  acceptable to
the  respective  Issuing  Bank), a Trade Letter of Credit Request in the form of
Exhibit C-2 attached  hereto (each a "Trade  Letter of Credit  Request") and (y)
completed and executed a letter of credit  application  in the form  customarily
used by such Issuing  Bank for Trade  Letters of Credit or in such other form as
the  Administrative  Agent and the  Issuing  Bank shall  request.  Whenever  any
Borrower  desires  that a Standby  Letter of Credit be issued by an Issuing Bank
other than the  Administrative  Agent for its account it shall have executed and
delivered to the  respective  Issuing Bank (with copies  having been sent to the
Administrative  Agent) at least five Business Days prior to the issuance thereof
(or such shorter period as may be acceptable to the respective  Issuing Bank), a
Standby  Letter of Credit  Request in the form of Exhibit  C-3  attached  hereto
(each a "Standby Letter of Credit Request").  Letter of Credit Requests shall be
given in  writing,  or in the case of requests  of Trade  Letters of Credit,  by
telephone,  if promptly confirmed in writing, or, if the Administrative Agent is
the  Issuing  Bank,  as  otherwise  provided  in the  Letter of  Credit  Service
Agreement,  provided that (I) if the express  provisions of any letter of credit
application  conflict  with  the  express  provisions  of  this  Agreement,  the
provisions  of this  Agreement  shall control to the extent of such conflict and
(II) no event (other than the failure to reimburse  Letter of Credit Drawings as
provided for in Section 2.05) which  constitutes a default under any application
shall  constitute an Event of Default  hereunder solely by reason of any default
provisions contained in such application.

     (b) The  making of each  Letter of Credit  Request  shall be deemed to be a
representation  and warranty by the Borrowers  that such Letter of Credit may be
issued in accordance  with,  and will not violate the  requirements  of, Section
2.01(d).  Unless the respective  Issuing Bank has received  notice from any Bank
before it issues a Letter of Credit that one or more of the conditions specified
in Section 6 are not then  satisfied,  or that the  issuance  of such  Letter of
Credit  would  violate  Section  2.01(d),  then such  Issuing Bank may issue the
requested  Letter of Credit for the account of the Borrowers in accordance  with
such Issuing  Bank's  usual and  customary  practices.  Upon its issuance of any
Letter of Credit,  such  Issuing  Bank shall  promptly  notify each Bank of such
issuance.

     2.04 Letter of Credit Participations.  

     (a)  Immediately  upon the  issuance by any  Issuing  Bank of any Letter of
Credit,  such Issuing Bank shall be deemed to have sold and  transferred to each
Bank,  other than such Issuing Bank (each such Bank, in its capacity  under this
Section  2.04,  a  "Participant"),  and each  such  Participant  shall be deemed
irrevocably and unconditionally to have purchased and received from such Issuing
Bank, without recourse or warranty, an undivided interest and participation,  to
the extent of such Participant's  Adjusted  Percentage in such Letter of Credit,
each  drawing  made  thereunder  and  Acceptances  created  thereunder  and  the
obligations of the Borrowers under this Agreement with respect thereto,  and any
security  therefor  or  guaranty  pertaining  thereto.  Upon any  change  in the
Revolving  Loan  Commitments  or Adjusted  Percentages  of the Banks pursuant to
Section  1.13 or 13.04 or as a result of a Bank  Default,  it is  hereby  agreed


                                      -14-
<PAGE>

that, with respect to all outstanding Letters of Credit,  Acceptances and Unpaid
Drawings,  there shall be an automatic adjustment to the participations pursuant
to this Section 2.04 to reflect the new Adjusted Percentages of the assignor and
assignee Bank or of all Banks with Revolving Loan  Commitments,  as the case may
be. 

     (b) In determining  whether to pay or create an Acceptance under any Letter
of Credit,  such  Issuing  Bank shall have no  obligation  relative to the other
Banks other than to confirm that any  documents  required to be delivered  under
such  Letter of Credit  appear to have been  delivered  and that they  appear to
substantially  comply on their  face  with the  requirements  of such  Letter of
Credit.  Any action taken or omitted to be taken by any Issuing Bank under or in
connection with any Letter of Credit if taken or omitted in the absence of gross
negligence  or  willful  misconduct,  as  determined  by a  court  of  competent
jurisdiction,  shall not create for such Issuing Bank any resulting liability to
the Borrowers or any Bank.

     (c) In the event that any Issuing  Bank makes any payment  under any Letter
of Credit issued by it or any  Acceptance  created  thereunder and the Borrowers
shall not have  reimbursed  such amount in full to such Issuing Bank pursuant to
Section  2.05(a),  such Issuing Bank shall  promptly  notify the  Administrative
Agent,  which shall promptly notify each  Participant of such failure,  and each
Participant  shall  promptly  and  unconditionally  pay to such Issuing Bank the
amount of such Participant's Adjusted Percentage of such unreimbursed payment in
Dollars and in same day funds. If the Administrative Agent so notifies, prior to
11:00 A.M. (New York time) on any Business Day, any Participant required to fund
a payment under a Letter of Credit,  such  Participant  shall make  available to
such Issuing  Bank in Dollars  such  Participant's  Adjusted  Percentage  of the
amount of such  payment on such  Business  Day in same day funds.  If and to the
extent such  Participant  shall not have so made its Adjusted  Percentage of the
amount of such payment  available to such Issuing Bank, such Participant  agrees
to pay to such Issuing  Bank,  forthwith on demand,  such amount,  together with
interest thereon, for each day from such date until the date such amount is paid
to such Issuing Bank at the  overnight  Federal  Funds Rate.  The failure of any
Participant  to make  available to such Issuing Bank its Adjusted  Percentage of
any payment  under any Letter of Credit shall not relieve any other  Participant
of its obligation  hereunder to make available to such Issuing Bank its Adjusted
Percentage of any Letter of Credit or Acceptance  created thereunder on the date
required,  as specified above,  but no Participant  shall be responsible for the
failure of any other  Participant  to make  available  to such Issuing Bank such
other Participant's Adjusted Percentage of any such payment.

     (d)  Whenever  any  Issuing  Bank  receives  a payment  of a  reimbursement
obligation  as to which  it has  received  any  payments  from the  Participants
pursuant to clause (c) above,  such Issuing  Bank shall pay to each  Participant
which has paid its  Adjusted  Percentage  thereof,  in  Dollars  and in same day
funds, an amount equal to such Participant's share (based upon the proportionate
aggregate amount  originally  funded by such Participant to the aggregate amount
funded  by all  Participants)  of the  principal  amount  of such  reimbursement
obligation  and interest  thereon  accruing after the purchase of the respective
participations.

     (e) (i) In the case of Standby Letters of Credit, the Administrative  Agent
shall deliver to each  Participant  copies of each Standby Letter of Credit upon
issuance  and  any  amendments  thereto  as  they  occur,  as  furnished  to the
Administrative Agent by the Issuing Bank.



                                      -15-
<PAGE>

     (ii) In the case of Trade Letters of Credit, when the Administrative  Agent
is not the Issuing Bank, then the Issuing Bank is to send to the  Administrative
Agent, promptly on the first business day of each week, by telefax,  their daily
outstanding  Trade  Letters  of  Credit  balances  for the  previous  week.  The
Administrative Agent shall deliver to each Bank upon each calendar month end and
upon each  Letter of Credit fee payment a report  setting  forth for such period
the aggregate  daily amount  available to be drawn under Trade Letters of Credit
issued by all Issuing Banks that were outstanding during such period.

     (f) The  obligations of the  Participants  to make payments to each Issuing
Bank with respect to Letters of Credit and Acceptances  issued  thereunder shall
be irrevocable and not subject to any qualification or exception  whatsoever and
shall be made in  accordance  with the terms and  conditions  of this  Agreement
under all circumstances,  including,  without  limitation,  any of the following
circumstances:

          (i) any lack of validity or enforceability of this Agreement or any of
     the other Credit Documents;

          (ii) the existence of any claim, setoff,  defense or other right which
     the Borrowers or any of their  Subsidiaries  may have at any time against a
     beneficiary  named in a Letter of Credit,  any  transferee of any Letter of
     Credit (or any  Person for whom any such  transferee  may be  acting),  any
     holder of an Acceptance, the Administrative Agent, any Participant,  or any
     other Person,  whether in  connection  with this  Agreement,  any Letter of
     Credit,  any  Acceptance,  the  transactions  contemplated  herein  or  any
     unrelated  transactions  (including any underlying  transaction between any
     Borrower and the beneficiary named in any such Letter of Credit);

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

          (iv) the surrender or  impairment of any security for the  performance
     or observance of any of the terms of any of the Credit Documents; or

          (v) the occurrence of any Default or Event of Default.

     2.05 Agreement to Repay Letter of Credit Drawings and Acceptance  Payments.

     (a) The  Borrowers  hereby  jointly and  severally  agree to reimburse  the
respective Issuing Bank, by making payment to the  Administrative  Agent for the
account of such Issuing Bank in an amount in Dollars (in the case of any payment
or disbursement  made by such Issuing Bank in a currency other than Dollars,  of
the Dollar  Equivalent of such payment and disbursement as determined by BTCo on
the date of such payment or disbursement) and in immediately  available funds at
the Payment Office,  for any payment or  disbursement  made by such Issuing Bank
under any Letter of Credit or Acceptance  created  thereunder (each such amount,
or the Dollar Equivalent thereof as determined by BTCo on the date of payment or
disbursement, so paid until reimbursed, an "Unpaid Drawing"), immediately after,
and in any event on the date of such payment or  disbursement,  with interest on
the  amount  so paid or  disbursed  by such  Issuing  Bank,  to the  extent  not
reimbursed  prior to 12:00 Noon (New York  time) on the date of such  payment or
disbursement, from and including the date paid or disbursed to but excluding the
date such Issuing Bank was  reimbursed by the  Borrowers  therefor at a rate per
annum  which  shall  be the  Base  Rate in  effect  from  time to time  plus the


                                      -16-
<PAGE>

Applicable  Margin for Base Rate Loans,  provided,  however,  to the extent such
amounts  are not  reimbursed  prior to 12:00  Noon (New York time) on the second
Business Day following such payment or  disbursement,  interest shall thereafter
accrue on the  amounts  so paid or  disbursed  by such  Issuing  Bank (and until
reimbursed by the Borrowers) at a rate per annum which shall be the Base Rate in
effect from time to time plus the Applicable Margin for Base Rate Loans plus 2%,
in each such case,  with interest to be payable by the Borrowers on demand.  The
respective  Issuing Bank shall give the Borrowers  prompt notice of each Drawing
under any Letter of Credit or payment under any Acceptance  created  thereunder,
provided that the failure to give any such notice shall in no way affect, impair
or diminish the Borrowers' obligations hereunder.

     (b) The  obligations of the Borrowers  under this Section 2.05 to reimburse
the  respective  Issuing  Bank with respect to drawings on Letters of Credit and
payments under any Acceptance created thereunder (each, a "Drawing")  (including
interest  thereon)  shall  be joint  and  several  and  shall  be  absolute  and
unconditional  under any and all  circumstances  and irrespective of any setoff,
counterclaim  or  defense  to payment  which any  Borrower  may have or have had
against any Bank (including in its capacity as issuer of the Letter of Credit or
as Participant),  or any  nonapplication or misapplication by the beneficiary of
the proceeds of such Drawing,  the respective  Issuing Bank's only obligation to
the Borrowers being to confirm that any documents required to be delivered under
such  Letter of Credit  appear to have been  delivered  and that they  appear to
substantially  comply on their  face  with the  requirements  of such  Letter of
Credit.  Any action taken or omitted to be taken by any Issuing Bank under or in
connection  with any Letter of Credit or any  Acceptance  created  thereunder if
taken or omitted in the absence of gross negligence or willful misconduct, shall
not create for such Issuing Bank any resulting liability to the Borrowers.

     2.06 Increased Costs. If at any time after the date of this Agreement,  the
introduction  of or any change in any applicable law, rule,  regulation,  order,
guideline or request or in the  interpretation or administration  thereof by any
governmental   authority  charged  with  the  interpretation  or  administration
thereof,  or compliance by any Issuing Bank or any Participant  with any request
or directive by any such authority  (whether or not having the force of law), or
any change in  generally  acceptable  accounting  principles,  shall  either (i)
impose,  modify or make  applicable any reserve,  deposit,  capital  adequacy or
similar requirement against Letters of Credit issued, or Acceptances created, by
any Issuing Bank or  participated in by any  Participant,  or (ii) impose on any
Issuing  Bank or any  Participant  any other  conditions  relating,  directly or
indirectly,  to this Agreement,  any Letter of Credit or any Acceptance  created
thereunder;  and the result of any of the  foregoing  is to increase the cost to
any Issuing Bank or any Participant of issuing,  maintaining or participating in
any Letter of Credit or any Acceptance created thereunder,  or reduce the amount
of any sum  received  or  receivable  by any  Issuing  Bank  or any  Participant
hereunder or reduce the rate of return on its capital with respect to Letters of
Credit and Acceptances created thereunder (except for changes in the rate of tax
on, or determined by reference to, the net income or net profits of such Issuing
Bank or such  Participant,  or any  franchise tax based on the net income or net
profits of such Bank or Participant,  in either case pursuant to the laws of the
United States of America,  the jurisdiction in which it is organized or in which
its principal office or applicable  lending office is located or any subdivision
thereof or therein),  but without  duplication of any amounts payable in respect
of Taxes pursuant to Section 4.04(a), then, upon demand to the Borrowers by such
Issuing  Bank or any  Participant  (a copy of which demand shall be sent by such
Issuing Bank or such Participant to the Administrative Agent) and subject to the
provisions of Section 13.15 (to the extent  applicable),  the Borrowers  jointly
and  severally  agree  to pay to such  Issuing  Bank or  such  Participant  such

                                      -17-
<PAGE>

additional  amount or amounts as will  compensate  such Bank for such  increased
cost or reduction in the amount receivable or reduction on the rate of return on
its capital.  Any Issuing Bank or any  Participant,  upon  determining  that any
additional  amounts  will be payable  pursuant to this Section  2.06,  will give
prompt written  notice  thereof to the  Borrowers,  which notice shall include a
certificate  submitted to the Borrowers by such Issuing Bank or such Participant
(a copy of  which  certificate  shall  be  sent  by  such  Issuing  Bank or such
Participant to the Administrative Agent), setting forth in reasonable detail the
basis for the  calculation  of such  additional  amount or amounts  necessary to
compensate such Issuing Bank or such Participant. The certificate required to be
delivered  pursuant to this Section  2.06 shall,  if delivered in good faith and
absent manifest error, be final and conclusive and binding on the Borrowers.

     SECTION 3. Commitment Commission; Fees; Reductions of Commitment.
                                    
     3.01 Fees.  (a) The  Borrowers  jointly and  severally  agree to pay to the
Administrative  Agent  for  distribution  to  each  Non-Defaulting  Bank  with a
Revolving Loan Commitment a commitment commission (the "Commitment  Commission")
for the period from the Fourth  Restatement  Effective Date to but excluding the
Revolving  Loan Maturity Date (or such earlier date as the Total  Revolving Loan
Commitment shall have been terminated), computed at a rate for each day equal to
1/2 of 1%  (reduced  by the  then  applicable  Commitment  Commission  Reduction
Percentage) per annum on the daily average Unutilized  Revolving Loan Commitment
of such  Non-Defaulting  Bank.  Accrued  Commitment  Commission shall be due and
payable quarterly in arrears on each Quarterly Payment Date and on the Revolving
Loan  Maturity  Date or such  earlier date upon which the Total  Revolving  Loan
Commitment is terminated.

     (b) The Borrowers jointly and severally agree to pay to the  Administrative
Agent for pro rata distribution to each  Non-Defaulting Bank a fee in respect of
(x) each Letter of Credit issued hereunder (the "Letter of Credit Fee"), for the
period from and  including  the date of issuance of such Letter of Credit to the
termination of such Letter of Credit,  computed at a rate per annum equal to the
Applicable  Margin for Revolving  Loans  maintained  as  Eurodollar  Loans as in
effect from time to time on the daily Stated Amount of such Letter of Credit and
(y) each Acceptance (the "Acceptance Fee") for the period from and including the
date of  creation  of such  Acceptance  to and  including  the  maturity of such
Acceptance,  computed  at a rate per annum  equal to the  Applicable  Margin for
Revolving Loans maintained as Eurodollar Loans as in effect from time to time on
the daily Stated Amount of such  Acceptance.  Accrued  Letter of Credit Fees and
Acceptance Fees shall be due and payable  quarterly in arrears on each Quarterly
Payment  Date and upon the first day on or after  the  termination  of the Total
Revolving Loan Commitment upon which no Letters of Credit or Acceptances  remain
outstanding.

     (c) The  Borrowers  jointly and  severally  agree to pay to the  respective
Issuing Bank,  for its own account,  a facing fee in respect of (x) each Standby
Letter of Credit issued for its account  hereunder (the "Letter of Credit Facing
Fee") for the period from and  including  the date of  issuance of such  Standby
Letter of Credit to and  including  the  termination  of such Standby  Letter of
Credit,  computed  at a rate  equal to 1/8 of 1% per annum of the  daily  Stated
Amount of such Standby Letter of Credit,  provided that in any event the minimum
amount of the Letter of Credit Facing Fee payable in any 12 month period for any
Standby  Letter  of  Credit  shall  be  $500  (it  being  agreed  that,  on each
anniversary  of the issuance of any Standby Letter of Credit or upon any earlier
termination  or  expiration of a Standby  Letter of Credit,  if $500 exceeds the
amount of Letter of Credit  Facing Fees  theretofore  paid or then  accrued with
respect to such Standby  Letter of Credit,  in either case after the date of the
issuance  thereof or, if later,  after the date of the last  anniversary  of the
issuance  thereof (but  excluding any amounts paid after such  anniversary  with

                                      -18-
<PAGE>

respect to periods ending on or prior to such  anniversary,  including,  without
limitation,  as a result of the operation of this parenthetical),  the amount of
such  excess  shall be  payable on the next date upon  which  accrued  Letter of
Credit  Facing Fees are  otherwise  payable with  respect to Standby  Letters of
Credit as provided in the following sentence) and (y) each Acceptance created by
it (the  "Acceptance  Facing Fee," and together with the Letter of Credit Facing
Fees,  the "Facing Fees") for the period from and including the date of creation
of such Acceptance to and including the maturity of such Acceptance, computed at
a rate  equal  to 1/8  of 1% per  annum  of the  daily  Stated  Amount  of  such
Acceptance. Accrued Facing Fees shall be due and payable quarterly in arrears on
each Quarterly  Payment Date and on the date upon which the Total Revolving Loan
Commitment has been  terminated and all Letters of Credit and  Acceptances  have
been terminated in accordance with their terms.

     (d) The  Borrowers  jointly and  severally  agree to pay, upon each drawing
under,  issuance of, or amendment to any Letter of Credit,  such amount as shall
at the  time  of such  event  be the  administrative  charge  and  out-of-pocket
expenses which the respective  Issuing Bank is generally  imposing in connection
with such occurrence with respect to letters of credit.

     (e) The  Borrowers  jointly and severally  agree to pay to the Agents,  for
their own  account,  such  other  fees as have been  agreed to in writing by the
Borrowers and the Agents.

     3.02 Voluntary Termination of Unutilized Commitments. (a) Upon at least two
Business Days' prior notice from an Authorized  Representative  of the Borrowers
to  the   Administrative   Agent  at  its  Notice   Office   (which  notice  the
Administrative  Agent  shall  promptly  transmit  to  each  of the  Banks),  the
Borrowers  shall  have  the  right,  at any time or from  time to time,  without
premium or penalty, to terminate the Total Unutilized Revolving Loan Commitment,
in whole or in part, in integral multiples of $1,000,000, provided that (i) each
such reduction shall apply  proportionately  to permanently reduce the Revolving
Loan  Commitment of each Bank with such a Commitment,  and (ii) the reduction to
the Total Unutilized  Revolving Loan Commitment shall in no case be in an amount
which would cause the  Revolving  Loan  Commitment of any Bank to be reduced (as
required by preceding  clause (i)) by an amount which  exceeds the  remainder of
(x)  the  Unutilized  Revolving  Loan  Commitment  of  such  Bank  as in  effect
immediately  before  giving  effect  to such  reduction  minus  (y) such  Bank's
Adjusted  Percentage of the aggregate  principal  amount of Swingline Loans then
outstanding.

     (b) In the event of  certain  refusals  by a Bank as  provided  in  Section
13.12(b)  to  consent  to  certain  proposed  changes,  waivers,  discharges  or
terminations  with  respect to this  Agreement  which have been  approved by the
Required  Banks,  the  Borrowers  may,  subject  to  their  compliance  with the
requirements of said Section  13.12(b),  upon five Business Days' written notice
to  the   Administrative   Agent  at  its  Notice   Office   (which  notice  the
Administrative Agent shall promptly transmit to each of the Banks) terminate all
of the Revolving  Loan  Commitment  of such Bank so long as all Loans,  together
with accrued and unpaid interest, Fees and all other amounts, owing to such Bank
(other than amounts owing in respect of any Term Loans  maintained by such Bank,
if such Term Loans are not being repaid pursuant to Section 13.12(b)) are repaid
concurrently  with the effectiveness of such termination (at which time Schedule
I shall be deemed modified to reflect such changed  amounts),  and at such time,
such Bank shall no longer  constitute a "Bank" for  purposes of this  Agreement,
except with respect to indemnifications under this Agreement (including, without


                                      -19-
<PAGE>

limitation,  Sections 1.10,  1.11,  2.06,  4.04,  13.01 and 13.06),  which shall
survive as to such repaid Bank.

     3.03  Mandatory  Reduction of  Commitments.  (a) The Total  Revolving  Loan
Commitment  (and the Revolving Loan  Commitment of each Bank) shall terminate in
its entirety on July 31, 1998 and the Existing  Credit  Agreement shall continue
in effect (in accordance with its terms) unless the Fourth Restatement Effective
Date shall have occurred on or prior to such date.

     (b) In addition to any other mandatory  commitment  reductions  pursuant to
this Section 3.03, the Total Term Loan  Commitment (and the Term Loan Commitment
of each Bank) was  terminated in full on the Third  Restatement  Effective  Date
(after giving effect to the making of the Term Loans on such date).

     (c) In addition to any other mandatory  commitment  reductions  pursuant to
this Section 3.03, the Total  Revolving Loan  Commitment (and the Revolving Loan
Commitment of each Bank) shall  terminate in its entirety on the Revolving  Loan
Maturity Date.

     (d) In addition to any other mandatory  commitment  reductions  pursuant to
this Section 3.03, on each date after the Fourth Restatement Effective Date upon
which a mandatory  prepayment of Term Loans pursuant to Section 4.02(A)(b),  (c)
or (d) is required (and exceeds in amount the aggregate principal amount of Term
Loans  then   outstanding)  or  would  be  required  if  Term  Loans  were  then
outstanding, the Total Revolving Loan Commitment shall be permanently reduced by
the amount,  if any, by which the amount required to be applied pursuant to said
Section  (determined  as if an  unlimited  amount of Term  Loans  were  actually
outstanding)   exceeds  the  aggregate  principal  amount  of  Term  Loans  then
outstanding.

     (e) Each reduction to the Total Revolving Loan Commitment  pursuant to this
Section  3.03 shall be applied  proportionately  to reduce  the  Revolving  Loan
Commitment of each Bank.

     SECTION 4. Prepayments; Payments; Taxes.

     4.01  Voluntary  Prepayments.  (a) The  Borrowers  shall  have the right to
prepay the Loans,  without  premium or penalty,  in whole or in part at any time
and from time to time on the following terms and  conditions:  (i) an Authorized
Representative  of the Borrowers  shall give the  Administrative  Agent prior to
12:00 Noon (New York time) at its Notice Office (x) at least one Business  Day's
prior written notice (or telephonic notice promptly confirmed in writing) of the
Borrowers'  intent to prepay  Base Rate Loans (or same day notice in the case of
Swingline  Loans  provided  such notice is given  prior to 11:00 A.M.  (New York
time)) and (y) at least three Business Days' prior written notice (or telephonic
notice  promptly  confirmed  in  writing) of their  intent to prepay  Eurodollar
Loans, whether Term Loans,  Revolving Loans or Swingline Loans shall be prepaid,
the amount of such  prepayment  and the Types of Loans to be prepaid and, in the
case of Eurodollar Loans, the specific Borrowing or Borrowings pursuant to which
made, which notice the  Administrative  Agent shall promptly transmit to each of
the Banks; (ii) each prepayment shall be in an aggregate  principal amount of at
least $1,000,000 (or $500,000 in the case of Swingline Loans),  provided that if
any partial  prepayment of Eurodollar Loans made pursuant to any Borrowing shall
reduce the  outstanding  Eurodollar  Loans made pursuant to such Borrowing to an
amount less than the Minimum  Borrowing  Amount  applicable  thereto,  then such


                                      -20-
<PAGE>

Borrowing  may not be  continued  as a  Borrowing  of  Eurodollar  Loans and any
election of an Interest Period with respect thereto given by the Borrowers shall
have no force or effect; (iii) at the time of any prepayment of Eurodollar Loans
pursuant  to this  Section  4.01 on any  date  other  than  the  last day of the
Interest Period applicable thereto, the Borrowers shall pay the amounts required
pursuant to Section 1.11; and (iv) each  prepayment in respect of any Loans made
pursuant  to a Borrowing  shall be applied  pro rata among such Loans,  provided
that at the Borrowers' election in connection with any prepayment of Loans, such
prepayment shall not be applied to the prepayment of Loans of a Defaulting Bank.

     (b) In the event of  certain  refusals  by a Bank as  provided  in  Section
13.12(b)  to  consent  to  certain  proposed  changes,  waivers,  discharges  or
terminations  with  respect to this  Agreement  which have been  approved by the
Required Banks, the Borrowers may, upon five Business Days' written notice by an
Authorized  Representative of the Borrowers to the  Administrative  Agent at its
Notice Office (which notice the Administrative  Agent shall promptly transmit to
each of the Banks) repay all Loans,  together with accrued and unpaid  interest,
Fees,  and other amounts owing to such Bank in accordance  with,  and subject to
the  requirements  of, said Section  13.12(b) so long as (A) the  Commitments of
such Bank are  terminated  concurrently  with  such  repayment  (at  which  time
Schedule I shall be deemed modified to reflect the changed  Commitments) and (B)
the  consents  required by Section  13.12(b) in  connection  with the  repayment
pursuant to this clause (b) have been obtained.

     4.02  Mandatory   Repayments,   Cash   Collateralizations   and  Commitment
Reductions.

     (A) Requirements:

     (a) (i) On any day on which the sum of the aggregate  outstanding principal
amount of the Revolving Loans made by Non-Defaulting Banks,  Swingline Loans and
the Letter of Credit  Outstandings  exceeds the Adjusted  Total  Revolving  Loan
Commitment  as then in effect,  the  Borrowers  jointly and  severally  agree to
prepay  principal of Swingline  Loans and,  after the Swingline  Loans have been
repaid in full,  Revolving Loans of  Non-Defaulting  Banks in an amount equal to
such excess.  If,  after  giving  effect to the  prepayment  of all  outstanding
Swingline  Loans and  Revolving  Loans of  Non-Defaulting  Banks,  the aggregate
amount of the Letter of Credit Outstandings exceeds the Adjusted Total Revolving
Loan Commitment as then in effect,  the Borrowers jointly and severally agree to
pay to the Administrative  Agent at the Payment Office on such date an amount of
cash or Cash  Equivalents  equal to the  amount of such  excess (up to a maximum
amount equal to the Letter of Credit  Outstandings  at such time),  such cash or
Cash  Equivalents to be held as security for all obligations of the Borrowers to
Non-Defaulting Banks hereunder in a cash collateral account to be established by
the Administrative Agent.

          (ii) On any day on which the aggregate outstanding principal amount of
     the Revolving  Loans made by any Defaulting Bank exceeds the Revolving Loan
     Commitment of such  Defaulting  Bank,  the Borrowers  jointly and severally
     shall prepay  principal of Revolving  Loans of such  Defaulting  Bank in an
     amount equal to such excess.

     (b) In addition to any other mandatory repayments or commitment  reductions
pursuant  to this  Section  4.02,  on each  date  after the  Fourth  Restatement
Effective Date upon which Furniture Brands or any of its Restricted Subsidiaries
receives any cash proceeds from any incurrence by Furniture Brands or any of its
Restricted  Subsidiaries of Indebtedness for borrowed money (excluding any other
Indebtedness  for borrowed  money  permitted to be incurred  pursuant to Section
9.04 as such Section is in effect on the Fourth Restatement  Effective Date), an


                                      -21-
<PAGE>

amount equal to 100% (or 0% if the Leverage  Ratio,  after giving  effect to the
respective  debt  incurrence,  is less than 4.0:1.0 and so long as no Default or
Event of Default exists on the date of the respective incurrence of debt) of the
Net Cash Proceeds of the respective  incurrence of Indebtedness shall be applied
as a mandatory  repayment of principal of the then  outstanding  Term Loans.  In
addition to any other mandatory repayments or commitment  reductions pursuant to
this Section 4.02, on each date after the Fourth Restatement Effective Date upon
which any  Borrower  receives  any cash  proceeds  from any  incurrence  by such
Borrower of Permitted Unsecured  Indebtedness  pursuant to Section 9.04(ii),  an
amount equal to 50% of the Net Cash  Proceeds of the  respective  incurrence  of
Permitted  Unsecured  Indebtedness shall be applied as a mandatory  repayment of
principal of the then outstanding Term Loans.

     (c) In addition to any other mandatory repayments or commitment  reductions
pursuant  to this  Section  4.02,  on each  date  after the  Fourth  Restatement
Effective Date upon which Furniture Brands or any of its Restricted Subsidiaries
receives  proceeds  from any  sale or other  disposition  of  assets  (including
capital stock and securities held thereby,  but excluding (i) sales or transfers
of  inventory in the  ordinary  course of  business,  (ii) sales or transfers of
assets  with a fair  market  value  less  than (A)  $100,000  per  such  sale or
disposition  (or in a series  of  related  sales or  dispositions)  and (B) with
respect to any sale or transfer in an amount in excess of the amount referred to
in clause (A) above,  $10,000,000 in the aggregate for all such transfers in any
Fiscal  Year and (iii)  sales or  transfers  of  assets  permitted  pursuant  to
Sections 9.02 (v)),  an amount equal to 100% of the Net Sale Proceeds  therefrom
shall be applied as a mandatory  repayment of principal of the then  outstanding
Term Loans.

     (d) In addition to any other mandatory repayments or commitment  reductions
pursuant to this  Section  4.02,  within 10 days  following  each date after the
Fourth  Restatement  Effective  Date on  which  Furniture  Brands  or any of its
Restricted  Subsidiaries  receives any proceeds  from any Recovery  Event (other
than proceeds from Recovery  Events in an amount less than (A) $100,000 per each
Recovery  Event and (B) with  respect to any  Recovery  Event with  proceeds  in
excess  of the  amount  referred  to in  clause  (A)  above,  $1,000,000  in the
aggregate for all such Recovery  Events in any Fiscal Year),  an amount equal to
100% of the proceeds of such Recovery Event (net of reasonable  costs including,
without limitation,  legal costs and expenses,  and taxes incurred in connection
with such Recovery Event) shall be applied as a mandatory repayment of principal
of the then outstanding  Term Loans,  provided that (x) so long as no Default or
Event of Default then exists and such  proceeds do not exceed  $5,000,000,  such
proceeds  shall not be required to be so applied on such date to the extent that
an Authorized Representative of the Borrowers has delivered a certificate to the
Administrative  Agent on or prior to such date stating that such proceeds  shall
be used or shall be committed to be used to replace or restore any properties or
assets in respect of which such proceeds were paid within one year following the
date of such Recovery Event (which  certificate shall set forth the estimates of
the  proceeds  to be so  expended)  and (y) so long as no  Default  or  Event of
Default  then  exists  and to the extent  that (a) the  amount of such  proceeds
exceeds  $5,000,000,  (b) the amount of such proceeds,  together with other cash
available to the Borrowers and permitted to be spent by them or their Restricted
Subsidiaries  on Capital  Expenditures  during the relevant  period  pursuant to
Section 9.07,  equals at least 100% of the cost of replacement or restoration of
the  properties  or  assets  in  respect  of which  such  proceeds  were paid as
determined  by the  Borrowers  and as supported  by such  estimates or bids from
contractors  or  subcontractors  or such  other  supporting  information  as the
Administrative Agent may reasonably request, (c) an Authorized Representative of


                                      -22-
<PAGE>

the  Borrowers  has delivered to the  Administrative  Agent a certificate  on or
prior to the date the application  would otherwise be required  pursuant to this
Section 4.02(A)(d) in the form described in clause (x) above and also certifying
its  determination  as  required  by  preceding  clause (b) and  certifying  the
sufficiency of business interruption  insurance as required by succeeding clause
(d), and (d) an Authorized  Representative of the Borrowers has delivered to the
Administrative  Agent such evidence as the  Administrative  Agent may reasonably
request in form and  substance  reasonably  satisfactory  to the  Administrative
Agent  establishing  that the Borrowers have  sufficient  business  interruption
insurance and that the Borrowers will receive payment thereunder in such amounts
and at such times as are  necessary to satisfy all  obligations  and expenses of
the Borrowers  (including,  without limitation,  all debt service  requirements,
including  pursuant to this Agreement)  without any delay or extension  thereof,
for the period from the date of the respective  casualty,  condemnation or other
event giving rise to the Recovery Event and continuing through the completion of
the  replacement  or restoration  of respective  properties or assets,  then the
entire amount of the proceeds of such Recovery Event and not just the portion in
excess of $5,000,000 shall be deposited with the  Administrative  Agent pursuant
to a cash collateral arrangement  reasonably  satisfactory to the Administrative
Agent  whereby such proceeds  shall be disbursed to the  Borrowers  from time to
time as needed to pay  actual  costs  incurred  by them in  connection  with the
replacement or restoration of the respective  properties or assets  (pursuant to
such  certification  requirements  as may be established  by the  Administrative
Agent),  provided  further,  that at any time  while an  Event  of  Default  has
occurred and is  continuing,  the Required  Banks may direct the  Administrative
Agent (in which case the Administrative Agent shall, and is hereby authorized by
the Borrowers to, follow said  directions)  to apply any or all proceeds then on
deposit in such collateral account to the repayment of Obligations  hereunder in
the same manner as proceeds would be applied pursuant to the Security Agreement,
and provided  further,  that if all or any portion of such proceeds not required
to be applied as a mandatory  repayment pursuant to the second preceding proviso
(whether  pursuant to clause (x) or (y)  thereof)  are either (A) not so used or
committed  to be so used  within  one  year  after  the  date of the  respective
Recovery  Event or (B) if committed to be used within one year after the date of
receipt of such Net Sale  Proceeds  and not so used  within 18 months  after the
date of  respective  Recovery  Event then, in either such case,  such  remaining
portion not used or committed to be used in the case of preceding clause (A) and
not used in the case of preceding  clause (B) shall be applied on the date which
is the first  anniversary  of the date of the  respective  Recovery Event in the
case of clause (A) above or the date  occurring  18 months after the date of the
respective  Recovery  Event  in the case of  clause  (B)  above  as a  mandatory
repayment of principal of the then outstanding Term Loans.



                                      -23-
<PAGE>

     (B) Application:

     (a) With respect to each  repayment of Loans required by this Section 4.02,
the  Borrowers  may  designate the Types of Loans which are to be repaid and, in
the case of Eurodollar Loans, the specific  Borrowing or Borrowings  pursuant to
which made,  provided that: (i) repayments of Eurodollar  Loans pursuant to this
Section 4.02 may only be made on the last day of an Interest  Period  applicable
thereto unless all Eurodollar Loans with Interest Periods ending on such date of
required  repayment and all Base Rate Loans have been paid in full;  (ii) if any
repayment of Eurodollar  Loans made pursuant to a single  Borrowing shall reduce
the  outstanding  Eurodollar  Loans made pursuant to such Borrowing to an amount
less than the Minimum Borrowing Amount applicable  thereto,  then such Borrowing
shall  be  converted  at the end of the  then  current  Interest  Period  into a
Borrowing of Base Rate Loans; and (iii) each repayment of Loans required by this
Section  4.02  shall,  except  as  otherwise  expressly  set  forth  in  Section
4.02(A)(a),  be  applied  pro  rata  among  such  Loans.  In  the  absence  of a
designation  by the  Borrowers  as  described  in the  preceding  sentence,  the
Administrative  Agent shall,  subject to the above, make such designation in its
sole discretion with a view, but no obligation, to minimize breakage costs owing
under Section 1.11.

     (b)  Notwithstanding  anything to the contrary contained  elsewhere in this
Agreement,  (i) all the  outstanding  Term Loans  shall be repaid in full on the
Term Loan Maturity  Date,  (ii) all then  outstanding  Revolving  Loans shall be
repaid  in  full  on the  Revolving  Loan  Maturity  Date  and  (iii)  all  then
outstanding Swingline Loans shall be repaid on the Swingline Expiry Date.

     4.03 Method and Place of Payment. Except as otherwise specifically provided
herein,  all  payments  under  this  Agreement  or any Note shall be made to the
Administrative  Agent for the account of the Bank or Banks entitled  thereto not
later  than 12:00 Noon (New York time) on the date when due and shall be made in
Dollars  in   immediately   available   funds  at  the  Payment  Office  of  the
Administrative  Agent. Any payments received by the  Administrative  Agent after
such  time  shall be  deemed to have been  received  on the next  Business  Day.
Whenever  any payment to be made  hereunder or under any Note shall be stated to
be due on a day  which is not a  Business  Day,  the due date  thereof  shall be
extended to the next  succeeding  Business Day and,  with respect to payments of
principal,  interest  shall  be  payable  at the  applicable  rate  during  such
extension.

     4.04 Net  Payments.  (a) All payments  made by the  Borrowers  hereunder or
under any Note  will be made  without  setoff,  counterclaim  or other  defense.
Except as provided in Section  4.04(b),  all such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies,  imposts,  duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction or by any political  subdivision or
taxing  authority  thereof  or  therein  with  respect  to  such  payments  (but
excluding, except as provided in the second succeeding sentence, any tax imposed
on or measured  by the net income or net profits of a Bank  pursuant to the laws
of the  jurisdiction  in which it is organized or the  jurisdiction in which the
principal  office or  applicable  lending  office of such Bank is located or any
subdivision  thereof  or  therein)  and  all  interest,   penalties  or  similar
liabilities with respect thereto (all such non-excluded taxes, levies,  imports,
duties,  fees,  assessments or other charges being referred to  collectively  as
"Taxes").  If any Taxes are so levied or  imposed,  the  Borrowers  jointly  and
severally  agree to pay the  full  amount  of such  Taxes,  and such  additional
amounts as may be necessary so that every  payment of all amounts due under this
Agreement or under any Note, after withholding or deduction for or on account of
any Taxes, will not be less than the amount provided for herein or in such Note.
If any  amounts  are  payable  in  respect of Taxes  pursuant  to the  preceding
sentence,  the Borrowers  agree to reimburse each Bank, upon the written request


                                      -24-
<PAGE>

of such Bank,  for taxes imposed on or measured by the net income or net profits
of such Bank  pursuant to the laws of the  jurisdiction  in which the  principal
office or applicable lending office of such Bank is located or under the laws of
any political  subdivision or taxing authority of any such jurisdiction in which
the principal  office or applicable  lending  office of such Bank is located and
for any  withholding  of income or similar taxes imposed by the United States of
America as such Bank shall determine are payable by, or withheld from, such Bank
in respect of such amounts so paid to or on behalf of such Bank  pursuant to the
preceding  sentence  and in respect of any amounts  paid to or on behalf of such
Bank pursuant to this sentence. The Borrowers will furnish to the Administrative
Agent  within 45 days after the date the payment of any Taxes is due pursuant to
applicable law certified  copies of tax receipts  evidencing such payment by the
Borrowers.  The  Borrowers  jointly and  severally  agree to indemnify  and hold
harmless each Bank,  and reimburse such Bank upon its written  request,  for the
amount of any Taxes so levied or imposed and paid by such Bank.

     (b) Each Bank that is not a United  States  person (as such term is defined
in Section  7701(a)(30)  of the Code) agrees to deliver to the Borrowers and the
Administrative Agent on or prior to the Third Restatement Effective Date (or the
Fourth  Restatement  Effective  Date in the case of such Banks that first become
party hereto on the Fourth Restatement Effective Date), or in the case of a Bank
that is an assignee or transferee of an interest under this  Agreement  pursuant
to  Section  1.13 or  13.04  (unless  the  respective  Bank was  already  a Bank
hereunder immediately prior to such assignment or transfer), on the date of such
assignment  or transfer to such Bank,  (i) two accurate  and  complete  original
signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms)
certifying to such Bank's entitlement to a complete exemption from United States
withholding  tax with  respect to payments to be made under this  Agreement  and
under  any  Note,  or (ii) if the Bank is not a "bank"  within  the  meaning  of
Section  881(c)(3)(A)  of the Code and cannot  deliver either  Internal  Revenue
Service  Form 1001 or 4224  pursuant  to clause  (i)  above,  (x) a  certificate
substantially  in the  form of  Exhibit  D (any  such  certificate,  a  "Section
4.04(b)(ii)  Certificate")  and (y) two accurate and  complete  original  signed
copies of Internal  Revenue Service Form W-8 (or successor  form)  certifying to
such Bank's  entitlement to a complete  exemption from United States withholding
tax with  respect to payments of  interest to be made under this  Agreement  and
under any Note.  In addition,  each Bank agrees that from time to time after the
Fourth  Restatement   Effective  Date,  when  a  lapse  in  time  or  change  in
circumstances renders the previous  certification  obsolete or inaccurate in any
material respect, it will deliver to the Borrowers and the Administrative  Agent
two new accurate and complete original signed copies of Internal Revenue Service
Form 4224 or 1001,  or Form W-8 and a Section  4.04(b)(ii)  Certificate,  as the
case may be,  and such  other  forms as may be  required  in order to confirm or
establish  the  entitlement  of  such  Bank  to a  continued  exemption  from or
reduction in United States  withholding  tax with respect to payments under this
Agreement  and any Note,  or it shall  immediately  notify the Borrowers and the
Administrative  Agent of its inability to deliver any such Form or  Certificate.
Notwithstanding  anything to the  contrary  contained  in Section  4.04(a),  but
subject to Section  13.04(b) and the immediately  succeeding  sentence,  (x) the
Borrowers shall be entitled, to the extent they are required to do so by law, to
deduct or withhold  income or similar taxes imposed by the United States (or any
political  subdivision  or taxing  authority  thereof or therein) from interest,
fees or other amounts payable hereunder for the account of any Bank which is not
a United  States person (as such term is defined in Section  7701(a)(30)  of the
Code) for U.S.  Federal income tax purposes to the extent that such Bank has not
provided to the Borrowers U.S.  Internal  Revenue Service Forms that establish a
complete  exemption  from such  deduction or  withholding  and (y) the Borrowers
shall not be obligated  pursuant to Section 4.04(a) hereof to gross-up  payments
to be made to a Bank in respect of income or similar taxes imposed by the United

                                      -25-
<PAGE>



States if (I) such Bank has not provided to the Borrowers  the Internal  Revenue
Service Forms required to be provided to the Borrowers  pursuant to this Section
4.04(b)  or (II) in the  case  of a  payment,  other  than  interest,  to a Bank
described in clause (ii) above, to the extent that such forms do not establish a
complete exemption from withholding of such taxes.  Notwithstanding  anything to
the contrary  contained in the  preceding  sentence or elsewhere in this Section
4.04 and except as set forth in Section  13.04(b),  the  Borrowers  agree to pay
additional amounts and to indemnify each Bank in the manner set forth in Section
4.04(a)  (without  regard to the  identity  of the  jurisdiction  requiring  the
deduction or withholding)  in respect of any amounts  deducted or withheld by it
as described in the  immediately  preceding  sentence as a result of any changes
after the Fourth  Restatement  Effective  Date in any  applicable  law,  treaty,
governmental  rule,  regulation,  guideline or order,  or in the  interpretation
thereof, relating to the deducting or withholding of income or similar Taxes.

     (c) The  provisions  of this Section 4.04 are subject to the  provisions of
Section 13.15 (to the extent applicable).

     SECTION 5. Conditions  Precedent to the Fourth Restatement  Effective Date.
The occurrence of the Fourth  Restatement  Effective Date, and the obligation of
each  Bank to make  Loans,  and the  obligation  of each  Issuing  Bank to issue
Letters of Credit, on the Fourth  Restatement  Effective Date, is subject at the
time of the making of such Loans or the  issuance  of such  Letters of Credit to
the satisfaction of the following conditions:

     5.01 Execution of Agreement;  Notes. On or prior to the Fourth  Restatement
Effective  Date (i) this  Agreement  shall have been  executed and  delivered as
provided  in  Section  13.10,  (ii)  there  shall  have  been  delivered  to the
Administrative  Agent for the account of each of the Banks which has a Revolving
Loan Commitment that is increased on the Fourth Restatement  Effective Date from
the Revolving Loan  Commitment (if any) of such Bank before giving effect to the
occurrence of the Fourth Restatement  Effective Date, the appropriate  Revolving
Note  executed by the  Borrowers,  in each case in the amount,  maturity  and as
otherwise  provided  herein,  and (iii) there shall have been  delivered  to the
Administrative  Agent for the account of BTCo the Swingline Note executed by the
Borrowers,  in each  case in the  amount,  maturity  and as  otherwise  provided
herein.

     5.02 Fees, etc. On the Fourth  Restatement  Effective Date, all costs, fees
and expenses (including, without limitation, legal fees and expenses) payable to
the Agents and the Banks shall have been paid to the extent then due.

     5.03 Opinions of Counsel.  On the Fourth  Restatement  Effective  Date, the
Administrative  Agent  shall  have  received  (i) from the  General  Counsel  to
Furniture Brands and its Restricted  Subsidiaries,  an opinion  addressed to the
Agents and each of the Banks and dated the  Fourth  Restatement  Effective  Date
covering the matters set forth in Exhibit E.

     5.04 Corporate Documents;  Proceedings;  etc. (a) On the Fourth Restatement
Effective  Date,  the  Administrative  Agent shall have received a  certificate,
dated  the  Fourth   Restatement   Effective  Date,   signed  by  an  Authorized
Representative of the Borrowers and each Subsidiary of the Borrowers which is to
become a Credit Party on the Fourth  Restatement  Effective Date  (excluding any
such Person which was a Credit Party on the Third  Restatement  Effective Date),


                                      -26-
<PAGE>

and attested to by another Authorized  Representative of such respective Person,
in the form of Exhibit F with  appropriate  insertions,  together with copies of
the certificate of incorporation and by-laws of such respective  Person, and the
resolutions of such respective Person referred to in such  certificate,  and the
foregoing shall be reasonably acceptable to the Agents.

     (b) On the Fourth  Restatement  Effective  Date, the  Administrative  Agent
shall have received bring-down certificates of all Credit Parties (x) certifying
that  there  were no  changes,  or  providing  the text of any  changes,  to the
Certificate  of  Incorporation  and By-Laws of such Credit  Parties as delivered
pursuant to Section 5.04 of the Original Credit  Agreement,  Section 5.04 of the
First Restated  Credit  Agreement,  Section 5.04 of the Second  Restated  Credit
Agreement or Section 5.04 of the Existing Credit Agreement,  as the case may be,
(y) to the  effect  that  each  such  Credit  Party is in good  standing  in its
respective  state of  incorporation  and in those  states where each such Credit
Party conducts  business and (z) providing the resolutions  adopted by each such
Credit  Party  with  respect  to the  actions  contemplated  in  this  Agreement
(including  without  limitation with respect to the amendment and restatement of
this  Agreement,  and the  obligations  of such Credit Party with respect to the
increased  extensions  of credit  pursuant  hereto) and the  foregoing  shall be
reasonably acceptable to the Agents in their reasonable discretion.

     (c) All corporate and legal  proceedings and all instruments and agreements
in connection with the transactions contemplated by this Agreement and the other
Documents  shall  be  reasonably  satisfactory  in  form  and  substance  to the
Administrative  Agent and the  Administrative  Agent  shall  have  received  all
information  and  copies of all  documents  and  papers,  including  records  of
corporate proceedings,  governmental  approvals,  good standing certificates and
bring-down telegrams, if any, which the Administrative Agent reasonably may have
requested in connection  therewith,  such documents and papers where appropriate
to be certified by proper corporate or governmental authorities.

     5.05  Collective  Bargaining  Agreements;  Permitted Debt  Agreements;  Tax
Sharing  Agreements.  On or prior to the Fourth Restatement  Effective Date, the
Administrative  Agent shall have received (i) a certification from an Authorized
Representative  of Furniture  Brands that all agreements and plans referenced in
Section 5.05(a) of the Original Credit  Agreement,  Section 5.05(a) of the First
Restated  Credit  Agreement,  Section  5.05(a)  of the  Second  Restated  Credit
Agreement and Section 5.05(a) of the Existing Credit Agreement,  as the case may
be,  previously  delivered  to the  Administrative  Agent by each Credit  Party,
remain in full force and  effect (or  specifying  which of such  agreements  and
plans do not remain in full force and effect) and (ii) any amendments thereto or
additional such agreements.

     5.06 Solvency;  Environmental  Analyses;  Insurance Matters. On or prior to
the Fourth Restatement Effective Date, the Borrowers shall cause to be delivered
to the Administrative  Agent (i) a solvency certificate from the Chief Financial
Officer of Furniture Brands, in the form of Exhibit G hereto,  setting forth his
conclusions  that,  after giving effect to the Transaction and the incurrence of
all the financings  contemplated  herein,  Furniture Brands and its Subsidiaries
(on a consolidated basis), is not insolvent, and has not been rendered insolvent
by the Indebtedness in connection therewith,  will not be left with unreasonably
small capital with which to engage in its and/or their  businesses  and will not
have  incurred  debts beyond its and/or their  ability to pay such debts as they
mature,  (ii)  such  environmental  updates  as may have been  requested  by the
Administrative  Agent, the results of which will be in scope, form and substance
acceptable to the Agents,  and (iii)  evidence of insurance  complying  with the


                                      -27-
<PAGE>

requirements of Section 8.03 for the business and properties of Furniture Brands
and its  Restricted  Subsidiaries,  in  scope,  form  and  substance  reasonably
satisfactory  to the Agents and naming  the  Collateral  Agent as an  additional
insured  and/or  loss  payee,  and  stating  that  such  insurance  shall not be
cancelled or revised without 30 days' prior written notice by the insurer to the
Administrative Agent.

     5.07 Subsidiary Guaranty.  On or prior to the Fourth Restatement  Effective
Date,  each  Subsidiary  Guarantor  shall  have duly  authorized,  executed  and
delivered  the Fourth  Amended and Restated  Subsidiary  Guaranty in the form of
Exhibit H hereto (as modified,  supplemented  or amended from time to time,  the
"Subsidiary Guaranty").

     5.08  Pledge  Agreement.  On or prior to the Fourth  Restatement  Effective
Date, each Credit Party shall have duly  authorized,  executed and delivered the
Fourth  Amended  and  Restated  Pledge  Agreement  in the form of  Exhibit I (as
modified, supplemented or amended from time to time, the "Pledge Agreement") and
shall have  delivered  to the  Collateral  Agent,  as  Pledgee,  all the Pledged
Securities  referred to therein then owned by such Credit Party, (x) endorsed in
blank in the case of promissory notes  constituting  Pledged  Securities and (y)
together with  executed and undated  stock powers,  in the case of capital stock
constituting Pledged Securities.

     5.09 Security  Agreement.  On or prior to the Fourth Restatement  Effective
Date, each Credit Party shall have duly  authorized,  executed and delivered the
Fourth  Amended and  Restated  Security  Agreement  in the form of Exhibit J (as
modified,  supplemented or amended from time to time, the "Security  Agreement")
covering  all of such  Credit  Party's  present  and future  Security  Agreement
Collateral, together with:

     (a) proper Financing Statements or amendments thereto (Form UCC-1 or UCC-3,
respectively)  fully  executed  for  filing  under the UCC or other  appropriate
filing  offices of each  jurisdiction  as may be necessary or, in the reasonable
opinion  of  the  Collateral  Agent,  desirable  to  perfect  (or  maintain  the
perfection of) the security interests purported to be created (or maintained) by
the Security Agreement;

     (b) certified  copies of Requests for  Information or Copies (Form UCC-11),
or equivalent reports,  listing all effective financing statements that name any
Credit  Party as debtor and that are filed in the  jurisdictions  referred to in
clause (a) above,  together with copies of such other financing statements (none
of which shall cover the Collateral  except to the extent  evidencing  Permitted
Liens  or  in  respect  of  which  the  Collateral  Agent  shall  have  received
termination  statements  (Form UCC-3) or such other  termination  statements  as
shall be required by local law) fully executed for filing;

     (c) evidence of the  completion of all other  recordings and filings of, or
with  respect  to,  the  Security  Agreement  as may  be  necessary  or,  in the
reasonable  opinion of the Collateral  Agent,  desirable to perfect (or maintain
the perfection of) the security interests intended to be created (or maintained)
by the Security Agreement;

     (d) lockbox  agreements  and other  agreements  from deposit banks utilized
pursuant to the Cash  Management  System,  recognizing  the  security  interests


                                      -28-
<PAGE>

granted pursuant thereto and directing payments from deposit accounts to be made
to the Concentration Account; and

     (e) evidence that all other actions necessary or, in the reasonable opinion
of the  Collateral  Agent,  desirable  to perfect and protect (or  maintain  the
perfection of) the security interests purported to be created (or maintained) by
the Security Agreement have been taken.

     5.10  Receivables  Facility.  (a)  On or  prior  to  the  Fourth  Amendment
Restatement Effective Date, the Receivables Facility shall have been terminated,
all  loans  and notes  with  respect  thereto  shall  have been  repaid in full,
together with interest thereon, and all other amounts (including premiums) owing
pursuant  to the  Receivables  Facility  shall have been  repaid in full and all
documents in respect of the Receivables Facility and all guarantees with respect
thereto  shall have been  terminated  (except as to  indemnification  provisions
which may survive to the extent provided therein) and be of no further force and
effect. Without limiting the foregoing,  the parties to the Receivables Facility
Intercreditor  Agreement shall have executed and delivered an agreement relating
thereto   which   acknowledges   and  agrees  that  the   Receivables   Facility
Intercreditor  Agreement is  terminated,  which  agreement  shall be in form and
substance satisfactory to the Administrative Agent.

     (b) On or prior to the Fourth Restatement  Effective Date, the creditors in
respect of the  Receivables  Facility shall have terminated and released any and
all security  interests and liens on the assets owned by the Borrowers and their
respective   Subsidiaries   (including   the   Receivables   Subsidiary).    The
Administrative  Agent shall have received such releases of security interests in
and liens on the assets owned by the Borrowers and their respective Subsidiaries
(including the Receivables  Subsidiary) as may have been reasonably requested by
the  Administrative  Agent,  which  releases  shall  be in  form  and  substance
reasonably  satisfactory  to the  Administrative  Agent.  Without  limiting  the
foregoing,  there shall have been  delivered (i) proper  termination  statements
(Form  UCC-3 or the  appropriate  equivalent)  for filing  under the UCC of such
jurisdiction  where  a  financing  statement  (Form  UCC-1  or  the  appropriate
equivalent)   was  filed  with  respect  to  Borrowers   and  their   respective
Subsidiaries  (including the  Receivables  Subsidiary),  in connection  with the
security  interests  created  with respect to the  Receivables  Facility and the
documentation  related thereto and (ii) all collateral  owned by the Receivables
Subsidiary  in the  possession  of any  creditors in respect of the  Receivables
Facility or any collateral agent or trustee under any related security  document
shall have been returned to the Receivables Subsidiary.

     (c) On or prior to the Fourth  Restatement  Effective Date, the Receivables
Subsidiary shall have been liquidated.

     (d) The  Administrative  Agent shall have  received  evidence,  in form and
substance  reasonably  satisfactory  to it,  that the  matters set forth in this
Section 5.10 have been satisfied as of the Fourth Restatement Effective Date.

     5.11 Consent Letter. On or prior to the Fourth Restatement  Effective Date,
the  Administrative  Agent  shall  have  received a letter  from CT  Corporation
System,   presently  located  at  1633  Broadway,  New  York,  New  York  10019,
substantially  in  the  form  of  Exhibit  K,  indicating  its  consent  to  its
appointment  by each Credit Party as its agent to receive  service of process as
specified in Section 13.08 or in the respective Security Document.

                                      -29-
<PAGE>

     5.12  Adverse  Change;  Governmental  Approvals;  etc.  (a) On  the  Fourth
Restatement  Effective  Date,  nothing  shall have occurred (and the Banks shall
have become aware of no facts,  conditions or other  information  not previously
known) which the Agents reasonably  believe could have a material adverse effect
on the rights or remedies of the  Administrative  Agent or the Banks,  or on the
ability of the Credit  Parties to perform their  respective  obligations  to the
Administrative  Agent and the Banks or which the Agents reasonably believe would
have a material adverse effect on the operations, property, assets, liabilities,
condition  (financial or  otherwise)  or prospects of the  Borrowers  taken as a
whole or the Borrowers and their Restricted Subsidiaries taken as a whole.

     (b) On the Fourth Restatement Effective Date, there shall not have occurred
and be continuing  material adverse change to the syndication  market for credit
facilities similar in nature to this Agreement and there shall not have occurred
and be  continuing  a material  disruption  of or a material  adverse  change in
financial,  banking or capital markets that would have a material adverse effect
on the syndication,  in each case as determined by the  Administrative  Agent in
its sole discretion.

     (c) On or prior to the Fourth Restatement Effective Date, all necessary and
material  governmental  (domestic  and  foreign)  and third party  approvals  in
connection with the  Transaction  shall have been obtained and remain in effect,
and all applicable  waiting  periods shall have expired without any action being
taken by any competent authority which restrains, prevents or imposes materially
adverse conditions upon the consummation of the Transaction. Additionally, there
shall not exist any judgment,  order,  injunction or other  restraint  issued or
filed or a hearing  seeking  injunctive  relief or other  restraint  pending  or
notified  prohibiting or imposing  materially adverse conditions upon the making
of any  Loan,  issuance  of any  Letter of  Credit  or the  consummation  of the
Transaction.

     5.13 Litigation. On the Fourth Restatement Effective Date, no litigation by
any entity (private or governmental) shall be pending or threatened with respect
to the  Transaction  or  any  documentation  executed  in  connection  therewith
(including  any  Credit  Document),  or which  the  Administrative  Agent or the
Required Banks shall reasonably  believe could have a materially  adverse effect
on  the  Transaction  or the  business,  property,  assets,  nature  of  assets,
liabilities,  condition  (financial  or otherwise) or prospects of the Borrowers
taken as a whole or the Borrowers and their Restricted  Subsidiaries  taken as a
whole.

     5.14 Financial Statements; Pro Forma Financial Statements;  Projections. On
or prior to the Fourth Amendment Effective Date, the Administrative  Agent shall
have received true and correct copies of the financial statements (including the
pro forma financial  statements) and Projections  referred to in Section 7.05(a)
and  (e),  which  pro  forma  financial  statements  and  Projections  shall  be
satisfactory in form and substance to the Agents.

     5.15 Refinancing; Existing Credit Agreement; etc. On the Fourth Restatement
Effective Date, (i) all outstanding Revolving Loans (as contemplated by the last
sentence of Section 1.01(b)) and all outstanding Swingline Loans shall be repaid
in full  (although  Revolving  Loans may be  incurred  hereunder  on the  Fourth
Restatement Effective Date in accordance with the provisions hereof) and, if any
such then outstanding Revolving Loans were at such time maintained as Eurodollar
Loans,  all breakage or similar costs owing in connection  therewith  shall have
been paid as contemplated by Section 1.11 of the Existing Credit Agreement, (ii)


                                      -30-
<PAGE>

all outstanding  Term Loans shall continue to be outstanding on, and immediately
after giving effect to, the Fourth Restatement Effective Date, (iii) all accrued
interest  and all  regularly  accruing  fees  pursuant  to the  Existing  Credit
Agreement  shall be repaid  in full on,  and  through,  the  Fourth  Restatement
Effective  Date  (whether  or not same would  otherwise  be then due and payable
pursuant to the Existing  Credit  Agreement) and (iv) the  Administrative  Agent
shall have received  evidence in form,  scope and substance  satisfactory  to it
that the  matters set forth in this  Section  5.15 have been  satisfied  on such
date.

     5.16 Officer's  Certificate.  On the Fourth Restatement Effective Date, the
Administrative  Agent  shall  have  received  a  certificate,  dated the  Fourth
Restatement  Effective  Date,  and  signed  on  behalf  of the  Borrowers  by an
Authorized  Representative,  stating that all conditions in Sections 5.04, 5.05,
5.10, 5.15 and 6.01 have been satisfied on such date.

     5.17  Mortgage  Amendments;  etc.  On or  prior to the  Fourth  Restatement
Effective Date, the Collateral Agent shall have received:

     (i) fully executed counterparts of amendments (the "Mortgage  Amendments"),
     in form and  substance  satisfactory  to the  Administrative  Agent and the
     Required Banks, to each of the Existing  Mortgages,  together with evidence
     that counterparts of each of the Mortgage Amendments have been delivered to
     the title company insuring the lien of the Existing Mortgages for recording
     in all places to the extent necessary or desirable,  in the judgment of the
     Collateral  Agent,  effectively to maintain a valid and  enforceable  first
     priority mortgage lien (subject to Permitted Encumbrances relating thereto)
     on the Existing  Mortgaged  Properties in favor of the Collateral Agent (or
     such other  trustee as may be required or desired  under local law) for the
     benefit of the Secured Creditors; and

          (ii) endorsements  reasonably  satisfactory to the Collateral Agent to
     each  Existing  Mortgage  Policy  assuring the  Collateral  Agent that each
     Existing  Mortgage is a valid and enforceable  first priority mortgage lien
     on the  respective  Existing  Mortgaged  Properties,  free and clear of all
     defects and encumbrances except Permitted Encumbrances.

     SECTION 6.  Conditions  Precedent to All Credit  Events.  The obligation of
each  Bank  to make  Loans  (including  Loans  made  on the  Fourth  Restatement
Effective Date but excluding Mandatory  Borrowings made thereafter,  which shall
be made as provided in Section  1.01(d)),  and the obligation of an Issuing Bank
to issue any Letter of Credit, is subject, at the time of each such Credit Event
(except  as  hereinafter  indicated),  to  the  satisfaction  of  the  following
conditions:

     6.01 No Default;  Representations and Warranties.  At the time of each such
Credit  Event and also after  giving  effect  thereto  (i) there  shall exist no
Default  or  Event  of  Default  and (ii)  all  representations  and  warranties
contained  herein or in any other Credit  Document  shall be true and correct in
all material  respects with the same effect as though such  representations  and
warranties  had been  made on the date of the  making of such  Credit  Event (it
being  understood  and agreed that any  representation  or warranty which by its
terms is made as of a specified date shall be required to be true and correct in
all material respects only as of such specified date).

     6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to the making
of each Loan (excluding  Swingline Loans), the  Administrative  Agent shall have


                                      -31-
<PAGE>

received  the notice  required by Section  1.03(a).  Prior to the making of each
Swingline  Loan,  BTCo  shall  have  received  the  notice  required  by Section
1.03(b)(i).

     (b) Prior to the  issuance  of each  Letter of Credit,  the  Administrative
Agent and the  respective  Issuing  Bank shall have  received a Letter of Credit
Request meeting the requirements of Section 2.03.

     The  acceptance  of the benefit of each Credit  Event  shall  constitute  a
representation and warranty by the Borrowers to the Agents and each of the Banks
that  all the  conditions  specified  in  Section  5 and in this  Section  6 and
applicable to such Credit Event exist as of that time (except to the extent that
any of the conditions  specified in Section 5 are required to be satisfactory to
or determined by any Bank, the Required Banks and/or the Administrative  Agent).
All of the Notes,  certificates,  legal opinions and other  documents and papers
referred  to in Section 5 and in this  Section 6,  unless  otherwise  specified,
shall be  delivered  to the  Administrative  Agent at the Notice  Office for the
account  of  each  of the  Banks  and,  except  for  the  Notes,  in  sufficient
counterparts  or copies for each of the Banks and shall be in form and substance
reasonably satisfactory to the Banks.

     SECTION 7. Representations,  Warranties and Agreements.  In order to induce
the Banks to enter  into this  Agreement  and to make the  Loans,  and issue (or
participate in) the Letters of Credit as provided herein,  each of the Borrowers
makes the following  representations,  warranties and  agreements,  in each case
after giving effect to the  Transaction  consummated  on the Fourth  Restatement
Effective  Date,  all of which shall  survive the execution and delivery of this
Agreement  and the Notes and the making of the Loans and issuance of the Letters
of  Credit,  with the  occurrence  of each  Credit  Event on or after the Fourth
Restatement  Effective  Date being  deemed to  constitute a  representation  and
warranty  that the matters  specified  in this Section 7 are true and correct in
all material respects on and as of the Fourth Restatement  Effective Date and on
the date of each such  Credit  Event (it being  understood  and agreed  that any
representation  or warranty  which by its terms is made as of a  specified  date
shall be  required to be true and correct in all  material  respects  only as of
such specified date).

     7.01  Corporate  Status.  Furniture  Brands  and  each  of  its  Restricted
Subsidiaries  (i) is a duly organized and validly  existing  corporation in good
standing under the laws of the jurisdiction of its  incorporation,  (ii) has the
corporate power and authority to own its property and assets and to transact the
business  in which it is engaged and  presently  proposes to engage and (iii) is
duly  qualified and is authorized to do business and is in good standing in each
jurisdiction  where the conduct of its business  requires  such  qualifications,
except for failures to be so qualified which,  individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.

     7.02  Corporate  Power and  Authority.  Each Credit Party has the corporate
power and authority to execute,  deliver and perform the terms and provisions of
each of the Documents to which it is party and has taken all necessary corporate
action to authorize the  execution,  delivery and  performance  by it of each of
such  Documents.  Each Credit Party has duly executed and delivered  each of the
Documents  to which it is  party,  and each of such  Documents  constitutes  the
legal,  valid  and  binding  obligation  of such  Credit  Party  enforceable  in
accordance with its terms, except to the extent that the enforceability  thereof
may be limited by applicable bankruptcy, insolvency, reorganization,  moratorium


                                      -32-
<PAGE>

or other similar laws  generally  affecting  creditors'  rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law).

     7.03 No Violation.  Neither the  execution,  delivery or performance by any
Credit Party of the Documents to which it is a party,  nor compliance by it with
the terms and  provisions  thereof,  (i) will  contravene  any  provision of any
applicable  law,  statute,  rule or regulation or any  applicable  order,  writ,
injunction  or decree of any court or  governmental  instrumentality,  (ii) will
conflict with or result in any breach of any of the terms, covenants, conditions
or provisions  of, or constitute a default  under,  or result in the creation or
imposition of (or the obligation to create or impose) any Lien (except  pursuant
to the  Security  Documents)  upon any of the material  properties  or assets of
Furniture Brands or any of its Restricted  Subsidiaries pursuant to the terms of
any indenture,  mortgage,  deed of trust, credit agreement or loan agreement, or
any other material agreement,  contract or instrument, to which Furniture Brands
or any of its  Restricted  Subsidiaries  is a party or by which it or any of its
property or assets is bound or to which it may be subject or (iii) will  violate
any provision of the Certificate of Incorporation or By-Laws of Furniture Brands
or any of its Restricted Subsidiaries.

     7.04  Governmental  Approvals.  No  order,  consent,   approval,   license,
authorization  or  validation  of, or filing,  recording  or  registration  with
(except  (i) as have  been  obtained  or made  prior to the  Fourth  Restatement
Effective  Date and (ii) other than UCC-1 or UCC-3  filings  and  recordings  of
Assignments of Security Interests in U.S. Patents and Trademarks,  in each case,
performed pursuant to Section 5.09, which filings and/or recordings, as the case
may be, if this  representation  is being  made on a date which is more than ten
days after the Fourth Restatement  Effective Date, have been made), or exemption
by, any governmental or public body or authority, or any subdivision thereof, is
required to authorize,  or is required in connection  with,  (i) the  execution,
delivery and performance of any Document or (ii) the legality, validity, binding
effect or enforceability of any such Document.

     7.05 Financial Statements;  Financial Condition;  Undisclosed  Liabilities;
Projections; etc. (a) The consolidated and consolidating statements of financial
condition of Furniture  Brands and its Subsidiaries for the Fiscal Year ended on
December  31,  1997  and  the  three-month  period  ended  on  March  31,  1998,
respectively,  and the related  consolidated  and  consolidating  statements  of
income and  consolidated  statements  of cash flow and changes in  shareholders'
equity  of  Furniture  Brands  and  its  Subsidiaries  for  the  Fiscal  Year or
three-month period ended on such dates, as the case may be, and furnished to the
Banks  prior to the Fourth  Restatement  Effective  Date in each  case,  present
fairly the  financial  condition of Furniture  Brands and its  Subsidiaries  (or
Furniture  Brands and its  Restricted  Subsidiaries,  as the case may be) at the
date of such statements of financial condition and the results of the operations
of Furniture Brands and its Subsidiaries (or Furniture Brands and its Restricted
Subsidiaries  as the  case  may be) for the  respective  Fiscal  Year or  fiscal
quarter,  as the  case  may be  (subject,  in the  case of  unaudited  financial
statements,  to normal  year-end  adjustments).  All of the foregoing  financial
statements have been prepared in accordance with generally  accepted  accounting
principles  and  practices  consistently  applied,  except,  in the  case of the
quarterly  financial  statements,  for the  omission of  footnotes,  and certain
reclassifications  and ordinary end of period  adjustments  and accruals (all of
which  are of a  recurring  nature  and  none of which  individually,  or in the
aggregate,  would  be  material).  The  pro  forma  consolidated  statements  of
financial condition of Furniture Brands and its Subsidiaries, in each case after


                                      -33-
<PAGE>

giving effect to the  Transaction  and the financing  therefor,  copies of which
have been furnished to the Banks prior to the Fourth Restatement Effective Date,
present  fairly in all material  respects the pro forma  consolidated  financial
condition of Furniture Brands and its Subsidiaries as of March 31, 1998.

     (b) Since  December 31, 1997 there has been no material  adverse  change in
the business, operations, property, assets, liabilities, condition (financial or
otherwise)  or prospects of the  Borrowers  taken as a whole or of the Borrowers
and their Restricted Subsidiaries taken as a whole, it being understood that any
determination  of whether such material  adverse  change has occurred shall take
into account,  inter alia, (x) any available  indemnities and (y) the timing and
likelihood of payment thereunder.

     (c) (i) On and as of the Fourth  Restatement  Effective Date,  after giving
effect to the  Transaction and to all  Indebtedness  (including the Loans) being
incurred or assumed and Liens created (or  maintained)  by the Credit Parties in
connection  therewith  (assuming  the full  utilization  of all  Revolving  Loan
Commitments  on the  Fourth  Restatement  Effective  Date),  (a)  the sum of the
assets, at a fair valuation, of each Borrower,  individually,  each Borrower and
its Subsidiaries,  (each of the foregoing,  as to itself or as to itself and its
Subsidiaries,  a "Solvent  Entity")  will  exceed its or their  debts;  (b) each
Solvent  Entity  has not  incurred  and does not  intend to incur,  and does not
believe  that it will incur,  debts beyond its ability to pay such debts as such
debts  mature;  and (c) each Solvent  Entity will have  sufficient  capital with
which to conduct its businesses.  For purposes of this Section  7.05(c),  "debt"
means any liability on a claim, and "claim" means (i) right to payment,  whether
or not such a right is reduced to  judgment,  liquidated,  unliquidated,  fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured,
or unsecured or (ii) right to an equitable  remedy for breach of  performance if
such breach  gives rise to a right to  payment,  whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent,  matured, unmatured,
disputed, undisputed, secured or unsecured.

     (d) Except as fully  disclosed in the financial  statements  referred to in
Section  7.05(a) or in  Schedule  IV,  there  were as of the Fourth  Restatement
Effective Date no liabilities or obligations with respect to Furniture Brands or
any of its Subsidiaries of any nature  whatsoever  (whether  absolute,  accrued,
contingent or otherwise and whether or not due) which, either individually or in
aggregate,  is reasonably  likely to have a Material  Adverse Effect.  As of the
Fourth Restatement  Effective Date, none of the Borrowers knows of any basis for
the assertion against it of any liability or obligation of any nature whatsoever
that is not fully disclosed in the financial  statements  referred to in Section
7.05(a) or as disclosed in Schedule IV hereto which,  either  individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.

     (e) On and as of the Fourth  Restatement  Effective  Date, the  projections
previously   delivered   to  the   Administrative   Agent  and  the  Banks  (the
"Projections")  have been  prepared  on a basis  consistent  with the  financial
statements  referred to in Section 7.05(a) (other than as set forth or presented
in such  Projections),  and there are no statements or conclusions in any of the
Projections  which are based upon or include  information known to the Borrowers
to be  misleading  in any  material  respect or which fail to take into  account
material  information  regarding  the matters  reported  therein.  On the Fourth
Restatement  Effective Date, the Borrowers  believed that the  Projections  were
reasonable and attainable.



                                      -34-
<PAGE>

     7.06 Litigation.  There are no actions, suits or proceedings pending or, to
the best knowledge of the Borrowers, threatened (i) with respect to any Document
or (ii) that could reasonably be expected to have a Material Adverse Effect.

     7.07 True and  Complete  Disclosure.  All factual  information  (taken as a
whole)  furnished by or on behalf of Furniture Brands or any of its Subsidiaries
in  writing  to  the  Administrative  Agent  or  any  Bank  (including,  without
limitation,  all factual information contained in the Documents) for purposes of
or in  connection  with  this  Agreement,  the  other  Credit  Documents  or any
transaction  contemplated  herein or  therein  is,  and all other  such  factual
information (taken as a whole) hereafter  furnished by or on behalf of Furniture
Brands or any of its Subsidiaries in writing to the Administrative  Agent or any
Bank will be, true and accurate in all material respects on the date as of which
such  information  is dated or certified and not incomplete by omitting to state
any fact necessary to make such information (taken as a whole) not misleading in
any material respect at such time in light of the circumstances under which such
information was provided.

     7.08.  Use of Proceeds;  Margin  Regulations.  (a) All proceeds of the Term
Loans were used as required by the Existing Credit Agreement

     (b) All proceeds of the Revolving  Loans and Swingline Loans have been, and
shall be,  used for the  Borrowers'  and  their  Subsidiaries'  ongoing  general
corporate purposes.

     (c) The value of the Margin  Stock at any time owned by the  Borrowers  and
their respective Subsidiaries does not, and will not, exceed 25% of the value of
the assets of the Borrowers and their Subsidiaries taken as a whole. Neither the
making of any Loan nor the use of the proceeds thereof nor the occurrence of any
other  Credit  Event will  violate or be  inconsistent  with the  provisions  of
Regulation T, U or X of the Board of Governors of the Federal Reserve System.

     7.09 Tax Returns and Payments.  Each of Furniture Brands and its Restricted
Subsidiaries  have timely filed or caused to be timely  filed,  on the due dates
thereof  or  within  applicable  grace  periods   (inclusive  of  any  permitted
extensions), with the appropriate taxing authority, all Federal, state and other
material  returns,  statements,  forms and  reports  for taxes  (the  "Returns")
required to be filed by or with respect to the income,  properties or operations
of Furniture  Brands and its  Restricted  Subsidiaries.  The Returns  accurately
reflect in all material respects all liability for taxes of Furniture Brands and
its Restricted Subsidiaries for the periods covered thereby other than Taxes for
which  adequate  reserves have been  established  in accordance  with  generally
accepted  accounting  principles.  Each of Furniture  Brands and its  Restricted
Subsidiaries have paid all material taxes payable by them other than taxes which
are not  delinquent,  and other than those contested in good faith and for which
adequate  reserves have been  established in accordance with generally  accepted
accounting principles.  Except as disclosed in the financial statements referred
to in Section 7.05(a) or (b) and except as disclosed on Schedule V, there is, as
of the Fourth Restatement Effective Date, no material action, suit,  proceeding,
investigation,  audit,  or claim now  pending or, to the best  knowledge  of the
Borrowers, threatened by any authority regarding any taxes relating to Furniture
Brands or its Restricted  Subsidiaries.  As of the Fourth Restatement  Effective
Date,  except  as set  forth on  Schedule  V,  none of  Furniture  Brands or its
Restricted  Subsidiaries  has  entered  into  an  agreement  or  waiver  or been
requested  to enter  into an  agreement  or  waiver  extending  any  statute  of
limitations  relating to the payment or collection of taxes of Furniture  Brands
or its  Restricted  Subsidiaries,  or is aware of any  circumstances  that would
cause the taxable  years or other  taxable  periods of  Furniture  Brands or its
Restricted  Subsidiaries not to be subject to the normally applicable statute of
limitations.  As of the Fourth  Restatement  Effective  Date,  none of Furniture
Brands or its Restricted  Subsidiaries has provided,  with respect to themselves
or property held by them, any consent under Section 341 of the Code.  Except for


                                      -35-
<PAGE>

amounts  specifically  set forth in Schedule V, none of Furniture  Brands or its
Restricted  Subsidiaries has incurred, or will incur, any material tax liability
in  connection  with the  Transaction  and the other  transactions  contemplated
hereby. Additionally,  all of the foregoing representations are true and correct
as to all Unrestricted Subsidiaries of Furniture Brands (to the same extent they
were  Restricted  Subsidiaries)  except to the extent any and all failures to be
true and correct  could not  reasonably  be expected to have a Material  Adverse
Effect.  Notwithstanding anything to the contrary contained above, to the extent
the  foregoing   representations  contained  in  this  Section  7.09  relate  to
Thomasville  and its  Subsidiaries  for periods  prior to the First  Restatement
Effective  Date,  such  representations  shall  be  deemed  untrue  only  if the
aggregate effect of all such failures and  noncompliances of the types described
above with respect to Thomasville and its  Subsidiaries for periods prior to the
First Restatement Effective Date would reasonably be expected to have a Material
Adverse Effect.

     7.10 Compliance with ERISA. (a) Each Plan is in substantial compliance with
ERISA and the Code; no Reportable  Event has occurred with respect to a Plan; to
the best knowledge of the Borrowers,  no  Multiemployer  Plan is insolvent or in
reorganization;  no Plan has an Unfunded Current Liability;  no Plan, and to the
best knowledge of the  Borrowers,  no Spunoff Plan, has an accumulated or waived
funding  deficiency,  or has applied for an extension of any amortization period
within the meaning of Section 412 of the Code; all contributions  required to be
made by the Borrowers,  any of their respective  Restricted  Subsidiaries or any
ERISA  Affiliate with respect to a Plan, a Spunoff Plan, a  Multiemployer  Plan,
and/or a Foreign  Pension Plan have been timely made;  none of the  Borrowers or
any of their  respective  Restricted  Subsidiaries  nor any ERISA  Affiliate has
incurred  any  liability to or on account of a Plan,  a Spunoff  Plan,  and/or a
Multiemployer  Plan pursuant to Section 409,  502(i),  502(1),  515, 4062, 4063,
4064,  4069,  4201, 4204 or 4212 of ERISA or Section  401(a)(29),  4971, 4975 or
4980 of the Code or  reasonably  expects to incur any liability  (including  any
indirect, contingent or secondary liability) under any of the foregoing Sections
with  respect to any Plan,  a Spunoff  Plan,  and/or a  Multiemployer  Plan;  no
proceedings have been instituted to terminate or appoint a trustee to administer
any Plan and, to the best  knowledge  of the  Borrowers,  any Spunoff  Plan;  no
condition  exists  which  presents  a risk  to  the  Borrowers  or any of  their
respective  Restricted  Subsidiaries  or any  ERISA  Affiliate  of  incurring  a
liability to or on account of a Plan, or to the best  knowledge of the Borrowers
a Spunoff Plan, and/or a Multiemployer Plan pursuant to the foregoing provisions
of ERISA and the Code;  using  actuarial  assumptions  and  computation  methods
consistent  with  Part 1 of  subtitle  E of Title  IV of  ERISA,  the  aggregate
liabilities of the Borrowers, their respective Restricted Subsidiaries and their
ERISA  Affiliates  to  all  Multiemployer  Plans  in  the  event  of a  complete
withdrawal  therefrom,  as of the close of the most  recent  fiscal year of each
such Multiemployer Plan ended prior to the date of the most recent Credit Event,
would not exceed $50,000;  no lien imposed under the Code or ERISA on the assets
of the Borrowers or any of their respective Restricted Subsidiaries or any ERISA
Affiliate exists on account of any Plan, a Spunoff Plan,  and/or a Multiemployer
Plan or is likely to arise on account of any Plan,  or to the best  knowledge of
the  Borrowers,  is  likely  to arise on  account  of any  Spunoff  Plan  and/or
Multiemployer   Plan;  and  the  Borrowers  and  their   respective   Restricted
Subsidiaries do not maintain or contribute to any employee  welfare benefit plan
(as  defined  in  Section  3(1) of ERISA)  which  provides  benefits  to retired
employees  or other former  employees  (other than as required by Section 601 of


                                      -36-
<PAGE>

ERISA) or any  employee  pension  benefit  plan (as  defined in Section  3(2) of
ERISA) the  obligations  with respect to which could  reasonably  be expected to
have a Material  Adverse  Effect.  For purposes of this Section  7.10(a) "to the
best  knowledge  of the  Borrowers"  with  respect to any Spunoff Plan means (x)
actual  knowledge  or (y)  knowledge  acquired  through  written or oral  notice
provided  directly to a Borrower by any governmental  agency,  court, or Spunoff
Plan administrator.

     (b) Each Foreign Pension Plan has been maintained in substantial compliance
with its  terms  and  with  the  requirements  of any and all  applicable  laws,
statutes, rules, regulations and orders and has been maintained, where required,
in good standing with applicable regulatory  authorities.  None of the Borrowers
nor any of their respective Restricted  Subsidiaries has incurred any obligation
in connection  with the  termination of or withdrawal  from any Foreign  Pension
Plan.  The present  value of the  accrued  benefit  liabilities  (whether or not
vested)  under  each  Foreign  Pension  Plan,  determined  as of the end of each
Borrower's   most  recently   ended  fiscal  year  on  the  basis  of  actuarial
assumptions,  each of which is  reasonable,  did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities.

     (c)  Notwithstanding  anything to the  contrary in this Section  7.10,  the
representations  made in this Section 7.10 shall only be untrue if the aggregate
effect of all failures and  noncompliances  of the types  described  above could
reasonably be expected to have a Material Adverse Effect.

     7.11 The Security  Documents.  (a) The provisions of the Security Agreement
are effective to create (or maintain) in favor of the  Collateral  Agent for the
benefit  of the  Secured  Creditors  a legal,  valid  and  enforceable  security
interest in all right,  title and interest of the Credit Parties in the Security
Agreement  Collateral  described therein,  and the Security Agreement,  upon the
filing of Form UCC-1 or UCC-3 financing statements or the appropriate equivalent
(which filings, if this representation is being made more than 10 days after the
Fourth Restatement Effective Date, have been made), create (or maintain) a fully
perfected first lien on, and security interest in, all right, title and interest
in all of the Security Agreement  Collateral  described  therein,  to the extent
that a  security  interest  may be  perfected  therein  by  filing  a  financing
statement under the UCC,  subject to no other Liens other than Permitted  Liens.
The  recordation  of the  Assignment  of Security  Interest in U.S.  Patents and
Trademarks in the form  attached to the Security  Agreement in the United States
Patent and  Trademark  Office  together with filings on Form UCC-1 or UCC-3 made
pursuant to the Security  Agreement will be effective,  under applicable law, to
perfect the security  interest granted to the Collateral Agent in the trademarks
and patents covered by the Security Agreement.  Each of the Credit Parties party
to the Security  Agreement  has good and valid title to all  Security  Agreement
Collateral owned by such Credit Party described  therein,  free and clear of all
Liens except those described above in this clause (a).

     (b) The security  interests  created in favor of the Collateral  Agent,  as
Pledgee,  for the benefit of the Secured  Creditors  under the Pledge  Agreement
constitute first priority perfected security interests in the Pledged Securities
described in the Pledge Agreement, subject to no security interests of any other
Person.  No filings or recordings  are required in order to perfect (or maintain
the  perfection  or priority of) the security  interests  created in the Pledged
Securities and the proceeds thereof under the Pledge Agreement.



                                      -37-
<PAGE>

     (c) Until such time (if any) as the  Mortgages  are released in  accordance
with the provisions of Section 13.20, the Mortgages  create, as security for the
obligations  purported to be secured thereby, a valid and enforceable  perfected
security  interest in and mortgage  lien on all of the  Mortgaged  Properties in
favor of the  Collateral  Agent (or such  other  trustee as may be  required  or
desired under local law) for the benefit of the Secured  Creditors,  superior to
and prior to the rights of all third persons (except that the security  interest
and mortgage  lien  created in the  Mortgaged  Properties  may be subject to the
Permitted  Encumbrances  related  thereto)  and subject to no other Liens (other
than  Permitted  Liens).  Schedule III contains a true and complete list of each
parcel of Real Property  owned or leased by Furniture  Brands and its Restricted
Subsidiaries  on the Fourth  Restatement  Effective Date (and indicates which of
said Real Properties constitute Existing Mortgaged Properties),  and the type of
interest  therein  held  by  Furniture  Brands  or such  Restricted  Subsidiary.
Furniture  Brands  and  each  of  its  Restricted  Subsidiaries  have  good  and
indefeasible  title to all fee-owned  Mortgaged  Properties and valid  leasehold
title to all Leaseholds material to its business, in each case free and clear of
all Liens except those described in the first sentence of this subsection (c).

     7.12 Representations and Warranties in Other Documents. All representations
and  warranties  set forth in the Documents  other than this Agreement were true
and   correct  in  all   material   respects  at  the  time  as  of  which  such
representations  and warranties were made (or deemed made) and shall be true and
correct in all material respects as of the Fourth Restatement  Effective Date as
if such  representations and warranties were made on and as of such date, unless
stated to relate to a specific earlier date, in which case such  representations
and  warranties  shall be true and correct in all  material  respects as of such
earlier date.

     7.13 Properties.  Furniture Brands and each of its Restricted  Subsidiaries
have good and valid title to all material  properties  owned by them,  including
all property  reflected in the balance  sheets  referred to in Sections  7.05(a)
(except as sold or otherwise disposed of since the date of such balance sheet in
the ordinary course of business or otherwise as permitted  hereunder),  free and
clear of all Liens, other than (i) as referred to in the balance sheet or in the
notes  thereto  or in the  pro  forma  balance  sheet  or (ii)  Permitted  Liens
otherwise permitted by Section 9.01.

     7.14  Capitalization.  (a) On the Fourth  Restatement  Effective  Date, the
authorized  capital stock of Furniture Brands consists of 100,000,000  shares of
Furniture Brands Common Stock,  $1.00 stated value per share,  52,184,653 shares
of which are  issued  and  outstanding  as of June 30,  1998.  As of the  Fourth
Restatement  Effective  Date,  Furniture  Brands does not have  outstanding  any
securities convertible into or exchangeable for its capital stock or outstanding
any rights to subscribe for or to purchase,  or any options for the purchase of,
or any agreement providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock, in
each case other than the  options  outstanding  pursuant to the  Employee  Stock
Option Plan.

     (b) On the Fourth Restatement  Effective Date, the authorized capital stock
of  Broyhill  consists of  5,296,178  shares of common  stock,  no par value per
share,  100 shares of which are issued and  outstanding  and have been delivered
for pledge  pursuant to the Pledge  Agreement.  All such  outstanding  shares of
common   stock  have  been  duly  and  validly   issued,   are  fully  paid  and
nonassessable.  As of the Fourth Restatement  Effective Date,  Broyhill does not
have outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase,  or any options
for the purchase of, or any agreements providing for the issuance (contingent or


                                      -38-
<PAGE>

otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock.

     (c) On the Fourth Restatement  Effective Date, the authorized capital stock
of Lane consists of 1,000 shares of common stock, no par value per share, all of
which are issued and  outstanding and have been delivered for pledge pursuant to
the Pledge Agreement. All such outstanding shares of common stock have been duly
and  validly  issued,  are  fully  paid  and  nonassessable.  As of  the  Fourth
Restatement  Effective  Date,  Lane  does not have  outstanding  any  securities
convertible into or exchangeable for its capital stock or outstanding any rights
to  subscribe  for or to  purchase,  or any options for the  purchase of, or any
agreements  providing  for the issuance  (contingent  or  otherwise)  of, or any
calls, commitments or claims of any character relating to, its capital stock.

     (d) On the Fourth Restatement  Effective Date, the authorized capital stock
of  Thomasville  consists of 1,000 shares of common  stock,  $1.00 par value per
share,  1,000 shares of which are issued and outstanding and have been delivered
for pledge  pursuant to the Pledge  Agreement.  All such  outstanding  shares of
common   stock  have  been  duly  and  validly   issued,   are  fully  paid  and
nonassessable. As of the Fourth Restatement Effective Date, Thomasville does not
have outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase,  or any options
for the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock.

     7.15 Subsidiaries.  (a) On the Fourth Restatement Effective Date, Furniture
Brands has no Subsidiaries  other than the other Borrowers and their  respective
Subsidiaries.

     (b) After the Fourth Restatement Effective Date, Furniture Brands will have
no Subsidiaries other than (i) those Subsidiaries listed on Schedule VI and (ii)
new Subsidiaries created in compliance with this Agreement.

     7.16  Compliance  with  Statutes,  etc.  Furniture  Brands  and each of its
Subsidiaries  are in compliance  with all applicable  statutes,  regulations and
orders of, and all applicable  restrictions imposed by, all governmental bodies,
domestic  or  foreign,  in respect  of the  conduct  of their  business  and the
ownership of their property (including applicable statutes,  regulations, orders
and restrictions relating to environmental standards and controls),  except such
noncompliances  as could not,  individually  or in the aggregate,  reasonably be
expected to have a Material Adverse Effect.

     7.17  Investment  Company  Act.  None of  Furniture  Brands  nor any of its
Subsidiaries  is  an  "investment  company"  or a  company  "controlled"  by  an
"investment  company," within the meaning of the Investment Company Act of 1940,
as amended.

     7.18 Public Utility Holding  Company Act. None of Furniture  Brands nor any
of its  Subsidiaries  is a "holding  company,"  or a  "subsidiary  company" of a
"holding  company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.

     7.19  Environmental   Matters.   (a)  Furniture  Brands  and  each  of  its
Subsidiaries  have  complied  with  all  applicable  Environmental  Laws and the
requirements of any permits issued under such  Environmental  Laws. There are no
pending or, to the best knowledge of the Borrowers after due inquiry, threatened


                                      -39-
<PAGE>

Environmental Claims against Furniture Brands, or any of its Subsidiaries or any
Real Property owned or operated by Furniture Brands or any of its  Subsidiaries.
There  are no  facts,  circumstances,  conditions  or  occurrences  on any  Real
Property owned or operated by Furniture Brands or any of its Subsidiaries or, to
the best knowledge of Furniture  Brands or the Borrowers  after due inquiry,  on
any property adjoining or in the vicinity of any such Real Property that, to the
best knowledge of the Borrowers after due inquiry,  could reasonably be expected
(i) to form the basis of an Environmental  Claim against Furniture Brands or any
of its  Subsidiaries  or any such Real  Property  or (ii) to cause any such Real
Property to be subject to any restrictions on the ownership,  occupancy,  use or
transferability  of  such  Real  Property  by  Furniture  Brands  or  any of its
Subsidiaries under any applicable Environmental Law.

     (b) Hazardous Materials have not at any time been generated,  used, treated
or stored on, or  transported to or from, any Real Property owned or operated by
Furniture  Brands  or any of its  Subsidiaries  except  in  compliance  with all
applicable  Environmental  Laws and so as not to give  rise to an  Environmental
Claim.  Hazardous  Materials  have not at any time been  Released on or from any
Real Property owned or operated by Furniture  Brands or any of its  Subsidiaries
except in compliance  with all  applicable  Environmental  Laws and so as not to
give rise to an Environmental Claim.

     (c)  Notwithstanding  anything to the  contrary in this Section  7.19,  the
representations  made in this Section 7.19 shall only be untrue if the aggregate
effect of all failures and  noncompliances  of the types  described  above could
reasonably be expected to have a Material Adverse Effect.

     7.20 Labor Relations.  None of Furniture Brands nor any of its Subsidiaries
is engaged in any unfair labor  practice  that could  reasonably  be expected to
have a Material Adverse Effect.  There is (i) no unfair labor practice complaint
pending  against  Furniture  Brands or any of its  Subsidiaries  or, to the best
knowledge of the Borrowers,  threatened against any of them, before the National
Labor  Relations  Board,  and no  material  grievance  or  material  arbitration
proceeding  arising out of or under any  collective  bargaining  agreement is so
pending  against  Furniture  Brands or any of its  Subsidiaries  or, to the best
knowledge  of the  Borrowers,  threatened  against any of them,  (ii) no strike,
labor dispute,  slowdown or stoppage pending against  Furniture Brands or any of
its Subsidiaries or, to the best knowledge of the Borrowers,  threatened against
Furniture  Brands or any of its  Subsidiaries and (iii) to the best knowledge of
the Borrowers,  no union  representation  proceeding pending with respect to the
employees of Furniture Brands or any of its  Subsidiaries,  except (with respect
to any matter specified in clause (i), (ii) or (iii) above,  either individually
or in the aggregate) such as could not reasonably be expected to have a Material
Adverse Effect.

     7.21 Patents, Licenses,  Franchises and Formulas.  Furniture Brands and its
Subsidiaries own all material patents, trademarks, permits, service marks, trade
names, copyrights,  licenses, franchises and formulas, or rights with respect to
the foregoing,  and have obtained  assignments of all leases and other rights of
whatever nature, reasonably necessary for the present conduct of their business,
without any known  conflict with the rights of others  which,  or the failure to
obtain  which,  as the case may be, could  reasonably be expected to result in a
Material Adverse Effect.

     7.22 Indebtedness.  Schedule VII sets forth a true and complete list of all
Indebtedness   for  borrowed  money  of  Furniture  Brands  and  its  Restricted


                                      -40-
<PAGE>

Subsidiaries as of the Fourth Restatement  Effective Date and which is to remain
outstanding after giving effect to the Transaction  (excluding the Loans and the
Letters  of Credit , the  "Existing  Indebtedness"),  in each case  showing  the
aggregate  principal amount thereof and the name of the respective  borrower and
any other entity which directly or indirectly guaranteed such debt.

     7.23  Transaction.  At the time of  consummation  thereof,  the Transaction
shall have been  consummated in all respects in accordance with the terms of the
respective Documents and all applicable laws. At the time of consummation of the
Transaction,  all consents and approvals of, and filings and registrations with,
and all other actions in respect of, all governmental  agencies,  authorities or
instrumentalities  required in order to make or consummate the Transaction  will
have been obtained,  given,  filed or taken and are or will be in full force and
effect (or effective  judicial  relief with respect  thereto has been obtained).
All applicable  waiting  periods with respect thereto have or, prior to the time
when required,  will have, expired without,  in all such cases, any action being
taken by any competent authority which restrains,  prevents, or imposes material
adverse conditions upon the Transaction.  Additionally, there does not exist any
judgment,   order  or  injunction   prohibiting  or  imposing  material  adverse
conditions  upon the  Transaction  or the  occurrence of any Credit Event or the
performance  by the Credit  Parties of their  obligations  under the  respective
Documents. All actions taken by the Credit Parties pursuant to or in furtherance
of the  Transaction  have been taken in material  compliance with the respective
Documents and all applicable laws.

     7.24 Receivables Subsidiary.  The Receivables Subsidiary was formed for the
purpose of purchasing,  and receiving contributions of, receivables from each of
the Borrowers  (other than  Furniture  Brands) and their  respective  Restricted
Subsidiaries,  and selling such receivables to, or obtaining secured loans from,
the Receivables  Purchasers,  pursuant to the Receivables Facility and except in
connection with the foregoing (and activities  reasonably  incidental  thereto),
the  Receivables  Subsidiary  engaged  in no  business  activities  and  had  no
significant assets or liabilities and in no event purchased receivables from any
Unrestricted  Subsidiary.  On the Fourth Amendment Effective Date, and following
the termination of the Receivables Facility,  the Receivable Subsidiary has been
liquidated.

     SECTION 8.  Affirmative  Covenants.  Each of the Borrowers hereby covenants
and agrees that on and after the Fourth Restatement Effective Date and until the
Total  Commitment and all Letters of Credit and Acceptances  have terminated and
the Loans, Notes and Unpaid Drawings, together with interest, Fees and all other
Obligations incurred hereunder and thereunder, are paid in full:

     8.01   Information   Covenants.   The   Borrowers   will   furnish  to  the
Administrative Agent, and the Administrative Agent will promptly forward to each
Bank:

     (a) Monthly Reports. Within 30 days after the end of each calendar month of
Furniture  Brands (within 45 days after the end of the last month of each Fiscal
Year), the consolidated and consolidating balance sheets of Furniture Brands and
its  Subsidiaries,  in each case,  as at the end of such month,  and the related
consolidated  and  consolidating  statements  of  income  and  the  consolidated
statement  of cash  flow for  such  month  and for the  elapsed  portion  of the
calendar year ended with the last day of such month,  in each case setting forth
comparative  figures for the corresponding  month in the prior calendar year and
the  budgeted  figures  for such  month as set  forth in the  respective  budget
delivered pursuant to Section 8.01(e).



                                      -41-
<PAGE>

     (b) Quarterly Financial  Statements.  As soon as available and in any event
within 45 days after the close of each of the first three  quarterly  accounting
periods in each Fiscal Year,  (i) the  consolidated  and  consolidating  balance
sheets of Furniture Brands and its Subsidiaries,  in each case, as at the end of
such quarterly period and the related consolidated and consolidating  statements
of income and the consolidated  statement of cash flow for such quarterly period
and for the  elapsed  portion of the Fiscal Year ended with the last day of such
quarterly period and (ii) management's  discussion and analysis of the important
operational and financial developments during such quarterly period.

     (c)  Annual  Financial  Statements.  Within 95 days after the close of each
Fiscal Year, (i) the consolidated and consolidating  balance sheets of Furniture
Brands and its Subsidiaries, in each case, as at the end of such Fiscal Year and
the related consolidated and consolidating statements of income and consolidated
statements  of  shareholders'  equity and cash flow for such Fiscal Year setting
forth  comparative  figures for the preceding Fiscal Year and (A) certified,  in
the  case of such  consolidated  financial  statements  and (B)  confirmed  by a
letter, in the case of the consolidating statements,  delivered in substantially
the form of the auditor's  letter  delivered to Furniture  Brands on January 28,
1997,  in each case by KPMG Peat  Marwick  or such other  independent  certified
public accountants of recognized national standing reasonably  acceptable to the
Administrative  Agent,  together with a report of such  accounting  firm stating
that in the course of its regular audit of the financial statements of Furniture
Brands and its  Subsidiaries,  which  audit was  conducted  in  accordance  with
generally  accepted  auditing  standards,   such  accounting  firm  obtained  no
knowledge  of any  Default  or  Event  of  Default  which  has  occurred  and is
continuing or, if in the opinion of such accounting firm such a Default or Event
of Default  with  respect to the  covenants  set forth in Sections  9.02 through
9.14,  inclusive,  has occurred and is continuing,  a statement as to the nature
thereof  and  (ii)  management's   discussion  and  analysis  of  the  important
operational and financial developments during such Fiscal Year.

     (d) Management  Letters.  Promptly  after the receipt  thereof by Furniture
Brands or any of its Restricted Subsidiaries,  a copy of any "management letter"
received  by  such  Person  from  their  certified  public  accountants  and the
management's responses thereto.

     (e) Budgets.  No later than 30 days following the commencement of the first
day of each Fiscal Year,  a budget in form  satisfactory  to the  Administrative
Agent (including  budgeted statements of income and sources and uses of cash and
balance sheets)  prepared by Furniture  Brands for (x) each of the twelve months
of such  Fiscal Year  prepared  in detail and (y) each of the four Fiscal  Years
immediately  following  such Fiscal Year prepared in summary form, in each case,
of  Furniture  Brands  and  its  Restricted  Subsidiaries,  accompanied  by  the
statement of an  Authorized  Representative  of  Furniture  Brands to the effect
that, to the best of his knowledge,  the budget is a reasonable estimate for the
period covered thereby.

     (f)  Officer's  Certificates.  At the time of the delivery of the financial
statements  provided for in Section  8.01(a),  (b) and (c), a certificate  of an
Authorized Representative of Furniture Brands to the effect that, to the best of
such Authorized  Representative's  knowledge, no Default or Event of Default has
occurred and is  continuing  or, if any Default or Event of Default has occurred
and is continuing,  specifying the nature and extent thereof,  which certificate
shall,  in the case of any such financial  statements  delivered in respect of a
period ending on the last day of a fiscal  quarter or year of Furniture  Brands,
(x) set forth the calculations  required to establish whether the Borrowers were
in  compliance  with the  provisions  of  Sections  4.02(A)  (excluding  Section
4.02(A)(d)),  9.02, 9.03, 9.04, 9.05 and 9.07 through 9.09, inclusive,  and 9.14


                                      -42-
<PAGE>

at the end of such fiscal quarter or year, as the case may be, and (y) set forth
the  calculation  of the Leverage  Ratio and Senior Debt Leverage  Ratio and the
amount of the Available  Basket Amount,  the Available Debt Proceeds  Amount and
the  Consolidated  Cumulative  50% Net Income  Amount,  at the end of the period
covered by such  financial  statements,  and all  sources  and uses of  proceeds
relating to the calculation  thereof  changing during the period covered by such
statements.

     (g) Notice of  Default or  Litigation.  Promptly,  and in any event  within
three Business Days after an executive officer of any Borrower obtains knowledge
thereof,  notice of (i) the occurrence of any event which  constitutes a Default
or Event of Default and (ii) any  litigation or  governmental  investigation  or
proceeding pending (x) against Furniture Brands or any of its Subsidiaries which
could  reasonably be expected to materially  and adversely  affect the business,
operations, property, assets, liabilities, condition (financial or otherwise) or
prospects  of the  Borrowers  taken  as a  whole  or  the  Borrowers  and  their
Restricted  Subsidiaries  taken as a whole,  (y) with  respect  to any  material
Indebtedness  of Furniture  Brands and its  Restricted  Subsidiaries  taken as a
whole or (z) with  respect  to any  Document.  

     (h)  Other  Reports  and  Filings.   Promptly,   copies  of  all  financial
information,  proxy materials and other  information and reports,  if any, which
Furniture  Brands  or any of its  Restricted  Subsidiaries  shall  file with the
Securities  and  Exchange  Commission  or any  successor  thereto (the "SEC") or
deliver  to  holders  of  its   Indebtedness   pursuant  to  the  terms  of  the
documentation  governing  such  Indebtedness  (or any  trustee,  agent  or other
representative therefor).

     (i)  Environmental  Matters.  Promptly  upon,  and in any event  within ten
Business  Days after,  an executive  officer of  Furniture  Brands or any of its
Restricted  Subsidiaries obtains knowledge thereof, notice of one or more of the
following  environmental  matters,  unless such environmental matters could not,
individually or when aggregated with all other such  environmental  matters,  be
reasonably expected to materially and adversely affect the business, operations,
property, assets,  liabilities,  condition (financial or otherwise) or prospects
of the  Borrowers  taken as a whole or of the  Borrowers  and  their  Restricted
Subsidiaries taken as a whole:

          (i) any pending or threatened  Environmental  Claim against  Furniture
     Brands or any of its Subsidiaries or any Real Property owned or operated by
     Furniture Brands or any of its Subsidiaries;

          (ii) any  condition or occurrence on or arising from any Real Property
     owned or operated by Furniture Brands or any of its  Subsidiaries  that (a)
     results in  noncompliance  by Furniture  Brands or any of its  Subsidiaries
     with any applicable  Environmental  Law or (b) could reasonably be expected
     to form the basis of an Environmental Claim against Furniture Brands or any
     of its Subsidiaries or any such Real Property;

          (iii)  any  condition  or  occurrence  on any Real  Property  owned or
     operated  by  Furniture  Brands  or  any  of its  Subsidiaries  that  could


                                      -43-
<PAGE>

     reasonably  be  expected  to cause such Real  Property to be subject to any
     restrictions  on  the  ownership,  occupancy,  use  or  transferability  by
     Furniture Brands or any of its Subsidiaries of such Real Property under any
     Environmental Law; and

          (iv) the taking of any removal or  remedial  action in response to the
     actual or alleged  presence of any Hazardous  Material on any Real Property
     owned  or  operated  by  Furniture  Brands  or any of its  Subsidiaries  as
     required  by  any   Environmental   Law  or  any   governmental   or  other
     administrative  agency;  provided  that in any  event the  Borrowers  shall
     deliver  to  each  Bank  all  notices  received  by  them  or any of  their
     respective  Subsidiaries from any government or governmental  agency under,
     or pursuant to, CERCLA.

All such notices shall  describe in  reasonable  detail the nature of the claim,
investigation,  condition,  occurrence  or removal or remedial  action,  and the
Borrowers' or such  Subsidiary's  response thereto.  In addition,  the Borrowers
will  provide  the Banks with  copies of all  material  communications  with any
government  or  governmental   agency  relating  to   Environmental   Laws,  all
communications  with any  Person  (other  than its  attorneys)  relating  to any
Environmental  Claim of which  notice is required  to be given  pursuant to this
Section 8.01(i),  and such detailed reports of any such  Environmental  Claim as
may reasonably be requested by the Banks.

     (j) Annual Meetings with Banks. At the request of the Administrative Agent,
Furniture  Brands shall within 120 days after the close of each Fiscal Year hold
a meeting  at a time and place  selected  by  Furniture  Brands  and  reasonably
acceptable  to the  Administrative  Agent with all of the Banks at which meeting
shall be reviewed  the  financial  results of the  previous  Fiscal Year and the
financial  condition  of  Furniture  Brands and the  budgets  presented  for the
current Fiscal Year.

     (k)  Other  Information.  From  time to time,  such  other  information  or
documents  (financial or otherwise)  with respect to Furniture  Brands or any of
its Subsidiaries as any Bank may reasonably request in writing.

     8.02 Books,  Records and  Inspections.  The Borrowers  will, and will cause
each of their respective Restricted Subsidiaries to, keep proper books of record
and account in which full, true and correct entries in conformity with generally
accepted accounting  principles and all requirements of law shall be made of all
dealings  and  transactions  in relation to its  business  and  activities.  The
Borrowers will, and will cause each of their respective Restricted  Subsidiaries
to, permit officers and designated representatives of the Agents or the Required
Banks to visit and inspect,  after  reasonable  notice during  regular  business
hours and  under  guidance  of  officers  of the  Borrowers  or such  Restricted
Subsidiary,   any  of  the  properties  of  the  Borrowers  or  such  Restricted
Subsidiary,  and to  examine  the  books of  account  of the  Borrowers  or such
Restricted  Subsidiary  and discuss the  affairs,  finances  and accounts of the
Borrowers or such Restricted  Subsidiary with, and be advised as to the same by,
its and their officers and independent accountants, all at such reasonable times
and  intervals  and to such  reasonable  extent  as such  Agent or such Bank may
request.

     8.03  Maintenance  of Property;  Insurance.  (a) Schedule VIII sets forth a
true and complete listing of all insurance (including  self-insurance  programs)
maintained by Furniture Brands and its Restricted  Subsidiaries as of the Fourth
Restatement  Effective  Date.  The Borrowers  will, and will cause each of their
respective  Restricted  Subsidiaries to, (i) keep all property  necessary in its
business in good working order and condition  (ordinary wear and tear excepted),
(ii) maintain insurance on all its property in at least such amounts and against


                                      -44-
<PAGE>

at least such risks as is consistent  and in accordance  with industry  practice
and (iii)  furnish to the  Administrative  Agent,  upon  written  request,  full
information as to the insurance carried.  In addition to the requirements of the
immediately preceding sentence,  the Borrowers will at all times cause insurance
of the types described in Schedule VIII to be maintained (with the same scope of
coverage as that  described  in Schedule  VIII) at levels  which are at least as
great  as the  respective  amount  described  opposite  the  respective  type of
insurance on Schedule VIII under the column headed  "Minimum  Amount Required to
be Maintained."

     (b) Except with respect to self-insurance programs listed on Schedule VIII,
the Borrowers will, and will cause their respective Restricted  Subsidiaries to,
at all times keep their  respective  property insured in favor of the Collateral
Agent,  and all  policies  (including  Mortgage  Policies) or  certificates  (or
certified  copies  thereof)  with  respect  to such  insurance  (and  any  other
insurance  maintained  by the  Borrowers or any of their  respective  Restricted
Subsidiaries) (i) shall be endorsed to the Collateral  Agent's  satisfaction for
the benefit of the Collateral Agent (including,  without  limitation,  by naming
the Collateral  Agent as loss payee or as an additional  insured  (provided that
Furniture  Brands and its Restricted  Subsidiaries  shall be permitted to settle
claims in an amount less than  $10,000,000  per claim,  so long as the  proceeds
from such claims are applied in accordance with Section 4.02(A)(d)),  (ii) shall
state that such insurance policies shall not be cancelled without 30 days' prior
written notice thereof by the respective  insurer to the Collateral Agent, (iii)
shall provide that the respective insurers  irrevocably waive any and all rights
of subrogation with respect to the Collateral  Agent and the Secured  Creditors,
(iv) shall contain the standard non-contributory mortgagee clause endorsement in
favor of the Collateral  Agent with respect to hazard  insurance  coverage,  (v)
shall,   except  in  the  case  of  public  liability   insurance  and  workers'
compensation insurance, provide that any losses shall be payable notwithstanding
(A) any act or neglect of the  Borrowers or any of their  respective  Restricted
Subsidiaries,  (B) the  occupation  or use of the  properties  for purposes more
hazardous  than those  permitted by the terms of the  respective  policy if such
coverage is obtainable at commercially  reasonable rates and is of the kind from
time to time  customarily  insured  against by Persons  owning or using  similar
property  and in such amounts as are  customary,  (C) any  foreclosure  or other
proceeding  relating to the insured  properties if such coverage is available at
commercially  reasonable rates or (D) any change in the title to or ownership or
possession  of the  insured  properties  and (vi)  shall be  deposited  with the
Collateral Agent if such coverage is available at commercially reasonable rates.

     (c) If the  Borrowers or any of their  respective  Restricted  Subsidiaries
shall fail to maintain all insurance in accordance with this Section 8.03, or if
the Borrowers or any of their respective  Restricted  Subsidiaries shall fail to
so endorse and deposit all policies or certificates  with respect  thereto,  the
Administrative Agent and/or the Collateral Agent shall have the right (but shall
be under no  obligation)  after  giving  notice  to  Furniture  Brands  (but not
requiring any consent from  Furniture  Brands) to procure such insurance and the
Borrowers agree to jointly and severally  reimburse the Administrative  Agent or
the  Collateral  Agent,  as the case  may be,  for all  costs  and  expenses  of
procuring such insurance.

     8.04 Corporate Franchises. The Borrowers will, and will cause each of their
respective  Restricted  Subsidiaries  to,  do or cause to be  done,  all  things
necessary  to preserve and keep in full force and effect its  existence  and its
material  rights,  franchises,  licenses and patents;  provided,  however,  that
nothing in this Section 8.04 shall prevent (i) sales of assets, mergers or other
transactions by or among Furniture Brands or any of its Restricted  Subsidiaries


                                      -45-
<PAGE>

in accordance  with Section 9.02 or (ii) (x) the withdrawal by Furniture  Brands
or  any  of the  Restricted  Subsidiaries  of  its  qualification  as a  foreign
corporation  or  the  failure  to  qualify  as  a  foreign  corporation  in  any
jurisdiction or (y) the amendment of the Certificate of Incorporation or By-Laws
of Furniture Brands or any of its Subsidiaries,  in each case which would not in
any way materially and adversely  affect the Banks, and where such withdrawal or
failure or  amendment,  as the case may be, could not  reasonably be expected to
have a Material Adverse Effect.

     8.05 Compliance with Statutes, etc. The Borrowers will, and will cause each
of their  respective  Subsidiaries  to,  comply  with all  applicable  statutes,
regulations  and orders  of, and all  applicable  restrictions  imposed  by, all
governmental  bodies,  domestic  or  foreign,  in respect of the  conduct of its
business and the ownership of its property,  except such noncompliances as could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

     8.06 Compliance with Environmental Laws. (a) The Borrowers will comply, and
will cause each of their  respective  Subsidiaries  to comply,  in all  material
respects with all  Environmental  Laws applicable to the ownership or use of its
Real Property now or hereafter  owned or operated by Furniture  Brands or any of
its  Subsidiaries,  will within a reasonable time period pay or cause to be paid
all costs and expenses  incurred in connection  with such  compliance,  and will
keep or cause to be kept all such Real  Property  free and clear of any Liens on
such Real Property imposed pursuant to such Environmental  Laws;  provided that,
none of Furniture Brands nor any of its Subsidiaries shall be required to remove
any such Liens, so long as the aggregate  amount of obligations  purported to be
secured  by such  Liens  does not  exceed  $1,000,000,  and such Liens are being
contested in good faith and by proper proceedings if it has maintained  adequate
reserves with respect thereto in accordance with generally  accepted  accounting
principles.  None of Furniture Brands nor any of its Subsidiaries will generate,
use,  treat,  store,  release or  dispose  of, or permit  the  generation,  use,
treatment,  storage,  release or disposal  of  Hazardous  Materials  on any Real
Property  now or hereafter  owned or operated by Furniture  Brands or any of its
Subsidiaries,  or transport or permit the transportation of Hazardous  Materials
to or from any such Real Property except for Hazardous  Materials used or stored
at  any  such  Real  Properties  in  material  compliance  with  all  applicable
Environmental Laws and reasonably required in connection with the operation, use
and maintenance of any such Real Property.

     (b) At the  written  request of the  Administrative  Agent or the  Required
Banks,  which request shall specify in reasonable detail the basis therefor,  at
any time and from time to time,  the Borrowers  will provide,  at the Borrowers'
joint and several cost and expense,  an  environmental  site  assessment  report
concerning  any Real  Property now or  hereafter  owned or operated by Furniture
Brands or any of its Subsidiaries,  prepared by an environmental consulting firm
approved by the  Administrative  Agent,  indicating  the  presence or absence of
Hazardous  Materials and the potential cost of any removal or remedial action in
connection with any Hazardous  Materials on such Real Property;  provided,  that
such  request may be made only if (i) there has occurred  and is  continuing  an
Event of  Default,  (ii)  the  Administrative  Agent  reasonably  believes  that
Furniture  Brands,  any of its  Subsidiaries or any such Real Property is not in
material  compliance with Environmental Law, or (iii)  circumstances  exist that
reasonably could be expected to form the basis of a material Environmental Claim
against Furniture Brands, any of its Subsidiaries or any such Real Property.  If
the  Borrowers  fail to provide the same  within 90 days after such  request was
made, the Administrative Agent may order the same, and the Borrowers shall grant
and  hereby  grant to the  Administrative  Agent and the Banks and their  agents


                                      -46-
<PAGE>

access to such Real Property and specifically grant the Administrative Agent and
the  Banks an  irrevocable  non-exclusive  license,  subject  to the  rights  of
tenants,  to  undertake  such an  assessment,  all at the  Borrowers'  joint and
several expense.

     8.07 ERISA. As soon as possible and, in any event, within 20 days after the
Borrowers  or any of  their  respective  Restricted  Subsidiaries  or any  ERISA
Affiliate knows or has reason to know of the occurrence of any of the following,
the Borrowers will deliver to the  Administrative  Agent, and the Administrative
Agent  shall  promptly  forward  to each  Bank a  certificate  of an  Authorized
Representative  of the Borrowers setting forth details as to such occurrence and
the action, if any, that the Borrowers, such Restricted Subsidiary or such ERISA
Affiliate is required or proposes to take, together with any notices required or
proposed  to be given  to or filed  with or by the  Borrowers,  such  Restricted
Subsidiary,  the ERISA  Affiliate,  the PBGC, or a Plan  participant or the Plan
administrator with respect thereto:  that a Reportable Event has occurred;  that
an accumulated  funding deficiency has been incurred or an application is likely
to be or has  been  made  to the  Secretary  of the  Treasury  for a  waiver  or
modification of the minimum funding standard (including any required installment
payments) or an extension of any  amortization  period under  Section 412 of the
Code with respect to a Plan,  Multiemployer  Plan and/or a Spunoff Plan;  that a
contribution  required to be made to a Plan,  Multiemployer  Plan and/or Foreign
Pension Plan has not been timely made; that a Plan,  Multiemployer Plan and/or a
Spunoff Plan has been or is reasonably  expected to be terminated,  reorganized,
partitioned  or  declared  insolvent  under  Title  IV of  ERISA;  that a  Plan,
Multiemployer  Plan  and/or a Spunoff  Plan has an  Unfunded  Current  Liability
giving rise to a lien under ERISA or the Code; that proceedings are likely to be
or have been  instituted  or notice  has been  given to  terminate  or appoint a
trustee to administer a Plan,  Multiemployer  Plan and/or a Spunoff Plan; that a
proceeding  has been  instituted  pursuant  to Section 515 of ERISA to collect a
delinquent  contribution to a Multiemployer Plan if material in amount; that the
Borrowers,  any  of  their  respective  Restricted  Subsidiaries  or  any  ERISA
Affiliate  will or is  reasonably  expected  to  incur  any  material  liability
(including any indirect,  contingent or secondary liability) to or on account of
the  termination  of or  withdrawal  from a Plan,  Multiemployer  Plan  and/or a
Spunoff Plan under Section 4062,  4063,  4064, 4069, 4201, 4204 or 4212 of ERISA
or with  respect  to a Plan,  Multiemployer  Plan  and/or a Spunoff  Plan  under
Section  401(a)(29),  4971, 4975 or 4980 of the Code or Section 409 or 502(i) or
502(l) of ERISA;  or except as disclosed on Schedule  XIV, that the Borrowers or
any Restricted Subsidiary is reasonably expected to incur any liability pursuant
to any employee  welfare benefit plan (as defined in Section 3(1) of ERISA) that
provides  benefits to retired employees or other former employees (other than as
required  by Section  601 of ERISA) or any  employee  pension  benefit  plan (as
defined  in  Section  3(2) of ERISA)  which  liability,  individually  or in the
aggregate,  could reasonably be expected to have a Material Adverse Effect. Upon
request,  the Borrowers will deliver to each of the Banks a complete copy of the
annual report (Form 5500) of each Plan (including,  to the extent required to be
filed with the Internal  Revenue  Service in connection with such annual report,
the related financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information) required to be filed with
the  Internal  Revenue  Service.  In  addition  to any  certificates  or notices
delivered to the Banks  pursuant to the first  sentence  hereof,  copies of such
annual  reports and any  material  notices  received by the  Borrowers or any of
their respective Restricted  Subsidiaries or any ERISA Affiliate with respect to
any Plan,  Multiemployer Plan, Spunoff Plan and/or Foreign Pension Plan shall be
delivered to the Banks no later than 20 days after the date such report has been
requested  or such notice has been  received by the  Borrowers,  the  Restricted
Subsidiary or the ERISA Affiliate,  as applicable.  For purposes of this Section


                                      -47-
<PAGE>

8.07  "knows or has  reason to know"  with  respect  to any  Spunoff  Plan means
knowledge  acquired  through  written  or oral  notice  provided  directly  to a
Borrower by any governmental agency, court, or Spunoff Plan administrator.

     8.08 End of Fiscal Years; Fiscal Quarters. Furniture Brands shall cause (i)
each of its Fiscal Years to end on December 31, and each of its fiscal  quarters
to end on the last day of each March, June, September and December and (ii) each
of its Restricted  Subsidiaries' (x) fiscal years to end on the closest Saturday
to  December 31 and (y) fiscal  quarters  to end on the closest  Saturday to the
last day of each March, June, September and December.

     8.09 Performance of Obligations. Each of the Borrowers will, and will cause
each of its Subsidiaries  to, perform all of its obligations  under the terms of
each mortgage,  indenture, security agreement and other debt instrument by which
it is bound, except such  non-performances as could not,  individually or in the
aggregate,  reasonably  be  expected  to have a material  adverse  effect on the
business,  operations,  property, assets,  liabilities,  condition (financial or
otherwise)  or prospects of the  Borrowers  taken as a whole or of the Borrowers
and the Restricted Subsidiaries taken as a whole.

     8.10  Payment of Taxes.  Each of the  Borrowers  will pay and  discharge or
cause  to be paid  and  discharged,  and will  cause  each of  their  respective
Subsidiaries  to  pay  and  discharge,   all  material  taxes,  assessments  and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any material  properties  belonging to it, in each case on a timely  basis,
and all lawful claims which,  if unpaid,  might become a lien or charge upon any
properties of Furniture Brands or any of its Restricted  Subsidiaries;  provided
that none of Furniture Brands nor any of its  Subsidiaries  shall be required to
pay any such tax, assessment,  charge, levy or claim which is being contested in
good faith and by proper proceedings if it has maintained adequate reserves with
respect thereto in accordance with generally accepted accounting principles.

     8.11 Additional Security;  Further Assurances;  Required Appraisals. (a) At
any time and from time to time prior to the Mortgage Release Date, the Borrowers
will, and will cause each of their respective Restricted  Subsidiaries to, grant
to the  Collateral  Agent  security  interests  and  mortgages  (an  "Additional
Mortgage")  in such Real Property  (other than Real  Property  encumbered by (i)
liens incurred by a Restricted  Subsidiary at a time when it was an Unrestricted
Subsidiary,  to the extent such Liens are otherwise  permitted by this Agreement
and (ii) Liens securing  Indebtedness  permitted  pursuant to Section 9.04 (vi),
but only until such time as such Indebtedness is repaid) of the Borrowers or any
of their respective  Restricted  Subsidiaries as are not covered by the original
Mortgages,  to the  extent  such  Real  Property  is  acquired  after  the Third
Restatement   Effective  Date  and  either  (x)  the  cost  (including   assumed
Indebtedness)  of such  Real  Property  is in excess  of  $2,500,000  or (y) the
respective  Additional  Mortgage has been  requested by the Required Banks (each
such Real Property,  an "Additional  Mortgaged  Property").  All such Additional
Mortgages shall be granted pursuant to  documentation  substantially in the form
of the Mortgages delivered to the Administrative Agent on the Original Effective
Date  or the  First  Restatement  Effective  Date or in  such  other  form as is
reasonably  satisfactory to the Administrative  Agent and shall constitute valid
and enforceable perfected Liens superior to and prior to the rights of all third
Persons and subject to no other Liens except as are permitted by Section 9.01 at
the time of perfection thereof.  The Additional Mortgages or instruments related
thereto shall have been duly recorded or filed in such manner and in such places
as are required by law to establish,  perfect, preserve and protect the Liens in


                                      -48-
<PAGE>

favor of the Collateral  Agent required to be granted pursuant to the Additional
Mortgages and all taxes, fees and other charges payable in connection  therewith
shall have been paid in full.

     (b) The Borrowers will, and will cause each of their respective  Restricted
Subsidiaries  to, at the joint  and  several  expense  of the  Borrowers,  make,
execute, endorse,  acknowledge, file and/or deliver to the Collateral Agent from
time to time  such  vouchers,  invoices,  schedules,  confirmatory  assignments,
conveyances,  financing statements,  transfer endorsements,  powers of attorney,
certificates, real property surveys, reports and other assurances or instruments
and take such further  steps  relating to the  Collateral  covered by any of the
Security  Documents as the Collateral  Agent may reasonably  require pursuant to
this Section 8.11. Furthermore, the Borrowers shall cause to be delivered to the
Collateral  Agent such  opinions of counsel,  title  insurance and other related
documents as may be requested by the Collateral Agent to assure itself that this
Section 8.11 has been complied with.

     (c) Each Borrower agrees to cause each Restricted Subsidiary established or
created in accordance with Section 9.11 to execute and deliver a guaranty of all
Obligations  and all obligations  under Interest Rate  Protection  Agreements in
substantially the form of the Subsidiary Guaranty, or by becoming a party to the
Subsidiary Guaranty.

     (d) Each  Borrower  agrees to pledge all of the  capital  stock of each new
Subsidiary (other than any Subsidiary of an Unrestricted  Subsidiary) created in
accordance  with  Section  9.11 to the  Collateral  Agent for the benefit of the
Secured Creditors pursuant to the Pledge Agreement.

     (e) Each  Borrower will cause each  Restricted  Subsidiary  established  or
created in accordance with Section 9.11 to grant to the Collateral Agent a first
priority Lien on all property  (tangible and intangible) of such Subsidiary upon
terms similar to those set forth in the Security  Documents as appropriate,  and
satisfactory  in form and  substance  to the  Administrative  Agent and Required
Banks. Each Borrower shall cause each of its respective Restricted Subsidiaries,
at its own expense, to execute, acknowledge and deliver, or cause the execution,
acknowledgment and delivery of, and thereafter  register,  file or record in any
appropriate governmental office, any document or instrument reasonably deemed by
the  Collateral  Agent  to be  necessary  or  desirable  for  the  creation  and
perfection  of the  foregoing  Liens.  Each  Borrower  will  cause  each  of its
respective  Restricted  Subsidiaries  to  take  all  actions  requested  by  the
Administrative  Agent (including,  without limitation,  the filing of UCC-1s) in
connection with the granting of such security interests.

     (f) The security  interests required to be granted pursuant to this Section
8.11  shall be  granted  pursuant  to  security  documentation  (which  shall be
substantially  similar to the Security  Documents already executed and delivered
by Furniture Brands and its Restricted Subsidiaries, as applicable) or otherwise
satisfactory  in form  and  substance  to the  Administrative  Agent  and  shall
constitute  valid and  enforceable  perfected  security  interests  prior to the
rights of all third  Persons and subject to no other Liens  except such Liens as
are  permitted by Section  9.01.  The  Additional  Security  Documents and other
instruments  related  thereto shall be duly recorded or filed in such manner and
in such places and at such times as are required by law to  establish,  perfect,
preserve and protect the Liens, in favor of the Collateral Agent for the benefit
of the  respective  Secured  Creditors,  required to be granted  pursuant to the
Additional  Security  Documents and all taxes, fees and other charges payable in
connection  therewith  shall  be paid,  jointly  and  severally,  in full by the


                                      -49-
<PAGE>

Borrowers.  At the time of the execution and delivery of the Additional Security
Documents,  the Borrowers  shall cause to be delivered to the  Collateral  Agent
such  opinions  of  counsel,  Mortgage  Policies,  title  surveys,  real  estate
appraisals  and other related  documents as may be  reasonably  requested by the
Administrative  Agent or the  Required  Banks to  assure  themselves  that  this
Section 8.11 has been complied with.

     (g) In the event that the Administrative Agent or the Required Banks at any
time after the Fourth Restatement  Effective Date determine in its or their good
faith  discretion  that real estate  appraisals  satisfying the  requirements of
FIRREA (any such  appraisal a "Required  Appraisal")  are or were required to be
obtained,  or should be obtained,  in connection with any Mortgaged  Property or
Mortgaged  Properties,  then,  within 120 days after  receiving  written  notice
thereof from the Administrative Agent or the Required Banks, as the case may be,
such Required Appraisal shall be delivered,  at the expense of the Borrowers, to
the Administrative Agent which Required Appraisal, and the respective appraiser,
shall be satisfactory to the Administrative Agent.

     (h) Each of the Borrowers agrees that each action required above by Section
8.11 (a) or (b) shall be completed  as soon as  possible,  but in no event later
than 60 days after such action is  requested  to be taken by the  Administrative
Agent or the Required  Banks.  Each of the  Borrowers  further  agrees that each
action  required  by  Section  8.11(c),  (d),  (e) and (f) with  respect  to the
Additional Collateral shall be completed  contemporaneously with the creation of
such new Subsidiary.

     8.12 Interest Rate Protection.  The Borrowers shall maintain,  for a period
of at least three years after the Third  Restatement  Effective  Date,  interest
rate  protection  pursuant to one or more  Interest Rate  Protection  Agreements
which establish a fixed or maximum interest rate (whether  through swaps,  caps,
collars, or otherwise)  acceptable to the Administrative  Agent in respect of at
least  (i)  $300,000,000  notional  principal  amount  of  Indebtedness  through
February  22,  1999,  and  (ii)  $100,000,000   notional   principal  amount  of
Indebtedness  during  the  period  from  February  22,  1999  through  the third
anniversary of the Third Restatement  Effective Date. The  Administrative  Agent
has approved the Interest Rate Protection  Agreements which are in effect on the
Fourth  Restatement  Effective Date which  established fixed or maximum interest
rates in respect  of  $300,000,000  notional  principal  amount of  Indebtedness
through February 22, 1999.

     8.13  Ownership of  Subsidiaries.  Furniture  Brands shall at all times own
100% of the  outstanding  capital  stock of the other  Borrowers.  Except to the
extent otherwise expressly consented in writing by the Required Banks and except
as set forth in Schedule VI, the Borrowers shall directly or indirectly own 100%
of the capital  stock of each of their  Subsidiaries  (other  than as  permitted
pursuant to the definition of Permitted Acquisition).

     8.14  Permitted  Acquisitions.  Subject to the  provisions  of this Section
8.14,  Section  9.02(vi) and the  requirements  contained in the  definition  of
Permitted Acquisition,  the Borrowers and their Restricted Subsidiaries may from
time to time  after the  Fourth  Restatement  Effective  Date  effect  Permitted
Acquisitions,  so long as (i) the Borrowers shall have given the  Administrative
Agent and the  Banks at least 10  Business  Days'  prior  written  notice of any
Permitted Acquisition, (ii) based on calculations made by the Borrowers on a Pro
Forma Basis after giving effect to the respective Permitted  Acquisition and any
Indebtedness  (including without  limitation  Permitted Acquired Debt) incurred,


                                      -50-
<PAGE>

issued or assumed in connection with the respective Permitted  Acquisition or to
finance same, (x) no Default or Event of Default will exist under, or would have
existed  during the periods  covered by, the  financial  covenants  contained in
Sections 9.08 and 9.09 of this  Agreement and (y) if any  Indebtedness  is being
incurred,  issued  or  assumed  in  connection  with  the  respective  Permitted
Acquisition or to finance same (excluding,  however,  Permitted Acquired Debt in
connection  with any Permitted  Acquisition  where the only  Indebtedness  being
incurred,  issued or  assumed in  connection  therewith  or to  finance  same is
Permitted  Acquired  Debt),  the Senior  Debt  Leverage  Ratio  shall not exceed
3.5:1.0, (iii) based on good faith projections prepared by the Borrowers for the
period from the date of the  consummation  of the Permitted  Acquisition  to the
date which is one year thereafter,  the level of financial  performance measured
by the  covenants  set forth in  Sections  9.08 and 9.09 shall be better than or
equal to such level as would be required to provide  that no Default or Event of
Default would exist under the financial covenants contained in Sections 9.08 and
9.09 of this  Agreement  as  compliance  with such  covenants  would be required
through  the date  which is one year  from the date of the  consummation  of the
respective Permitted Acquisition,  (iv) the Administrative Agent shall have been
satisfied in its reasonable  discretion that the proposed Permitted  Acquisition
could not reasonably be expected to result in materially increased tax, ERISA or
environmental  liabilities  with  respect  to  Furniture  Brands  or  any of its
Restricted  Subsidiaries,  it being understood that any determination of whether
the proposed  Permitted  Acquisition  could  reasonably be expected to result in
such materially  increased tax, ERISA or  environmental  liabilities  shall take
into account,  inter alia, (x) any available  indemnities and (y) the timing and
likelihood of payment  thereunder and (v) the Borrowers  shall have delivered to
the  Administrative  Agent an officer's  certificate  executed by an  Authorized
Representative  of the  Borrowers,  certifying (A) to the best of his knowledge,
compliance with the  requirements  of preceding  clauses (i), (ii) and (iii) and
containing the calculations required by the preceding clauses (ii) and (iii) and
(B) compliance with the requirements of Section 9.02(vi).

     8.15 Maintenance of Corporate Separateness. Furniture Brands will, and will
cause each of its  Subsidiaries  to, satisfy  customary  corporate  formalities,
including the holding of regular board of directors' and shareholders'  meetings
or action by directors or shareholders  without a meeting and the maintenance of
corporate offices and records. None of the Borrowers nor any of their respective
Restricted Subsidiaries shall make any payment to a creditor of any Unrestricted
Subsidiaries in respect of any liability of any Unrestricted  Subsidiaries,  and
no bank account of any Unrestricted Subsidiary shall be commingled with any bank
account  of  any  of  the  Borrowers  or  any  of  their  respective  Restricted
Subsidiaries.  Any  financial  statements  distributed  to any  creditors of any
Unrestricted  Subsidiaries  shall  clearly  establish or indicate the  corporate
separateness  of such  Unrestricted  Subsidiary  from the  Borrowers  and  their
respective Restricted Subsidiaries. Finally, neither Furniture Brands nor any of
its  Subsidiaries  shall take any  action,  or conduct  its affairs in a manner,
which is likely to result in the corporate  existence of Furniture Brands or any
of its  Subsidiaries  being  ignored,  or in the assets and  liabilities  of the
Borrowers or any of their respective Restricted Subsidiaries being substantively
consolidated  with  those  of any  Unrestricted  Subsidiaries  in a  bankruptcy,
reorganization or other insolvency proceeding.

     8.16 Cash  Management  System.  The Borrowers  will, and will cause each of
their  respective  Restricted  Subsidiaries  to,  utilize and  maintain the Cash
Management  System  for  all  deposits  made  by  any  of  them  (including  the
concentration  of all such  deposits  in the  Concentration  Account).  The Cash
Management System shall be operated solely for the business of the Borrowers and
their respective Restricted Subsidiaries.



                                      -51-
<PAGE>

     8.17  Margin  Stock.  The  Borrowers  will,  and will  cause  each of their
respective  Subsidiaries  to,  take any and all  actions as may be  required  to
ensure that no capital stock pledged, or required to be pledged, pursuant to any
Security Document shall constitute Margin Stock.

     SECTION 9. Negative Covenants. The Borrowers covenant and agree that on and
after the Fourth  Restatement  Effective Date and until the  Commitments and all
Letters of Credit  and  Acceptances  have  terminated  and the Loans,  Notes and
Unpaid Drawings, together with interest, Fees and all other Obligations incurred
hereunder and thereunder, are paid in full:

     9.01  Liens.  The  Borrowers  will not,  and will not  permit  any of their
respective Restricted  Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon or with  respect  to any  property  or assets  (real or  personal,
tangible  or  intangible)   of  Furniture   Brands  or  any  of  its  Restricted
Subsidiaries, whether now owned or hereafter acquired, or sell any such property
or assets subject to an understanding or agreement,  contingent or otherwise, to
repurchase such property or assets (including sales of accounts  receivable with
recourse to Furniture Brands or any of its Restricted  Subsidiaries),  or assign
any right to  receive  income or permit the  filing of any  financing  statement
under the UCC or any other similar notice of Lien under any similar recording or
notice  statute;  provided  that the  provisions  of this Section 9.01 shall not
prevent  the  creation,  incurrence,  filing,  assumption  or  existence  of the
following (Liens described below are herein referred to as "Permitted Liens"):

          (i) incipient Liens for taxes,  assessments or governmental charges or
     levies  not yet  due  and  payable  or  Liens  for  taxes,  assessments  or
     governmental  charges  or  levies  being  contested  in good  faith  and by
     appropriate  proceedings for which adequate  reserves have been established
     in accordance with generally accepted  accounting  principles in the United
     States (or the  equivalent  thereof in any country in which a Foreign Sales
     Corporation or a Foreign Subsidiary is doing business, as applicable);

          (ii) Liens in respect of property or assets of the Borrowers or any of
     their  Restricted  Subsidiaries  imposed by law, which were incurred in the
     ordinary  course of business  and do not secure  Indebtedness  for borrowed
     money,  such as carriers',  warehousemen's,  materialmen's  and  mechanics'
     liens and other similar  Liens arising in the ordinary  course of business,
     and (x) which do not in the aggregate  materially detract from the value of
     the  Borrowers'  or such  Restricted  Subsidiary's  property  or  assets or
     materially  impair the use thereof in the  operation of the business of the
     Borrowers or such Restricted Subsidiary or (y) which are being contested in
     good faith by appropriate proceedings, which proceedings have the effect of
     preventing  the forfeiture or sale of the property or assets subject to any
     such Lien;

          (iii) Liens in  existence  on the Fourth  Restatement  Effective  Date
     which are listed, and the property subject thereto  described,  in Schedule
     IX, but only to the respective  date, if any, set forth in such Schedule IX
     for the  removal  and  termination  of any such Liens,  plus  renewals  and
     extensions  of such Liens to the extent set forth on Schedule IX,  provided
     that  (x) the  aggregate  principal  amount  of the  Indebtedness,  if any,
     secured by such Liens does not increase from that amount outstanding at the
     time of any such renewal or extension and (y) any such renewal or extension
     does not encumber any additional  assets or properties of Furniture  Brands
     or any of its Restricted Subsidiaries;



                                      -52-
<PAGE>

          (iv) Permitted Encumbrances;

          (v) Liens created pursuant to the Security Documents;

          (vi)  licenses,  leases or subleases  granted to other  Persons in the
     ordinary course of business not materially  interfering with the conduct of
     the business of Furniture Brands and its Restricted Subsidiaries taken as a
     whole;

          (vii) Liens upon assets  subject to Capitalized  Lease  Obligations of
     the Borrowers and their Restricted  Subsidiaries to the extent permitted by
     Section  9.04(vi),  provided  that (x) such  Liens only serve to secure the
     payment of Indebtedness arising under such Capitalized Lease Obligation and
     (y) the Lien  encumbering  the asset giving rise to the  Capitalized  Lease
     Obligation  does not  encumber  any  other  asset of the  Borrowers  or any
     Restricted Subsidiary of the Borrowers;

          (viii)  Liens  placed  upon  assets  used in the  ordinary  course  of
     business of the Borrowers or any of their  Restricted  Subsidiaries  at the
     time of  acquisition  or new  construction  thereof by the Borrowers or any
     such  Restricted  Subsidiary  or  within  180  days  thereafter  to  secure
     Indebtedness  incurred to pay all or a portion of the purchase price and/or
     construction  costs thereof,  plus renewals or extensions of such Liens, or
     Liens securing Permitted Acquired Debt, plus renewals or extensions of such
     Liens,  provided that (x) the aggregate outstanding principal amount of all
     Indebtedness  secured by Liens permitted by this clause (viii) shall not at
     any time exceed the amount  permitted  by Section  9.04(vi)  and (y) in all
     events,  the Lien  encumbering the assets so acquired or newly  constructed
     does not  encumber  any other  asset of the  Borrowers  or such  Restricted
     Subsidiary;

          (ix)  easements,   rights-of-way,   restrictions   (including   zoning
     restrictions),  encroachments,  protrusions  and other  similar  charges or
     encumbrances,  and minor title  deficiencies,  in each case  whether now or
     hereafter  in  existence,  not  securing  Indebtedness  and not  materially
     interfering  with the conduct of the  business of the  Borrowers  or any of
     their respective Restricted Subsidiaries;

          (x) Liens arising from  precautionary UCC financing  statement filings
     regarding  operating  leases  entered into by the Borrowers or any of their
     Restricted Subsidiaries in the ordinary course of business;

          (xi) Liens  arising out of the  existence  of  judgments or awards not
     constituting an Event of Default under Section 10.09, provided that no cash
     or property is deposited or delivered to secure the respective  judgment or
     award (or any  appeal  bond in  respect  thereof,  except as  permitted  by
     following clause (xiv));

          (xii) statutory and contractual landlords' liens under leases to which
     the Borrowers or any of their Restricted Subsidiaries are a party;

          (xiii)  Liens  (other than any Lien  imposed by ERISA) (x) incurred or
     deposits made in the ordinary course of business of the Borrowers and their
     respective   Restricted    Subsidiaries   in   connection   with   workers'
     compensation,  unemployment  insurance and other types of social  security,
     (y) to  secure  the  performance  by the  Borrowers  and  their  respective
     Restricted  Subsidiaries  of  tenders,  statutory  obligations  (other than
     excise taxes),  surety,  stay,  customs and appeal bonds,  statutory bonds,


                                      -53-
<PAGE>

          bids, leases, government contracts,  trade contracts,  performance and
          return of money  bonds and other  similar  obligations  (exclusive  of
          obligations  for the payment of  borrowed  money) or (z) to secure the
          performance   by  the  Borrowers  and  their   respective   Restricted
          Subsidiaries  of leases of Real  Property,  to the extent  incurred or
          made  in  the  ordinary  course  of  business   consistent  with  past
          practices,  provided that the aggregate amount of deposits at any time
          pursuant  to  sub-clause  (y) and  sub-clause  (z)  shall  not  exceed
          $5,000,000 in the aggregate;

                  (xiv) any interest or title of a lessor,  sublessor,  licensee
         or  licensor  under any lease or license  agreement  permitted  by this
         Agreement;

                  (xv) Liens (x) in favor of  customs  and  revenue  authorities
         arising as a matter of law to secure the  payment of customs  duties in
         connection  with the  importation  of goods and deposits made to secure
         statutory  obligations in the form of excise taxes or (y) in respect of
         property or assets of Thomasville or any of its Subsidiaries imposed by
         law or  governmental  action  which  arise out of  actual or  potential
         claims  under any  Environmental  Law  disclosed  in the  environmental
         report  furnished  to the  Administrative  Agent  prior  to  the  First
         Restatement Effective Date, in each case so long as the Liens described
         in this  clause (y) are being  contested  in good  faith (or  Furniture
         Brands  or its  respective  Subsidiaries  are in  good  faith  pursuing
         indemnities in respect thereof pursuant to the Armstrong Stock Purchase
         Agreement) pursuant to appropriate proceedings,  which proceedings have
         the effect of preventing the forfeiture or sale of the property subject
         to any such Lien and so long as adequate  reserves (if necessary)  have
         been  established  in accordance  with  generally  accepted  accounting
         principles with respect to the liability or liabilities secured by such
         Liens;

                  (xvi) Liens arising out of conditional  sale, title retention,
         consignment or similar  arrangements for the sale of goods entered into
         by the  Borrowers  or  any  of  their  Restricted  Subsidiaries  in the
         ordinary  course of business in accordance  with the past  practices of
         the Borrowers and their Restricted  Subsidiaries prior to the Effective
         Date; and

                  (xvii) Liens not otherwise  permitted by the foregoing clauses
         (i) through (xvi) to the extent attaching to properties and assets with
         an aggregate fair value not in excess of, and securing  liabilities not
         in excess of, $20,000,000 in the aggregate at any time outstanding.

     9.02 Consolidation,  Merger, Purchase or Sale of Assets, etc. The Borrowers
will not, and will not permit any of their  respective  Restricted  Subsidiaries
to, wind up,  liquidate or dissolve its affairs or enter into any transaction of
merger or  consolidation,  or convey,  sell,  lease or otherwise  dispose of (or
agree to do any of the  foregoing  at any  future  time)  all or any part of its
property  or assets  (other  than the  liquidation  of Cash  Equivalents  in the
ordinary course of business), or enter into any sale-leaseback transactions,  or
purchase or otherwise  acquire (in one or a series of related  transactions) any
part of the property or assets (other than  purchases or other  acquisitions  of
inventory,  materials,  equipment, furniture, fixtures, and intangible assets in
the ordinary course of business) of any Person, except that:

          (i)  Capital  Expenditures  by  the  Borrowers  and  their  Restricted
     Subsidiaries  shall be  permitted to the extent not in violation of Section
     9.07;



                                      -54-
<PAGE>

               (ii) each of the Borrowers and their Restricted  Subsidiaries may
          (x) in the  ordinary  course of  business,  sell,  lease or  otherwise
          dispose  of any  assets  which,  in the  reasonable  judgment  of such
          Person,  are  obsolete,  worn out or otherwise no longer useful in the
          conduct  of such  Person's  business,  (y)  sell,  lease or  otherwise
          dispose of any other assets,  provided  that each such sale,  lease or
          disposition shall be for fair market value (other than with respect to
          sales,  leases or  dispositions  in an aggregate  amount not to exceed
          $100,000  per  calendar  year) and at least  75% of the  consideration
          therefor shall be in the form of cash, and provided further,  that (A)
          except as provided in  following  clause (B), the  aggregate  Net Sale
          Proceeds of all assets subject to sales or other dispositions pursuant
          to clauses (x) and (y) shall not exceed  $15,000,000  in the aggregate
          in any Fiscal Year and (B) in addition to sales  effected  pursuant to
          preceding clause (A),  additional  assets may be sold pursuant to this
          Section   9.02(ii)   so  long  as  at  least  90%  of  the   aggregate
          consideration for any such asset sale shall be in the form of cash and
          so long as the aggregate Net Sale Proceeds of all assets sold pursuant
          to this clause (B) after the Second Restatement  Effective Date do not
          exceed  $75,000,000,  and (z) enter into transactions  permitted under
          Section 9.01(vi);

               (iii)  Investments may be made to the extent permitted by Section
          9.05;

               (iv) each of the Borrowers and their Restricted  Subsidiaries may
          lease (as lessee) real or personal property (so long as any such lease
          does not create a Capitalized  Lease  Obligation  except to the extent
          permitted by Section 9.04);

               (v) each of the Borrowers and their  Restricted  Subsidiaries may
          make sales or  transfers of  inventory  (x) in the ordinary  course of
          business  or (y) to any other  Borrower or any  Domestic  Wholly-Owned
          Subsidiary of Furniture Brands which is a Subsidiary Guarantor;

               (vi) the Borrowers and their respective  Restricted  Subsidiaries
          shall be permitted to make Permitted  Acquisitions so long as (A) such
          Permitted   Acquisitions   are   effected  in   accordance   with  the
          requirements of Section 8.14, (B) after giving effect to any Permitted
          Acquisition,  the aggregate  amount paid (including for the purpose of
          this  clause  (vi) all cash  consideration  paid,  the  amount  of all
          Indebtedness directly issued as consideration,  the face amount of all
          Permitted  Acquired Debt incurred or assumed and the fair market value
          of any merger  consideration,  but  excluding the fair market value of
          all Furniture  Brands Common Stock and/or  Qualified  Preferred  Stock
          issued as consideration therefor, in each case in connection with such
          Permitted   Acquisition)   by  the  Borrowers  and  their   Restricted
          Subsidiaries in connection with such Permitted  Acquisition  shall not
          exceed the sum of (x) the Available  Basket Amount at such time (after
          giving effect to all prior and  contemporaneous  adjustments  thereto,
          except  as a  result  of  such  Permitted  Acquisition)  and  (y)  the
          Available  Debt  Proceeds  Amount at such time (after giving effect to
          all prior and contemporaneous  adjustments thereto, except as a result
          of such Permitted Acquisition), and (C) with respect to each Permitted
          Acquisition,  no Default or Event of  Default is in  existence  at the
          time of the consummation of such Permitted  Acquisition or would exist
          after giving effect thereto;

               (vii)  Furniture  Brands  may sell or  otherwise  dispose  of any
          shares of capital stock of any Unrestricted Subsidiaries owned by it;



                                      -55-
<PAGE>

               (viii) so long as no Default or Event of Default  then  exists or
          would result  therefrom,  the  Borrowers or any Domestic  Wholly-Owned
          Subsidiary which is a Restricted Subsidiary of Furniture Brands may be
          merged  into  or  consolidated  with  any  Borrower  (so  long as such
          Borrower is the  surviving  corporation  of such  merger) or any other
          Domestic  Wholly-Owned  Subsidiary which is a Restricted Subsidiary of
          the Borrowers;

               (ix) the Borrowers and their respective  Restricted  Subsidiaries
          shall be  permitted  to merge  with  another  Person  (so long as such
          Borrower or Restricted  Subsidiary is the surviving  corporation),  so
          long as such  merger  is used to  effect a  Permitted  Acquisition  in
          compliance with Section 9.02(vi); and

               (x) the  Borrowers  may sell or  otherwise  dispose  of  Excluded
          Assets.

To the extent the Required  Banks (or, the Required  Supermajority  Banks to the
extent  required by Section  13.12(a)) waive the provisions of this Section 9.02
with  respect  to the  sale  of any  Collateral,  or any  Collateral  is sold as
permitted by this Section 9.02, such Collateral (unless sold to Furniture Brands
or a Subsidiary  of Furniture  Brands) shall be sold free and clear of the Liens
created by the Security Documents,  and the Administrative  Agent and Collateral
Agent shall be authorized  to take any actions  deemed  appropriate  in order to
effect the foregoing.

     9.03 Dividends. Furniture Brands shall not, and shall not permit any of its
Restricted Subsidiaries to, authorize, declare or pay any Dividends with respect
to Furniture Brands or any of its Restricted Subsidiaries, except that:

          (i) any  Restricted  Subsidiary  of any Borrower may pay  Dividends to
     such  Borrower  or  any  Wholly-Owned  Subsidiary  which  is  a  Restricted
     Subsidiary of the Borrowers; and

          (ii) so long as no Default or Event of Default  exists or would result
     therefrom, Furniture Brands shall be permitted to pay Dividends (including,
     without  limitation,  Dividends on Qualified  Preferred  Stock and payments
     made to repurchase or redeem outstanding capital stock of Furniture Brands)
     in an amount not to exceed  (A) the  Available  Basket  Amount on such date
     (after giving effect to all prior and  contemporaneous  reductions thereto,
     except as a result of such Dividend),  minus (B) all Guaranty Payments made
     by Furniture Brands pursuant to Section 9.10(b)(ii)(y)(A) and (B).

     9.04  Indebtedness.  Furniture  Brands will not, and will not permit any of
its Restricted  Subsidiaries to, contract,  create,  incur,  assume or suffer to
exist any Indebtedness, except:

          (i)  Indebtedness  incurred  pursuant to this  Agreement and the other
     Credit Documents;

          (ii)  Permitted  Unsecured  Indebtedness  not to exceed  in  aggregate
     principal amount $300,000,000 at any time outstanding shall be permitted on
     terms and  conditions  set forth in the  definition of Permitted  Unsecured
     Indebtedness;



                                      -56-
<PAGE>

          (iii) Existing  Indebtedness shall be permitted to the extent the same
     is listed on Schedule VII, but no refinancings or renewals thereof,  except
     as expressly permitted on such Schedule VII;

          (iv) accrued  expenses and current trade accounts  payable incurred in
     the ordinary course of business;

          (v)  Indebtedness  under Interest Rate Protection  Agreements  entered
     into in compliance with Section 8.12;

          (vi)  Indebtedness of the Borrowers and their Restricted  Subsidiaries
     evidenced by Capitalized Lease Obligations to the extent permitted pursuant
     to Section  9.01(vii),  and  Indebtedness  secured by Liens permitted under
     Section 9.01(viii) and Permitted  Acquired Debt;  provided that in no event
     shall the aggregate  principal amount of Capitalized  Lease Obligations and
     Indebtedness permitted by this clause (vii) exceed $20,000,000;

          (vii)  Indebtedness  under Currency Hedging Agreements entered into in
     compliance with Section 9.05(ix);  

          (viii)  Contingent  Obligations (a) of the Borrowers or any Restricted
     Subsidiary  as a guarantor of the lessee under any lease  pursuant to which
     the  Borrowers  or a  Restricted  Subsidiary  is the lessee so long as such
     lease  is  otherwise   permitted   hereunder,   (b)  of  Furniture   Brands
     constituting  guarantees by Furniture Brands of trade payables owing in the
     ordinary  course  of  business  by  its  Restricted  Subsidiaries,  (c)  of
     Furniture  Brands and/or  Thomasville  consisting  of guarantees  (with the
     maximum  amount  guaranteed  at any time pursuant to this clause (c) not to
     exceed  $7,500,000 in the  aggregate)  of actual or potential  claims under
     Environmental  Laws as  referenced  in Section  9.01(xv)(y)  and (d) of the
     Borrowers or any  Restricted  Subsidiary as a guarantor of the lessee under
     any lease  pursuant  to which a third  party is the lessee in an  aggregate
     amount not to exceed $25,000,000;

          (ix)  Contingent  Obligations of Furniture  Brands pursuant to (x) the
     Surviving Guaranties;  provided that the making of any payments thereunder,
     and any  renewals or  extensions  of such  Surviving  Guaranties,  shall be
     subject  to  restrictions  set  forth in  Section  9.10(b)  and (y) the Tax
     Sharing Agreements; and

          (x) Indebtedness among the Borrowers and their Restricted Subsidiaries
     to the extent permitted pursuant to Section 9.05(v).

     In  furtherance  of the  foregoing  and in no  way in  limitation  thereof,
Furniture  Brands  shall not permit  any  Unrestricted  Subsidiary  to incur any
Indebtedness  having  any  element  of  recourse  to  Furniture  Brands  or  its
Restricted Subsidiaries or to any of their assets or property.

     9.05  Investments;  etc. The Borrowers will not, and will not permit any of
their respective Restricted Subsidiaries to, directly or indirectly,  lend money
or credit or make  advances  to any  Person,  or  purchase or acquire any stock,
obligations  or  securities  of, or any other  interest  in, or make any capital
contribution  to, any other  Person,  or purchase  or own a futures  contract or
otherwise  become  liable  for  the  purchase  or  sale  of  currency  or  other


                                      -57-
<PAGE>

commodities  at a future date in the nature of a futures  contract,  or hold any
cash or Cash Equivalents (any of the foregoing,  an  "Investment"),  except that
the following shall be permitted:

          (i) the Borrowers and their  Restricted  Subsidiaries  may acquire and
     hold accounts  receivables  owing to any of them, if created or acquired in
     the ordinary course of business and payable or  dischargeable in accordance
     with customary terms;

          (ii) the Borrowers and their  Restricted  Subsidiaries may acquire and
     hold cash and Cash Equivalents (including cash and Cash Equivalents held by
     Furniture Brands on behalf of its Restricted  Subsidiaries  pursuant to the
     Cash Management System);

          (iii) Furniture Brands and its Restricted  Subsidiaries may make loans
     and  advances  in the  ordinary  course  of  business  to their  respective
     employees so long as the  aggregate  principal  amount  thereof at any time
     outstanding  (determined without regard to any write-downs or write-offs of
     such loans and advances) shall not exceed $1,000,000;

          (iv) the Borrowers may enter into Interest Rate Protection  Agreements
     to the extent permitted in Section 9.04(v);

          (v)  any  Credit  Party  or  the   Receivables   Subsidiary  may  make
     intercompany loans and advances to any other Credit Party;

          (vi) the Borrowers may (x) establish  Subsidiaries  in compliance with
     Section 9.11 and (y) make Investments therein as otherwise provided in this
     Section 9.05;

          (vii)  so long as no  Default  or Event of  Default  exists,  or would
     result therefrom,  the Borrowers and their Restricted Subsidiaries may make
     Investments  at any time in an amount  not to exceed the  Available  Basket
     Amount at such time (after giving  effect to all prior and  contemporaneous
     reductions thereto, except as a result of such Investment);

          (viii) the Borrowers and their Restricted Subsidiaries may retain cash
     consideration  plus purchase money notes derived from asset sales permitted
     pursuant to Section 9.02(ii);

          (ix) the Borrowers may enter into and perform their  obligations under
     Currency Hedging Agreements entered into in the ordinary course of business
     and consistent with past practices so long as (i) any such Currency Hedging
     Agreement  is related to income  derived  from  foreign  operations  of the
     Borrowers or any Restricted  Subsidiary  (or any Foreign Sales  Corporation
     which  is a  Restricted  Subsidiary)  or  otherwise  related  to  purchases
     permitted  hereunder from foreign  suppliers and (ii) such Currency Hedging
     Agreements  do not exceed a notional  amount  equal to  $15,000,000  in the
     aggregate at any one time;

          (x) the Borrowers and their  Restricted  Subsidiaries  may acquire and
     own investments  (including  notes or other debt obligations or securities)
     received in  connection  with the  bankruptcy  or  reorganization  of their
     suppliers and customers and in settlement of delinquent  obligations of, or
     disputes  with,  their  customers or  suppliers  in the ordinary  course of
     business;



                                      -58-
<PAGE>

          (xi) existing Investments by the Borrowers and their
       Restricted  Subsidiaries  shall be  permitted  to the  extent  listed  on
       Schedule X;

          (xii)   Furniture   Brands   shall  be   permitted   to  make  capital
     contributions  to  Foreign  Sales  Corporations  in an amount not to exceed
     $100,000 in the aggregate; and

          (xiii)  Permitted  Acquisitions  shall be permitted in compliance with
     Sections 8.14 and 9.02(vi).

     9.06  Transactions  with  Affiliates  and  Unrestricted  Subsidiaries.  The
Borrowers  will not,  and will not  permit  any of their  respective  Restricted
Subsidiaries  to, enter into any  transaction or series of related  transactions
with any Affiliate of Furniture  Brands or any of its Subsidiaries or any of its
Unrestricted Subsidiaries,  other than in the ordinary course of business and on
terms  and  conditions  substantially  as  favorable  to the  Borrowers  or such
Restricted  Subsidiary as would  reasonably be obtained by the Borrowers or such
Restricted Subsidiary at that time in a comparable arm's-length transaction with
a Person other than an Affiliate, except that:

          (i) Dividends may be paid to the extent provided in Section 9.03;

          (ii) Investments may be made to the extent permitted by Section 9.05;

          (iii) the  transactions  entered into between the  Borrowers and their
     Subsidiaries  shall be  permitted  to the  extent  expressly  permitted  by
     Section 9.02;

          (iv)  customary  fees  may be paid  to  non-officer  directors  of the
     Borrowers and their Restricted Subsidiaries;

          (v) Furniture  Brands and its Restricted  Subsidiaries  may enter into
     employment  arrangements  with respect to the  procurement of services with
     their respective officers and employees in the ordinary course of business;

          (vi) the Borrowers and their  respective  Restricted  Subsidiaries may
     make  capital   contributions  to  any  of  their   respective   Restricted
     Subsidiaries which is a Credit Party;

          (vii)  existing   transactions   between   Furniture  Brands  and  its
     Subsidiaries  and their  Affiliates shall be permitted to the extent listed
     on Schedule XI;

          (viii)  Furniture  Brands may sell or issue  Furniture  Brands  Common
     Stock and  Qualified  Preferred  Stock to its  Affiliates  (other  than its
     Subsidiaries); and

          (ix) Furniture Brands may modify the Tax Sharing Agreement as provided
     in Section 9.10(c).

     Except as specifically  provided above, no management or similar fees shall
be paid or payable by Furniture Brands or any of its Restricted  Subsidiaries to
any Affiliate (other than Furniture Brands).

     Notwithstanding  anything  contained in the foregoing to the contrary,  any
transactions  between and among Furniture Brands and/or Restricted  Subsidiaries


                                      -59-
<PAGE>

on the one hand  and any of their  respective  Affiliates  (excluding  Furniture
Brands and its Restricted Subsidiaries) on the other hand, shall be arm's-length
transactions  and on terms and  conditions  at least as  favorable  to Furniture
Brands and/or such  Restricted  Subsidiaries  as the terms and conditions  which
would apply to a similar transaction on an arm's-length basis with a Person that
is not an Affiliate; provided, that, any transaction (other than as described in
clauses (i), (ii),  (iii) and (vi) above)  between and among the  aforementioned
parties  with a value in excess  of  $1,000,000  shall  only be  permitted  if a
majority  of  the  disinterested  directors  of  Furniture  Brands  approve  the
transaction.

     9.07 Capital Expenditures.  (a) The Borrowers will not, and will not permit
any  of  their   respective   Restricted   Subsidiaries  to,  make  any  Capital
Expenditures,  except that the Borrowers and their  Restricted  Subsidiaries may
make  Capital  Expenditures  so long as the  aggregate  amount  of such  Capital
Expenditures made pursuant to this clause (a) does not exceed $80,000,000 in any
Fiscal Year (beginning with the Fiscal Year ended in 1998).

     (b) In  addition  to the  Capital  Expenditures  permitted  pursuant to the
preceding clause (a), the Borrowers and their respective Restricted Subsidiaries
shall  be  permitted  to make  additional  Capital  Expenditures  to the  extent
consisting of the reinvestment of proceeds of Recovery Events not required to be
applied  as  a  mandatory  repayment  pursuant  to  the  provisions  of  Section
4.02(A)(d).

     9.08  Consolidated  Net Interest  Coverage  Ratio.  The Borrowers  will not
permit  the  Consolidated  Net  Interest  Coverage  Ratio for any period of four
consecutive fiscal quarters,  in each case taken as one accounting period, ended
on the last day of a fiscal  quarter  set forth below to be less than the amount
set forth opposite such period below:

                  Fiscal Quarter
                  Ended Closest to                      Ratio

                  June 30, 1998                       3.00:1.00
                  September 30, 1998                  3.25:1.00
                  December 31, 1998                   3.25:1.00
                  March 31, 1999                      3.50:1.00
                      and the last day of
                      each fiscal quarter thereafter

     9.09 Maximum  Leverage  Ratio.  The Borrowers  will not permit the Leverage
Ratio at any time to be  greater  than the ratio set forth  opposite  the fiscal
quarter most recently ended as set forth below:

                  Fiscal Quarter
                  Ended Closest to                      Ratio

                  June 30, 1998                       4.50:1.00
                  September 30, 1998                  4.35:1.00
                  December 31, 1998                   4.25:1.00
                  March 31, 1999                      4:00:1.00
                      and the last day of each
                      fiscal quarter thereafter



                                      -60-
<PAGE>

     9.10  Limitation  on  Modifications  of and  Payments on  Indebtedness  and
Qualified  Preferred  Stock;  Modifications  of  Certificate  of  Incorporation,
By-Laws and Certain Other Agreements;  Surviving Guaranty Payments, etc. (a) The
Borrowers  will not,  and will not  permit  any of their  respective  Restricted
Subsidiaries  to, (i) make (or give any notice in respect of) any  voluntary  or
optional  payment or prepayment on or redemption,  repurchase or acquisition for
value of any of the Existing Indebtedness,  or after the incurrence thereof, any
Permitted Unsecured  Indebtedness (any such payment,  prepayment,  redemption or
acquisition,  a "Restricted  Junior Payment"),  if at such time (x) a Default or
Event of Default then exists or arises  therefrom or (y) such Restricted  Junior
Payment shall exceed an amount equal to the then Available  Basket Amount (after
giving effect to all prior or contemporaneous  adjustments thereto,  except as a
result of such Restricted  Junior Payment),  (ii) amend or modify, or permit the
amendment or  modification  of, any provision of the Existing  Indebtedness  or,
after the incurrence or issuance thereof, any Permitted Unsecured  Indebtedness,
or Qualified Preferred Stock or of any agreement (including, without limitation,
any  purchase  agreement,  indenture,  loan  agreement,  security  agreement  or
certificate  of  designation)  relating  thereto,  other than any  amendments or
modifications to the Existing Indebtedness, any Permitted Unsecured Indebtedness
or any  Qualified  Preferred  Stock which (A) do not make any term or  condition
thereof more restrictive than the previously  existing terms and conditions with
respect thereto, (B) do not in any way materially adversely affect the interests
of the Banks and (C) do not increase the interest or dividend  rates  applicable
thereunder,  reduce the  maturity  date  thereunder  or change  any  pay-in-kind
mechanics or requirements or any subordination  provision thereof or (iii) amend
or modify its Certificate of Incorporation  (including,  without limitation,  by
the filing or modification  of any  certificate of  designation,  other than any
certificate of designation relating to Qualified Preferred Stock) or By-Laws, or
any  agreement  entered into by it, with  respect to its capital  stock or enter
into any new agreement with respect to its capital stock if the foregoing  would
in any way materially and adversely affect the Banks.

     (b) Furniture Brands will not (i) amend, extend, renew or modify, or permit
the  amendment,  extension,  renewal or  modification  of, any  provision of the
Surviving  Guaranties  (or  any  lease  obligation  guarantied  thereby)  or any
agreement  relating  thereto,  other than any  renewal or  extension  of a lease
obligation  guarantied by any Surviving  Guaranty pursuant to the renewal and/or
extension  provisions  contained therein as in effect on the Original  Effective
Date which (a) creates a  continuing  guaranty  obligation  with respect to such
existing lease (without any amendments thereto which would increase the lessee's
obligations thereunder), (b) is exercised (x) not more than 30 days prior to the
last day on which such extension or renewal may be exercised in accordance  with
the terms of the lease  relating  thereto  and (y) at a time when no  Default or
Event of Default then exists or arises  therefrom  and (c) creates  future fixed
payment  obligations  with respect thereto which,  when combined with all future
fixed payment  obligations  under renewals and/or  extensions made in compliance
with this  Section  9.10(b)(i),  would not exceed  $10,000,000  or (ii) make any
payment whatsoever, whether voluntary, mandatory or otherwise, in respect of the
Surviving  Guaranties (any such payment,  a "Guaranty  Payment") if at such time
(x) a Default or Event of Default  then exists or arises  therefrom  or (y) such
payment  shall  exceed an  amount  equal to the sum of (A)  $5,000,000  less the
amount of all Guaranty  Payments  theretofore made after the Second  Restatement
Effective  Date pursuant to this clause (A), plus (B) at any time, the aggregate
amount of Dividends which could be made pursuant to Section 9.03(ii).

     (c) The  Borrowers  will not,  and will not permit any of their  respective
Restricted  Subsidiaries  to,  amend,  modify or change any provision of any Tax


                                      -61-
<PAGE>

Sharing  Agreement  other  than any  amendment,  modification  or change  deemed
immaterial  by the  Administrative  Agent or as  otherwise  consented  to by the
Required Banks.

     9.11 Limitation on Creation or Acquisition of  Subsidiaries  and Restricted
Subsidiaries.  The  Borrowers  will  not,  and  will  not  permit  any of  their
respective  Restricted  Subsidiaries to, establish,  create or acquire after the
Fourth Restatement Effective Date any Subsidiary,  unless (x) if such Subsidiary
is an Unrestricted  Subsidiary (other than a Foreign Sales Corporation),  (i) it
is established,  created or acquired by Furniture Brands or another Unrestricted
Subsidiary, (ii) if owned by Furniture Brands, 100% of the capital stock of such
new Unrestricted  Subsidiary owned by Furniture Brands shall be pledged pursuant
to the Pledge Agreement and the certificates  representing such stock,  together
with stock powers duly executed in blank,  shall be delivered to the  Collateral
Agent and (iii)  such  Unrestricted  Subsidiary  shall,  at the  request  of the
Administrative  Agent,  become a party to a Tax Sharing  Agreement,  (y) if such
Subsidiary is a Restricted  Subsidiary (other than a Foreign Sales Corporation),
(i) at least 10 Business  Days'  prior  written  notice  thereof is given to the
Administrative  Agent and the Banks,  (ii) 100% of the capital stock of such new
Subsidiary  is pledged  pursuant to the Pledge  Agreement  and the  certificates
representing such stock,  together with stock powers duly executed in blank, are
delivered  to the  Collateral  Agent and (iii)  such new  Restricted  Subsidiary
executes a counterpart of the Subsidiary  Guaranty,  the Security  Agreement and
the Pledge  Agreement or (z) if such Subsidiary is a Foreign Sales  Corporation,
any  Investment  therein  is made  in  accordance  with  Section  9.05(xii).  In
addition,  each new Restricted Subsidiary shall execute and deliver, or cause to
be  executed  and  delivered,  all  other  relevant  documentation  of the  type
described  in  Section 5 as such new  Restricted  Subsidiary  would  have had to
deliver if such new Restricted  Subsidiary were a Restricted Subsidiary and/or a
Subsidiary Guarantor on the Fourth Restatement Effective Date.

     9.12  Limitation on Issuance of Capital Stock.  (a) Furniture  Brands shall
not issue (i) any Preferred Stock (other than Qualified Preferred Stock) or (ii)
any  redeemable  common  stock  unless,  in either case,  all terms  thereof are
satisfactory  to the Required  Banks in their sole  discretion.  Notwithstanding
anything  to the  contrary  contained  in the  immediately  preceding  sentence,
Furniture Brands may adopt a shareholders'  rights plan and,  pursuant  thereto,
may from time to time issue rights to purchase  common  stock  and/or  Preferred
Stock of Furniture Brands to its shareholders.

     (b) No Restricted Subsidiary of Furniture Brands shall issue, or permit any
of their  Restricted  Subsidiaries to issue, any capital stock (including by way
of sales  of  treasury  stock)  or any  options  or  warrants  to  purchase,  or
securities  convertible  into,  capital  stock,  except  (i) for  transfers  and
replacements of then outstanding shares of capital stock, (ii) for stock splits,
stock  dividends and additional  issuances  which do not decrease the percentage
ownership of Furniture Brands or any of its Restricted Subsidiaries in any class
of the capital stock of such Restricted Subsidiaries, (iii) to qualify directors
to the extent  required by  applicable  law,  and (iv)  Restricted  Subsidiaries
formed after the Fourth Restatement  Effective Date pursuant to Section 9.11 may
issue capital stock to the Borrowers or the respective  Restricted Subsidiary of
the Borrowers which is to own such stock in accordance with the  requirements of
Section 9.11. All capital stock issued in accordance  with this Section  9.12(b)
shall,  to the extent  required by the Pledge  Agreement,  be  delivered  to the
Collateral Agent for pledge pursuant to the Pledge Agreement.



                                      -62-
<PAGE>

     9.13  Business.  The  Borrowers  will not, and will not permit any of their
Restricted  Subsidiaries  to, engage  (directly or  indirectly)  in any business
other than substantially the same lines of business in which they are engaged on
the Fourth  Restatement  Effective Date and reasonable  extensions  thereof.  No
Restricted  Subsidiary  of Furniture  Brands  will,  or will permit any of their
Restricted  Subsidiaries  to, create or own any Unrestricted  Subsidiaries.  The
Foreign Sales Corporation will not engage in any business other than the sale of
goods and/or services  outside of the United States and any business  reasonably
incidental to the foregoing.

     9.14 Limitation on Certain Restrictions on Subsidiaries.  (a) The Borrowers
will not, and will not permit any of their  respective  Restricted  Subsidiaries
to,  directly or  indirectly,  create or  otherwise  cause or suffer to exist or
become  effective,  except as set forth on Schedule  XIII,  any  encumbrance  or
restriction  on the  ability  of  any  such  Restricted  Subsidiary  to (x)  pay
dividends  or make any other  distributions  on its  capital  stock or any other
interest  or  participation  in its  profits  owned by  Furniture  Brands or any
Restricted  Subsidiary  of Furniture  Brands,  or pay any  Indebtedness  owed to
Furniture Brands or a Restricted  Subsidiary of Furniture Brands, (y) make loans
or  advances  to  Furniture  Brands  or  any  of  Furniture  Brands'  Restricted
Subsidiaries  or (z)  transfer  any of its  properties  or assets  to  Furniture
Brands, except for such encumbrances or restrictions existing under or by reason
of (i) applicable law, (ii) this Agreement and the other Credit Documents, (iii)
customary provisions restricting subletting or assignment of any lease governing
a  leasehold  interest  of  the  Borrowers  or a  Restricted  Subsidiary  of the
Borrowers, and (iv) customary provisions restricting assignment of any licensing
agreement  entered into by the  Borrowers or any  Restricted  Subsidiary  of the
Borrowers in the ordinary course of business.

     (b) Furniture Brands will not permit any of its  Unrestricted  Subsidiaries
to,  directly or  indirectly,  create or  otherwise  cause or suffer to exist or
become  effective  any  restriction  whatsoever  on the  operations of Furniture
Brands and/or its Restricted Subsidiaries.

     SECTION 10. Events of Default.  Upon the occurrence of any of the following
specified events (each an "Event of Default"):

     10.01 Payments.  The Borrowers shall (i) default in the payment when due of
any  principal of any Loan or any Note or (ii)  default,  and such default shall
continue  unremedied for three or more Business Days, in the payment when due of
any Unpaid  Drawings or  interest on any Loan or Note,  or any Fees or any other
amounts owing hereunder or thereunder; or

     10.02 Representations, etc. Any representation,  warranty or statement made
by any Credit Party herein or in any other Credit Document or in any certificate
delivered  pursuant  hereto or thereto  shall prove to be untrue in any material
respect on the date as of which made or deemed made; or

     10.03 Covenants.  The Borrowers shall (i) default in the due performance or
observance  by it of any  term,  covenant  or  agreement  contained  in  Section
8.01(g)(i),  8.08,  8.12, 8.13, 8.14, 8.15, 8.16 or Section 9 or (ii) default in
the due performance or observance by it of any other term, covenant or agreement
contained in this  Agreement and such default shall  continue  unremedied  for a
period of 30 days after written  notice to the  Borrowers by the  Administrative
Agent or any Bank; or

     10.04  Default  Under  Other  Agreements.  The  Borrowers  or any of  their
respective  Restricted  Subsidiaries  shall (i)  default  in any  payment of any
Indebtedness  (other than the  Obligations)  beyond the period of grace, if any,


                                      -63-
<PAGE>

provided  in the  instrument  or  agreement  under which such  Indebtedness  was
created or (ii) default in the  observance  or  performance  of any agreement or
condition relating to any Indebtedness (other than the Obligations) or contained
in any instrument or agreement evidencing,  securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or other
event or  condition  is to cause,  or to permit  the  holder or  holders of such
Indebtedness  (or a trustee  or agent on behalf of such  holder or  holders)  to
cause  (determined  without regard to whether any notice is required),  any such
Indebtedness  to  become  due  prior  to  its  stated  maturity,  or  (iii)  any
Indebtedness  (other  than the  Obligations)  of the  Borrowers  or any of their
respective  Restricted  Subsidiaries shall be declared to be due and payable, or
required to be prepaid other than by a regularly scheduled required  prepayment,
prior to the  stated  maturity  thereof,  provided  that  (x) it shall  not be a
Default  or Event of Default  under  this  Section  10.04  unless the  aggregate
principal  amount of all  Indebtedness  as described  in  preceding  clauses (i)
through (iii), inclusive, is at least $10,000,000; or

     10.05   Bankruptcy,   etc.  The  Borrowers  or  any  of  their   respective
Subsidiaries shall commence a voluntary case concerning itself under Title 11 of
the United States Code entitled  "Bankruptcy," as now or hereafter in effect, or
any  successor  thereto  (the  "Bankruptcy  Code");  or an  involuntary  case is
commenced against the Borrowers or any of their respective  Subsidiaries and the
petition is not controverted within 30 days, or is not dismissed within 60 days,
after  commencement  of the case; or a custodian  (as defined in the  Bankruptcy
Code) is  appointed  for, or takes  charge of, all or  substantially  all of the
property  of the  Borrowers  or any of  their  respective  Subsidiaries,  or the
Borrowers or any of their respective Subsidiaries commences any other proceeding
under any  reorganization,  arrangement,  adjustment of debt, relief of debtors,
dissolution,  insolvency  or  liquidation  or  similar  law of any  jurisdiction
whether now or  hereafter  in effect  relating to the  Borrowers or any of their
respective  Subsidiaries,  or there is commenced against the Borrowers or any of
their respective  Subsidiaries any such proceeding which remains undismissed for
a period of 60 days, or the Borrowers or any of their respective Subsidiaries is
adjudicated  insolvent  or  bankrupt;  or any  order of  relief  or other  order
approving  any such case or  proceeding  is entered;  or the Borrowers or any of
their  respective  Subsidiaries  suffers any appointment of any custodian or the
like for it or any substantial part of its property to continue  undischarged or
unstayed for a period of 60 days;  or the  Borrowers or any of their  respective
Subsidiaries  makes a general  assignment  for the benefit of creditors;  or any
corporate  action  is  taken  by  the  Borrowers  or  any  of  their  respective
Subsidiaries for the purpose of effecting any of the foregoing; or

     10.06 ERISA. (a) Any Plan,  Multiemployer  Plan,  and/or Spunoff Plan shall
fail to satisfy the minimum funding standard  required for any plan year or part
thereof or a waiver of such standard or extension of any amortization  period is
sought or granted under Section 412 of the Code,  any Plan,  Multiemployer  Plan
and/or  Spunoff Plan shall have had or is likely to have a trustee  appointed to
administer such Plan, Multiemployer Plan and/or Spunoff Plan pursuant to Section
4042 of ERISA, any Plan,  Multiemployer Plan and/or Spunoff Plan shall have been
or is reasonably  expected to be terminated or to be the subject of  termination
proceedings  under Section 4042 of ERISA,  any Plan,  Multiemployer  Plan and/or
Spunoff Plan shall have an Unfunded Current Liability,  a contribution  required
to be made to a Plan,  Multiemployer  Plan,  Spunoff Plan and/or Foreign Pension
Plan has not been timely made, the Borrowers or any their respective  Restricted
Subsidiaries  or any ERISA  Affiliate has incurred or is reasonably  expected to
incur a liability to or on account of a Plan,  Multiemployer Plan and/or Spunoff


                                      -64-
<PAGE>

Plan under Section 409, 502(i),  502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204
or 4212 of ERISA or  Section  401(a)(29),  4971,  4975 or 4980 of the Code,  the
Borrowers or any of their respective Restricted  Subsidiaries has incurred or is
reasonably  expected  to  incur  liabilities  pursuant  to one or more  employee
welfare  benefit  plans (as  defined in  Section  3(1) of ERISA)  which  provide
benefits to retired  employees or other former employees (other than as required
by  Section  601 of ERISA) or  employee  pension  benefit  plans (as  defined in
Section 3(2) of ERISA) or Foreign Pension Plans, (b) there shall result from any
such  event or events  the  imposition  of a lien,  the  granting  of a security
interest, or a liability or a material risk of incurring a liability; (c) and in
each  case in  clauses  (a) and (b)  above,  such  lien,  security  interest  or
liability, individually, and/or in the aggregate, in the opinion of the Required
Banks, will have a Material Adverse Effect; or

     10.07  Security  Documents.  At any time after the  execution  and delivery
thereof,  any of the  Security  Documents  shall  cease to be in full  force and
effect,  or shall cease in any material respect to give the Collateral Agent for
the benefit of the Secured  Creditors the Liens,  rights,  powers and privileges
purported to be created  thereby  (including,  without  limitation,  a perfected
security  interest  in,  and Lien on,  all of the  Collateral),  in favor of the
Collateral  Agent,  superior  to and prior to the  rights  of all third  Persons
(except as permitted by Section 9.01),  and subject to no other Liens (except as
permitted  by  Section  9.01),  or any  Credit  Party  shall  default in the due
performance  or observance of any term,  covenant or agreement on its part to be
performed or observed pursuant to any of the Security Documents and such default
shall continue beyond any grace period specifically  applicable thereto pursuant
to the terms of such Security Document; or

     10.08 Subsidiary Guaranty. The Subsidiary Guaranty or any provision thereof
shall cease to be in full force or effect as to any Subsidiary Guarantor, or any
Subsidiary  Guarantor  or  Person  acting  by or on  behalf  of such  Subsidiary
Guarantor shall deny or disaffirm such Subsidiary Guarantor's  obligations under
the Subsidiary  Guaranty,  or any Subsidiary  Guarantor shall default in the due
performance  or observance of any term,  covenant or agreement on its part to be
performed or observed pursuant to the Subsidiary Guaranty; or

     10.09 Judgments.  One or more judgments or decrees shall be entered against
the Borrowers or any of their respective  Restricted  Subsidiaries  involving in
the aggregate for the Borrowers and their respective  Restricted  Subsidiaries a
liability  (not paid or fully  covered  by a  reputable  and  solvent  insurance
company) and such judgments and decrees either shall be final and non-appealable
or shall not be vacated,  discharged or stayed or bonded  pending appeal for any
period of 60 consecutive  days,  and the aggregate  amount of all such judgments
exceeds $10,000,000; or

     10.10 Change of Control. A Change of Control shall occur; or

     10.11 Tax Sharing Agreement. One or more parties to a Tax Sharing Agreement
(other than Borrowers or any of their respective Restricted  Subsidiaries) shall
have  defaulted in its or their payment  obligations  (other than  reimbursement
obligations  in respect of payments made under the Surviving  Guaranties)  in an
aggregate amount equal to or greater than $5,000,000 thereunder and such default
or defaults shall remain  unremedied  for a period in excess of ten  consecutive
Business Days;

then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing,  the Administrative Agent, upon the written request of
the Required Banks, shall by written notice to the Borrowers, take any or all of
the following actions, without prejudice to the rights of any Agent, any Bank or
the holder of any Note to enforce its claims against any Credit Party  (provided
that, if an Event of Default specified in Section 10.05 shall occur with respect
to the  Borrowers,  the result of which  would  occur upon the giving of written
notice by the Administrative  Agent to the Borrowers as specified in clauses (i)
and (ii) below shall occur automatically without the giving of any such notice):
(i) declare the Total  Commitment  terminated,  whereupon the Commitment of each
Bank shall forthwith  terminate  immediately  and any Commitment  Commission and
other Fees shall  forthwith  become due and payable  without any other notice of
any kind;  (ii) declare the principal of and any accrued  interest in respect of
all Loans and the Notes and all  Obligations  owing  hereunder and thereunder to
be,  whereupon  the  same  shall  become,  forthwith  due  and  payable  without
presentment,  demand,  protest  or other  notice of any  kind,  all of which are


                                      -65-
<PAGE>

hereby waived by each Credit Party;  (iii)  terminate any Letter of Credit which
may be terminated in accordance with its terms; (iv) direct the Borrowers to pay
(and  the  Borrowers  agree  that  upon  receipt  of such  notice,  or upon  the
occurrence of an Event of Default specified in Section 10.05 with respect to the
Borrowers,  they will pay) to the  Collateral  Agent at the Payment  Office such
additional amount of cash, to be held as security by the Collateral Agent, as is
equal to the  aggregate  Stated  Amount of all Letters of Credit  issued for the
account of the Borrowers and all Acceptances then outstanding;  (v) enforce,  as
Collateral  Agent, all of the Liens and security  interests  created pursuant to
the Security Documents;  and (vi) apply any cash collateral held for the benefit
of the Banks pursuant to Section 4.02 to repay outstanding Obligations.

     SECTION 11. Definitions and Accounting Terms.

     11.01 Defined Terms. As used in this  Agreement,  the following terms shall
have the following  meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):

     "Acceptance" shall have the meaning provided in Section 2.01(a).

     "Acceptance  Facing  Fee" shall  having  the  meaning  provided  in Section
3.01(c).

     "Acceptance Fee" shall have the meaning provided in Section 3.01(b).

     "Action" shall mean Action Industries, Inc., a Mississippi corporation.

     "Additional  Collateral" shall mean all property (whether real or personal)
in which  security  interests are granted (or have been purported to be granted)
(and continue to be in effect at the time of determination)  pursuant to Section
8.11.

     "Additional Mortgage" shall have the meaning provided in Section 8.11(a).

     "Additional  Mortgaged Property" shall have the meaning provided in Section
8.11(a).

     "Additional   Security   Documents"   shall  mean  all  mortgages,   pledge
agreements,  security  agreements  and other  security  documents  entered  into
pursuant to Section 8.11 with respect to Additional Collateral.

     "Adjusted  Certificate  of Deposit  Rate" shall mean,  on any day,  the sum
(rounded to the nearest  1/100 of 1%) of (1) the rate  obtained by dividing  (x)
the most recent weekly average dealer offering rate for negotiable  certificates
of deposit with a three-month  maturity in the secondary  market as published in
the most recent Federal Reserve System  publication  entitled  "Select  Interest
Rates,"  published  weekly  on  Form  H.15  as of the  date  hereof,  or if such
publication or a substitute  containing the foregoing rate information shall not
be  published by the Federal  Reserve  System for any week,  the weekly  average


                                      -66-
<PAGE>

offering rate determined by the Administrative  Agent on the basis of quotations
for such  certificates  received by it from three certificate of deposit dealers
in New York of recognized standing or, if such quotations are unavailable,  then
on the basis of other sources reasonably  selected by the Administrative  Agent,
by (y) a percentage  equal to 100% minus the stated  maximum rate of all reserve
requirements  as  specified  in  Regulation  D  applicable  on  such  day  to  a
three-month  certificate  of deposit  of a member  bank of the  Federal  Reserve
System in excess of  $100,000  (including,  without  limitation,  any  marginal,
emergency, supplemental, special or other reserves), plus (2) the then daily net
annual assessment rate as estimated by the Administrative  Agent for determining
the current annual assessment payable by the Administrative Agent to the Federal
Deposit Insurance Corporation for insuring three-month certificates of deposit.

     "Adjusted Percentage" shall mean (x) at a time when no Bank Default exists,
for each Bank,  such  Bank's  Percentage  and (y) at a time when a Bank  Default
exists (i) for each Bank that is a Defaulting  Bank, zero and (ii) for each Bank
that is a Non-Defaulting Bank, the percentage determined by dividing such Bank's
Revolving  Loan  Commitment at such time by the Adjusted  Total  Revolving  Loan
Commitment  at such time,  it being  understood  that all  references  herein to
Revolving Loan Commitments and the Adjusted Total Revolving Loan Commitment at a
time when the Total  Revolving Loan  Commitment or Adjusted Total Revolving Loan
Commitment,  as the case may be, has been terminated  shall be references to the
Revolving Loan Commitments or Adjusted Total Revolving Loan  Commitment,  as the
case may be, in effect immediately prior to such termination,  provided that (A)
no Bank's Adjusted Percentage shall change upon the occurrence of a Bank Default
from that in effect  immediately prior to such Bank Default,  to the extent such
change after giving effect to such Bank Default,  and any repayment of Revolving
Loans and Swingline Loans at such time pursuant to Section 4.02(a) or otherwise,
would  cause  the sum of (i)  the  aggregate  outstanding  principal  amount  of
Revolving Loans of all Non-Defaulting Banks plus (ii) the aggregate  outstanding
principal   amount  of   Swingline   Loans  plus  (iii)  the  Letter  of  Credit
Outstandings,  to exceed the Adjusted Total Revolving Loan  Commitment;  (B) any
changes to the Adjusted  Percentage  that would have become  effective  upon the
occurrence  of a Bank  Default but that did not become  effective as a result of
the  preceding  clause (A) shall  become  effective  on the first date after the
occurrence  of the relevant  Bank Default on which the sum of (i) the  aggregate
outstanding  principal amount of the Revolving Loans of all Non-Defaulting Banks
plus (ii) the aggregate  outstanding  principal  amount of Swingline  Loans plus
(iii) the Letter of Credit  Outstandings  is equal to or less than the  Adjusted
Total Revolving Loan Commitment; and (C) if (i) a Non-Defaulting Bank's Adjusted
Percentage  is  changed  pursuant  to the  preceding  clause  (B) and  (ii)  any
repayment of such Bank's  Revolving Loans, or of Unpaid Drawings with respect to
Letters  of Credit or of  Swingline  Loans,  that were made  during  the  period
commencing after the date of the relevant Bank Default and ending on the date of
such change to its Adjusted  Percentage  must be returned to the  Borrowers as a
preferential or similar  payment in any bankruptcy or similar  proceeding of the
Borrowers,  then the change to such  Non-Defaulting  Bank's Adjusted  Percentage
effected  pursuant to said clause (B) shall be reduced to that positive  change,
if  any,  as  would  have  been  made to its  Adjusted  Percentage  if (x)  such
repayments  had not  been  made  and  (y) the  maximum  change  to its  Adjusted
Percentage  would  have  resulted  in the sum of the  outstanding  principal  of
Revolving  Loans made by such Bank plus such Bank's new Adjusted  Percentage  of
the  outstanding  principal  amount of  Swingline  Loans and of Letter of Credit
Outstandings equaling such Bank's Revolving Loan Commitment at such time.



                                      -67-
<PAGE>

     "Adjusted Total Revolving Loan Commitment" shall mean at any time the Total
Revolving Loan Commitment less the aggregate  Revolving Loan  Commitments of all
Defaulting Banks.

     "Administrative Agent" shall mean Bankers Trust Company, in its capacity as
Administrative Agent for the Banks hereunder, and shall include any successor to
the Administrative Agent appointed pursuant to Section 12.09.

     "Affiliate"  shall  mean,  with  respect to any  Person,  any other  Person
(including,  for  purposes of Section  9.06 only,  all  directors,  officers and
partners of such Person) directly or indirectly  controlling,  controlled by, or
under direct or indirect  common control with, such Person;  provided,  however,
that for  purposes of Section  9.06,  an  Affiliate  of  Furniture  Brands shall
include any Person that directly or indirectly owns more than 5% of any class of
the capital  stock of Furniture  Brands and any officer or director of Furniture
Brands or any such Person. A Person shall be deemed to control another Person if
such Person possesses,  directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person,  whether  through
the ownership of voting securities, by contract or otherwise.

     "Agents" shall mean any of the Administrative  Agent, the Collateral Agent,
the Documentation Agent and the Syndication Agent.

     "Agreement"  shall mean this Credit Agreement,  as modified,  supplemented,
amended, restated, extended, renewed or replaced from time to time.

     "Alternate  Currency"  shall mean each of Deutsche  Marks,  Dutch Guilders,
Japanese Yen, Hong Kong Dollars,  Korean Won, Mexican Pesos,  Canadian  Dollars,
French Francs and British Pounds  Sterling and such other  currencies  which are
readily convertible into Dollars.

     "Alternate  Receivables  Purchase  Agreement"  shall mean that  Receivables
Purchase  Agreement,  dated as of  November  15,  1994,  among  the  Receivables
Subsidiary,  as Seller, and Credit Lyonnais,  as Purchaser and Agent, as amended
and restated as of December 29, 1995, as same may be further  amended,  modified
or  supplemented  from  time to time in  compliance  with  Section  9.10,  or as
replaced in compliance with the definition of Receivables Facility.

     "Applicable  Margin"  shall  mean (A) in the  case of  Revolving  Loans,  a
percentage  per annum  equal to (i) in the case of Base Rate  Loans,  0.125% and
(ii) in the case of  Eurodollar  Loans,  1.125%,  in each case  reduced (but not
below zero) by the then applicable Reduction Percentage,  if any, and (B) in the
case of Term Loans, a percentage per annum equal to (i) in the case of Base Rate
Loans, 0.75% and (ii) in the case of Eurodollar Loans, 1.75%.

     "Armstrong  Stock  Purchase   Agreement"  shall  mean  the  Stock  Purchase
Agreement,  dated  as of  November  18,  1995,  by  and  among  Armstrong  World
Industries, Inc., Armstrong Enterprises, Inc. and Furniture Brands.

     "Assignment  and  Assumption  Agreement"  shall  mean  the  Assignment  and
Assumption  Agreement  substantially  in the form of  Exhibit  L  (appropriately
completed).



                                      -68-
<PAGE>

     "Atlantic"  shall mean  Atlantic  Asset  Securitization  Corp.,  a Delaware
corporation.

     "Atlantic  Receivables  Purchase  Agreement"  shall  mean  the  Receivables
Purchase  Agreement,  dated as of  November  15,  1994,  among  the  Receivables
Subsidiary,  Atlantic,  as Purchaser,  and Credit Lyonnais, as Agent, as amended
and restated as of December 29, 1995 as same may be further amended, modified or
supplemented from time to time.

     "Authorized  Representative"  shall mean,  with  respect to (i)  delivering
Notices of  Borrowing,  Notices of  Conversion,  Letter of Credit  Requests  and
similar  notices,  any person or persons that has or have been authorized by the
respective  boards of the  Borrowers to deliver  such  notices  pursuant to this
Agreement  and that has or have  appropriate  signature  cards on file  with the
Administrative  Agent,  BTCo and each Issuing Bank;  (ii)  delivering  financial
information and officer's certificates pursuant to this Agreement, any financial
officer of Furniture  Brands and (iii) any other matter in connection  with this
Agreement or any other Credit  Document,  any officer (or a person or persons so
designated by any two officers) of Furniture Brands.

     "Available  Basket  Amount"  shall mean, on any date of  determination,  an
amount  equal to zero,  plus (i)  $50,000,000,  plus (ii) all Net Cash  Proceeds
received  by  Furniture  Brands  from  issuances  of common  stock or  Qualified
Preferred  Stock by  Furniture  Brands  (including  pursuant to any  exercise of
options or warrants to purchase  such stock)  after June 30, 1998 plus (iii) the
Consolidated  Cumulative 50% Net Income  Amount,  minus (iv) any amounts used to
effect  Permitted  Acquisitions  pursuant to clause  (B)(x) of Section  9.02(vi)
after the Fourth Restatement  Effective Date and on or prior to such date, minus
(v) any Dividend  payments made by Furniture Brands pursuant to Section 9.03(ii)
after the Fourth Restatement  Effective Date and on or prior to such date, minus
(vi) any Investments by the Borrowers or their Restricted  Subsidiaries pursuant
to Section 9.05(vii) after the Fourth Restatement Effective Date and on or prior
to such date,  minus (vii) any  Restricted  Junior  Payments  made by  Furniture
Brands or its Restricted  Subsidiaries  after the Fourth  Restatement  Effective
Date and on or prior to such date  pursuant  to  Section  9.10(a)  minus  (viii)
Guaranty Payments made by the Borrowers or their Restricted  Subsidiaries  after
the Fourth  Restatement  Effective Date and on or prior to such date pursuant to
Section 9.10(b)(ii)(y)(B).

     "Available Debt Proceeds Amount" shall mean, on any date of  determination,
an  amount  equal  to  zero,  plus (i) all Net  Cash  Proceeds  received  by the
Borrowers  after  the  Fourth  Restatement  Effective  Date  from  the  issuance
Permitted Unsecured Indebtedness pursuant to Section 9.04(ii) retained by any of
the  Borrowers  on or prior to such  date and not  required  to be used to repay
Loans on or prior to such date  pursuant to Section  4.02(A)(b),  minus (ii) any
amounts  used to effect  Permitted  Acquisitions  pursuant  to clause  (B)(y) of
Section  9.02(vi) on or prior to such date;  provided  that,  at the time of the
consummation  of any Permitted  Acquisition,  the Available Debt Proceeds Amount
shall be  increased  by the face amount of  Permitted  Acquired  Debt (not being
issued in return for Net Cash Proceeds) being incurred  pursuant  thereto and by
the  aggregate  principal  amount  of  Permitted  Unsecured  Indebtedness  being
directly issued as  consideration  in respect of such Permitted  Acquisition (so
long as no Net Cash  Proceeds  are  received  in  connection  therewith),  which
increase  in the  Available  Debt  Proceeds  Amount  shall  be  reduced  to zero
immediately upon the consummation of the respective Permitted Acquisition.



                                      -69-
<PAGE>

     "Bank" shall mean each financial  institution listed on Schedule I, as well
as any Person which becomes a "Bank" hereunder pursuant to 13.04(b).

     "Bank Default" shall mean (i) the refusal (which has not been retracted) of
a Bank,  in violation of this  Agreement,  to make  available its portion of any
Borrowing  (including  any  Mandatory  Borrowing)  or to fund its portion of any
unreimbursed  payment  under Section  2.03(c) or (ii) a Bank having  notified in
writing the Borrowers and/or the Administrative Agent that it does not intend to
comply  with its  obligations  under  Section  1.01 or  Section 2 in the case of
either  clause  (i) or (ii),  as a result  of any  takeover  of such bank by any
regulatory authority or agency.

     "Bankruptcy Code" shall have the meaning provided in Section 10.05.

     "Base Rate" at any time shall mean the higher of (i) 1/2 of 1% in excess of
the Adjusted Certificate of Deposit Rate and (ii) the Prime Lending Rate.

     "Base Rate Loan" shall mean each Loan  designated  or deemed  designated as
such by the  Borrowers  at the  time of the  incurrence  thereof  or  conversion
thereto.

     "Borrowers"  shall have the meaning provided in the first paragraph of this
Agreement.

     "Borrowing"  shall  mean  the  incurrence  of (i)  Swingline  Loans  by the
Borrower from BTCo on a given date or (ii) one Type of Loan of a single  Tranche
by the  Borrower  from all of the Banks  having  Commitments  of the  respective
Tranche on a pro rata basis on a given date (or resulting from  conversions on a
given date),  having in the case of Eurodollar  Loans the same Interest  Period;
provided  that Base Rate Loans  incurred  pursuant to Section  1.10(b)  shall be
considered part of any related Borrowing of Eurodollar Loans.

     "Broyhill"  shall have the meaning  provided in the first paragraph of this
Agreement.

     "BTCo" shall mean Bankers Trust Company in its individual capacity.

     "Business  Day"  shall mean (i) for all  purposes  other than as covered by
clause (ii) below, any day except Saturday, Sunday and any day which shall be in
New  York  City a legal  holiday  or a day on  which  banking  institutions  are
authorized or required by law or other government  action to close and (ii) with
respect to all notices and  determinations  in connection  with, and payments of
principal  and interest on,  Eurodollar  Loans,  any day which is a Business Day
described in clause (i) above and which is also a day for trading by and between
banks in the New York interbank Eurodollar market.

     "Capital  Expenditures"  shall  mean,  with  respect  to  any  Person,  all
expenditures  by such Person  which should be  capitalized  in  accordance  with
generally accepted accounting  principles,  including all such expenditures with
respect to fixed or capital assets (including, without limitation,  expenditures
for  maintenance  and repairs which should be  capitalized  in  accordance  with
generally  accepted  accounting  principles) and the amount of Capitalized Lease
Obligations incurred by such Person.



                                      -70-
<PAGE>

     "Capitalized  Lease  Obligations"  of any  Person  shall  mean  all  rental
obligations which, under generally accepted accounting  principles,  are or will
be required to be capitalized on the books of such Person, in each case taken at
the  amount  thereof  accounted  for as  indebtedness  in  accordance  with such
principles.

     "Cash  Equivalents"  shall mean, as to any Person, (i) securities issued or
directly and fully  guaranteed  or insured by the United States or any agency or
instrumentality  thereof  (provided that the full faith and credit of the United
States is pledged in support  thereof)  having  maturities  of not more than one
year  from the date of  acquisition,  (ii) time  deposits  and  certificates  of
deposit  of any  commercial  bank  having,  or  which is the  principal  banking
subsidiary  of a bank  holding  company  organized  under the laws of the United
States, any State thereof,  the District of Columbia or any foreign jurisdiction
having  capital,   surplus  and  undivided  profits  aggregating  in  excess  of
$200,000,000,  with  maturities  of not  more  than  one  year  from the date of
acquisition by such Person, (iii) repurchase obligations with a term of not more
than 90 days for  underlying  securities  of the types  described  in clause (i)
above entered into with any bank meeting the qualifications  specified in clause
(ii) above,  (iv)  commercial  paper  issued by any Person  incorporated  in the
United States rated at least A-1 or the equivalent  thereof by Standard & Poor's
Rating Services or at least P-1 or the equivalent  thereof by Moody's  Investors
Service, Inc. and in each case maturing not more than one year after the date of
acquisition by such Person, (v) investments in money market funds  substantially
all of whose  assets are  comprised  of  securities  of the types  described  in
clauses (i) through (iv) above and (vi) demand  deposit  accounts  maintained in
the ordinary course of business not in excess of $100,000 in the aggregate.

     "Cash Management System" shall mean the "Cash Management System" as defined
in the Original Credit Agreement.

     "CERCLA" shall mean the Comprehensive Environmental Response, Compensation,
and  Liability  Act of 1980,  as the same may be amended  from time to time,  42
U.S.C. ss. 9601 et seq.

     "Change of Control" shall mean the occurrence of any of the following:  (i)
Furniture Brands shall at any time cease to own 100% of the capital stock of any
of  Broyhill,  Lane or  Thomasville,  (ii) the board of  directors  of Furniture
Brands shall cease to consist of a majority of Continuing Directors or (iii) any
Person,  entity or "group"  (as such term is defined in Section  13(d)(3) of the
Securities  Exchange Act of 1934, as amended) is or becomes the beneficial owner
of an amount of outstanding Voting Stock of Furniture Brands in excess of 25% of
the  total  amount  of fully  diluted  shares  of  outstanding  Voting  Stock of
Furniture Brands.

     "Code" shall mean the Internal  Revenue Code of 1986,  as amended from time
to time, and the  regulations  promulgated  and the rulings  issued  thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement,  and to any  subsequent  provision of the Code,  amendatory  thereof,
supplemental thereto or substituted therefor.

     "Collateral"  shall  mean all  property  (whether  real or  personal)  with
respect to which any security  interests  have been granted (or  purported to be
granted) pursuant to any Security Document,  including,  without limitation, all
Pledge Agreement Collateral,  all Security Agreement  Collateral,  all Mortgaged


                                      -71-
<PAGE>

Properties  (unless and until released pursuant to Section 13.20),  all cash and
Cash Equivalents  delivered as collateral  pursuant to Section 4.02 or 10 hereof
and all Additional Collateral, if any.

     "Collateral Agent" shall mean the Administrative Agent acting as collateral
agent for the Secured Creditors pursuant to the Security Documents.

     "Collective  Bargaining  Agreements" shall have the meaning provided in the
Existing Credit Agreement.

     "Commitment"  shall mean any of the commitments of any Bank, i.e.,  whether
the Term Loan Commitment or the Revolving Loan Commitment.

     "Commitment Commission" shall have the meaning provided in Section 3.01(a).

     "Commitment  Commission  End Date" shall have the  meaning  provided in the
definition of `Commitment Commission Reduction Percentage'.

     "Commitment  Commission Reduction  Percentage" shall mean .125% on and from
the Third Restatement Effective Date through July 30, 1997 (or such earlier date
on  which  the  Borrowers  deliver  to the  Administrative  Agent a  certificate
containing the  calculations of Leverage Ratio for the fiscal quarter ended June
30, 1997, and thereafter  shall mean, from and after each day of delivery of any
certificate  delivered in accordance with the following  sentence  indicating an
entitlement  to a Commitment  Commission  Reduction  Percentage  other than zero
(each,  a "Commitment  Commission  Start Date") to and including the  applicable
Commitment  Commission End Date described  below, the percentage set forth below
opposite the Leverage Ratio  indicated to have been achieved in any  certificate
delivered in accordance with the following sentence:

                  Leverage                           Commitment Commission
                  Ratio                              Reduction Percentage

                  Equal to or                                  0%
                  greater than
                  4.00:1

                  Equal to or                               .125%
                  greater than
                  3.50:1 but less
                  than 4.00:1

                  Equal to or                               .250%
                  greater than
                  2.50:1 but less
                  than 3.50:1

                  Less than 2.50:1                          .375%

From and after the date of the delivery of the certificate  referenced above for
the fiscal  quarter ended June 30, 1997,  the Leverage Ratio shall be determined
based  on the  delivery  of a  certificate  of the  Borrowers  by an  Authorized
Representative of the Borrowers to the Administrative  Agent,  within 30 days of
the last day of any fiscal  quarter of  Furniture  Brands  (beginning  after the
fiscal quarter ended on June 30, 1997, based on calculations  made at the end of
each fiscal  quarter  commencing  with the fiscal  quarter ended June 30, 1997),


                                      -72-
<PAGE>

which  certificate shall set forth the calculation of the Leverage Ratio for the
fiscal quarter ended  immediately  prior to the relevant  Commitment  Commission
Start Date and the Commitment  Commission  Reduction  Percentage  which shall be
thereafter  applicable  (until same is changed or ceases to apply in  accordance
with the following sentences). The Commitment Commission Reduction Percentage so
determined shall apply, except as set forth in the succeeding sentence, from the
Commitment  Commission  Start  Date to the  earlier of (x) the date on which the
next certificate is delivered to the Administrative Agent and (y) the date which
is 30 days  following  the last day of the fiscal  quarter in which the previous
Commitment  Commission  Start Date  occurred  (the  "Commitment  Commission  End
Date"),   at  which  time,  if  no   certificate   has  been  delivered  to  the
Administrative  Agent  indicating  an  entitlement  to a  Commitment  Commission
Reduction  Percentage  other  than zero (and thus  commencing  a new  Commitment
Commission Start Date), the Commitment  Commission Reduction Percentage shall be
reduced to zero.  Notwithstanding  anything to the contrary  contained  above in
this definition, the Commitment Commission Reduction Percentage shall be reduced
to zero at all times during which there shall exist an Event of Default.

     "Commitment  Commission  Start Date" shall have the meaning provided in the
definition of `Commitment Commission Reduction Percentage'.

     "Concentration  Account"  shall have the meaning  provided in the  Security
Agreement.

     "Consolidated   Cumulative  Net  Income  Period"  shall  mean  each  period
consisting  of a fiscal  quarter of Furniture  Brands ending after June 30, 1998
and for which the related financial statements required to be delivered pursuant
to Section 8.01(b) or (c) of this Agreement have theretofore been delivered.

     "Consolidated  Cumulative 50% Net Income Amount" shall mean, at any date an
amount  determined  on a  cumulative  basis  equal  to  (i)  the  sum  of 50% of
Consolidated  Net  Income for all  Consolidated  Cumulative  Net Income  Periods
ending  after June 30,  1998 and prior to such date of  determination  for which
Consolidated Net Income was a positive  number,  minus (ii) 100% of Consolidated
Net Income for all Consolidated  Cumulative Net Income Periods ending after June
30,  1998 and prior to such date of  determination  for which  Consolidated  Net
Income was a negative number.

     "Consolidated Debt" shall mean all Indebtedness of Furniture Brands and its
Restricted  Subsidiaries  determined  on a  consolidated  basis with  respect to
borrowed  money or other  obligations  of such Persons which would appear on the
balance sheet of such Persons as indebtedness  (including  unreimbursed drawings
under  Letters  of Credit  and  unreimbursed  payments  under  Acceptances,  but
excluding   Consolidated  Current  Liabilities  and  deferred  tax  and  pension
liabilities), plus (i) all Contingent Obligations of such Persons incurred after
the Third Restatement Effective Date (excluding the Thomasville lease guarantees
upon which payments are not being made and obligations resulting from extensions
or  renewals  of the  leases  guaranteed  by the  Surviving  Guarantees  made in
compliance  with this  Agreement),  plus (ii) all  Contingent  Obligations  with
respect  to any  Surviving  Guaranty  on and after  the date on which  Furniture


                                      -73-
<PAGE>

Brands made any payment in respect of such Surviving  Guaranty,  minus (iii) the
cash in excess of  $10,000,000  as shown on the  consolidated  balance  sheet of
Furniture   Brands  and  its   Restricted   Subsidiaries   as  of  the  date  of
determination.

     "Consolidated EBIT" shall mean, for any period, the Consolidated Net Income
of  Furniture   Brands  and  its  Restricted   Subsidiaries,   determined  on  a
consolidated  basis,  before  Consolidated  Net Interest  Expense (to the extent
deducted in  arriving at  Consolidated  Net Income) and  provision  for taxes or
gains or losses from sales of assets other than  inventory  sold in the ordinary
course of business,  in each case that were included in arriving at Consolidated
Net Income.

     "Consolidated  EBITDA"  shall  mean,  for any  period,  Consolidated  EBIT,
adjusted by adding thereto the amount of all  amortization  of  intangibles  and
depreciation,  in each case that were deducted in arriving at Consolidated  EBIT
for such period.

     "Consolidated  Net Income"  shall mean,  for any period,  the net after tax
income of  Furniture  Brands and its  Restricted  Subsidiaries  determined  on a
consolidated basis, without giving effect to any extraordinary gains or losses.

     "Consolidated  Net Interest  Coverage  Ratio" for any period shall mean the
ratio of  Consolidated  EBITDA to  Consolidated  Net  Interest  Expense for such
period.

     "Consolidated Net Interest  Expense" shall mean, for any period,  the total
consolidated   interest   expense  of  Furniture   Brands  and  its   Restricted
Subsidiaries  for such period  (calculated  without regard to any limitations on
the payment  thereof)  plus,  without  duplication,  that portion of Capitalized
Lease   Obligations  of  Furniture   Brands  and  its  Restricted   Subsidiaries
representing  the interest  factor for such  period,  and  capitalized  interest
expense,  but excluding the amortization of any deferred financing costs and all
amounts in respect of the Interest Rate Protection Agreements, all determined on
a consolidated basis.

     "Consolidated Senior Debt" at any time shall mean Consolidated Debt on such
date,  adjusted by  excluding  therefrom  the amount of  Permitted  Subordinated
Indebtedness reflected in Consolidated Debt on such date.

     "Contingent  Obligation"  shall mean, as to any Person,  any  obligation of
such Person  guaranteeing  or intended to guarantee  any  Indebtedness,  leases,
dividends or other obligations ("primary  obligations") of any other Person (the
"primary  obligor") in any manner,  whether  directly or indirectly,  including,
without  limitation,  any obligation of such Person,  whether or not contingent,
(i) to purchase any such primary obligation or any property  constituting direct
or  indirect  security  therefor,  (ii) to advance  or supply  funds (x) for the
purchase or payment of any such primary  obligation  or (y) to maintain  working
capital or equity  capital of the primary  obligor or  otherwise to maintain the
net worth or  solvency  of the  primary  obligor,  (iii) to  purchase  property,
securities  or services  primarily  for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary  obligation or (iv) otherwise to assure or hold harmless the holder
of such primary obligation against loss in respect thereof;  provided,  however,
that  the  term  Contingent   Obligation  shall  not  include   endorsements  of
instruments  for deposit or collection in the ordinary  course of business.  The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent  Obligation is made (or, if less,  the maximum amount of such primary
obligation  for which  such  Person may be liable  pursuant  to the terms of the
instrument  evidencing  such  Contingent   Obligation)  or,  if  not  stated  or


                                      -74-
<PAGE>

determinable,  the maximum reasonably  anticipated  liability in respect thereof
(assuming  such Person is required to perform  thereunder) as determined by such
Person in good faith.

     "Continuing Bank" shall mean each Existing Bank with outstanding Term Loans
or a Revolving Loan  Commitment  under this Agreement  (immediately  upon giving
effect to the Fourth Restatement Effective Date).

     "Continuing  Directors" shall mean the Directors of Furniture Brands on the
Fourth  Restatement  Effective Date (and immediately  after giving effect to the
Transaction) and each other Director if such Director's  nomination for election
to the Board of Directors of Furniture  Brands is  recommended  by a majority of
the then Continuing Directors.

     "Converse" shall mean Converse Inc., a Delaware corporation.

     "Credit  Documents"  shall mean this Agreement and, after the execution and
delivery  thereof  pursuant  to the terms of this  Agreement,  each  Note,  each
Security  Document and the  Subsidiary  Guaranty  and,  after the  execution and
delivery  thereof,  each  additional  guaranty  or  security  document  executed
pursuant to Section 8.11.

     "Credit  Event"  shall mean the making of any Loan or the  issuance  of any
Letter of Credit.

     "Credit Lyonnais" shall have the meaning provided in the first paragraph of
this Agreement.

     "Credit Party" shall mean the Borrowers and each Subsidiary Guarantor.

     "Currency Hedging  Agreements"  shall mean any foreign exchange  contracts,
currency swap agreements or other similar agreements or arrangements designed to
protect against the  fluctuations in currency  values.  

     "Default" shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.

     "Defaulting  Bank" shall mean any Bank with respect to which a Bank Default
is in effect.

     "Disqualified  Preferred  Stock"  means any  Preferred  Stock of  Furniture
Brands which is not Qualified Preferred Stock.

     "Dividend"  with  respect  to any Person  shall  mean that such  Person has
declared or paid a dividend or returned any equity  capital to its  stockholders
or  authorized or made any other  distribution,  payment or delivery of property
(other  than  common  stock  of such  Person  or  Qualified  Preferred  Stock of
Furniture Brands paid as a pay-in-kind Dividend on any Qualified Preferred Stock
of Furniture Brands) or cash to its stockholders as such, or redeemed,  retired,
purchased or otherwise acquired, directly or indirectly, for a consideration any
shares of any class of its  capital  stock  outstanding  on or after the  Fourth
Restatement  Effective  Date (or any options or  warrants  issued by such Person


                                      -75-
<PAGE>

with  respect  to its  capital  stock),  or set  aside  any funds for any of the
foregoing purposes,  or shall have permitted any of its Subsidiaries to purchase
or otherwise  acquire for a consideration any shares of any class of the capital
stock of such Person  outstanding on or after the Fourth  Restatement  Effective
Date (or any  options or  warrants  issued by such  Person  with  respect to its
capital stock). Without limiting the foregoing,  "Dividends" with respect to any
Person shall also  include all  payments  made or required to be made during any
period by such  Person with  respect to any stock  appreciation  rights,  plans,
equity  incentive or achievement  plans or any similar plans or setting aside of
any funds for the  foregoing  purposes,  except to the extent such payments have
reduced Consolidated EBITDA during the respective period.

     "Documentation  Agent"  shall mean  Credit  Lyonnais,  in its  capacity  as
Documentation Agent for the Banks hereunder.

     "Documents" shall mean the Credit Documents.

     "Dollar  Equivalent"  shall mean,  with respect to any currency  other than
Dollars,  the amount of Dollars into which such  currency  could be converted at
the Exchange Rate.

     "Dollars" and the sign "$" shall each mean freely transferable lawful money
of the United States.

     "Domestic  Subsidiary"  with  respect to any Person shall mean a Subsidiary
thereof other than a Foreign Subsidiary thereof.

     "Domestic   Wholly-Owned   Subsidiary"   of  any  Person  shall  mean  each
Wholly-Owned Subsidiary of such Person which is also a Domestic Subsidiary.

     "Drawing" shall have the meaning provided in Section 2.05(b).

     "Eligible  Transferee"  shall mean and include a  commercial  bank,  mutual
fund,  financial  institution  or other  "accredited  investor"  (as  defined in
Regulation D of the Securities Act).

     "Employee Stock Option Plan" shall mean the Furniture  Brands  Incorporated
1992 Stock Option Plan.

     "End Date" shall have the meaning  provided in the  definition of Reduction
Percentage.

     "Environmental  Claims"  means any and all  administrative,  regulatory  or
judicial actions,  suits, demands,  demand letters,  directives,  claims, liens,
notices of noncompliance or violation, investigations or proceedings relating in
any way to any  Environmental  Law or any permit issued,  or any approval given,
under any such  Environmental  Law  (hereafter,  "Claims"),  including,  without
limitation, (a) any and all Claims by governmental or regulatory authorities for
enforcement,  cleanup, removal,  response,  remedial or other actions or damages
pursuant to any applicable  Environmental Law, and (b) any and all Claims by any
third party  seeking  damages,  contribution,  indemnification,  cost  recovery,
compensation or injunctive relief in connection with alleged injury or threat of
injury to health,  safety or the  environment  due to the  presence of Hazardous
Materials.

     "Environmental Law" means any applicable Federal,  state,  foreign or local
statute,  law,  rule,  regulation,  ordinance,  code,  binding  and  enforceable
guideline,  binding and enforceable written policy and rule of common law now or
hereafter  in  effect  and  in  each  case  as  amended,  and  any  judicial  or
administrative  interpretation thereof, including any judicial or administrative


                                      -76-
<PAGE>

order, consent decree or judgment, to the extent binding on the Borrowers or any
of their respective Subsidiaries,  relating to the environment,  employee health
and safety or Hazardous Materials,  including, without limitation, CERCLA; RCRA;
the Federal Water Pollution  Control Act, 33 U.S.C.  ss. 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. ss. 2601 et seq.; the Clean Air Act, 42 U.S.C.
ss. 7401 et seq.; the Safe Drinking  Water Act, 42 U.S.C.  ss. 3803 et seq.; the
Oil Pollution Act of 1990, 33 U.S.C.  ss. 2701 et seq.;  the Emergency  Planning
and the Community  Right-to-Know  Act of 1986, 42 U.S.C.  ss. 11001 et seq., the
Hazardous  Material  Transportation  Act,  49 U.S.C.  ss.  1801 et seq.  and the
Occupational  Safety and Health Act, 29 U.S.C. ss. 651 et seq. (to the extent it
regulates occupational exposure to Hazardous Materials); and any state and local
or foreign  counterparts  or  equivalents,  in each case as amended from time to
time.

     "ERISA" shall mean the Employee  Retirement Income Security Act of 1974, as
amended from time to time, and the  regulations  promulgated  and rulings issued
thereunder.  Section  references to ERISA are to ERISA, as in effect at the date
of this Agreement and any subsequent  provisions of ERISA,  amendatory  thereof,
supplemental thereto or substituted therefor.

     "ERISA  Affiliate"  shall mean each person (as  defined in Section  3(9) of
ERISA) which  together  with the  Borrowers or any  Subsidiary  of the Borrowers
would be deemed to be a "single  employer"  (i)  within  the  meaning of Section
414(b),  (c), (m) or (o) of the Code or (ii) as a result of the Borrowers or any
Subsidiary  of the  Borrowers  being or having  been a general  partner  of such
person.

     "Eurodollar  Loan" shall mean each Loan designated as such by the Borrowers
at the time of the incurrence thereof or conversion thereto.

     "Eurodollar Rate" shall mean (a) the offered quotation to first-class banks
in the New York  interbank  Eurodollar  market by BTCo for  Dollar  deposits  of
amounts in immediately  available funds comparable to the outstanding  principal
amount of the Eurodollar Loan of BTCo with maturities comparable to the Interest
Period   applicable  to  such  Eurodollar  Loan  commencing  two  Business  Days
thereafter  as of 10:00 A.M.  (New York time) on the date which is two  Business
Days prior to the commencement of such Interest Period, divided (and rounded off
to the  nearest  1/16 of 1%) by (b) a  percentage  equal to 100%  minus the then
stated maximum rate of all reserve requirements (including,  without limitation,
any marginal,  emergency,  supplemental,  special or other reserves  required by
applicable  law)  applicable to any member bank of the Federal Reserve System in
respect of  Eurocurrency  funding or  liabilities as defined in Regulation D (or
any successor category of liabilities under Regulation D).

     "Event of Default" shall have the meaning provided in Section 10.

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

     "Exchange  Rate" shall mean,  when  converting any amount  denominated in a
currency other than Dollars into Dollars,  the rate  determined in good faith by
BTCo  at  the  opening  of  business  (or  close  of  business  in the  case  of
determinations  of  reimbursement  obligations  with respect to Drawings) in New
York,  on the date as to which any  determination  thereof is to be made, as the
spot rate at which such currency is offered for sale to BTCo against delivery of
Dollars by BTCo. If for any reason the Exchange Rate for any currency  cannot be
calculated  as provided  above,  BTCo shall  calculate the Exchange Rate on such
basis as it deems fair and equitable.  In  determining  the Stated Amount of any
Letter of Credit (A) for  purposes of  Sections  1.01(b),  1.01(c),  2.01(d) and


                                      -77-
<PAGE>

4.02(A)(a),  the Exchange Rate shall be calculated (x) on the Fourth Restatement
Effective Date, (y) on the first Business Day of each calendar month  thereafter
and  (z) on such  other  day as  BTCo  may,  in its  sole  discretion,  consider
appropriate  and (B) for purposes of Section  3.01,  the Exchange  Rate shall be
calculated on the Fourth  Restatement  Effective Date and the first Business Day
of each  calendar  month  thereafter.  The Exchange  Rate for all  reimbursement
obligations  with  respect to Letters of Credit  (including  without  limitation
pursuant to Sections  2.04 and 2.05) shall be  determined  by using the Exchange
Rate as in effect on the date the  respective  Unpaid  Drawing  was paid by such
Issuing Bank.

     "Excluded Assets" shall mean each of the assets listed on Schedule XVI.

     "Existing  Banks"  shall mean each Person  which was a Bank  under,  and as
defined in, the Existing Credit Agreement.

     "Existing Credit Agreement" shall have the meaning provided in the recitals
to this Agreement.

     "Existing Indebtedness" shall have the meaning provided in Section 7.22.

     "Existing IRBs" shall mean $8,000,000  Industrial  Development Authority of
Fluvanna County,  Virginia Floating Rate Demand Industrial  Development  Revenue
Bonds (Thomasville Furniture Industries, Inc. Project) Series 1986.

     "Existing  Letters of Credit"  shall mean the  letters of credit  listed on
Schedule XII and previously issued under the Existing Credit Agreement.

     "Existing  Loans" shall mean the Existing  Revolving Loans and the Existing
Swingline Loans.

     "Existing  Mortgage  Policies"  shall mean each mortgage  insurance  policy
issued with respect to an Existing Mortgage under the Original Credit Agreement,
the First Restated Credit Agreement, the Second Restated Credit Agreement or the
Existing Credit Agreement.

     "Existing  Mortgaged  Properties"  shall  mean  all  Real  Property  of the
Borrowers  and  their  respective   Subsidiaries  listed  on  Schedule  III  and
designated on said Schedule III as an Existing Mortgaged Property.

     "Existing  Mortgages"  shall mean all  Mortgages  granted by the  Borrowers
pursuant to the Original Credit Agreement,  the First Restated Credit Agreement,
the Second Restated Credit  Agreement or the Existing Credit Agreement and which
have not been released by the lenders thereunder prior to the Fourth Restatement
Effective  Date,   which  Mortgages  shall  apply  to  the  Existing   Mortgaged
Properties.

     "Existing  Receivables  Facility"  shall mean the  Receivables  Facility as
defined in the Existing Credit Agreement.

     "Existing  Revolving Loans" shall mean the "Revolving  Loans" under, and as
defined in, the Existing Credit Agreement.



                                      -78-
<PAGE>

     "Existing  Swingline Loans" shall mean the "Swingline  Loans" under, and as
defined in, the Existing Credit Agreement.

     "Facing Fee" shall have the meaning provided in Section 3.01(c).

     "Federal Funds Rate" shall mean for any period, a fluctuating interest rate
equal for each day during  such period to the  weighted  average of the rates on
overnight Federal Funds  transactions with members of the Federal Reserve System
arranged by Federal Funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding  Business Day) by the Federal Reserve
Bank of New York,  or, if such rate is not so  published  for any day which is a
Business Day, the average of the  quotations  for such day on such  transactions
received  by the  Administrative  Agent  from  three  Federal  Funds  brokers of
recognized standing selected by the Administrative Agent.

     "Fees" shall mean all amounts payable pursuant to or referred to in Section
3.01.

     "FIRREA" shall mean Financial Institution Reform,  Recovery and Enforcement
Act of 1989.

     "First  Restated  Credit   Agreement"   shall  mean  the  "Existing  Credit
Agreement" under, and as defined in, the Second Restated Credit Agreement.

     "First  Restatement  Effective Date" shall mean the "Restatement  Effective
Date" as defined in the First Restated Credit Agreement.

     "Fiscal  Year" shall mean each fiscal year of  Furniture  Brands  ending on
December 31 of each calendar year.

     "Florsheim" shall mean The Florsheim Shoe Company, a Delaware corporation.

     "Fluvanna  Letter  of  Credit"  shall  mean a letter  of  credit  issued by
NationsBank pursuant to the Existing Agreement on or after the First Restatement
Effective Date in support of the Existing IRBs.

     "Foreign Pension Plan" means any plan, fund (including, without limitation,
any  superannuation  fund) or other similar  program  established  or maintained
outside the United States of America by any Borrower or any one or more of their
respective  Subsidiaries primarily for the benefit of employees of such Borrower
or such Subsidiary  residing  outside the United States of America,  which plan,
fund or other similar program  provides,  or results in,  retirement  income,  a
deferral of income in  contemplation  of  retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code.

     "Foreign Sales Corporation" shall mean a Wholly-Owned Foreign Subsidiary of
Furniture Brands and/or its Restricted  Subsidiaries  created for the purpose of
effecting sales of goods and/or services in foreign countries.

     "Foreign  Subsidiary" with respect to any Person shall mean each Subsidiary
thereof that is incorporated  under the laws of any jurisdiction  other than the
United States of America, any State thereof, the United States Virgin Islands or
Puerto Rico.



                                      -79-
<PAGE>

     "Fourth Restatement Effective Date" shall have the meaning
provided in Section 13.10.

     "Furniture  Brands" shall have the meaning  provided in the first paragraph
of this Agreement.

     "Furniture  Brands  Common  Stock" shall mean the common stock of Furniture
Brands.

     "Guaranty Payments" shall have the meaning provided in Section 9.10(b).

     "Hazardous  Materials"  means  (a) any  petroleum  or  petroleum  products,
radioactive  materials,  asbestos in any form that is or could  become  friable,
urea formaldehyde foam insulation,  transformers or other equipment that contain
dielectric fluid containing any level of  polychlorinated  biphenyls,  and radon
gas; (b) any  chemicals,  materials or substances  defined as or included in the
definition of "hazardous  substances," "hazardous waste," "hazardous materials,"
"extremely   hazardous   substances,"   "restricted   hazardous  waste,"  "toxic
substances,"  "toxic  pollutants,"  "contaminants," or "pollutants," or words of
similar  import,  under  any  applicable  Environmental  Law;  and (c) any other
chemical,  material or substance,  exposure to which is  prohibited,  limited or
regulated by any governmental authority under Environmental Laws.

     "Indebtedness" shall mean, as to any Person,  without duplication,  (i) all
indebtedness  (including principal,  interest,  fees and charges) of such Person
for borrowed  money or for the deferred  purchase price of property or services,
(ii) the maximum amount available to be drawn under all letters of credit issued
for the  account  of such  Person  and all  unpaid  drawings  in respect of such
letters of credit,  (iii) all Indebtedness of the types described in clause (i),
(ii),  (iv),  (v), (vi) or (vii) of this  definition  secured by any Lien on any
property owned by such Person, whether or not such Indebtedness has been assumed
by such Person (to the extent of the value of the respective property), (iv) the
aggregate amount required to be capitalized under leases under which such Person
is the lessee,  (v) all  obligations of such person to pay a specified  purchase
price for  goods or  services,  whether  or not  delivered  or  accepted,  i.e.,
take-or-pay  and similar  obligations,  (vi) all Contingent  Obligations of such
Person and (vii) all obligations under any Interest Rate Protection Agreement or
under any similar type of agreement.

     "Interest  Determination  Date" shall mean,  with respect to any Eurodollar
Loan, the second  Business Day prior to the  commencement of any Interest Period
relating to such Eurodollar Loan.

     "Interest Period" shall have the meaning provided in Section 1.09.

     "Interest  Rate  Protection  Agreement"  shall mean any interest  rate swap
agreement, interest rate cap agreement, interest collar agreement, interest rate
hedging  agreement,  interest rate floor agreement or other similar agreement or
arrangement.

     "Investments" shall have the meaning provided in Section 9.05.

     "Issuing  Bank"  shall mean BTCo and any Bank  which at the  request of the
Borrowers and with the consent of the  Administrative  Agent (which shall not be
unreasonably  withheld or delayed) agrees,  in such Bank's sole  discretion,  to


                                      -80-
<PAGE>

become an Issuing Bank for the purpose of issuing  Letters of Credit pursuant to
Section 2. On the Fourth  Restatement  Effective Date the sole Issuing Banks are
(x) BTCo and (y) NationsBank with respect to the Fluvanna Letter of Credit.

     "Judgment Currency" shall have the meaning provided in Section 13.21.

     "Judgment  Currency  Conversion  Date" shall have the  meaning  provided in
Section 13.21.

     "Lane"  shall have the  meaning  provided  in the first  paragraph  of this
Agreement.

     "L/C Supportable Obligations" shall mean obligations of Furniture Brands or
its  Restricted  Subsidiaries  incurred in the ordinary  course of business with
respect to insurance  obligations  and workers'  compensation,  surety bonds and
other similar statutory obligations,  and all obligations  customarily supported
by Standby Letters of Credit and satisfactory to the Administrative Agent.

     "Leaseholds" of any Person means all the right,  title and interest of such
Person as lessee or  licensee  in,  to and  under  leases or  licenses  of land,
improvements and/or fixtures.

     "Letter of Credit" shall have the meaning provided in Section
2.01(a) and shall include Trade Letters of Credit and Standby Letters of Credit.

     "Letter of Credit Facing Fee" shall have the meaning provided
in Section 3.01(c).

     "Letter of Credit Fee" shall have the meaning provided in Section 3.01(b).

     "Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the
aggregate  Stated  Amount of all  outstanding  Letters of Credit  which have not
terminated and  Acceptances  which have not matured or been prepaid and (ii) the
amount of all Unpaid Drawings.

     "Letter of Credit  Request"  shall mean any request  for the  issuance of a
Letter of Credit made by the Borrowers  pursuant to Section  2.03(a),  including
Trade Letter of Credit Requests and Standby Letter of Credit Requests.

     "Letter of Credit  Service  Agreement"  shall have the meaning  provided in
Section 2.03(a).

     "Leverage Ratio" shall mean on any date the ratio of (i) Consolidated  Debt
on such date to (ii)  Consolidated  EBITDA  for the  period of four  consecutive
fiscal quarters most recently ended on or prior to such date.

     "Lien" shall mean any mortgage, pledge, hypothecation,  assignment, deposit
arrangement,  encumbrance,  lien (statutory or other),  preference,  priority or
other security  agreement of any kind or nature whatsoever  (including,  without
limitation,  any  conditional  sale or  other  title  retention  agreement,  any
financing  or  similar  statement  or  notice  filed  under the UCC or any other
similar recording or notice statute, and any lease having substantially the same
effect as any of the foregoing).



                                      -81-
<PAGE>

     "Loan" shall mean each Term Loan,  each  Revolving  Loan and each Swingline
Loan.

     "Majority Banks" of any Tranche shall mean those Non-Defaulting Banks which
would  constitute the Required Banks under, and as defined in, this Agreement if
all  outstanding  Obligations  of the other  Tranches  under this Agreement were
repaid in full and all Commitments with respect thereto were terminated.

     "Mandatory Borrowing" shall have the meaning provided in Section 1.01(d).

     "Margin Stock" shall have the meaning provided in Regulation U.

     "Material  Adverse  Effect"  shall  mean a material  adverse  effect on the
business,  operations,  property, assets,  liabilities,  condition (financial or
otherwise) or prospects of the  Borrowers  taken as a whole or the Borrowers and
their  Restricted  Subsidiaries  taken as a whole, it being  understood that any
determination  of whether a Material Adverse Effect has occurred shall take into
account,  inter  alia,  (x) any  available  indemnities  and (y) the  timing and
likelihood of payments thereunder.

     "Maturity Date" shall mean, with respect to any Tranche of Loans,  the Term
Loan Maturity  Date,  the Revolving  Loan Maturity Date or the Swingline  Expiry
Date, as the case may be.

     "Maximum Swingline Amount" shall mean $25,000,000.

     "Minimum  Borrowing  Amount" shall mean (i) for Revolving Loans  $1,000,000
and,  if  greater,  in an integral  multiple  of  $500,000;  (ii) for Term Loans
$1,000,000 and, if greater, in an integral multiple of $1,000,000; and (iii) for
Swingline Loans, $500,000 and, if greater, in an integral multiple of $100,000.

     "Mortgage"  shall  mean and  include  each  Existing  Mortgage,  as amended
pursuant to the  respective  Mortgage  Amendment,  and,  after the execution and
delivery thereof, each Additional Mortgage, in each case as same may be amended,
modified or supplemented from time to time.

     "Mortgage Amendments" shall have the meaning provided in Section 5.17.

     "Mortgage  Policies"  shall mean and include each Existing  Mortgage Policy
and, after the execution and delivery  thereof,  each mortgage  insurance policy
issued with respect to an Additional Mortgaged Property.

     "Mortgaged Property" shall mean each Existing Mortgaged Property and, after
the  execution  and  delivery  of any  Additional  Mortgage,  shall  include the
respective Additional Mortgaged Property.

     "Mortgage Release Date" shall have the meaning provided in Section 13.20.

     "Multiemployer  Plan" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA, which is maintained or contributed to by (or to which there
is an  obligation  to  contribute  of)  the  Borrowers  or a  Subsidiary  of the
Borrowers or an ERISA  Affiliate and,  except for a Spunoff Plan, each such plan


                                      -82-
<PAGE>

for the five year  period  immediately  following  the latest  date on which the
Borrowers, any Subsidiaries of the Borrowers or any ERISA Affiliates maintained,
contributed to or had an obligation to contribute to such plan.

     "NationsBank"  shall have the meaning  provided in the first  paragraph  of
this Agreement.

     "Net  Cash  Proceeds"  shall  mean  for any  event  requiring  a  mandatory
repayment pursuant to Section 4.02, the gross cash proceeds  (including any cash
received by way of deferred payment pursuant to a promissory note, receivable or
otherwise,  but only as and when  received)  received  from such  event,  net of
reasonable  transaction  costs  (including,  as  applicable,  any  underwriting,
brokerage or other  customary  commissions  and reasonable  legal,  advisory and
other fees and expenses associated therewith) received from any such event.

     "Net Sale  Proceeds"  shall  mean for any sale of  assets,  the gross  cash
proceeds  (including any cash received by way of deferred  payment pursuant to a
promissory  note,  receivable  or  otherwise,  but  only as and  when  received)
received  from  any  sale  of  assets,  net  of  reasonable   transaction  costs
(including,  without limitation, any underwriting,  brokerage or other customary
selling commissions and reasonable legal,  advisory and other fees and expenses,
including title and recording  expenses,  associated  therewith) and payments of
unassumed  liabilities  relating to the assets sold at the time of, or within 30
days  after,  the date of such sale,  the  amount of such  gross  cash  proceeds
required to be used to repay any  Indebtedness  (other than  Indebtedness of the
Banks  pursuant to this  Agreement)  which is secured by the  respective  assets
which were sold, and the estimated  marginal increase in income taxes which will
be payable by Furniture  Brands'  consolidated  group with respect to the fiscal
year in which the sale  occurs  as a result  of such  sale;  but  excluding  any
portion of any such gross cash proceeds  which  Furniture  Brands  determines in
good  faith  should be  reserved  for  post-closing  adjustments  (to the extent
Furniture  Brands  delivers  to the  Banks a  certificate  signed  by its  chief
financial   officer,   controller  or  chief  accounting   officer  as  to  such
determination),  it being  understood  and agreed  that on the day that all such
post-closing  adjustments have been  determined,  (which shall not be later than
six months following the date of the respective asset sale), the amount (if any)
by which the reserved amount in respect of such sale or disposition  exceeds the
actual  post-closing  adjustments  payable  by  Furniture  Brands  or any of its
Restricted Subsidiaries shall constitute Net Sale Proceeds on such date received
by Furniture  Brands and/or any of its Restricted  Subsidiaries  from such sale,
lease, transfer or other disposition.

     "New Bank" shall mean each of the Persons  listed on Schedule I that is not
a Continuing Bank.

     "Non-Defaulting  Bank"  shall  mean and  include  each  Bank  other  than a
Defaulting Bank.

     "Note" shall mean each Revolving Note and the Swingline Note.

     "Notice of Borrowing" shall have the meaning provided in Section 1.03.

     "Notice of Conversion" shall have the meaning provided in Section 1.06.

     "Notice Office" shall mean the office of the  Administrative  Agent located
at 130 Liberty Street, New York, New York 10006, Attention:  Anthony LoGrippo or


                                      -83-
<PAGE>

such other office as the Administrative Agent may hereafter designate in writing
as such to the other parties hereto.

     "Obligations" shall mean all amounts owing to the Administrative Agent, the
Collateral  Agent,  any Issuing  Bank or any Bank  pursuant to the terms of this
Agreement or any other Credit Document.

     "Original Credit  Agreement" shall mean the "Original Credit  Agreement" as
defined in the First Restated Credit Agreement.

     "Original  Effective Date" shall mean the Effective Date as defined in, the
Original Credit Agreement.

     "Participant" shall have the meaning provided in Section 2.04(a).

     "Pay-In-Kind Preferred Stock" means any Preferred Stock where all dividends
with respect thereto may, at the option of the issuer  thereof,  be paid through
the issuance of additional shares of preferred stock of the same series.

     "Payment Office" shall mean the office of the Administrative  Agent located
at One Bankers Trust Plaza,  New York,  New York 10006,  or such other office as
the Administrative Agent may hereafter designate in writing as such to the other
parties hereto.

     "PBGC"  shall mean the Pension  Benefit  Guaranty  Corporation  established
pursuant to Section 4002 of ERISA, or any successor thereto.

     "Percentage" of any Bank at any time shall mean a fraction  (expressed as a
percentage) the numerator of which is the Revolving Loan Commitment of such Bank
at such time and the denominator of which is the Total Revolving Loan Commitment
at such time,  provided  that if the  Percentage of any Bank is to be determined
after  the  Total  Revolving  Loan  Commitment  has  been  terminated,  then the
Percentages  of the Banks shall be  determined  immediately  prior (and  without
giving effect) to such termination.

     "Permitted  Acquired  Debt" shall mean  Indebtedness  (other than Permitted
Unsecured Indebtedness incurred pursuant to Section 9.04(ii) assumed or acquired
in connection with a Permitted Acquisition as permitted under this Agreement.

     "Permitted  Acquisition" shall mean the acquisition by the Borrowers or any
of their  Restricted  Subsidiaries of assets  constituting  part of or an entire
business or division of any Person not already a Subsidiary  of the Borrowers or
of 100% of the capital stock of any such Person which Person shall,  as a result
of such  acquisition,  become a  Restricted  Subsidiary,  provided  that (A) the
consideration  paid  by  the  Borrowers  and/or  their  Restricted  Subsidiaries
consists solely of cash or Furniture Brands Common Stock or Qualified  Preferred
Stock, the issuance of Indebtedness  otherwise permitted in Section 9.04 and the
assumption/acquisition of any Permitted Acquired Debt (calculated at face value)
relating to such business,  division or Person, (B) the assets acquired,  or the
business  of the Person  whose stock is  acquired,  shall be in the same line of
business in which the Borrowers and their  Restricted  Subsidiaries  are already
engaged,  and (C) in the case of the acquisition of 100% of the capital stock of
any Person,  such Person shall own no capital  stock of any other Person  unless
either (x) such Person owns 100% of the  capital  stock of such other  Person or


                                      -84-
<PAGE>

(y)  (1)  such  Person  and/or  its  Wholly-Owned  Subsidiaries  own  80% of the
consolidated assets or capital stock of such Person and its Subsidiaries and (2)
any non-Wholly Owned Subsidiary of such Person was non-Wholly Owned prior to the
date of such  Permitted  Acquisition  of such  Person (it being  understood  and
agreed that  investments by  Subsidiaries  shall be permitted in accordance with
the  provisions  of Section  9.05).  Notwithstanding  anything  to the  contrary
contained in the immediately  preceding  sentence,  any  acquisition  shall be a
Permitted  Acquisition  only if all  requirements  of Sections 8.14 and 9.02(vi)
applicable to Permitted Acquisitions are met with respect thereto.

     "Permitted Debt Agreements" shall have the meaning provided in the Existing
Credit Agreement.

     "Permitted Encumbrance" shall mean, with respect to any Mortgaged Property,
such exceptions to title as are set forth in the title insurance policy or title
commitment  delivered  with respect  thereto,  all of which  exceptions  must be
acceptable to the Administrative Agent in its reasonable discretion.

     "Permitted Liens" shall have the meaning provided in Section 9.01.

     "Permitted  Subordinated  Indebtedness"  shall mean any Permitted Unsecured
Indebtedness  which is  subordinated  on terms  reasonably  satisfactory  to the
Administrative Agent and the Required Banks to all Obligations hereunder and any
other obligations secured pursuant to the Security Documents and incurred by the
Borrowers,  so long as (i) such  Indebtedness  shall  require  no  amortization,
sinking fund payment or any other  scheduled  maturity of the  principal  amount
thereof on any date which is earlier than the date  occurring one year after the
Term Loan  Maturity  Date and (ii) all  other  provisions  of such  Indebtedness
(including,  without  limitation,  covenants,  defaults  and  remedies)  in  the
documents  governing or evidencing the same are reasonably  satisfactory  to the
Administrative  Agent  and the  Required  Banks.  To the  extent  the  preceding
sentence   requires  terms  of  Permitted   Subordinated   Indebtedness   to  be
satisfactory to the Required Banks,  such terms shall be deemed  satisfactory to
the  Required  Banks unless  objected to by the Required  Banks in writing on or
prior to the date which is 20 Business Days after the documentation  therefor is
delivered to the Banks. Notwithstanding anything to the contrary contained above
in the  definition  of  "Permitted  Subordinated  Indebtedness",  all  Permitted
Subordinated  Indebtedness  shall be required  to  constitute  Indebtedness  for
borrowed  money  (where 100% of the  consideration  received for the issuance of
such Indebtedness is cash), except that Permitted Subordinated  Indebtedness may
be issued directly as consideration in connection with a Permitted Acquisition.

     "Permitted  Unsecured   Indebtedness"  shall  mean  any  general  unsecured
Indebtedness  incurred by the  Borrowers,  so long as (i) based on  calculations
made by the Borrowers on a Pro Forma Basis after giving effect to the incurrence
of such Indebtedness,  no Default or Event of Default will exist under, or would
have existed under the periods covered by, the financial  covenants contained in
Sections 9.08 and 9.09 of this Agreement,  (ii) based on good faith  projections
prepared by the Borrowers for the period from the date of the incurrence of such
Indebtedness  to the date which is one year  thereafter,  the level of financial
performance  measured by the covenants set forth in Sections 9.08 and 9.09 shall
be better than or equal to such level as would be  required  to provide  that no
Default or Event of Default would exist under the financial  covenants contained
in Sections 9.08 and 9.09 of this  Agreement as compliance  with such  covenants
would  be  required  through  the date  which  is one year  from the date of the
incurrence of such  Indebtedness,  (iii)  Furniture  Brands shall furnish to the
Administrative  Agent  for  distribution  to  each  of the  Banks  an  officer's


                                      -85-
<PAGE>

certificate  by the chief  financial  officer or treasurer  of Furniture  Brands
certifying to the best of his knowledge as to compliance  with the  requirements
of the preceding clauses (i) and (ii) and containing the pro forma  calculations
required by the  preceding  clauses (i) and (ii),  (iv) the average life of such
Indebtedness  at the time of the  incurrence  thereof shall be at least one year
beyond the Term Loan Maturity Date (assuming  maximum  utilization  thereof) and
(v) such  Indebtedness  shall not  contain  any  provision  (including,  without
limitation,  covenants,  defaults and  remedies) in the  documents  governing or
evidencing the same which, in the opinion of the Administrative  Agent, are more
restrictive  than  the  provisions  in  the  Credit  Documents.  Notwithstanding
anything  to the  contrary  contained  above  in the  definition  of  "Permitted
Unsecured Indebtedness",  all Permitted Unsecured Indebtedness shall be required
to constitute  indebtedness  for borrowed money where 100% of the  consideration
received for the issuance for such  Indebtedness is cash,  except that Permitted
Unsecured  Indebtedness  may be issued directly as  consideration  in connection
with Permitted  Acquisitions so long as the proviso to Section 9.04(ii) has been
complied with.

     "Person"  shall mean any  individual,  partnership,  joint  venture,  firm,
corporation,  association,  trust  or  other  enterprise  or any  government  or
political subdivision or any agency, department or instrumentality thereof.

     "Plan" shall mean any  single-employer  plan, as defined in Section 4001 of
ERISA,  which  is  maintained  or  contributed  to by (or to  which  there is an
obligation to contribute  of), the Borrowers or a Subsidiary of the Borrowers or
an ERISA  Affiliate,  and except for a Spunoff Plan, each such plan for the five
year period  immediately  following  the latest date on which the  Borrowers,  a
Subsidiary of the Borrowers or an ERISA Affiliate maintained, contributed or had
an obligation to contribute to such plan.

     "Pledge Agreement" shall have the meaning provided in Section 5.08.

     "Pledge Agreement Collateral" shall mean all "Collateral" as defined in the
Pledge Agreement.

     "Pledged  Securities"  shall mean  "Pledged  Securities"  as defined in the
Pledge Agreement.

     "Preferred  Stock," as applied to the capital  stock of any  Person,  means
capital  stock of such Person  (other than common  stock of such  Person) of any
class or classes  (however  designed)  that ranks  prior,  as to the  payment of
dividends or as to the  distribution of assets upon any voluntary or involuntary
liquidation,  dissolution  or  winding up of such  Person,  to shares of capital
stock of any  other  class of such  Person,  and  shall  include  any  Qualified
Preferred Stock and Disqualified Preferred Stock.

     "Prime  Lending Rate" shall mean the rate which BTCo announces from time to
time as its prime  lending  rate,  the Prime  Lending Rate to change when and as
such prime lending rate changes.  The Prime Lending Rate is a reference rate and
does not necessarily  represent the lowest or best rate actually  charged to any
customer. BTCo may make commercial loans or other loans at rates of interest at,
above or below the Prime Lending Rate.

     "Pro Forma Basis" shall mean,  as to any Person,  for any of the  following
events  which occur  subsequent  to the  commencement  of a period for which the
financial  effect of such event is being  calculated,  and giving  effect to the


                                      -86-
<PAGE>

event for which such  calculation is being made,  such  calculation as will give
pro forma effect to such event as if same had occurred at the  beginning of such
period of calculation, and

          (i) for purposes of the foregoing calculation,  the transaction giving
     rise to the need to calculate  the pro forma effect to any of the following
     events  shall be  assumed  to have  occurred  on the  first day of the four
     fiscal  quarter  period last ended before the  occurrence of the respective
     event for which such pro forma effect is being  determined  (the "Reference
     Period"), and

          (ii) in making any  determination  with respect to the  incurrence  or
     assumption of any Indebtedness during the Reference Period or subsequent to
     the  Reference  Period  and on or  prior  to the  date  of the  transaction
     referenced  in  clause  (i)  above  (the  "Transaction   Date"),   (w)  all
     Indebtedness  (including the Indebtedness incurred or assumed and for which
     the financial effect is being  calculated)  incurred or permanently  repaid
     during the Reference Period shall be deemed to have been incurred or repaid
     at the beginning of such period,  (x)  Consolidated Net Interest Expense of
     such Person  attributable to interest on any Indebtedness  bearing floating
     interest  rates  should be  computed on a pro forma basis as if the rate in
     effect on the Transaction  Date had been the applicable rate for the entire
     period,  (y) Consolidated Net Interest Expense of such Person  attributable
     to interest on any  Indebtedness  under any revolving credit facility which
     was in effect during the respective Reference Period shall be computed on a
     pro forma basis based upon the average daily  balance of such  Indebtedness
     outstanding  during the applicable  period (or, if shorter,  the portion of
     the period  during which the revolving  credit  facility was in effect) and
     (z)  Consolidated  Net Interest Expense will be increased or reduced by the
     net cost  (including  amortization  of discount) or benefit  (after  giving
     effect to  amortization  of discount)  associated  with the  Interest  Rate
     Protection  Agreements,  which will  remain in effect for the  twelve-month
     period after the Transaction Date and which shall have the effect of fixing
     the interest rate on the date of computation, and

          (iii) in making any  determination of Consolidated  EBITDA,  pro forma
     effect  shall  be  given  to  any  Permitted   Acquisition  or  Significant
     Divestiture which occurred during the Reference Period or subsequent to the
     Reference  Period and prior to the Transaction  Date,  Consolidated  EBITDA
     shall  be  determined  as if  such  Permitted  Acquisition  or  Significant
     Divestiture occurred on the first day of the Reference Period,  taking into
     account cost savings and expenses which would otherwise be accounted for as
     an adjustment pursuant to Article 11 of Regulation S-X under the Securities
     Act, as if such cost savings or expenses  were realized on the first day of
     the Reference Period.

     "Projections" shall have the meaning provided in Section 7.05(e).

     "Purchase  and   Contribution   Agreement"  shall  mean  the  Purchase  and
Contribution Agreement, dated as of November 15, 1994 as amended and restated as
of December 29, 1995,  among  Broyhill,  Lane,  Action and  Thomasville  and the
Receivables Subsidiary, as same may be further amended, modified or supplemented
from time to time.

     "Qualified  Preferred  Stock"  means  any  Pay-In-Kind  Preferred  Stock of
Furniture Brands, or any other Preferred Stock of Furniture Brands,  the express
terms of which shall provide that Dividends  thereon shall not be required to be
paid in cash at any time that such cash payment would be prohibited by the terms
of this Agreement (and any refinancings,  replacements or extensions hereof) and
in either case which,  by its terms (or by the terms of any security  into which


                                      -87-
<PAGE>

it is convertible or for which it is exchangeable), or upon the happening of any
event  (including an event which would  constitute a Change of Control),  cannot
mature  (excluding  any maturity as the result of an optional  redemption by the
issuer  thereof) and is not mandatorily  redeemable,  pursuant to a sinking fund
obligation or otherwise,  and is not redeemable,  or required to be repurchased,
at the sole option of the holder thereof (including,  without  limitation,  upon
the occurrence of an event which would constitute a Change of Control), in whole
or in part, on or prior to the first anniversary of the Term Loan Maturity Date.

     "Quarterly  Payment  Date" shall mean the last  Business  Day of each June,
September,  December and March,  occurring after the Third Restatement Effective
Date.

     "RCRA" shall mean the Resource  Conservation  and Recovery Act, as the same
may be amended from time to time, 42 U.S.C.ss. 6901 et seq.

     "Real Property" of any Person shall mean all the right,  title and interest
of such Person in and to land, improvements and fixtures, including Leaseholds.

     "Receivables Documents" shall mean the Receivables Purchase Agreements, the
Purchase and Contribution  Agreement and any related  documentation entered into
by the Borrowers and their Restricted  Subsidiaries,  the Receivables Subsidiary
and/or the Receivables Purchasers in connection with the Receivables Facility.

     "Receivables  Facility"  shall mean the  arrangement  pursuant to which (x)
each of Broyhill,  Lane, Action and Thomasville and its respective  Subsidiaries
from time to time sell accounts receivable to the Receivables Subsidiary and (y)
the Receivables Subsidiary sells interests in the receivables to the Receivables
Purchasers,  or obtains  subordinated  loans secured by the receivables from the
Receivables Purchasers, as more fully set forth in the Receivables Documents.

     "Receivables Facility  Intercreditor  Agreement" shall mean the Receivables
Facility  Intercreditor  Agreement dated as of November 17, 1994, as amended and
restated  as of  December  29,  1995,  as further  amended  and  restated  as of
September 6, 1996,  and as further  amended and restated as of June 27, 1997 and
executed  by  the  Collateral   Agent,   Credit  Lyonnais  and  the  Receivables
Subsidiary,  as the same may be amended,  modified or supplemented  from time to
time.

     "Receivables  Purchase  Agreements"  shall mean and  include  the  Atlantic
Receivables Purchase Agreement, the Alternate Receivables Purchase Agreement and
the Subordinated Loan Agreement.

     "Receivables  Purchaser"  shall mean and  include  (i) with  respect to the
Alternate Receivables Purchase Agreement,  Credit Lyonnais and (ii) with respect
to the Atlantic Receivables Purchase Agreement, Atlantic and Credit Lyonnais and
(iii) with respect to the Subordinated Loan Agreement, Credit Lyonnais and their
respective successors and assigns (in the event that the Receivables Facility is
replaced,  any  replacement  receivables  purchasers  shall be  deemed to be the
Receivables Purchasers hereunder).

     "Receivables  Subsidiary" shall mean Interco Receivables Corp., the special
purpose  subsidiary  formed by Broyhill,  Lane and Action and owned by Broyhill,
Lane,   Action  and  Thomasville  to  purchase  and  receive   contributions  of
receivables  from each of  Broyhill,  Lane,  Action  and  Thomasville  and their
respective other Restricted Subsidiaries pursuant to the Receivables Facility.

     "Recovery  Event" shall mean the receipt by Furniture  Brands or any of its
Restricted  Subsidiaries of any cash insurance  proceeds or  condemnation  award
payable  (i) by reason of theft,  loss,  physical  destruction  or damage or any


                                      -88-
<PAGE>

other  similar  event with respect to any property or assets of the Borrowers or
any of its  Subsidiaries  and (ii) under any policy of insurance  required to be
maintained under Section 8.03.

     "Reduction  Percentage"  shall mean .125% on and from the Third Restatement
Effective  Date  through  July  30,  1997  (or such  earlier  date on which  the
Borrowers  deliver to the  Administrative  Agent a  certificate  containing  the
calculations of Leverage Ratio for the fiscal quarter ended June 30, 1997),  and
thereafter  shall mean,  from and after each day of delivery of any  certificate
delivered in accordance with the following sentence indicating an entitlement to
a Reduction  Percentage  other than zero (each, a "Start Date") to and including
the applicable End Date described below, the percentage set forth below opposite
the Leverage Ratio indicated to have been achieved in any certificate  delivered
in accordance with the following sentence:

                  Leverage                                 Interest
                     Ratio                             Reduction Discount

                  Equal to or
                  greater than 4.00:1                            0%

                  Equal to or                                 .125%
                  greater than
                  3.50:1 but less
                  than 4.00:1

                  Equal to or                                 .250%
                  greater than
                  3.00:1 but less
                  than 3.50:1

                  Equal to or                                 .375%
                  greater than
                  2.50:1 but less
                  than 3.00:1

                  Less than 2.50:1                            .625%

From and after the date of the delivery of the certificate  referenced above for
the fiscal  quarter ended June 30, 1997,  the Leverage Ratio shall be determined
based  on the  delivery  of a  certificate  of the  Borrowers  by an  Authorized
Representative of the Borrowers to the Administrative  Agent,  within 30 days of
the last day of any fiscal  quarter of  Furniture  Brands  (beginning  after the
fiscal quarter ended on June 30, 1997, based on calculations  made at the end of
each fiscal  quarter  commencing  with the fiscal  quarter  ended June 30, 1997,
which  certificate shall set forth the calculation of the Leverage Ratio for the
fiscal  quarter  ended  immediately  prior to the  relevant  Start  Date and the
Reduction Percentage which shall be thereafter applicable (until same is changed
or ceases to apply in accordance  with the following  sentences).  The Reduction


                                      -89-
<PAGE>

Percentage  so  determined  shall apply,  except as set forth in the  succeeding
sentence,  from the Start Date to the  earlier of (x) the date on which the next
certificate is delivered to the  Administrative  Agent and (y) the date which is
30 days following the last day of the fiscal quarter in which the previous Start
Date  occurred  (the "End  Date"),  at which time,  if no  certificate  has been
delivered to the  Administrative  Agent indicating an entitlement to a Reduction
Percentage other than zero (and thus commencing a new Start Date), the Reduction
Percentage  shall be reduced to zero.  Notwithstanding  anything to the contrary
contained above in this definition, the Reduction Percentage shall be reduced to
zero at all times during which there shall exist an Event of Default.

     "Refinancing"  shall mean all repayments and  refinancings  of Indebtedness
under the Existing  Credit  Agreement and the  refinancing  of all  outstandings
pursuant to the Receivables Facility in connection with the Transaction.

     "Register" shall have the meaning provided in Section 13.17.

     "Regulation  D" shall mean  Regulation  D of the Board of  Governors of the
Federal  Reserve  System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.

     "Regulation  T" shall mean  Regulation  T of the Board of  Governors of the
Federal  Reserve  System as from time to time in effect and any successor to all
or a portion thereof.

     "Regulation  U" shall mean  Regulation  U of the Board of  Governors of the
Federal  Reserve  System as from time to time in effect and any successor to all
or a portion thereof.

     "Regulation  X" shall mean  Regulation  X of the Board of  Governors of the
Federal  Reserve  System as from time to time in effect and any successor to all
or a portion thereof.

     "Release"  means  any  spilling,   leaking,  pumping,  pouring,   emitting,
emptying,  discharging,  injecting,  escaping,  leaching,  dumping, disposing or
migration into the environment.

     "Replaced Bank" shall have the meaning provided in Section 1.13.

     "Replacement Bank" shall have the meaning provided in Section 1.13.

     "Reportable  Event"  shall mean an event  described  in Section  4043(c) of
ERISA with  respect  to a Plan  other  than those  events as to which the 30-day
notice period is waived under  subsection .13, .14, .16, .18, .19 or .20 of PBGC
Regulation Section 2615.

     "Required Appraisal" shall have the meaning provided in Section 8.11(g).

     "Required  Banks"  shall  mean  Non-Defaulting  Banks,  the  sum  of  whose
outstanding  Term Loans and Revolving Loan Commitments (or after the termination
thereof,  outstanding Revolving Loans and Adjusted Percentage of Swingline Loans
and Letter of Credit Outstandings)  represent greater than 50% of the sum of all
outstanding  Term Loans and the Adjusted  Total  Revolving  Loan  Commitment (or
after the termination thereof,  the sum of the then total outstanding  Revolving
Loans of  Non-Defaulting  Banks and the aggregate  Adjusted  Percentages  of all
Non-Defaulting  Banks of the total  outstanding  Swingline  Loans and  Letter of
Credit Outstandings at such time).



                                      -90-
<PAGE>

     "Required  Supermajority Banks" shall mean those Non-Defaulting Banks which
would  constitute the Required Banks under, and as defined in, this Agreement if
the term "50%" contained therein were changed to "66-2/3%."

     "Restricted  Junior  Payment"  shall have the  meaning  provided in Section
9.10.

     "Restricted  Subsidiaries"  shall mean, (x) all of the  Subsidiaries of the
Borrowers  and  their  respective   Subsidiaries  in  existence  on  the  Fourth
Restatement  Effective Date and (y) any Subsidiary  (other than an  Unrestricted
Subsidiary)   that  is  created,   established  or  acquired  after  the  Fourth
Restatement Effective Date.

     "Returns" shall have the meaning provided in Section 7.09.

     "Revolving Loan" shall have the meaning provided in Section 1.01(b).

     "Revolving Loan Commitment" shall mean, for each Bank, the amount set forth
opposite  such  Bank's  name in  Schedule  I hereto  directly  below the  column
entitled  "Revolving  Loan  Commitment," as same may be (x) reduced from time to
time pursuant to Sections 3.02,  3.03,  4.02 and/or 10 or (y) adjusted from time
to time as a result of assignments to or from such Bank pursuant to Section 1.13
or 13.04(b).

     "Revolving Loan Maturity Date" shall mean September 15, 2001.

     "Revolving Note" shall have the meaning provided in Section 1.05(a).

     "SEC" shall have the meaning provided in Section 8.01(h).

     "Second  Restated  Credit   Agreement"  shall  mean  the  "Existing  Credit
Agreement" under, and as defined in, the Existing Credit Agreement.

     "Second Restatement Effective Date" shall mean September 6, 1996.

     "Section  4.04(b)(ii)  Certificate"  shall  have the  meaning  provided  in
Section 4.04(b)(ii).

     "Secured  Creditors"  shall  have the  meaning  assigned  that  term in the
Security Documents.

     "Securities Act" shall mean the Securities Act of 1933, as amended.

     "Security Agreement" shall have the meaning provided in Section 5.09.

     "Security  Agreement  Collateral" shall mean all "Collateral" as defined in
the Security Agreement.

     "Security   Document"  shall  mean  the  Pledge  Agreement,   the  Security
Agreement,  each Mortgage and,  after the execution and delivery  thereof,  each
Additional Mortgage and each Additional Security Document.

     "Senior Debt Leverage  Ratio" shall mean on any date a ratio  calculated as
provided in the definition of Leverage Ratio contained herein; provided that the


                                      -91-
<PAGE>

term  "Consolidated  Senior  Debt" shall be deemed  inserted in lieu of the term
"Consolidated Debt" in clause (i) of the definition of Leverage Ratio.

     "Shareholders'  Agreements" shall have the meaning provided in the Existing
Credit Agreement.

     "Significant  Divestiture"  shall  mean any sale or  other  disposition  of
assets by Furniture Brands and/or its Restricted  Subsidiaries,  the fair market
value of which  exceeds  $5,000,000  for any  transaction  (or series of related
transactions).

     "Solvent Entity" shall have the meaning provided in Section 7.05(c).

     "Spunoff  Plan" shall mean any employee  benefit plan as defined in Section
3(3) of ERISA  which  Furniture  Brands  ceased to  maintain  or  contribute  to
pursuant to the  Distribution  and Services  Agreement  dated as of November 17,
1994.

     "Standby  Letter of  Credit"  shall  mean any  Standby  Letter of Credit or
similar  instrument  issued or deemed  issued for the  account  of any  Borrower
pursuant  to  Section  2.01  for  the  purpose  of  supporting  L/C  Supportable
Obligations.

     "Standby  Letter of Credit  Request"  shall have the  meaning  provided  in
Section 2.03(a).

     "Start  Date"  shall  have  the  meaning  provided  in  the  definition  of
`Reduction Percentage.'

     "Stated  Amount" of (x) each Letter of Credit shall,  at any time, mean the
maximum amount available to be drawn thereunder (in each case determined without
regard to whether any  conditions to drawing  could then be met);  provided that
the "Stated  Amount" of each Letter of Credit  denominated  in a currency  other
than Dollars shall be, on any date of calculation,  the Dollar Equivalent of the
maximum  amount  available  to be drawn in the  respective  currency  thereunder
(determined  without  regard to whether any  conditions to drawing could then be
met) and (y) each Acceptance shall mean the amount of each such Acceptance.

     "Subordinated Loan Agreement" shall mean the Subordinated Loan Agreement in
the form annexed to the  Atlantic  Receivables  Purchase  Agreement on the First
Restatement Effective Date.

     "Subsidiary"  shall mean, as to any Person,  (i) any corporation  more than
50% of whose stock of any class or classes having by the terms thereof  ordinary
voting  power  to  elect  a  majority  of  the  directors  of  such  corporation
(irrespective  of  whether  or not at the time  stock of any class or classes of
such  corporation  shall  have or  might  have  voting  power by  reason  of the
happening of any  contingency) is at the time owned by such Person and/or one or
more  Subsidiaries of such Person and (ii) any partnership,  association,  joint
venture or other entity in which such Person and/or one or more  Subsidiaries of
such  Person has more than a 50% equity  interest  at the time.  As used in this
Agreement,  the term  "Subsidiary"  shall  include  or  apply to any  Restricted
Subsidiary and any Unrestricted Subsidiary.

     "Subsidiary  Guarantor"  shall  mean  Broyhill  Transport,  Inc.,  a  North
Carolina corporation,  Lane Advertising,  Inc., a Virginia  corporation,  Action


                                      -92-
<PAGE>

Industries,  Inc., a Virginia  corporation,  Action Transport,  Inc., a Delaware
corporation,  Action  Merger  Sub,  Inc.,  a  Mississippi  corporation,  Fayette
Enterprises,  Inc.,  a  Mississippi  corporation,  Gordon's,  Inc.,  a  Delaware
corporation,  Thomasville Home Furnishings,  Inc., a Delaware  corporation,  The
Lane Company,  Incorporated, a Virginia corporation, and Thomasville Upholstery,
Inc., a Delaware  corporation,  and any  Restricted  Subsidiary  of any Borrower
which executes a guarantee after the Fourth Restatement  Effective Date pursuant
to Section 8.11,  but shall in any event  exclude  Thomasville  Furniture  Latin
America, S.A.

     "Subsidiary Guaranty" shall have the meaning provided in Section 5.07.

     "Supermajority  Banks" of any Tranche shall mean those Non-Defaulting Banks
which  would  constitute  the  Required  Banks  under,  and as defined  in, this
Agreement if (x) all  outstanding  Obligations  of the other Tranches under this
Agreement  were repaid in full and all  Commitments  with  respect  thereto were
terminated and (y) the term "50%" contained therein were changed to "66-2/3%."

     "Surviving  Guaranties"  shall mean the guarantee  obligations of Furniture
Brands with respect to the leases described in Schedule XV hereto.

     "Swingline  Expiry  Date"  shall mean the date which is two  Business  Days
prior to the Revolving Loan Maturity Date.

     "Swingline Loan" shall have the meaning provided in Section 1.01(c).

     "Swingline Note" shall have the meaning provided in Section 1.05(a).

     "Syndication Agent" shall mean NationsBank,  in its capacity as Syndication
Agent for the Banks hereunder.

     "Tax Sharing  Agreement" shall mean any tax sharing,  disaffiliation or tax
allocation  agreement entered into among the Borrowers,  Converse and Florsheim,
as amended.

     "Taxes" shall have the meaning provided in Section 4.04(a).

     "Term Loan" shall have the meaning provided in Section 1.01(a).

     "Term Loan Commitment" shall mean for each Bank, the "Term Loan Commitment"
of such Bank under, and as defined in, the Existing Credit Agreement.

     "Term Loan Maturity Date" shall mean June 27, 2007.

     "Term Note" shall have the meaning provided in Section 1.05(a).

     "Third  Restatement  Effective  Date"  shall  mean  the  Third  Restatement
Effective Date under, and as defined in the Existing Credit Agreement.

     "Thomasville"  shall have the meaning  provided in the first  paragraph  of
this Agreement.



                                      -93-
<PAGE>

     "Total  Commitment"  shall mean, at any time, the sum of the Commitments of
each of the Banks.

     "Total Revolving Loan  Commitment"  shall mean, at any time, the sum of the
Revolving Loan Commitments of each of the Banks.

     "Total Term Loan  Commitment"  shall mean, at any time, the sum of the Term
Loan Commitments of each of the Banks.

     "Total  Unutilized  Revolving Loan Commitment"  shall mean, at any time, an
amount equal to the remainder of (x) the then Total  Revolving Loan  Commitment,
less (y) the sum of the  aggregate  principal  amount  of  Revolving  Loans  and
Swingline Loans  outstanding  plus the then aggregate amount of Letter of Credit
Outstandings.

     "Trade  Letter of  Credit"  shall  mean any  Letter  of  Credit or  similar
instrument  issued for the account of any Borrower  pursuant to Section 2.01 for
the purpose of providing the primary  payment  mechanism in connection  with the
purchase  of any  materials,  goods  or  services  by  the  Borrowers  or  their
Restricted  Subsidiaries  in the ordinary course of business of the Borrowers or
their Restricted Subsidiaries.

     "Trade Letter of Credit Request" shall have the meaning provided in Section
2.03(a).

     "Tranche" shall mean the respective  facility and  commitments  utilized in
making Loans  hereunder,  with there being three separate  Tranches,  i.e., Term
Loans, Revolving Loans and Swingline Loans.

     "Transaction"  shall mean (i) the amendment and restatement of the Existing
Credit  Agreement  in the form of this  Agreement as provided  herein,  (ii) the
termination of the Receivables Facility and the taking of the related actions as
required by Section 5.10 and (iii) the consummation of the Refinancing.

     "Type" shall mean the type of Loan determined with regard to
the interest  option  applicable  thereto,  i.e.,  whether a Base Rate Loan or a
Eurodollar Loan.

     "UCC" shall mean the Uniform Commercial Code as from time to time in effect
in the relevant jurisdiction.

     "Unfunded Current Liability" of any Plan means the amount, if any, by which
the actuarial present value of the accumulated benefits under the Plan as of the
close of its most  recent plan year each  exceeds  the fair market  value of the
assets  allocable  thereto,  each  determined  in accordance  with  Statement of
Financial Accounting Standards No. 87, based upon the actuarial assumptions used
by the Plan's actuary in the most recent annual valuation of the Plan.

     "United States" and "U.S." shall each mean the United States of America.

     "Unpaid Drawing" shall have the meaning provided for in Section 2.05(a).

     "Unrestricted   Subsidiary"  shall  mean  any  Wholly-Owned  Subsidiary  of
Furniture  Brands  that is  acquired  or created  after the  Fourth  Restatement
Effective Date and designated by Furniture Brands as an Unrestricted  Subsidiary
hereunder by written notice to the Administrative Agent; provided that Furniture
Brands shall only be permitted  to so  designate a new  Unrestricted  Subsidiary


                                      -94-
<PAGE>

after the  Fourth  Restatement  Effective  Date and so long as (i) no Default or
Event of Default  exists or would result  therefrom and (ii) 100% of the capital
stock of such  newly-designated  Unrestricted  Subsidiary  is owned by Furniture
Brands or another  Unrestricted  Subsidiary and all of the provisions of Section
9.11  shall  have  been  complied  with  in  respect  of  such  newly-designated
Unrestricted  Subsidiary and such Unrestricted Subsidiary is capitalized (to the
extent  capitalized by Furniture  Brands or any of its Restricted  Subsidiaries)
through  Investments as permitted by, and in compliance with, Section 9.05(vii),
with any assets owned by such Unrestricted Subsidiary at the time of the initial
designation  thereof to be  treated  as  Investments  made  pursuant  to Section
9.05(vii),  provided  that at the time of the initial  Investments  by Furniture
Brands in such Subsidiary (x) Furniture Brands shall designate such entity as an
Unrestricted  Subsidiary in a written notice to the Administrative Agent and (y)
such entity and the Borrowers shall have entered into tax sharing and management
services  agreements on a basis  reasonably  satisfactory to the  Administrative
Agent. Additionally,  Furniture Brands may not designate any Credit Party or any
Subsidiary  created  or  acquired  pursuant  to a  Permitted  Acquisition  as an
Unrestricted Subsidiary.

     "Unutilized  Revolving  Loan  Commitment"  with respect to any Bank, at any
time, shall mean such Bank's Revolving Loan Commitment at such time less the sum
of (i) the aggregate  outstanding  principal  amount of Revolving  Loans made by
such Bank and (ii)  such  Bank's  Adjusted  Percentage  of the  Letter of Credit
Outstandings at such time.

     "Voting  Stock"  shall  mean,  as to any  Person,  any class or  classes of
capital  stock of such Person  pursuant to which the  holders  thereof  have the
general voting power under ordinary  circumstances  to elect at least a majority
of the Board of Directors of such Person.

     "Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any corporation
100% of whose capital stock (other than director's  qualifying shares) is at the
time owned by such Person and/or one or more  Wholly-Owned  Subsidiaries of such
Person and (ii) any partnership,  association,  joint venture or other entity in
which such Person and/or one or more  Wholly-Owned  Subsidiaries  of such Person
has a 100% equity interest at such time.

     SECTION 12. The Agents.

     12.01 Appointment.  The Banks hereby designate BTCo as Administrative Agent
(for purposes of this Section 12, the term "Administrative  Agent" shall include
BTCo in its capacity as Collateral  Agent  pursuant to the Security  Documents),
Credit Lyonnais as Documentation  Agent and NationsBank as Syndication Agent, in
each case to act as  specified  herein and in the other Credit  Documents.  Each
Bank  hereby  irrevocably  authorizes,  and  each  holder  of  any  Note  by the
acceptance  of  such  Note  shall  be  deemed  irrevocably  to  authorize,   the
Administrative  Agent, the Documentation Agent and the Syndication Agent to take
such action on its behalf  under the  provisions  of this  Agreement,  the other
Credit Documents and any other instruments and agreements  referred to herein or
therein and to exercise  such powers and to perform  such duties  hereunder  and
thereunder as are  specifically  delegated to or required of the  Administrative
Agent, the Documentation  Agent or the Syndication Agent by the terms hereof and
thereof and such other powers as are reasonably  incidental thereto. Each of the
Administrative  Agent,  the  Documentation  Agent and the Syndication  Agent may
perform  any of its duties  hereunder  by or through  its  respective  officers,
directors, agents, employees or affiliates.



                                      -95-
<PAGE>

     12.02 Nature of Duties. The Administrative  Agent shall not have any duties
or  responsibilities  except those expressly set forth in this Agreement and the
Security Documents.  The Documentation Agent and the Syndication Agent, as such,
shall not have any  duties  or  responsibilities  under  this  Agreement  or any
Security  Document or any other document or matter related thereto.  None of the
Administrative  Agent, the Documentation  Agent or the Syndication Agent nor any
of its respective officers,  directors, agents, employees or affiliates shall be
liable for any action  taken or  omitted  by it or them  hereunder  or under any
other Credit Document or in connection  herewith or therewith,  unless caused by
its  or  their  gross  negligence  or  willful  misconduct.  The  duties  of the
Administrative Agent, the Documentation Agent and the Syndication Agent shall be
mechanical  and  administrative  in  nature;   the  Administrative   Agent,  the
Documentation  Agent and the Syndication  Agent shall not have by reason of this
Agreement or any other Credit  Document a fiduciary  relationship  in respect of
any Bank or the holder of any Note;  and nothing in this  Agreement or any other
Credit Document,  expressed or implied,  is intended to or shall be so construed
as to impose upon the  Administrative  Agent,  the  Documentation  Agent and the
Syndication  Agent any  obligations  in respect of this  Agreement  or any other
Credit Document except as expressly set forth herein or therein.

     12.03 Lack of Reliance on the Administrative Agent, the Documentation Agent
and  the  Syndication  Agent.   Independently  and  without  reliance  upon  the
Administrative  Agent, the Documentation  Agent and the Syndication  Agent, each
Bank and the holder of each Note, to the extent it deems  appropriate,  has made
and  shall  continue  to  make  (i)  its own  independent  investigation  of the
financial  condition  and affairs of Furniture  Brands and its  Subsidiaries  in
connection  with the making and the  continuance  of the Loans and the taking or
not taking of any action in  connection  herewith and (ii) its own  appraisal of
the  creditworthiness  of Furniture Brands and its  Subsidiaries  and, except as
expressly   provided  in  this  Agreement,   the   Administrative   Agent,   the
Documentation  Agent  and the  Syndication  Agent  shall  not  have  any duty or
responsibility,  either initially or on a continuing  basis, to provide any Bank
or the  holder of any Note with any  credit or other  information  with  respect
thereto, whether coming into its possession before the making of the Loans or at
any  time  or  times  thereafter.   None  of  the   Administrative   Agent,  the
Documentation  Agent  or  the  Syndication  Agent  or any  of  their  respective
affiliates nor any of their respective officers, directors, agents, or employees
shall be  responsible  to any Bank or the  holder of any Note for any  recitals,
statements,  information,   representations  or  warranties  herein  or  in  any
document,  certificate or other writing delivered in connection  herewith or for
the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility,  priority or  sufficiency  of this Agreement or any other Credit
Document or the financial  condition of Furniture Brands and its Subsidiaries or
be required to make any inquiry  concerning either the performance or observance
of any of the terms,  provisions or  conditions  of this  Agreement or any other
Credit  Document,  or the  financial  condition  of  Furniture  Brands  and  its
Subsidiaries  or the existence or possible  existence of any Default or Event of
Default.

     12.04 Certain Rights of the Administrative  Agent, the Documentation  Agent
and the Syndication Agent. If the Administrative  Agent, the Documentation Agent
or the Syndication Agent shall request instructions from the Required Banks with
respect to any act or action (including  failure to act) in connection with this
Agreement or any other Credit Document, such Administrative Agent, Documentation
Agent or Syndication  Agent shall be entitled to refrain from such act or taking
such  action  unless and until the  Administrative  Agent  shall  have  received


                                      -96-
<PAGE>

instructions   from  the  Required  Banks;   and  such   Administrative   Agent,
Documentation Agent or Syndication Agent shall not incur liability to any Person
by reason of so refraining. Without limiting the foregoing, no Bank or holder of
any Note shall have any right of action  whatsoever  against the  Administrative
Agent,  the  Documentation  Agent or the  Syndication  Agent as a result  of the
Administrative  Agent acting or  refraining  from acting  hereunder or under any
other Credit Document in accordance with the instructions of the Required Banks.

     12.05 Reliance.  The Administrative  Agent, the Documentation Agent and the
Syndication  Agent shall be entitled to rely,  and shall be fully  protected  in
relying, upon any note, writing,  resolution,  notice,  statement,  certificate,
telex,  teletype or telecopier  message,  cablegram,  radiogram,  order or other
document  or  telephone  message  signed,  sent or made by any Person  that such
Administrative  Agent,  Documentation  Agent or Syndication Agent believed to be
the proper  Person,  and, with respect to all legal  matters  pertaining to this
Agreement and any other Credit Document and its duties hereunder and thereunder,
upon advice of counsel  selected  by such  Administrative  Agent,  Documentation
Agent or Syndication Agent (which may be counsel for the Credit Parties).

     12.06 Indemnification.  To the extent each of the Administrative Agent, the
Documentation  Agent or the Syndication  Agent is not reimbursed and indemnified
by the Borrowers,  the Banks will  reimburse and indemnify  such  Administrative
Agent,  Documentation  Agent  or  Syndication  Agent,  in  proportion  to  their
respective  "percentages" as used in determining the Required Banks  (determined
as if there were no Defaulting  Banks), for and against any and all liabilities,
obligations,  losses, damages,  penalties,  claims, actions,  judgments,  costs,
expenses or  disbursements of whatsoever kind or nature which may be imposed on,
asserted against or incurred by such Administrative  Agent,  Documentation Agent
or Syndication  Agent in performing its respective duties hereunder or under any
other Credit  Document,  in any way relating to or arising out of this Agreement
or any other  Credit  Document;  provided  that no Bank  shall be liable for any
portion of such liabilities,  obligations,  losses, damages, penalties, actions,
judgments,   suits,  costs,  expenses  or  disbursements   resulting  from  such
Administrative  Agent's,  Documentation  Agent's or  Syndication  Agent's  gross
negligence or willful misconduct.

     12.07 The Administrative Agent, the Documentation Agent and the Syndication
Agent in its Individual  Capacity.  With respect to its obligation to make Loans
and  participate  in  Letters  of  Credit  under  this  Agreement,  each  of the
Administrative  Agent, the  Documentation  Agent and the Syndication Agent shall
have the rights and powers  specified  herein for a "Bank" and may  exercise the
same  rights and powers as though it were not  performing  the duties  specified
herein;  and the term  "Banks,"  "Required  Banks,"  "holders  of  Notes" or any
similar terms shall, unless the context clearly otherwise indicates, include the
Administrative Agent, the Documentation Agent and the Syndication Agent in their
individual capacity.  Each of the Administrative  Agent, the Documentation Agent
and the Syndication Agent may accept deposits from, lend money to, and generally
engage in any kind of banking,  trust or other business with any Credit Party or
any  Affiliate  of any Credit  Party as if they were not  performing  the duties
specified herein, and may accept fees and other consideration from the Borrowers
or any other Credit Party for services in  connection  with this  Agreement  and
otherwise without having to account for the same to the Banks.

     12.08 Holders. The Administrative Agent may deem and treat the payee of any
Note as the owner  thereof for all  purposes  hereof  unless and until a written
notice of the assignment,  transfer or endorsement  thereof, as the case may be,
shall have been filed with the Administrative  Agent. Any request,  authority or
consent of any Person  who,  at the time of making  such  request or giving such


                                      -97-
<PAGE>

authority or consent,  is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee,  assignee or endorsee, as the case may be,
of such Note or of any Note or Notes issued in exchange therefor.

     12.09 Resignation by the Agents.  

     (a) The  Administrative  Agent may resign from the  performance  of all its
functions and duties  hereunder  and/or under the other Credit  Documents at any
time by giving 15 Business  Days' prior written  notice to the Borrowers and the
Banks.  Such  resignation  shall take effect upon the appointment of a successor
Administrative  Agent  pursuant  to  clauses  (b) and (c) below or as  otherwise
provided below.

     (b) Upon any such notice of resignation, the Required Banks shall appoint a
successor Administrative Agent hereunder or thereunder who shall be a commercial
bank or trust company reasonably acceptable to the Borrowers.

     (c) If a successor  Administrative  Agent shall not have been so  appointed
within such 15 Business Day period, the  Administrative  Agent, with the consent
of the  Borrowers,  shall then appoint a commercial  bank or trust  company with
capital and surplus of not less than $500  million as  successor  Administrative
Agent who shall serve as Administrative Agent hereunder or thereunder until such
time, if any, as the Required Banks appoint a successor  Administrative Agent as
provided above.

     (d) If no successor  Administrative  Agent has been  appointed  pursuant to
clause (b) or (c) above by the 20th  Business  Day after the date such notice of
resignation was given by the Administrative  Agent, the  Administrative  Agent's
resignation  shall become effective and the Banks shall  thereafter  perform all
the duties of the  Administrative  Agent hereunder and/or under any other Credit
Document  until such time,  if any, as the  Required  Banks  appoint a successor
Administrative Agent as provided above.

     (e) The  Documentation  Agent,  as such, may resign at any time by giving 5
Business Days' prior written notice to the Banks.  Such  resignation  shall take
effect at the end of such five Business Day period.

     (f) The  Syndication  Agent,  as such,  may  resign at any time by giving 5
Business Days' prior written notice to the Banks.  Such  resignation  shall take
effect at the end of such five Business Day period.

     SECTION 13. Miscellaneous.

     13.01 Payment of Expenses,  etc. The Borrowers jointly and severally shall:
(i) whether or not the transactions herein contemplated are consummated, pay all
reasonable   out-of-pocket  costs  and  expenses  of  the  Administrative  Agent
(including, without limitation, the reasonable fees and disbursements of White &
Case LLP and local counsel) in connection  with the  preparation,  execution and
delivery of this Agreement and the other Credit  Documents and the documents and
instruments referred to herein and therein and any amendment,  waiver or consent
relating hereto or thereto,  of the Agents in connection  with their  respective
syndication  efforts with respect to this  Agreement  and of the  Administrative
Agent and, following and during the continuation of an Event of Default, each of
the Banks in connection  with the  enforcement  of this  Agreement and the other
Credit  Documents  and the  documents  and  instruments  referred  to herein and
therein (including, without limitation, the reasonable fees and disbursements of
counsel for the Administrative  Agent and, following and during the continuation


                                      -98-
<PAGE>

of an Event of Default,  for each of the  Banks);  (ii) pay and hold each of the
Banks harmless from and against any and all present and future stamp, excise and
other similar  taxes with respect to the foregoing  matters and hold each of the
Banks  harmless  from and against  any and all  liabilities  with  respect to or
resulting from any delay or omission  (other than to the extent  attributable to
such  Bank) to pay such  taxes;  and (iii)  indemnify  the  Agents and each Bank
(including  in its capacity as an Issuing  Bank),  and each of their  respective
officers, directors, employees, representatives,  affiliates and agents from and
hold  each of  them  harmless  against  any  and  all  liabilities,  obligations
(including removal or remedial actions),  losses,  damages,  penalties,  claims,
actions,   judgments,   suits,  costs,  expenses  and  disbursements  (including
reasonable  attorneys' and  consultants'  fees and  disbursements)  incurred by,
imposed on or assessed against any of them as a result of, or arising out of, or
in any way related  to, or by reason of, (a) any  investigation,  litigation  or
other  proceeding  (whether  or not any  Agent or any  Bank is a party  thereto)
related to the entering into and/or  performance  of this Agreement or any other
Credit  Document or the use of any Letter of Credit or the proceeds of any Loans
hereunder  or  the   consummation  of  any  transactions   contemplated   herein
(including, without limitation, the Transaction) or in any other Credit Document
or the  exercise of any of their  rights or remedies  provided  herein or in the
other  Credit  Documents,  or (b) the actual or alleged  presence  of  Hazardous
Materials  in the  air,  surface  water  or  groundwater  or on the  surface  or
subsurface  of any Real  Property  owned or at any time  operated  by  Furniture
Brands or any of its  Subsidiaries,  the  generation,  storage,  transportation,
handling or disposal of  Hazardous  Materials  at any  location,  whether or not
owned  or  operated  by  Furniture  Brands  or  any  of  its  Subsidiaries,  the
non-compliance of any Real Property with foreign, federal, state and local laws,
regulations, and ordinances (including applicable permits thereunder) applicable
to any Real Property,  or any  Environmental  Claim asserted  against  Furniture
Brands,  any of its  Subsidiaries,  or any  Real  Property  owned or at any time
operated by  Furniture  Brands or any of its  Subsidiaries,  including,  in each
case, without  limitation,  the reasonable fees and disbursements of counsel and
other consultants incurred in connection with any such investigation, litigation
or other proceeding (but excluding any losses,  liabilities,  claims, damages or
expenses  to the extent  incurred by reason of the gross  negligence  or willful
misconduct of the Person to be indemnified).  To the extent that the undertaking
to  indemnify,  pay or hold  harmless  any  Agent or any  Bank set  forth in the
preceding  sentence may be  unenforceable  because it is violative of any law or
public policy, the Borrowers shall make the maximum  contribution to the payment
and  satisfaction  of each of the indemnified  liabilities  which is permissible
under applicable law.

     13.02 Right of Setoff.  In addition to any rights now or hereafter  granted
under  applicable  law or  otherwise,  and not by way of  limitation of any such
rights,  upon the  occurrence  of an  Event  of  Default,  each  Bank is  hereby
authorized  at any  time or from  time to  time,  without  presentment,  demand,
protest or other notice of any kind to the Borrowers or to any other Person, any
such notice being hereby  expressly  waived,  to set off and to appropriate  and
apply any and all deposits  (general or special) and any other  Indebtedness  at
any time held or owing by such Bank (including,  without limitation, by branches
and agencies of such Bank wherever  located) to or for the credit or the account
of any Credit Party against and on account of the Obligations and liabilities of
all Credit  Parties to such Bank under this  Agreement or under any of the other
Credit Documents,  including,  without limitation,  all interests in Obligations
purchased by such Bank pursuant to Section 13.06(b), and all other claims of any
nature or  description  arising out of or connected  with this  Agreement or any
other Credit Document,  irrespective of whether or not such Bank shall have made
any demand hereunder and although said  Obligations,  liabilities or claims,  or
any of them, shall be contingent or unmatured.



                                      -99-
<PAGE>

     13.03 Notices.  Except as otherwise  expressly provided herein, all notices
and other  communications  provided for hereunder shall be in writing (including
telegraphic,  telex, telecopier or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered: if to the Borrowers, at the Borrowers'
address specified opposite its signature below; if to any other Credit Party, at
such Credit Party's address set forth in any Credit Document; if to any Bank, at
its address  specified  opposite  its name on  Schedule II below;  and if to the
Administrative  Agent,  at its Notice Office;  or, as to any Credit Party or the
Administrative Agent, at such other address as shall be designated by such party
in a written  notice to the other  parties  hereto and, as to each Bank, at such
other  address as shall be  designated  by such Bank in a written  notice to the
Borrowers  and the  Administrative  Agent.  All such notices and  communications
shall,  when  mailed,  telegraphed,  telexed,  telecopied,  or cabled or sent by
overnight  courier,  be effective when deposited in the mails,  delivered to the
telegraph company,  cable company or overnight  courier,  as the case may be, or
sent by telex or  telecopier,  except  that  notices and  communications  to the
Administrative  Agent and the Borrowers shall not be effective until received by
the Administrative Agent or the Borrowers, as the case may be.

     13.04 Benefit of Agreement.  (a) This  Agreement  shall be binding upon and
inure to the benefit of and be  enforceable  by the  respective  successors  and
assigns of the parties  hereto;  provided,  however,  no Borrower  may assign or
transfer any of its rights, obligations or interest hereunder or under any other
Credit  Document  without  the prior  written  consent  of all of the Banks and,
provided  further,  that  although  any  Bank  may  transfer,  assign  or  grant
participations in its rights hereunder,  such Bank shall remain a "Bank" for all
purposes  hereunder  (and may not  transfer  or assign all or any portion of its
Commitment hereunder except as provided in Section 13.04(b)) and the transferee,
assignee  or  participant,  as the case may be,  shall not  constitute  a "Bank"
hereunder  and,  provided  further,  that no Bank  shall  transfer  or grant any
participation  under  which the  participant  shall have  rights to approve  any
amendment to or waiver of this Agreement or any other Credit  Document except to
the  extent  such  amendment  or waiver  would (i)  extend  the final  scheduled
maturity  of any Loan or Note or extend the expiry  date of any Letter of Credit
in which such  participant is  participating  beyond the Revolving Loan Maturity
Date,  or reduce  the rate or extend the time of  payment  of  interest  or Fees
thereon (except in connection with a waiver of applicability of any post-default
increase in interest rates) or reduce the principal amount thereof,  or increase
the amount of the  participant's  participation  over the amount thereof then in
effect  (it  being  understood  that  waivers  or  modifications  of  conditions
precedent,  covenants, Defaults or Events of Default or of a mandatory reduction
in the Total  Revolving  Loan  Commitment  shall not  constitute a change in the
terms of such  participation,  and that an  increase in any  Commitment  or Loan
shall be permitted  without the consent of any participant if the  participant's
participation  is not  increased  as a  result  thereof),  (ii)  consent  to the
assignment or transfer by the  Borrowers of any of their rights and  obligations
under this Agreement or (iii) release all or substantially all of the Collateral
under all of the Security  Documents (except as expressly provided in the Credit
Documents) supporting the Loans and/or Letters of Credit hereunder in which such
participant  is  participating.  In the  case  of any  such  participation,  the
participant  shall not have any rights under this  Agreement or any of the other
Credit Documents (the participant's  rights against such Bank in respect of such
participation  to be those set forth in the  agreement  executed by such Bank in
favor of the  participant  relating  thereto)  and all  amounts  payable  by the
Borrowers  hereunder  shall be  determined  as if such  Bank  had not sold  such
participation.

     (b) Notwithstanding the foregoing,  any Bank (or any Bank together with one
or more other  Banks) may (x)  assign  all or a portion  of its  Revolving  Loan
Commitment  (and  related   outstanding   Obligations   hereunder)   and/or  its


                                     -100-
<PAGE>

outstanding  Term Loans to (i) its parent  company  and/or any affiliate of such
Bank which is at least 50% owned by such Bank or its parent company or to one or
more  Banks or (ii) in the case of any Bank that is a fund that  invests in bank
loans,  any other  fund that  invests  in bank  loans and is managed by the same
investment advisor of such Bank or by an Affiliate of such investment advisor or
(y) after  providing  at least two  Business  Days prior  notice to (but without
requiring the consent of) Furniture  Brands,  assign all, or if less than all, a
portion equal to at least $10,000,000 in the aggregate for the assigning Bank or
assigning  Banks, of such Revolving Loan  Commitments (or, if the Revolving Loan
Commitments have terminated, its outstanding obligations) and/or its outstanding
Term  Loans  hereunder  to one or  more  Eligible  Transferees,  each  of  which
assignees  shall  become a party to this  Agreement as a Bank by execution of an
Assignment and Assumption Agreement,  provided that, (i) at such time Schedule I
shall be deemed  modified  to reflect the  Commitment  and/or  outstanding  Term
Loans, as the case may be, of such new Bank and of the existing Banks, (ii) upon
surrender of the old Notes, new Notes will be issued, at the Borrowers' expense,
to such new Bank and to the assigning  Bank,  such new Notes to be in conformity
with the requirements of Section 1.05 (with  appropriate  modifications)  to the
extent needed to reflect the revised  Commitments and/or outstanding Term Loans,
as the case may be,  (iii)  the  consent  of the  Administrative  Agent  and any
Issuing  Bank shall be  required in  connection  with any such  assignment  of a
Bank's  Commitment  and/or  outstanding  Term  Loans,  as the case may be (which
consent  shall  not  be  unreasonably   withheld  or  delayed),   and  (iv)  the
Administrative  Agent shall receive at the time of each such  assignment  (other
than in  connection  with an assignment by a Bank to an affiliate of such Bank),
from the  assigning or assignee  Bank,  the payment of a  non-refundable  fee of
$3,500 and,  provided  further,  that such  transfer or  assignment  will not be
effective until recorded by the Administrative Agent on the Register pursuant to
Section 13.17 hereof.  To the extent of any assignment  pursuant to this Section
13.04(b), the assigning Bank shall be relieved of its obligations hereunder with
respect to its assigned Commitments.  At the time of each assignment pursuant to
this  Section  13.04(b) to a Person  which is not already a Bank  hereunder  and
which  is not a United  States  person  (as  such  term is  defined  in  Section
7701(a)(30)  of the  Code) for  Federal  income  tax  purposes,  the  respective
assignee Bank shall provide to the  Borrowers and the  Administrative  Agent the
appropriate  Internal  Revenue  Service  Forms  (and,  if  applicable  a Section
4.04(b)(ii)  Certificate)  described in Section  4.04(b).  To the extent that an
assignment of all or any portion of a Bank's Commitments and related outstanding
Obligations pursuant to Section 1.13 or this Section 13.04(b) would, at the time
of such assignment, result in increased costs under Section 1.10 or 1.11 greater
than  those  being  charged  by the  respective  assigning  Bank  prior  to such
assignment,  then the  Borrowers  shall  not be  obligated  to pay such  greater
increased  costs  (although  the  Borrowers  shall be obligated to pay any other
increased  costs of the type  described  above  resulting from changes after the
date of the respective assignment).

     (c)  Nothing in this  Agreement  shall  prevent or  prohibit  any Bank from
pledging its Loans and Notes  hereunder to a Federal  Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank.

     13.05 No Waiver;  Remedies  Cumulative.  No failure or delay on the part of
the Administrative Agent or any Bank or any holder of any Note in exercising any
right,  power or privilege  hereunder or under any other Credit  Document and no
course of  dealing  between  the  Borrowers  or any other  Credit  Party and the


                                     -101-
<PAGE>

Administrative  Agent or any Bank or the holder of any Note  shall  operate as a
waiver thereof;  nor shall any single or partial exercise of any right, power or
privilege  hereunder  or under any other Credit  Document  preclude any other or
further exercise thereof or the exercise of any other right,  power or privilege
hereunder or thereunder.  The rights, powers and remedies herein or in any other
Credit  Document  expressly  provided are  cumulative  and not  exclusive of any
rights,  powers or remedies  which the  Administrative  Agent or any Bank or the
holder of any Note would  otherwise  have.  No notice to or demand on any Credit
Party in any case shall entitle any Credit Party to any other or further  notice
or demand in similar or other circumstances or constitute a waiver of the rights
of the  Administrative  Agent or any Bank or the holder of any Note to any other
or further action in any circumstances without notice or demand.

     13.06  Payments  Pro  Rata.  (a)  Except  as  otherwise  provided  in  this
Agreement,  the  Administrative  Agent agrees that promptly after its receipt of
each  payment from or on behalf of the  Borrowers in respect of any  Obligations
hereunder,  it shall  distribute  such payment to the Banks (other than any Bank
that has  consented in writing to waive its pro rata share of any such  payment)
pro rata based upon their  respective  shares,  if any, of the Obligations  with
respect to which such payment was received.

     (b)  Each of the  Banks  agrees  that,  if it  should  receive  any  amount
hereunder  (whether by voluntary payment,  by realization upon security,  by the
exercise  of the right of setoff or  banker's  lien,  by  counterclaim  or cross
action,  by  the  enforcement  of any  right  under  the  Credit  Documents,  or
otherwise),  which is applicable to the payment of the principal of, or interest
on, the Loans,  Unpaid Drawings,  Commitment  Commission or other Fees, of a sum
which with  respect to the related  sum or sums  received by other Banks is in a
greater  proportion  than the total of such Obligation then owed and due to such
Bank bears to the total of such Obligation then owed and due to all of the Banks
immediately prior to such receipt,  then such Bank receiving such excess payment
shall  purchase  for cash without  recourse or warranty  from the other Banks an
interest in the Obligations of the respective Credit Party to such Banks in such
amount as shall result in a proportional  participation by all the Banks in such
amount;  provided that if all or any portion of such excess amount is thereafter
recovered  from such Bank,  such  purchase  shall be rescinded  and the purchase
price restored to the extent of such recovery, but without interest.

     (c)  Notwithstanding   anything  to  the  contrary  contained  herein,  the
provisions  of the preceding  Sections  13.06(a) and (b) shall be subject to the
express  provisions  of this  Agreement  which  require,  or  permit,  differing
payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks.

     13.07  Calculations;  Computations.  (a)  The  financial  statements  to be
furnished to the Banks pursuant  hereto shall be made and prepared in accordance
with  generally  accepted  accounting  principles  in the United  States (or the
equivalent  thereof in any country in which a Foreign Sales Corporation is doing
business,  as applicable)  consistently applied throughout the periods involved,
provided  that,  (i)  except as  otherwise  specifically  provided  herein,  all
computations of the Available Basket Amount, the Available Debt Proceeds Amount,
and the  Consolidated  Cumulative  50% Net Income  Amount  and all  computations
determining compliance with Sections 9.02 through 9.09, inclusive, shall utilize
accounting  principles and policies in conformity with those used to prepare the
historical  financial  statements  delivered  to the Banks  pursuant to Sections


                                     -102-
<PAGE>

7.05(a), and (ii) for purposes of calculating financial terms, all covenants and
related definitions,  all such calculations based on the operations of Furniture
Brands and its Restricted  Subsidiaries  on a  consolidated  basis shall be made
without giving effect to the operations of any Unrestricted Subsidiaries.

     (b) All  computations  of interest,  Commitment  Commission  and other Fees
hereunder shall be made on the basis of a year of 360 days for the actual number
of days  (including  the first day but excluding the last day)  occurring in the
period for which such interest, Commitment Commission or other Fees are payable.

     13.08  GOVERNING LAW;  SUBMISSION TO  JURISDICTION;  VENUE;  WAIVER OF JURY
TRIAL.  (a) THIS  AGREEMENT  AND THE OTHER CREDIT  DOCUMENTS  AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER  SHALL,  EXCEPT AS OTHERWISE
PROVIDED IN CERTAIN OF THE  MORTGAGES,  BE CONSTRUED IN  ACCORDANCE  WITH AND BE
GOVERNED  BY THE LAW OF THE STATE OF NEW YORK.  ANY LEGAL  ACTION OR  PROCEEDING
WITH RESPECT TO THIS  AGREEMENT  OR ANY OTHER CREDIT  DOCUMENT MAY BE BROUGHT IN
THE  COURTS OF THE STATE OF NEW YORK OR OF THE UNITED  STATES  FOR THE  SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,  EACH OF
THE  BORROWERS  HEREBY  IRREVOCABLY  ACCEPTS  FOR  ITSELF  AND IN RESPECT OF ITS
PROPERTY,  GENERALLY  AND  UNCONDITIONALLY,  THE  JURISDICTION  OF THE AFORESAID
COURTS.  EACH OF THE  BORROWERS  HEREBY  IRREVOCABLY  DESIGNATES,  APPOINTS  AND
EMPOWERS  CT  CORPORATION  SYSTEM,  WITH  OFFICES  ON THE  DATE  HEREOF  AT 1633
BROADWAY,  NEW YORK,  NEW YORK  10019 AS ITS  DESIGNEE,  APPOINTEE  AND AGENT TO
RECEIVE  AND ACCEPT  FOR AND ON ITS  BEHALF,  AND IN  RESPECT  OF ITS  PROPERTY,
SERVICE OF ANY AND ALL LEGAL PROCESS,  SUMMONS,  NOTICES AND DOCUMENTS WHICH MAY
BE SERVED IN ANY SUCH ACTION OR  PROCEEDING.  IF FOR ANY REASON  SUCH  DESIGNEE,
APPOINTEE  AND AGENT SHALL  CEASE TO BE  AVAILABLE  TO ACT AS SUCH,  EACH CREDIT
PARTY AGREES TO DESIGNATE A NEW  DESIGNEE,  APPOINTEE AND AGENT IN NEW YORK CITY
ON THE  TERMS  AND  FOR  THE  PURPOSES  OF THIS  PROVISION  SATISFACTORY  TO THE
ADMINISTRATIVE  AGENT  UNDER  THIS  AGREEMENT.  EACH  OF THE  BORROWERS  FURTHER
IRREVOCABLY  CONSENT TO THE SERVICE OF PROCESS OUT OF ANY OF THE  AFOREMENTIONED
COURTS IN ANY SUCH  ACTION OR  PROCEEDING  BY THE  MAILING OF COPIES  THEREOF BY
REGISTERED  OR  CERTIFIED  MAIL,  POSTAGE  PREPAID,  TO ANY CREDIT  PARTY AT ITS
ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE
30 DAYS  AFTER  SUCH  MAILING.  NOTHING  HEREIN  SHALL  AFFECT  THE RIGHT OF THE
ADMINISTRATIVE AGENT UNDER THIS AGREEMENT, ANY BANK OR THE HOLDER OF ANY NOTE TO
SERVE  PROCESS  IN ANY  OTHER  MANNER  PERMITTED  BY LAW  OR TO  COMMENCE  LEGAL
PROCEEDINGS  OR  OTHERWISE  PROCEED  AGAINST  ANY  CREDIT  PARTY  IN  ANY  OTHER
JURISDICTION.

     (b) EACH OF THE BORROWERS HEREBY  IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS
OR PROCEEDINGS  ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY


                                     -103-
<PAGE>

FURTHER  IRREVOCABLY  WAIVES  AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.

     (c) EACH OF THE PARTIES TO THIS  AGREEMENT  HEREBY  IRREVOCABLY  WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION,  PROCEEDING OR COUNTERCLAIM  ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

     13.09  Counterparts.  This  Agreement  may be  executed  in any  number  of
counterparts and by the different parties hereto on separate counterparts,  each
of which when so executed and delivered  shall be an original,  but all of which
shall together  constitute one and the same  instrument.  A set of  counterparts
executed by all the parties  hereto shall be lodged with the  Borrowers  and the
Administrative Agent.

     13.10 Effectiveness. This Agreement shall become effective on the date (the
"Fourth Restatement Effective Date") on which (i) each Borrower,  each New Bank,
the Required Banks (determined  immediately  before the occurrence of the Fourth
Restatement  Effective  Date) the  Supermajority  Banks holding  Revolving  Loan
Commitments   (determined  immediately  before  the  occurrence  of  the  Fourth
Restatement  Effective  Date) and each  Agent  shall have  signed a  counterpart
hereof  (whether the same or different  counterparts)  and shall have  delivered
(including by way of facsimile device) the same to the  Administrative  Agent at
its Notice  Office;  provided that the provisions of Section 13.20 shall only be
effective  if  counterparts  of this  Agreement  (whether  the same or different
counterparts)  are executed and  delivered  to the  Administrative  Agent by the
Required  Supermajority  Banks  (determined  after the  occurrence of the Fourth
Restatement  Effective Date) and (ii) the conditions  contained in Sections 5, 6
and 13.10(b) are met to the  satisfaction  of the  Administrative  Agent and the
Required  Banks  (determined  immediately  after the  occurrence  of the  Fourth
Restatement Effective Date). Unless the Administrative Agent has received actual
notice from any Bank that the conditions  contained in Sections 5 and 6 have not
been met to its satisfaction,  upon the satisfaction of the condition  described
in clause (i) of the immediately  preceding sentence and upon the Administrative
Agent's good faith determination that the conditions described in clause (ii) of
the immediately  preceding  sentence have been met, then the Fourth  Restatement
Effective  Date  shall  have been  deemed to have  occurred,  regardless  of any
subsequent determination that one or more of the conditions thereto had not been
met (although the occurrence of the Fourth Restatement  Effective Date shall not
release the  Borrowers  from any liability for failure to satisfy one or more of
the applicable conditions contained in Section 5 or 6). The Administrative Agent
will give the Borrowers and each Bank prompt written notice of the occurrence of
the Fourth Restatement Effective Date.

     13.11  Headings  Descriptive.  The  headings  of the several  sections  and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.

     13.12  Amendment or Waiver;  etc. (a) Neither this  Agreement nor any other
Credit  Document  nor any  terms  hereof  or  thereof  may be  changed,  waived,
discharged or terminated unless such change, waiver, discharge or termination is
in  writing  signed by the  respective  Credit  Parties  party  thereto  and the
Required Banks, provided that no such change,  waiver,  discharge or termination


                                     -104-
<PAGE>

shall,  without the consent of each Bank  (other than a  Defaulting  Bank) (with
Obligations  being  directly  affected  thereby in the case of following  clause
(i)), (i) extend the final scheduled maturity of any Loan or Note, or extend the
stated maturity of any Letter of Credit beyond the Revolving Loan Maturity Date,
or reduce the rate or extend the time of payment of interest or Fees thereon, or
reduce the principal amount thereof (except to the extent repaid in cash),  (ii)
release  all or  substantially  all of the  Collateral  under  all the  Security
Documents (except as expressly provided in the Credit  Documents),  (iii) amend,
modify or waive any provision of this Section 13.12,  (iv) reduce the percentage
specified in the definition of Required Banks (it being  understood  that,  with
the consent of the Required Banks,  additional  extensions of credit pursuant to
this  Agreement may be included in the  determination  of the Required  Banks on
substantially  the same basis as the extensions of Term Loans and Revolving Loan
Commitments  are  included  on the  Fourth  Restatement  Effective  Date) or (v)
consent to the  assignment  or transfer by the  Borrowers of any of their rights
and obligations  under this Agreement;  provided  further,  that no such change,
waiver,  discharge or termination  shall (s) increase the Commitment of any Bank
over the amount  thereof  then in effect  without  the  consent of such Bank (it
being  understood  that  waivers  or  modifications  of  conditions   precedent,
covenants,  Defaults  or Events of Default or of a  mandatory  reduction  in the
Total  Commitments  shall not  constitute  an increase of the  Commitment of any
Bank,  and that an increase in the  available  portion of any  Commitment of any
Bank shall not  constitute  an increase  in the  Commitment  of such Bank),  (t)
without the consent of the  respective  Issuing  Bank or Issuing  Banks,  amend,
modify or waive any  provision  of  Section 2 with  respect to Letters of Credit
issued by it or alter its  rights or  obligations  with  respect  to  Letters of
Credit or Acceptances,  (u) without the consent of BTCo, amend,  modify or waive
any  provision of Sections  1.01(c) and (d) or alter its rights and  obligations
with respect to Swingline  Loans, (v) without the consent of each Agent affected
thereby,  amend,  modify or waive any provision of Section 12 as same applies to
such Agent or any other  provision as same relates to the rights or  obligations
of such Agent, (w) without the consent of the Collateral Agent, amend, modify or
waive any  provision  relating to the rights or  obligations  of the  Collateral
Agent,  (x) without the consent of the Majority  Banks of Term Loans,  amend the
definition of Majority Banks or reallocate  any amounts that would  otherwise be
applied as a  mandatory  repayment  of Term  Loans  hereunder  to the  permanent
reduction of the Total Revolving Loan Commitment or as a mandatory  repayment of
Revolving Loans or Swingline Loans, (y) without the consent of the Supermajority
Banks of the respective  Tranche of Revolving  Loans (1) amend,  modify or waive
any Scheduled  Commitment  Reduction,  or (2) reduce the percentage specified in
the  definition of  Supermajority  Banks with respect to such  Tranche,  and (z)
without  the  consent of the  Required  Supermajority  Banks,  (1)  release  any
significant  portion of the Collateral under the Security  Documents  (except as
expressly   provided  in  the  Credit  Documents)  or  release  any  significant
Subsidiary  Guarantor from its obligations under the Subsidiary  Guaranty (other
than in  connection  with a  transaction  permitted  pursuant to Section  9.02);
provided  that no  Collateral  shall  constitute  a  significant  portion of the
Collateral and no Subsidiary Guarantor shall constitute a significant Subsidiary
Guarantor if the fair market  value of the  Collateral  to be released  plus the
fair market  value of the assets owned or held by such  Subsidiary  Guarantor is
$20  million  or less in the  aggregate  (based  on a  certificate  of the chief
financial officer of Furniture Brands taking into account all prior releases) or
(2) reduce the percentage specified in the definition of Required  Supermajority
Banks.

     (b) If, in  connection  with any  proposed  change,  waiver,  discharge  or
termination  to any of the  provisions  of this  Agreement  as  contemplated  by
clauses (i) through (v),  inclusive,  of the first proviso to Section  13.12(a),
the consent of the Required  Banks is obtained but the consent of one or more of
such other Banks whose consent is required is not  obtained,  then the Borrowers
shall have the  right,  so long as all  non-consenting  Banks  whose  individual


                                     -105-
<PAGE>

consent is required are treated as described in either clauses (A) or (B) below,
to either (A) replace  each such  non-consenting  Bank or Banks with one or more
Replacement  Banks  pursuant  to  Section  1.13 so  long as at the  time of such
replacement, each such Replacement Bank consents to the proposed change, waiver,
discharge or termination or (B) terminate such non-consenting  Bank's Commitment
in accordance with Sections  3.02(b) and/or 4.01(b),  provided that,  unless the
Commitments are terminated,  and Loans repaid,  pursuant to the preceding clause
(B) are  immediately  replaced in full at such time  through the addition of new
Banks or the increase of the Commitments  and/or  outstanding  Loans of existing
Banks (who in each case must specifically consent thereto),  then in the case of
any action  pursuant to  preceding  clause (B) the  Required  Banks  (determined
before giving effect to the proposed action) shall specifically consent thereto,
provided  further,  that in any event the Borrowers  shall not have the right to
replace a Bank,  terminate its  Commitment or repay its Loans solely as a result
of the  exercise of such  Bank's  rights (and the  withholding  of any  required
consent by such Bank) pursuant to the second proviso to Section 13.12(a).

     13.13  Survival.  All  indemnities  set  forth  herein  including,  without
limitation,  in Sections 1.10, 1.11, 2.06, 4.04, 13.01 and 13.06 shall,  subject
to Section 13.15 (to the extent applicable), survive the execution, delivery and
termination  of this Agreement and the Notes and the making and repayment of the
Loans.

     13.14 Domicile of Loans.  Each Bank may transfer and carry its Loans at, to
or for the  account  of any  office,  Subsidiary  or  Affiliate  of  such  Bank.
Notwithstanding  anything to the contrary contained herein, to the extent that a
transfer of Loans  pursuant to this  Section  13.14  would,  at the time of such
transfer,  result in increased costs under Section 1.10, 1.11, 2.06 or 4.04 from
those being  charged by the  respective  Bank prior to such  transfer,  then the
Borrowers  shall not be  obligated to pay such  increased  costs  (although  the
Borrowers  shall  be  obligated  to pay any  other  increased  costs of the type
described  above  resulting  from  changes  after  the  date  of the  respective
transfer).

     13.15 Limitation on Additional Amounts,  etc.  Notwithstanding  anything to
the contrary  contained in Sections 1.10,  1.11, 2.06 or 4.04 of this Agreement,
unless a Bank  gives  notice to the  Borrowers  that it is  obligated  to pay an
amount  under any such  Section  within one year after the later of (x) the date
the Bank  incurs  the  respective  increased  costs,  Taxes,  loss,  expense  or
liability, reduction in amounts received or receivable or reduction in return on
capital or (y) the date such Bank has actual  knowledge of its incurrence of the
respective  increased costs,  Taxes, loss,  expense or liability,  reductions in
amounts received or receivable or reduction in return on capital, then such Bank
shall only be entitled to be  compensated  for such amount jointly and severally
by the Borrowers  pursuant to said Section 1.10, 1.11, 2.06 or 4.04, as the case
may be, to the extent the costs, Taxes, loss, expense or liability, reduction in
amounts received or receivable or reduction in return on capital are incurred or
suffered  on or after the date which  occurs one year prior to such Bank  giving
notice to the  Borrowers  that it is  obligated  to pay the  respective  amounts
pursuant to said  Section  1.10,  1.11,  2.06 or 4.04,  as the case may be. This
Section 13.15 shall have no applicability to any Section of this Agreement other
than said Sections 1.10, 1.11, 2.06 and 4.04.

     13.16 Confidentiality.  (a) Subject to the provisions of clause (b) of this
Section  13.16,  each  Bank  agrees  that it will  use its best  efforts  not to
disclose  without  the  prior  consent  of  the  Borrowers  (other  than  to its
employees,  auditors, advisors or counsel or to another Bank if the Bank or such


                                     -106-
<PAGE>

Bank's holding or parent company in its sole discretion determines that any such
party should have access to such  information,  provided  such Persons  shall be
subject to the provisions of this Section 13.16 to the same extent as such Bank)
any  information  with  respect to Furniture  Brands or any of its  Subsidiaries
which is now or in the future furnished  pursuant to this Agreement or any other
Credit  Document and which is  designated  by  Furniture  Brands to the Banks in
writing  as  confidential,   provided  that  any  Bank  may  disclose  any  such
information (a) as has become generally  available to the public,  (b) as may be
required or appropriate in any report,  statement or testimony  submitted to any
municipal,  state  or  Federal  regulatory  body  having  or  claiming  to  have
jurisdiction  over  such Bank or to the  Federal  Reserve  Board or the  Federal
Deposit Insurance  Corporation or similar  organizations  (whether in the United
States or elsewhere) or their successors,  (c) as may be required or appropriate
in respect to any summons or subpoena or in connection with any litigation,  (d)
in order to comply with any law, order,  regulation or ruling applicable to such
Bank, (e) to any Agent or the Collateral Agent, (f) to any prospective or actual
transferee  or  participant  in  connection  with any  contemplated  transfer or
participation of any of the Notes or Commitments or any interest therein by such
Bank,  provided,  that  such  prospective  transferee  agrees  to  maintain  the
confidentiality contained in this Section and (g) to the National Association of
Insurance Commissioners or any similar organization or any nationally recognized
rating agency that requires access to information  about such Bank's  investment
portfolio in connection with ratings issued to such Bank.

     (b) Each of the Borrowers hereby acknowledges and agrees that each Bank may
share with any of its Affiliates any information  related to Furniture Brands or
any of its Subsidiaries (including,  without limitation,  any nonpublic customer
information   regarding  the   creditworthiness  of  Furniture  Brands  and  its
Subsidiaries),  provided such Persons shall be subject to the provisions of this
Section 13.16 to the same extent as such Bank.

     13.17 Register.  The Borrowers hereby designate the Administrative Agent to
serve as the Borrowers'  agent,  solely for purposes of this Section  13.17,  to
maintain a register  (the  "Register")  on which it will record the  Commitments
from time to time of each of the Banks,  the Loans made by each of the Banks and
each  repayment  in respect of the  principal  amount of the Loans of each Bank.
Failure to make any such recordation, or any error in such recordation shall not
affect the Borrowers'  obligations in respect of such Loans. With respect to any
Bank,  the  transfer  of the  Commitments  of such  Bank and the  rights  to the
principal of, and interest on, any Loan made pursuant to such Commitments  shall
not be effective  until such transfer is recorded on the Register  maintained by
the Administrative Agent with respect to ownership of such Commitments and Loans
and prior to such  recordation  all amounts owing to the transferor with respect
to such  Commitments  and  Loans  shall  remain  owing  to the  transferor.  The
registration  of  assignment or transfer of all or part of any  Commitments  and
Loans shall be recorded by the  Administrative  Agent on the Register  only upon
the acceptance by the Administrative  Agent of a properly executed and delivered
Assignment and Assumption  Agreement  pursuant to Section  13.04(b).  Coincident
with  the  delivery  of such  an  Assignment  and  Assumption  Agreement  to the
Administrative  Agent for acceptance and  registration of assignment or transfer
of all or part of a Loan, or as soon thereafter as practicable, the assigning or
transferor Bank shall surrender the Note evidencing such Loan, and thereupon one
or more new Notes in the same aggregate  principal amount shall be issued to the
assigning or  transferor  Bank and/or the new Bank.  The  Borrowers  jointly and
severally agree to indemnify the  Administrative  Agent from and against any and
all losses,  claims,  damages and liabilities of whatsoever  nature which may be
imposed  on,  asserted  against  or  incurred  by the  Administrative  Agent  in
performing  its duties under this Section  13.17,  provided  that the  Borrowers


                                     -107-
<PAGE>

shall have no  obligation to indemnify  the  Administrative  Agent for any loss,
claim,  damage,  liability or expense which  resulted  primarily  from the gross
negligence or willful misconduct of the Administrative Agent.

     13.18 Addition of New Banks; etc. On and as of the occurrence of the Fourth
Restatement  Effective Date in accordance with Section 13.10,  (x) each New Bank
shall become a "Bank"  under,  and for all purposes of, this  Agreement  and the
other Credit  Documents  and (y) each Existing Bank shall remain a "Bank" under,
and for all purposes of, this Agreement and the other Credit Documents.

     13.19  Post  Closing  Actions.  Notwithstanding  anything  to the  contrary
contained in this  Agreement or the other Credit  Documents,  the parties hereto
acknowledge and agree that:

     (a)  Title  Endorsements.  The  Borrowers  will  deliver,  or  cause  to be
delivered,  within  thirty  (30)  Business  Days  after the  Fourth  Restatement
Effective Date,  endorsements reasonably satisfactory to the Collateral Agent to
each Existing  Mortgage Policy assuring the Collateral  Agent that each Existing
Mortgage  is a  valid  and  enforceable  first  priority  mortgage  lien  on the
respective  Existing  Mortgaged  Properties,  free and clear of all  defects and
encumbrances except Permitted Encumbrances; and

     (b) Confirmatory UCC Searches.  The Borrowers will deliver,  or cause to be
delivered,  within  thirty  (30)  Business  Days  after the  Fourth  Restatement
Effective  Date,  certified  copies of Requests for  Information or Copies (Form
UCC-11), or equivalent reports,  listing all effective financing statements that
name any Credit Party as debtor and that are filed in the jurisdictions referred
to in Section 5.09(a),  together with copies of such other financing  statements
(none of which  shall  cover  the  collateral  except to the  extent  evidencing
Permitted Liens or in respect of which the Collateral  Agent shall have received
termination  statements  (Form UCC-3) or such other  termination  statements  as
shall be required by local law) fully executed for filing.

     (c)  Insurance  Certificates.  The Borrowers  will deliver,  or cause to be
delivered,  within  thirty  (30)  Business  Days  after the  Fourth  Restatement
Effective Date, evidence of insurance complying with the requirements of Section
8.03 for the business and  properties  of  Furniture  Brands and its  Restricted
Subsidiaries, in scope, form and substance reasonably satisfactory to the Agents
and naming the Collateral Agent as an additional  insured and/or loss payee, and
stating that such  insurance  shall not be canceled or revised  without 30 days'
prior written notice by the insurer to the Administrative Agent.

     All conditions  precedent and  representations  contained in this Agreement
and the other Credit  Documents shall be deemed modified to the extent necessary
to effect the foregoing (and to permit the taking of the actions described above
within the time periods required above, rather than as elsewhere provided in the
Credit  Documents);  provided,  that (x) to the  extent any  representation  and
warranty  would not be true because the foregoing  actions were not taken on the
Fourth  Restatement  Effective Date, the respective  representation and warranty
shall be required to be true and  correct in all  material  respects at the time
the respective  action is taken (or was required to be taken) in accordance with
the foregoing  provision of this Section 13.19 and (y) all  representations  and
warranties  relating  to the  Security  Documents  shall be  required to be true
immediately  after the actions  required to be taken by Section  13.19 have been
taken (or were  required to be taken).  The  acceptance  of the benefits of each
Credit  Event shall  constitute a  representation,  warranty and covenant by the


                                     -108-
<PAGE>

Borrowers  to each of the  Banks  that the  actions  required  pursuant  to this
Section  13.19  and that,  at such  time,  all  representations  and  warranties
contained in this  Agreement and the other Credit  Documents  shall then be true
and correct without any modification pursuant to this Section 13.19.

     13.20 Release of  Mortgages.  On any date upon which no Default or Event of
Default then exists, and so long as the Leverage Ratio for the fiscal quarter of
Furniture  Brands  most  recently  ended on or prior to the date upon  which the
respective  release  is to occur is less  than or  equal to  2.5:1.00,  then all
Mortgages  shall be released (such date,  the "Mortgage  Release Date") (and the
Collateral  Agent shall,  and is hereby  directed  to,  execute and deliver such
terminations  and other  documentation  with respect to the  Mortgages as may be
reasonably requested by Furniture Brands to effectuate such releases) so long as
the  following  conditions  are met to the  satisfaction  of the  Administrative
Agent:

          (i) the  financial  statements  for the fiscal  quarter most  recently
     ended on or prior to the date the  respective  release is  requested  shall
     have  been  delivered  to  the  Administrative  Agent  and  the  respective
     officer's certificate delivered pursuant to Section 8.01(f) shall establish
     that the Leverage Ratio is less than or equal to 2.5:1.00;

          (ii) Furniture Brands shall have delivered to the Administrative Agent
     an officer's certificate certifying that the Leverage Ratio is less than or
     equal to  2.5:1.00  and  stating  that no Default or Event of Default is in
     existence on the date the respective  release is requested pursuant to this
     Section 13.20;

          (iii) on the date the respective release is requested pursuant to this
     Section 13.20,  the Borrowers  shall  represent and warrant (and are hereby
     deemed to represent and warrant) that the release of all Mortgages does not
     constitute a release of all or substantially  all of the Collateral as then
     in effect; and

          (iv) Furniture Brands shall have delivered to the Administrative Agent
     an opinion of counsel  (which counsel shall be reasonably  satisfactory  to
     the Administrative Agent, and may be internal counsel for Furniture Brands)
     to the effect that the release of Mortgages  does not  constitute a release
     of all or substantially all of the Collateral at such time.

     So long as the  foregoing  conditions  are met to the  satisfaction  of the
Administrative  Agent,  the Collateral  Agent shall ( and is hereby directed to)
release all of the Mortgages and to take such action in connection  therewith as
may be reasonably requested by the Borrowers. All actions taken pursuant to this
Section 13.20 shall be taken at the joint and several  expense of the Borrowers.
Furthermore,  neither the  Administrative  Agent nor the Collateral  Agent shall
have any liability  whatsoever for any actions taken by them in accordance  with
the provision of this Section 13.20 (or which any Agent believed, in the absence
of gross negligence or willful  misconduct (on its part) were permitted pursuant
to the provisions of this Section 13.20.  Furthermore,  each of the Agents shall
be entitled to rely on the certificates furnished pursuant to this Section 13.20
and shall have no obligation  whatsoever to inquire as to the  underlying  facts
covered thereby.



                                     -109-
<PAGE>

     13.21 Judgment Currency.  (a) The Credit Parties' obligations hereunder and
under the other  Credit  Documents  to make  payments  in  Dollars  shall not be
discharged  or  satisfied  by any tender or recovery  pursuant  to any  judgment
expressed in or converted  into any currency  other than Dollars,  except to the
extent  that such  tender or recovery  results in the  effective  receipt by the
Administrative  Agent,  the Collateral  Agent or the respective Bank of the full
amount of  Dollars  expressed  to be payable to the  Administrative  Agent,  the
Collateral  Agent  or  such  Bank  under  this  Agreement  or the  other  Credit
Documents.  If for the purpose of obtaining or  enforcing  judgment  against any
Credit  Party in any  court or in any  jurisdiction,  it  becomes  necessary  to
convert into or from any currency  other than Dollars (such other currency being
hereinafter  referred to as the  "Judgment  Currency") an amount due in Dollars,
the conversion shall be made, at the Dollar Equivalent  thereof  determined,  in
each case,  on the day on which the  judgment is given (such  Business Day being
hereinafter referred to as the "Judgment Currency Conversion Date").

     (b) If there is a change in the rate of  exchange  prevailing  between  the
Judgment  Currency  Conversion Date and the date of actual payment of the amount
due, the Borrowers jointly and severally  covenant and agree to pay, or cause to
be paid, such additional  amounts, if any (but in any event not a lesser amount)
as may be  necessary  to ensure that the amount paid in the  Judgment  Currency,
when converted at the rate of exchange  prevailing on the date of payment,  will
produce the amount of Dollars which could have been purchased with the amount of
Judgment  Currency  stipulated in the judgment or judicial  award at the rate or
exchange prevailing on the Judgment Currency Conversion Date.

     (c) For purposes of determining the Dollar  Equivalent or any other rate of
exchange  for this  Section,  such amounts  shall  include any premium and costs
payable in connection with the purchase of Dollars.


<PAGE>


     IN WITNESS  WHEREOF,  the parties hereto have caused their duly  authorized
officers  to execute  and  deliver  this  Agreement  as of the date first  above
written.

Address:

c/o Furniture Brands International, Inc.    FURNITURE BRANDS INTERNATIONAL, INC.
101 South Hanley Road                       BROYHILL FURNITURE INDUSTRIES, INC.
St. Louis, MO  63105                        LANE FURNITURE INDUSTRIES, INC.
Tel: (314) 863-1100                         THOMASVILLE FURNITURE INDUSTRIES,
Attention:  David P. Howard                     INC.
Vice President, Treasurer                   Fax:  (314) 863-5306
and Chief Financial Officer
                                            By:  /s/  David P. Howard
                                               ----------------------
                                               Name:  David P. Howard
                                               Title: Vice President

<PAGE>

                                            BANKERS TRUST COMPANY, Individually
                                              and as Administrative Agent

                                            By:  /s/   James Reilly
                                                -------------------
                                                Name:  James Reilly
                                                Title: Vice President


<PAGE>




                                            NATIONSBANK, N.A., Individually
                                              and as Syndication Agent

                                            By:  /s/   Michael F. Murphy
                                                ------------------------
                                                Name:  Michael F. Murphy
                                                Title: Vice President


<PAGE>


                                            CREDIT LYONNAIS CHICAGO BRANCH,
                                               Individually and as
                                               Documentation Agent



                                             By:  /s/  Julie T. Kanak
                                                ---------------------
                                                Name:  Julie T. Kanak
                                                Title: Vice President

<PAGE>



                                            ALLIED IRISH BANK PLC, acting
                                             through its CAYMAN ISLAND BRANCH



                                            By:  /s/ Marcia Meeker
                                                ------------------
                                                Name:    Marcia Meeker
                                                Title: Vice Presdient



                                          By:   /s/ William J. Strickland
                                                -------------------------
                                                Name:  William J. Strickland
                                                Title: Senior Vice Presdient

<PAGE>



                                            BANK OF MONTREAL



                                            By:  /s/    Leon H. Sinclair
                                                 -----------------------
                                                 Name:  Leon H. Sinclair
                                                 Title: Director


<PAGE>


                                            THE BANK OF NEW YORK



                                            By:  /s/  Steven Wilson
                                                --------------------
                                                Name:   Steven Wilson
                                                Title: Assistant Vice President


<PAGE>



                                            THE BANK OF NOVA SCOTIA



                                            By:  /s/   F.C.H. Ashby
                                                 ------------------
                                                 Name:  F.C.H. Ashby
                                                 Title: Senior Manager Loan
                                                        Operations


<PAGE>



                                            BANK OF SCOTLAND



                                            By:  /s/   Annie Chin Tat
                                                ---------------------
                                                Name:  Annie Chin Tat
                                                Title: Senior Vice President


<PAGE>




                                            THE BANK OF TOKYO - MITSUBISHI,
                                            LTD., CHICAGO BRANCH



                                            By:  /s/  Ryo Nakata
                                                 ---------------
                                                 Name: Ryo Nakata
                                                 Title: General Manager


<PAGE>




                                            BANKBOSTON, N.A.



                                            By:  /s/   Randall L. Wehling
                                                -------------------------
                                                Name:  Randall L. Wehling
                                                Title: Vice President


<PAGE>



                                            CHIAO TUNG BANK CO., LTD.
                                            NEW YORK AGENCY



                                            By:  /s/   Kuang Si Shiu
                                                --------------------
                                                Name:  Kuang Si Shiu
                                                Title: SVP & GM


<PAGE>





                                            CIBC INC.



                                            By:  /s/    Elizabeth Fischer
                                                 ------------------------
                                                 Name:  Elizabeth Fischer
                                                 Title: Executive Director
                                                        CIBC Oppenheimer Corp,
                                                        AS AGENT

<PAGE>


                                            GCB INVESTMENT PORTFOLIO
                                            By: CITIBANK, N.A.



                                            By:  /s/    Steven Kaufman
                                                 ---------------------
                                                 Name:  Steven Kaufman
                                                 Title: Vice President


<PAGE>



                                            CITY NATIONAL BANK



                                            By:  /s/    Patrick M. Cassidy
                                                 -------------------------
                                                 Name:  Patrick M. Cassidy
                                                 Title: Vice President


<PAGE>



                                            CREDIT AGRICOLE INDOSUEZ



                                            By:  /s/    David Bouhl, F.V.P.
                                                 -------------------------
                                                 Name:  David Bouhl. F.V.P.
                                                 Title: Head of Corporate
                                                        Banking Chicago



                                            By:   /s/    Dean Balice
                                                  ------------------
                                                  Name:  Dean Balice
                                                  Title: Senior Vice President/
                                                         Branch Manager


<PAGE>



                                            DELANO COMPANY
                                            By Pacific Investment Management
                                             Company, as its Investment Advisor



                                            By:   /s/    Raymond Kennedy
                                                  ----------------------
                                                  Name:  Raymond Kennedy
                                                  Title: Senior Vice President

<PAGE>




                                            DEEPROCK & CO.

                                            By: Eaton Vance Management
                                                 as Investment Advisor



                                            By:  /s/    Payson F. Swaffield
                                                 -------------------------
                                                 Name:  Payson F. Swaffield
                                                 Title: Vice President


<PAGE>




                                            SENIOR DEBT PORTFOLIO

                                            By: Boston Management and Research
                                                 as Investment Advisor



                                            By:  /s/    Payson F. Swaffield
                                                 -------------------------
                                                 Name:  Payson F. Swaffield
                                                 Title: Vice President


<PAGE>


                                            FC CBO LTD.



                                            By:  /s/    E. John Thompson
                                                  ----------------------
                                                 Name:  E. John Thompson
                                                 Title: Secretary


<PAGE>



                                            FIRST AMERICAN NATIONAL BANK



                                            By:  /s/  Jerry J. Watterworth
                                               ---------------------------
                                               Name:  Jerry J. Watterworth
                                               Title: Senior Vice President


<PAGE>



                                            FIRST COMMERCIAL BANK
                                            (Incorporated in Taiwan, R.O.C.)
                                            Los Angeles Branch



                                            By:  /s/ Guey Fang Wu
                                                -----------------
                                                Name:  Guey Fang Wu
                                                Title: AVP & Deputy General
                                                       Manager


<PAGE>


                                            FIRST UNION NATIONAL BANK (F/K/A
                                            FIRST UNION NATIONAL BANK OF NORTH
                                            CAROLINA)


                                            By: /s/ Roger Pelz
                                                -----------------
                                                Name:  Roger Pelz
                                                Title: Senior Vice President


<PAGE>



                                            FLEET NATIONAL BANK



                                            By:  /s/  Jeffrey C. Lynch
                                               -----------------------
                                               Name:  Jeffrey C. Lynch
                                               Title: Vice President


<PAGE>




                                            THE FUJI BANK LIMITED



                                            By:  /s/  Tetsuo Kamatsu (K-219)
                                               ---------------------------
                                               Name:  Tetsuo Kamatsu (K-219)
                                               Title: Joint General Manager


<PAGE>






                                           THE INDUSTRIAL BANK OF JAPAN, LIMITED



                                            By:  /s/  Walter Wolff
                                                ------------------
                                                Name:  Walter Wolff
                                                Title: Joint General Manager


<PAGE>



                                            KZH HOLDING CORPORTAION III



                                            By:  /s/  Virginia Conway
                                               ---------------------------
                                               Name:  Virginia Conway
                                               Title: Authorized Agent


<PAGE>



                                            KZH-ING-I CORPORATION



                                            By:  /s/  Virginai Conway
                                               ----------------------
                                               Name:  Virgina Conway
                                               Title: Authorized Agent


<PAGE>




                                            THE LONG-TERM CREDIT BANK OF
                                            JAPAN, LTD.


                                            By:  /s/  Armund J. Schoen, Jr.
                                               ---------------------------
                                               Name:  Armund J. Schoen, Jr.
                                               Title: Senior Vice President


<PAGE>







                                            MERCANTILE BANK NATIONAL ASSOCIATION



                                              By:  /s/  Stephen M. Reese
                                                 -----------------------
                                                 Name:  Stephen M. Reese
                                                 Title: Vice President


<PAGE>



                                            MERRILL LYNCH DEBT STRATEGIES 
                                            PORTFOLIO

                                            By: Merrill Lynch Asset Management,
                                            L.P., as Investment Advisor



                                            By:  /s/  John M. Johnson
                                               ----------------------
                                               Name:  John M. Johnson
                                               Title: Authorized Signatory


<PAGE>



                                            DEBT STRATEGIES FUND, INC.



                                            By:  /s/  John M. Johnson
                                               ----------------------
                                               Name:  John M. Johnson
                                               Title: Authorized Signatory


<PAGE>





                                            MERRILL LYNCH SENIOR FLOATING RATE 
                                            FUND, INC.



                                            By:  /s/  John M. Johnson
                                            ----------------------
                                            Name:  John M. Johnson
                                            Title: Authorized Signatory


<PAGE>





                                            MERRILL LYNCH PRIME RATE PORTFOLIO

                                            By: Merrill Lynch Asset Management,
                                                L.P., as Investment Advisor




                                            By:  /s/  John M. Johnson
                                            -------------------------
                                            Name:  John M. Johnson
                                            Title: Authorized Signatory


<PAGE>






                                            SENIOR HIGH INCOME PORTFOLIO, INC.



                                            By:  /s/  John M. Johnson
                                            -------------------------
                                            Name:  John M. Johnson
                                            Title: Authorized Signatory


<PAGE>





                                            MERRILL LYNCH GLOBAL INVESTMENT
                                            SERIES:  INCOME STRATEGIES PORTFOLIO

                                            By: Merrill Lynch Asset Management,
                                                L.P., as Investment Advisor



                                            By:  /s/  John M. Johnson
                                                ---------------------
                                                Name:  John M. Johnson
                                                Title: Authorized Signatory


<PAGE>



                                            THE MITSUBISHI TRUST AND BANKING
                                            CORPORATION


                                            By:  /s/  Nobuo Tominaga
                                               -------------------------
                                            Name:  Nobuo Tominaga
                                            Title: Chief Manager


<PAGE>






                                            OCTAGON LOAN TRUST, by Octagon
                                            Credit Investors, as Manager



                                            By:  /s/  Richard W. Stewart
                                               -------------------------
                                               Name:  Richard W. Stewart
                                               Title: Managing Director


<PAGE>




                                            PARIBAS



                                            By:  /s/  Karen E. Coons
                                               --------------------
                                               Name:  Karen E.Coons
                                               Title: Vice President



                                            By:  /s/  Ann B. McAloon
                                               --------------------
                                               Name:  Ann B. McAloon
                                               Title: Vice President


<PAGE>



                                            THE SANWA BANK, LTD., CHICAGO BRANCH


                                            By:  /s/  Kenneth C. Eichwald
                                               --------------------------
                                               Name:  Kenneth C. Eichwald
                                               Title: Assistant General Manager


<PAGE>



                                            THE SUMITOMO BANK, LIMITED, CHICAGO
                                            BRANCH


                                            By:  /s/  Ken-Ichior Kobayashi
                                               ---------------------------
                                               Name:  Ken-Ichiro Kobayashi
                                               Title: Joint General Manager


<PAGE>




                                            SUMITOMO TRUST AND BANKING CO., LTD.
                                            NEW YORK BRANCH


                                            By:  /s/  Mr. Naoya Takeuchi
                                               ---------------------------
                                               Name:  Mr. Naoya Tekeuchi
                                               Title: Deputy General Manager


<PAGE>




                                           SUNTRUST BANK, ATLANTA



                                            By:  /s/  Linda L. Dash
                                               --------------------
                                               Name:  Linda L. Dash
                                               Title: Vice President




                                          By:  /s/  Margaret A. Jaketic
                                               ------------------------
                                               Name:  Margaret A. Jaketic
                                               Title: Vice President

<PAGE>





                                            U.S. BANK NATIONAL ASSOCIATION



                                            By:     (did not execute)
                                               ---------------------------
                                               Name:  
                                               Title: 


<PAGE>




                                            VAN KAMPEN AMERICAN CAPITAL PRIME
                                            RATE INCOME TRUST


                                            By:     (did not execute)
                                               ---------------------------
                                               Name:  
                                               Title: 


<PAGE>





                                            VAN KAMPEN CLO I, LIMITED
                                            By: Van Kampen American Capital
                                                Management, Inc. as Collateral
                                                Manager



                                             By:     (did not execute)
                                               ---------------------------
                                               Name:  
                                               Title: 




<PAGE>


                                                                      Schedule I
                                                                          


         OUTSTANDING PRINCIPAL OF TERM LOANS/REVOLVING LOAN COMMITMENTS1


----------------------------------------------------------- -------------------
Bank                                            Outstanding     Revolving Loan
                                              Principal Amount    Commitment
                                               of Term Loans
------------------------------------------------------------------------------
Bankers Trust Company                            $ 3,000,000       $45,000,000
------------------------------------------------------------------------------
Credit Lyonnais Chicago Branch                    10,000,000        27,000,000
==============================================================================
NationsBank, N.A.                                      0            27,000,000
==============================================================================
Allied Irish Bank PLC                                  0             8,000,000
==============================================================================
Bank of Montreal                                       0            39,430,000
==============================================================================
The Bank of Nova Scotia                                0            31,420,000
==============================================================================
The Bank of New York                                   0            28,000,000
==============================================================================
Bank of Scotland                                   9,000,000        19,250,000
==============================================================================
The Bank of Tokyo-Mitsubishi                           0            18,000,000
==============================================================================
BankBoston, N.A.                                   5,000,000             0
==============================================================================
Chiao Tung Bank Co., Ltd. New York Agency              0            10,000,000
==============================================================================
CIBC Inc.                                              0            20,000,000
==============================================================================
GCB Investment Portfolio (By: Citibank, N.A.)     13,000,000             0
==============================================================================
City National Bank                                     0            10,000,000
==============================================================================
Credit Agricole Indosuez                               0            18,000,000
==============================================================================
Delano Company                                     5,000,000             0
==============================================================================
Eaton Vance Deeprock                               2,000,000             0
==============================================================================
Eaton Vance Senior Debt                           37,000,000             0
==============================================================================
Chase Bank of Texas, N.A. (FC CBO Limited)         9,000,000             0
==============================================================================
First American National Bank                           0            19,250,000
==============================================================================
First Commercial Bank                                  0            10,000,000
==============================================================================
First Union National Bank                              0            29,430,000
==============================================================================
Fleet National Bank                                    0            11,430,000
==============================================================================
The Fuji Bank Limited                                  0            31,430,000
==============================================================================
The Industrial Bank of Japan, Limited                  0            27,500,000
==============================================================================
KZH Holding Corporation III                        5,000,000             0
==============================================================================
KZH - ING - I Corporation                          9,000,000             0
==============================================================================
The LTCB of Japan, Ltd.                                0            26,000,000
==============================================================================
Mercantile Bank National Association                   0            18,000,000
==============================================================================
Merrill Lynch Debt Strategies Portfolio            5,000,000             0
==============================================================================
Debt Strategies Fund, Inc.                         5,000,000             0
==============================================================================
Merrill Lynch Global Investment Series: Income    10,000,000             0
Strategies Portfolio
==============================================================================
Merrill Lynch Prime Rate Portfolio                 5,000,000             0
==============================================================================
Merrill Lynch Senior Floating Rate Fund, Inc.     10,000,000             0
==============================================================================
Senior High Income Portfolio, Inc.                 5,000,000             0
==============================================================================
Mitsubishi Trust and Banking                           0            18,000,000
==============================================================================

<PAGE>

                                                                    Schedule I
                                                                        Page 2
                                                                      
Octagon Loan Trust                                 9,000,000             0
==============================================================================
Paribas                                                0            23,000,000
==============================================================================
The Sanwa Bank, Ltd., Chicago Branch                   0            18,000,000
==============================================================================
The Sumitomo Bank, Limited, Chicago Branch             0            26,000,000
==============================================================================
Sumitomo Trust and Banking Co., Ltd. New York
Branch                                                 0            11,430,000
==============================================================================
SunTrust Bank                                          0            11,430,000
==============================================================================
U.S. Bank National Association                         0            18,000,000
==============================================================================
Van Kampen American Capital Prime Rate Trust      34,000,000             0
==============================================================================
Van Campen CLO I                                  10,000,000             0
==============================================================================
Total                                           $200,000,000      $600,000,000
==============================================================================


<PAGE>


                                 BANK ADDRESSES



BANKERS TRUST COMPANY
130 Liberty Street, 30th Floor
New York, NY  10006
Tel:     (212) 250-4886
         (212) 250-1661
Fax:     (212) 250-7218
Attention:  Anthony LoGrippo
                 Diane Rolfe

ALLIED IRISH BANK
405 Park Avenue
New York, NY 10022
Tel.:    (212) 339-8018
Fax:     (212) 339-8008
Attention:  Marcia Meeker

BANK OF MONTREAL
115 South LaSalle Street, 12th Floor
Chicago, IL 60603
Tel.:    (312) 750-3860
Fax:     (312) 750-6057
Attention:  Leon Sinclair

THE BANK OF NEW YORK
One Wall Street, 19th Floor
New York, NY 10286
Tel.:    (212) 635-8204
Fax:     (212) 635-1208
Attention:  John Lambert

BANKBOSTON, N.A.
100 Federal Street
MS: 01-11-06
Boston, MA 02110-2016
Tel.:    (617) 434-0896
Fax:     (617) 434-6046
Attention:  Randy Wehling

BANK OF NOVA SCOTIA
181 West Madison Street, Suite 3700
Chicago, IL 60602
Tel.:    (312) 201-4112
Fax:     (312) 201-4108
Attention:  David J. Vishny

BANK OF SCOTLAND
181 West Madison Street, Suite 3525
Chicago, IL 60602
Tel.:    (312) 263-4054
Fax:     (312) 263-1143
Attention:        Alison Divney

PACIFIC INVESTMENT MANAGEMENT COMPANY
840 Newport Center Drive
Newport Beach, CA 92658
Tel.:    (949) 717-7363
Fax:     (949) 640-3419
Attention:  Ray Kennedy
<PAGE>

BANK OF TOKYO MITSUBISHI LTD.
227 West Monroe Street, Suite 2300
Chicago, IL 60606
Tel.:    (312) 696-4662
Fax:     (312) 696-4535
Attention:  Alex Lam

BANQUE PARIBAS
227 West Monroe Street, Suite 3300
Chicago, IL 60606
Tel.:    (312) 853-6000
Fax:     (312) 853-6020
Attention:  Karen Coons

CANADIAN IMPERIAL BANK OF COMMERCE
200 West Monroe Street, Suite 2300
Chicago, IL 60606
Tel.:    (312) 750-8731
Fax:     (312) 236-8810
Attention:  David Quon

CHANCELLOR
1166 Avenue of the Americas, 27th Floor
New York, NY 10036
Tel.:    (212) 278-9673
Fax:     (212) 278-9619
Attention:  Chris Bondy

CHIAO TUNG BANK
200 Liberty Street
New York, NY 10281
Tel.:    (212) 285-2666
Fax:     (212) 285-2922
Attention:  Ifen Lee

CITIBANK GLOBAL ASSET MANAGEMENT
599 Lexington Avenue
26th Floor, Zone 10
New York, NY 10043
Tel.:    (212) 559-4786
Fax:     (212) 793-1871
Attention:  Hans Christensen

ING CAPITAL ADVISORS
233 W. Wacker Drive, Suite 5200
Chicago, IL  60606
Tel.:    (312) 496-7606
Fax:     (312) 496-7611
Attention:  Jane Nelson

CITY NATIONAL BANK
400 North Roxbury Drive
Beverly Hills, CA 90210
Tel.:    (310) 888-6132
Fax:     (310) 888-6152
Attention:  Kim R. Bingham

CREDIT LYONNAIS CHICAGO BRANCH
227 W. Monroe Street, Suite 3800
Chicago, IL 60606
Tel.:    (312) 220-7302
Fax:     (312) 641-0527
Attention:  Julie Kanak
<PAGE>

CREDIT AGRICOLE INDOSUEZ
55 East Monroe Street, Suite 4700
Chicago, IL 60603
Tel.:    (312) 917-7573
Fax:     (312) 372-3724
Attention:  Paul Dytrych

EATON VANCE
24 Federal Street
Boston, MA 02110
Tel.:    (617) 654-8484
Fax:     (617) 695-9594
Attention:  Payson Swaffield

CHASE BANK OF TEXAS
(FC CBO LTD.)
600 Travis Street
Houston, TX 77002-8039
Tel.:    (713) 216-4780
Fax:     (713) 216-2101
Attention:  Mike Flores

FIRST AMERICAN NATIONAL
315 Deaderick Street
Nashville, TN 37237-0314
Tel.:    (615) 748-2720
Fax:     (615) 748-2485
Attention:  Jerry Watterworth

FIRST COMMERCIAL
515 South Flower Street, Suite 1050
Los Angeles, CA 90071
Tel.:    (213) 362-0200
Fax:     (213) 362-0219
Attention:  Jonathan Kuo

FIRST UNION NATIONAL BANK
301 S. College Street, DC-5
Charlotte, NC 28288-0737
Tel.:    (704) 374-6060
Fax:     (704) 374-3300
Attention:  Roger Pelz

FLEET BANK
Mail Stop: MA OF D07L
1 Federal Street
Boston, MA 02211
Tel.:    (617) 346-5061
Fax:     (617) 346-0145
Attention:  Jeffrey C. Lynch

THE FUJI BANK, LTD.
225 West Wacker Drive, Suite 2000
Chicago, IL 60606
Tel.:    (312) 621-0397
Fax:     (312) 621-0539
Attention:  James R. Fayen

THE INDUSTRIAL BANK OF JAPAN, LIMITED
227 West Monroe Street, Suite 2600
Chicago, IL 60606
Tel.:    (312) 855-1111
Fax:     (312) 855-8200
Attention:  Tim Avendt
<PAGE>

THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED
190 South LaSalle Street, Suite 800
Chicago, IL 60603
Tel.:    (312) 704-5479
Fax:     (312) 704-8505
Attention:  Armund Schoen

MERRILL LYNCH
800 Scudders Mill Road
Plainsboro, NJ 08536
Tel.:    (609) 282-3001
Fax:     (609) 282-2756
Attention:  John M. Johnson

MERCANTILE BANK OF ST. LOUIS
Mercantile Tower, Tram 10-6
7th & Washington Street, 12th Floor
St. Louis, MO 63101
Tel.:    (314) 425-2459
Fax:     (314) 425-2203
Attention:  Stephen M. Reese

MITSUBISHI TRUST & BANKING CORP.
311 West Wacker Drive, Suite 6300
Chicago, IL 60606
Tel.:    (312) 408-6051
Fax:     (312) 663-0863
Attention:  John Pastore

NATIONSBANK
Mail Code M01-800-12-08
NationsBank Plaza
800 Market Street
St. Louis, Missouri 63101
Tel.:    (314) 466-6695
Fax:     (314) 466-7783
Attention:  Michael F. Murphy

OCTAGON
380 Madison Avenue, 12th Floor
New York, NY 10017
Tel.:    (212) 622-3070
Fax:     (212) 622-3797
Attention:  Jim Ferguson

THE SANWA BANK, LIMITED
10 South Wacker Drive, 31st Floor
Chicago, IL 60606
Tel.:    (312) 368-3006
Fax:     (312) 346-6677
Attention:  Kenneth C. Eichwald

THE SUMITOMO BANK
233 South Wacker Drive, Suite 4800
Chicago, IL 60606
Tel.:    (312) 879-7673
Fax:     (312) 876-6436
Attention:  Thomas Hanzel

THE SUMITOMO TRUST & BANKING CO., LTD., NEW YORK BRANCH
527 Madison Avenue
New York, NY 10022
Tel.:    (212) 326-0600
Fax:     (212)
Attention:  Suraj P. Bhatia
<PAGE>

SUNTRUST BANK, ATLANTA
25 Park Place, 24th Floor
Mail Code 118
Atlanta, Georgia 30303
Tel.:    (404) 658-4923
Fax:     (404) 658-4905
Attention:  Linda L. Dash

U.S. BANK NATIONAL ASSOCIATION
U.S. Bank Place (MPFP0607)
601 Second Avenue South
Minneapolis, MN 55402-4302
Tel.:    (612) 973-0848
Fax:     (612) 973-0824
Attention:  Erik P. Dove

VAN KAMPEN
One Parkview Plaza
Oakbrook Terrace, IL 60181
Tel.:    (630) 684-6438
Fax:     (630) 684-6740
Attention:  Jeffrey Maillet