<PAGE>
 
                                 EXHIBIT 10.4
                                 ------------

                      THIRD AMENDMENT TO CREDIT AGREEMENT
                      -----------------------------------

     This Third Amendment to Credit Agreement (the "Amendment") is made on this
29 day of January, 1998 by and among Converse Inc. (the "Borrower"), BT
Commercial Corporation, as Agent (in such capacity, the "Agent") and BT
Commercial Corporation (in its capacity as lender, "BTCC"), Sanwa Business
Credit Corporation ("Sanwa"), LaSalle National Bank ("LaSalle"), BankBoston,
N.A. ("BankBoston"), FINOVA Capital Corporation ("FINOVA"), BNY Financial
Corporation ("BNY"), Fleet Capital Corporation ("Fleet"), NationsBank of Texas,
N.A. ("NationsBank"), Heller Financial, Inc. (BT, Sanwa, LaSalle, BankBoston,
FINOVA, BNY, Fleet, NationsBank, and Heller referred to collectively as
"Lenders").

                             W I T N E S S E T H:

     WHEREAS, the Agent, the Lenders and the Borrower are parties to that
certain Credit Agreement dated as of May 21, 1997, as amended by that certain
First Amendment to Credit Agreement dated as of June 26, 1997, and that certain
Second Amendment to Credit Agreement dated as of November 25, 1997
(collectively, the "Credit Agreement"); and

     WHEREAS, the parties desire to amend the Credit Agreement, as more fully
set forth herein.

     NOW, THEREFORE, in consideration of the mutual agreements herein contained
and other good and valuable consideration, the adequacy is hereby acknowledged,
and subject to the terms and conditions hereof, the parties hereto agree as
follows:

     SECTION 1. DEFINITIONS Unless otherwise defined herein, all capitalized
                -----------                                      
terms shall have the meaning given to them in the Credit Agreement.

     SECTION 2  AMENDMENTS TO CREDIT AGREEMENT
                ------------------------------

          2.1  The defined term "Borrowing Base", which appears in Section 1.1
of the Credit Agreement, is hereby amended by deleting the proviso appearing at
the end of subsection (B) thereof, and inserting the following in its stead:
<PAGE>
 
          "; provided, however, that during the period from January
             --------  -------
          29, 1998 through and including March 31, 1998, and during
          the months of April, May, June and July of each year during
          the term hereof, the advance rate with respect to Eligible
          Inventory and Eligible L/C Inventory shall be seventy
          percent (70%), plus"
                         ---- 

          2.2   Section 7.7 of the Credit Agreement is hereby deleted in its
entirety, and the following is inserted in its stead:

          "7.7  INTEREST COVERAGE RATIO. Borrower shall not permit the
                ----------------------- 
          ratio of EBITDA to Consolidated Interest Expense to be less
          than (i) 1.2 to 1 for the fiscal quarter ending March, 1998,
          (ii) 1.25 to 1 for the fiscal quarter ending June, 1998,
          (iii) 1.0 to 1 for the four (4) fiscal quarters ending
          September, 1998, and (iv) 1.40 to 1 thereafter at the end of
          each subsequent fiscal quarter for the immediately preceding
          four (4) fiscal quarters."

     SECTION 3. CONDITIONS PRECEDENT. The effectiveness of this Amendment is
                --------------------                                      
expressly conditioned upon satisfaction of the following conditions precedent:

     3.1  Agent shall have received copies of this Amendment duly executed by
Borrower and Lenders constituting Required Lenders.

     3.2  Agent shall have received such other documents, certificates and
assurances as it shall reasonably request.

     SECTION 4. REAFFIRMATION OF BORROWER. Borrower hereby represents and
                -------------------------                                 
warrants to Agent and Lender that (i) the representations and warranties set
forth in Section 5 of the Credit Agreement are true and correct on and as of the
date hereof, except to the extent (a) that any such representations or
warranties relate to a specific date, or (b) of changes thereto as a result of
transactions for which Agent and Lender have granted their consent; (ii)
Borrower is on the date hereof in compliance with all of the terms and
provisions set forth in the Credit Agreement as hereby amended; and (iii) upon
execution hereof no Default or Event of Default has occurred and is continuing
or has not previously been waived.

     SECTION 5. FULL FORCE AND EFFECT. Except as herein amended, the Credit
                ---------------------                                
Agreement and all other Credit Documents shall remain in full force and effect
<PAGE>
 
     SECTION 6.  COUNTERPARTS. This Amendment may be executed in two or more
                 ------------                                           
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the
day and year specified above.

                                    BORROWER:

                                    CONVERSE INC.


                                    By:  /s/ Donald J. Camacho
                                       ----------------------------
                                       Name: Donald J. Camacho
                                            -----------------------
                                       Title: Senior Vice President
                                             ----------------------


                                    AGENT:

                                    BT COMMERCIAL CORPORATION


                                    By:  /s/ Frank Fazio
                                       ---------------------
                                       Name:  Frank Fazio
                                            ----------------
                                       Title: Vice President
                                             ---------------


                                    LENDER:

                                    BT COMMERCIAL CORPORATION


                                    By:  /s/ Frank Fazio
                                       ---------------------
                                       Name: Frank Fazio
                                            ----------------
                                       Title: Vice President
                                             ---------------


<PAGE>
 
                                    LENDER:

                                    SANWA BUSINESS CREDIT
                                    CORPORATION


                                    By:  /s/ Lawrence J. Placer
                                       ------------------------
                                       Name: Lawrence J. Placer
                                            -------------------
                                       Title: Vice President
                                            -------------------

                                    LENDER:

                                    LASALLE NATIONAL BANK


                                    By: /s/ Christopher G. Clifford
                                       -----------------------------
                                       Name: Christopher G. Clifford
                                            ------------------------
                                       Title: Senior Vice President
                                             -----------------------

                                    LENDER:

                                    BANKBOSTON, N.A.


                                    By:  /s/ Kathy A. Sweeney
                                       ----------------------
                                       Name: Kathy A. Sweeney
                                            -----------------
                                       Title: Vice President
                                             ----------------

                                    LENDER:

                                    FINOVA CAPITAL CORPORATION


                                    By: /s/ Brian Rujewitz
                                        -------------------------------
                                        Name: Brian Rujewitz
                                             --------------------------
                                        Title: Assistant Vice President
                                              -------------------------


<PAGE>
 
                                    LENDER:

                                    BNY FINANCIAL CORPORATION


                                    By: /s/ Frank Imperato
                                       ---------------------
                                       Name: Frank Imperato
                                            ----------------
                                       Title: Vice President
                                             ---------------

                                    LENDER:

                                    FLEET CAPITAL CORPORATION


                                    By:  /s/ Jennifer S. Mellitt
                                       -------------------------
                                       Name: Jennifer S. Mellitt
                                            --------------------
                                       Title: Vice President
                                             -------------------

                                    LENDER:

                                    NATIONSBANK OF TEXAS, N.A.


                                    By: /s/ Stacy Wills
                                       ------------------------------
                                       Name: Stacy Wills
                                            -------------------------
                                      Title: Assistant Vice President
                                            -------------------------

                                    LENDER:

                                    HELLER FINANCIAL, INC.


                                    By: /s/ Linda Peddle
                                       ---------------------
                                       Name: Linda Peddle
                                            ----------------
                                       Title: Vice President
                                             ---------------