Document:

Form of Officer's Certificate

 Exhibit 4(e) 
  

  
 AVISTA CORPORATION

  

  
  
 OFFICER’S CERTIFICATE 
  
 (Under Section 301 of the Indenture, 
 dated as of April 1, 1998) 
  
 Establishing Series of Securities Designated 
                                 , Series
             
  

  
                          ,          
  

 AVISTA CORPORATION 
  
 OFFICER’S CERTIFICATE 
 (Under Section 301 of the Indenture, 
 dated as of April 1, 1998) 
  
 I,
                    , a
                             of AVISTA CORPORATION (the “Company”), in accordance with
Section 301 of the Indenture, dated as of April 1, 1998 (the “Indenture”, capitalized terms used herein and not defined herein having the meanings specified in the Indenture), of the Company to JPMorgan Chase Bank (formerly known as The
Chase Manhattan Bank), trustee (the “Trustee”), do hereby establish a series of Securities having the terms and characteristics set forth in this Officer’s Certificate. 
  
 PART I 
  
 Set forth below in this Part I are the terms and characteristics of the series of Securities established hereby referred to in clauses (a) through (t) in
the second paragraph of Section 301 of the Indenture (the lettered clauses set forth herein corresponding to such clauses in said Section 301). 
  
 (a) the title of the Securities of such series, being Series No.      under the Indenture, shall be
“                    , Series      ” (the Securities of such series, for purposes of this Officer’s
Certificate, being sometimes hereinafter called the “Notes”); 
  
 (b) the aggregate principal amount of Notes which may be authenticated and delivered under the Indenture shall not be limited; 
  

(c) interest on the Notes shall be payable to the Person or Persons in whose names the Notes are registered at the close of business on the Regular
Record Date for such interest, except as otherwise expressly provided in the form of [Fixed Rate] Note attached hereto and hereby authorized and approved; 
  
 (d) the principal of the Notes shall be payable on
                        ,             ; 
  
 (e) [provisions relating to interest rate(s) will be inserted here]

  
 (f) the corporate trust office of JPMorgan Chase Bank in New
York, New York shall be the place at which (i) the principal of, premium, if any, and interest, if any, on the Notes at Maturity shall be payable upon presentment and interest prior to Maturity shall be payable as specified in the form of Note
attached hereto, (ii) registration of transfer of the Notes may be effected, (iii) exchanges of Notes may be effected and (iv) notices and demands to or upon the Company in respect of the Notes and the Indenture may be served; and JPMorgan Chase
Bank shall be the Security Registrar and a Paying Agent for the Notes; provided, however, that the Company reserves the right to change, by one or more Officer’s Certificates supplemental to this Officer’s Certificate, any such
place or the Security Registrar or such Paying Agent; and provided, further, that the Company reserves the right to designate, by one or more Officer’s Certificates supplemental to this Officer’s Certificate, its principal corporate
office in Spokane, Washington as any such place or itself as the Security Registrar; 
  
 (g) [optional redemption provisions will be inserted here] 
  

 1 

 (h) [mandatory redemption provisions will be inserted here] 
  
 (i) the Notes shall be issued in denominations of $1,000 and any integral
multiple thereof; 
  
 (j) inapplicable; 
  
 (k) inapplicable; 
  
 (l) inapplicable; 
  
 (m) inapplicable; 
  
 (n) inapplicable; 
  
 (o) inapplicable; 
  
 (p) inapplicable; 
  
 (q) the Notes are initially to be issued in global form, registered in the
name of Cede & Co., as nominee for The Depository Trust Company (the “Depositary”). Such Notes shall not be transferable or exchangeable, nor shall any purported transfer be registered, except as follows: 
  
 (i) such Notes may be transferred in whole, and appropriate
registration of transfer effected, if such transfer is by such nominee to the Depositary, or by the Depositary to another nominee thereof, or by any nominee of the Depositary to any other nominee thereof, or by the Depositary or any nominee thereof
to any successor securities depositary or any nominee thereof; and 
  
 (ii) such Notes may be exchanged for definitive Notes registered in the respective names of the beneficial holders thereof, and thereafter shall be transferable without restriction, if: 
  
 (A) the Depositary, or any successor securities depositary,
shall have notified the Company and the Trustee that it is unwilling or unable to continue to act as securities depositary with respect to such Notes and the Trustee shall not have been notified by the Company within ninety (90) days of the identity
of a successor securities depositary with respect to such Notes; 
  
 (B) the Company shall have delivered to the Trustee a Company Order to the effect that such Notes shall be so exchangeable on and after a date specified therein; or 
  
 (C) (I) an Event of Default shall have occurred and be
continuing, 
  

 2 

 (II) the Trustee shall have given notice of such Event of Default pursuant to Section 802 of the
Indenture and (III) there shall have been delivered to the Company and the Trustee an Opinion of Counsel to the effect that the interests of the beneficial owners of such Notes in respect thereof will be materially impaired unless such owners become
Holders of definitive Notes; 
  
 it being understood that any such registration of
transfer or exchange shall be effected in accordance with Section 305 of the Indenture; 
  
 (r) inapplicable; 
  
 (s) no
service charge shall be made for the registration of transfer or exchange of the Notes; provided, however, that the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection with such
transfer or exchange; and 
  
 (t) [Section 113 of the Indenture
shall apply to the Securities][the provisions of the Fixed Rate Note shall apply in lieu of the provisions of Section 113]. 
  
 PART II 
  
 Set forth below in this Part II are additional terms of the series of Notes established hereby, as contemplated by clause (u) in the second paragraph of
Section 301 of the Indenture. 
  
 (a) the Notes shall have such
further terms as are set forth in the form(s) of Fixed Rate Note attached hereto; 
  
 (b) if the Company shall make any deposit of money and/or Government Obligations with respect to any Notes, or any portion of the principal amount thereof, as contemplated by Section 601 of the Indenture, the Company
shall not deliver an Officer’s Certificate described in clause (z) in the first paragraph of said Section 601 unless the Company shall also deliver to the Trustee, together with such Officer’s Certificate, either: 
  
 (i) an instrument wherein the Company, notwithstanding the
satisfaction and discharge of its indebtedness in respect of the Notes, shall assume the obligation (which shall be absolute and unconditional) to irrevocably deposit with the Trustee or Paying Agent such additional sums of money, if any, or
additional Government Obligations (meeting the requirements of Section 601), if any, or any combination thereof, at such time or times, as shall be necessary, together with the money and/or Government Obligations theretofore so deposited, to pay
when due the principal of and premium, if any, and interest due and to become due on such Notes or portions thereof, all in accordance with and subject to the provisions of said Section 601; provided, however, that such instrument may state
that the obligation of the Company to make additional deposits as aforesaid shall be subject to the delivery to the Company by the Trustee of a notice asserting the deficiency accompanied by an opinion of an independent public accountant of
nationally recognized standing showing the calculation thereof (which opinion shall be obtained at the expense of the Company); or 
  

 3 

 (ii) an Opinion of Counsel to the effect that the Holders of such Notes, or portions of
the principal amount thereof, will not recognize income, gain or loss for United States federal income tax purposes as a result of the satisfaction and discharge of the Company’s indebtedness in respect thereof and will be subject to United
States federal income tax on the same amounts, at the same times and in the same manner as if such satisfaction and discharge had not been effected; and 
  
 (c) [Additional covenants will be inserted here] 
  

 4 

 IN WITNESS WHEREOF, I have executed this Officer’s Certificate this     
day of                 , [2003]. 
  

	

	 Name:

	 Title:

  

 5 

 FORM OF FIXED RATE NOTE 
  
 (See legend at the end of this Security for restrictions on transfer and change of form) 
  
 AVISTA CORPORATION 
                     , Series
             
  

	Original Interest Accrual Date:	 	Redeemable: Yes          No         
	Stated Maturity:	 	Initial Redemption Date:          
	Interest Rate:	 	Initial Redemption Price:        
	Interest Payment Dates:	 	Reduction Percentage:            
	Regular Record Dates:	 	Redemption Limitation Date:  
	Other Provisions:	 	 

  
 OID: Yes
     No      
 Total Amount of OID (%): 
 Yield to Maturity (%): 
 Initial
Accrual 
 Period OID (%): 
 (Constant - Yield Method) 
  

  
 This Security is not a Discount Security 
 within the meaning of the within-mentioned Indenture. 
  

  

	 Principal Amount
	 	Registered No.
	 $
	 	CUSIP              

  
 AVISTA CORPORATION, a corporation
organized and existing under the laws of the State of Washington (herein called the “Company”, which term includes any successor corporation under the Indenture referred to below), for value received, hereby promises to pay to 

 
 or registered assigns, the principal sum of 
  
 DOLLARS 
  
 on the Stated Maturity specified above, and to pay interest thereon from the Original Interest Accrual Date specified above or from the most
recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on the Interest Payment Dates specified above in each year, commencing with the Interest Payment Date next succeeding the Original Interest
Accrual Date specified above, and at Maturity, at the Interest Rate per annum specified above, until the principal hereof is paid or duly provided for. The interest so payable, and paid or duly provided for, on any Interest Payment Date shall, as
provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date specified above (whether or not a Business Day) next preceding
such Interest Payment Date. Notwithstanding the foregoing, (a) if the Original Interest Accrual Date of this Security is after a Regular Record Date and before the corresponding Interest Payment Date, interest so 
  

 1 

 payable for the period from and including the Original Interest Accrual Date to but excluding such Interest Payment Date
shall be paid on the next succeeding Interest Payment Date to the Holder hereof on the related Regular Record Date; and (b) interest payable at Maturity shall be paid to the Person to whom principal shall be paid. Except as otherwise provided in
said Indenture, any such interest not so paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities)
is registered at the close of business on a Special Record Date for the payment of such Unpaid Interest to be fixed by the Trustee, notice of which shall be given to Holders of Securities of this series not less than 15 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture. 
  
 Payment of the
principal of and premium, if any, on this Security and interest hereon at Maturity shall be made upon presentation of this Security at the Corporate Trust Office of The Chase Manhattan Bank in New York, New York, or at such other office or agency as
may be designated for such purpose by the Company from time to time. Payment of interest on this Security (other than interest at Maturity) shall be made by check mailed to the address of the Person entitled thereto as such address shall appear in
the Security Register, except that if such Person shall be a securities depositary, such payment may be made by such other means in lieu of check, as shall be agreed upon by the Company, the Trustee and such Person. Payment of the principal of and
premium, if any, and interest on this Security, as aforesaid, shall be made in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. 
  
 This Security is one of a duly authorized issue of securities of the Company
(herein called the “Securities”), issued and issuable in one or more series under and equally secured by an Indenture, dated as of April 1, 1998 (such Indenture as originally executed and delivered and as supplemented or amended from time
to time thereafter, together with any constituent instruments establishing the terms of particular Securities, being herein called the “Indenture”), between the Company and The Chase Manhattan Bank, trustee (herein called the
“Trustee,” which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the respective rights, limitations of rights, duties and
immunities of the Company, the Trustee and the Holders of the Securities thereunder and of the terms and conditions upon which the Securities are, and are to be, authenticated and delivered and secured. The acceptance of this Security shall be
deemed to constitute the consent and agreement by the Holder hereof to all terms and provisions of the Indenture. This Security is one of the series designated above. 
  
 If any Interest Payment Date, any Redemption Date or the Stated Maturity shall not be a Business Day (as hereinafter
defined), payment of the amounts due on this Security on such date may be made on the next succeeding Business Day; and if such payment is made or duly provided for on such Business Day, no interest shall accrue on such amounts for the period from
and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, to such Business Day. 
  

 2 

 If, as specified above, this Security is redeemable, this Security is subject to redemption at any time
on or after the Initial Redemption Date specified above, as a whole or in part, at the election of the Company, at the applicable redemption price (as described below) plus accrued interest to the date fixed for redemption. Such redemption price
shall be the Initial Redemption Price specified above for the twelve-month period commencing on the Initial Redemption Date and shall decline for the twelve-month period commencing on each anniversary of the Initial Redemption Date by a percentage
of principal amount equal to the Reduction Percentage specified above until such redemption price is 100% of the principal amount of this Security to be redeemed. 
  
 Notwithstanding the foregoing, the Company may not, prior to the Redemption Limitation Date, if any, specified above, redeem
this Security as contemplated above as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an effective interest cost to the Company (calculated in accordance with generally
accepted financial practice) less than the effective interest cost to the Company (similarly calculated) of this Security. 
  
 [Insert provisions, if any, for redemption pursuant to a sinking fund or analogous provision or at the option of the Holder.] 
  
 Notice of redemption [(other than at the election of the Holder)] shall be
given by mail to Holders of Securities, not less than 30 days nor more than 60 days prior the date fixed for redemption, all as provided in the Indenture. As provided in the Indenture, notice of redemption at the election of the Company as aforesaid
may state that such redemption shall be conditional upon the receipt by the Trustee of money sufficient to pay the principal of and premium, if any and interest, if any, on this Security on or prior the date fixed for such redemption; a notice of
redemption so conditioned shall be of no force or effect if such money is not so received and, in such event, the Company shall not be required to redeem this Security. 
  
 In the event of redemption of this Security in part only, a new Security or Securities of this series, of like tenor, for
the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. 
  
 If an Event of Default shall occur and be continuing, the principal of this Security may be declared due and payable in the manner and with the effect
provided in the Indenture. 
  
 The Indenture permits, with certain
exceptions as therein provided, the Trustee to enter into one or more supplemental indentures for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, the Indenture with the consent of the
Holders of not less than a majority in aggregate principal amount of the Securities of all series then Outstanding under the Indenture, considered as one class; provided, however, that if there shall be Securities of more than one series Outstanding
under the Indenture and if a proposed supplemental indenture shall directly affect the rights of the Holders if Securities of one or more, but less than all, of such series, then the consent only of the Holders of a majority in aggregate principal
amount of the Outstanding Securities of all series so directly affected, considered as one class, shall be required; and provided, further, that if the Securities of any series shall have been issued in more than one Tranche and if the proposed
supplemental indenture shall directly affect 
  

 3 

 the rights of the Holders of Securities of one or more, but less than all, of such Tranches, then the consent only of the
Holders of a majority in aggregate principal amount of the Outstanding Securities of all Tranches so directly affected, considered as one class, shall be required; and provided, further, that the Indenture permits the Trustee to enter into one or
more supplemental indentures for limited purposes without the consent of any Holders of Securities. The Indenture also contains provisions permitting the Holders of a majority in principal amount of the Securities then Outstanding, on behalf of the
Holders of all Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange thereof or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security. 
  
 As provided in the Indenture and
subject to certain limitations therein set forth, this Security or any portion of the principal amount hereof will be deemed to have been paid for all purposes of the Indenture and to be no longer Outstanding thereunder, and, at the election of the
Company, the Company’s entire indebtedness in respect thereof will be satisfied and discharged, if there has been irrevocably deposited with the Trustee or any Paying Agent (other than the Company), in trust, money in an amount which will be
sufficient and/or Eligible Obligations, the principal of and interest on which when due, without regard to any reinvestment thereof, will provide moneys which, together with moneys so deposited, will be sufficient to pay when due the principal of
and interest on this Security when due. 
  
 The Indenture contains
terms, provisions and conditions relating to the consolidation or merger of the Company with or into, and the conveyance or other transfer, or lease, of assets to, another Person, to the assumption by such other Person, in certain circumstances, of
all of the obligations of the Company under the Indenture and on the Securities and to the release and discharge of the Company, in certain circumstances, from such obligation. 
  
 As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is
registrable in the Security Register, upon surrender of this Security for registration of transfer at the corporate trust office of JPMorgan Chase Bank in New York, New York, or such other office or agency as may be designated by the Company from
time to time, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series of authorized denominations and of like tenor and aggregate principal amount, will be issued to the designated transferee or transferees. 
  
 The Securities of this series are issuable only as registered Securities, without coupons, and in denominations of $1,000 or
any amount in excess thereof that is an integral multiple of $1,000. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this Series are exchangeable for a like aggregate principal amount of Securities of
the same series and Tranche, of any authorized denominations, as requested by the Holder surrendering the same, and of like tenor upon surrender of the Security or Securities to be exchanged at the corporate trust office of JPMorgan Chase Bank in
New York, New York, or such other office or agency as may be designated by the Company from time to time. 
  

 4 

 No service charge shall be made for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. 
  
 Prior to due surrender of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the absolute owner hereof for all purposes (subject to Section 307 of the Indenture), whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary. 
  
 The Indenture and the
Securities shall be governed by and construed in accordance with the laws of the State of New York, except to the extent that the Trust Indenture Act shall be applicable . 
  
 As used herein, “Business Day” means any day, other than a Saturday or Sunday, which is not a day on which banking
institutions or trust companies in The City of New York, New York or other city in which is located any office or agency maintained for the payment of principal, premium, if any, or interest on this Security, are authorized or required by law,
regulation or executive order to remain closed. All other terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. 
  
 As provided in the Indenture, no recourse shall be had for the payment of the principal of or premium, if any, or interest
on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof, or of the indebtedness represented thereby, or upon any obligation, covenant or agreement under the Indenture, against, and no personal liability
whatsoever shall attach to, or be incurred by, any incorporator, shareholder, officer or director, as such, past, present or future of the Company or of any predecessor or successor corporation (either directly or through the Company or a
predecessor or successor corporation), whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that the Indenture and all
the Securities are solely corporate obligations and that any such personal liability is hereby expressly waived and released as a condition of, and as part of the consideration for, the execution of the Indenture and the issuance of the Securities.

  
 Unless the certificate of authentication hereon has been
executed by the Trustee or an Authenticating Agent by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 
  

 5 

 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. 
  

	 AVISTA CORPORATION

		
	 By:
	 	  

	 	 	 [Title]

  
 CERTIFICATE OF
AUTHENTICATION 
  
 This is one of the Securities of the series
designated therein referred to in the within-mentioned Indenture. 
  

				
	 Dated:
	 	  

	 	 	 	 
				
	 	 	  

	 	OR	 	  
  

				
	 	 	  

 as Trustee
	 	 	 	  

 as Trustee

				
	 By:
	 	  

	 	 	 	 By:
[                                        
            ],

	 	 	Authorized Officer	 	 	 	 
				
	 	 	 	 	 	 	As authenticating Agent
				
	 	 	 	 	 	 	 By:

 Authorized Officer

  

 6 

 This Security may not be transferred or exchanged, nor may any purported transfer be registered,
except (i) this Security may be transferred in whole, and appropriate registration of transfer effected, if such transfer is by Cede & Co., as nominee for The Depository Trust Company (the “Depositary”), to the Depositary, or by the
Depositary to another nominee thereof, or by any nominee of the Depositary to any other nominee thereof, or by the Depositary or any nominee thereof to any successor securities depositary or any nominee thereof; and (ii) this Security may be
exchanged for definitive Securities registered in the respective names of the beneficial holders hereof, and thereafter shall be transferable without restrictions if: (A) the Depositary, or any successor securities depositary, shall have notified
the Company and the Trustee that it is unwilling or unable to continue to act as securities depositary with respect to the Securities and the Trustee shall not have been notified by the Company within ninety (90) days of the identity of a successor
securities depositary with respect to the Securities; (B) the Company shall have delivered to the Trustee a Company Order to the effect that the Securities shall be so exchangeable on and after a date specified therein; or (C)(1) an Event of Default
shall have occurred and be continuing, (2) the Trustee shall have given notice of such Event of Default pursuant to Section 802 of the Indenture and (3) there shall have been delivered to the Company and the Trustee an Opinion of Counsel to the
effect that the interests of the beneficial owners of the Securities in respect thereof will be materially impaired unless such owners become Holders of definitive Securities. 
  

  
 FOR VALUE
RECEIVED the undersigned hereby sells, assigns and transfers unto 
  

 [please insert social security or other identifying number of assignee] 
  

 [please print or typewrite name and address of assignee] 
  

  
 the within
Security of AVISTA CORPORATION and does hereby irrevocably constitute and appoint                          , Attorney, to
transfer said Security on the books of the within-mentioned Company, with full power of substitution in the premises. 
  
 Dated:
                                 
  

  
 Notice: The signature to this assignment must correspond with the name as written upon the face of the Security in every particular without alteration or enlargement or any change whatsoever. 
  

 7<PAGE>

                                                                    EXHIBIT 10.1

                                U.S. $750,000,000

                                CREDIT AGREEMENT

                            Dated as of June 25, 2003

                                      among

                                  THE GAP, INC.

                                  as Borrower,

                 THE SUBSIDIARIES OF THE BORROWER NAMED HEREIN,

                            as Subsidiary Borrowers,

                 THE SUBSIDIARIES OF THE BORROWER NAMED HEREIN,

                               as LC Subsidiaries,

               THE BANKS AND FINANCIAL INSTITUTIONS NAMED HEREIN,

                                   as Lenders,

                             THE BANKS NAMED HEREIN

                                as Issuing Banks,

                         CITIGROUP GLOBAL MARKETS INC.,

                                       and

                         BANC OF AMERICA SECURITIES LLC,

                             as Joint Book Managers,

                         BANC OF AMERICA SECURITIES LLC,

                                  HSBC BANK USA

                                       and

                          J.P. MORGAN SECURITIES INC.,

                            as Co-Syndication Agents,

                         CITIGROUP GLOBAL MARKETS INC.,

                         BANC OF AMERICA SECURITIES LLC

                                       and

                          J.P. MORGAN SECURITIES INC.,

                            as Joint Lead Arrangers,

                                       and

                               CITICORP USA, INC.,

                                    as Agent

      for the Issuing Banks and the Lenders from time to time party hereto

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                            PAGE
<S>                                                                                           <C>
                                    ARTICLE I
                        DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01 Certain Defined Terms............................................................ 1

SECTION 1.02 Computation of Time Periods......................................................22

SECTION 1.03 Accounting Terms.................................................................22

                                   ARTICLE II
                        AMOUNTS AND TERMS OF THE ADVANCES

SECTION 2.01 The Advances.....................................................................22

SECTION 2.02 Making the Advances..............................................................23

SECTION 2.03 Fees.............................................................................26

SECTION 2.04 Reduction and Increase of the Commitments; Reduction and Increase of the
             Swing Line Commitment; Additional Issuing Banks..................................26

SECTION 2.05 Repayment of Advances............................................................30

SECTION 2.06 Interest on Advances.............................................................30

SECTION 2.07 Additional Interest on Eurodollar Rate Advances..................................31

SECTION 2.08 Interest Rate Determination......................................................31

SECTION 2.09 Voluntary Conversion of Advances.................................................32

SECTION 2.10 Prepayments of Advances..........................................................32

SECTION 2.11 Increased Costs..................................................................33

SECTION 2.12 Illegality.......................................................................34

SECTION 2.13 Borrower Guaranty................................................................35

SECTION 2.14 Subsidiary Borrowers.............................................................40

                                   ARTICLE III
                         AMOUNT AND TERMS OF LETTERS OF
                        CREDIT AND PARTICIPATIONS THEREIN

SECTION 3.01 Letters of Credit................................................................40
</TABLE>

                                        i

<PAGE>

<TABLE>
<S>                                                                                           <C>
SECTION 3.02 Limitation on the Issuance of Letters of Credit Denominated in Alternative
             Currencies.......................................................................41

SECTION 3.03 Issuing the Letters of Credit....................................................41

SECTION 3.04 Reimbursement Obligations........................................................41

SECTION 3.05 Participations Purchased by the Lenders..........................................42

SECTION 3.06 Letter of Credit Fees............................................................43

SECTION 3.07 Indemnification; Nature of the Issuing Banks' Duties.............................44

SECTION 3.08 Increased Costs..................................................................45

SECTION 3.09 Uniform Customs and Practice.....................................................46

SECTION 3.10 Reductions and Increases in Issuing Commitment...................................46

SECTION 3.11 Existing Letters of Credit.......................................................46

SECTION 3.12 Currency Provisions..............................................................47

SECTION 3.13 Borrower Guaranty................................................................48

SECTION 3.14 Dollar Payment Obligation........................................................51

SECTION 3.15 Applications; Survival of Provisions; Cash Collateral............................51

SECTION 3.16 LC Subsidiaries..................................................................51

                                   ARTICLE IV
                        PAYMENTS, TAXES, EXTENSIONS, ETC.

SECTION 4.01 Payments and Computations/Borrowings.............................................52

SECTION 4.02 Taxes/Borrowings.................................................................53

SECTION 4.03 Sharing of Payments, Etc./Borrowings.............................................56

SECTION 4.04 Evidence of Debt/Borrowings......................................................57

SECTION 4.05 Payments and Computations/Letters of Credit......................................57

SECTION 4.06 Taxes/Letters of Credit..........................................................59

SECTION 4.07 Sharing of Payments, Etc./Letters of Credit......................................62
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                           <C>
                                    ARTICLE V
                              CONDITIONS OF LENDING

SECTION 5.01 Conditions Precedent to Effectiveness of this Agreement..........................62

SECTION 5.02 Conditions Precedent to Each Advance/Issuance....................................64

                                   ARTICLE VI
                         REPRESENTATIONS AND WARRANTIES

SECTION 6.01 Representations and Warranties of the Borrower...................................65

                                   ARTICLE VII
                            COVENANTS OF THE BORROWER

SECTION 7.01 Affirmative Covenants............................................................68

SECTION 7.02 Negative Covenants...............................................................73

SECTION 7.03 Financial Covenants..............................................................80

SECTION 7.04 Reporting Requirements...........................................................81

                                  ARTICLE VIII
                                EVENTS OF DEFAULT

SECTION 8.01 Events of Default................................................................83

                                   ARTICLE IX
                                    THE AGENT

SECTION 9.01 Authorization and Action.........................................................86

SECTION 9.02 Agent's Reliance, Etc............................................................87

SECTION 9.03 CUSA, Citibank and Affiliates....................................................87

SECTION 9.04 Lender Credit Decision...........................................................88

SECTION 9.05 Indemnification..................................................................88

SECTION 9.06 Successor Agent..................................................................89

SECTION 9.07 Co-Syndication Agents, Joint Book Managers and Joint Lead Arrangers..............89

SECTION 9.08 Release of Collateral............................................................90

SECTION 9.09 Release of Guarantor/Domestic Subsidiary.........................................90
</TABLE>

                                       iii

<PAGE>

<TABLE>
<S>                                                                                           <C>
SECTION 9.10 Actions in Respect of Intercreditor Agreement....................................90

                                    ARTICLE X
                                  MISCELLANEOUS

SECTION 10.01 Amendments, Etc.................................................................90

SECTION 10.02 Notices, Etc....................................................................91

SECTION 10.03 No Waiver; Remedies.............................................................92

SECTION 10.04 Costs and Expenses..............................................................92

SECTION 10.05 Right of Set-off................................................................93

SECTION 10.06 Binding Effect..................................................................94

SECTION 10.07 Assignments and Participations..................................................94

SECTION 10.08 Severability of Provisions......................................................97

SECTION 10.09 Independence of Provisions......................................................97

SECTION 10.10 Confidentiality.................................................................97

SECTION 10.11 Headings........................................................................98

SECTION 10.12 Entire Agreement................................................................98

SECTION 10.13 Execution in Counterparts.......................................................98

SECTION 10.14 Consent to Jurisdiction.........................................................98

SECTION 10.15 GOVERNING LAW...................................................................99

SECTION 10.16 WAIVER OF JURY TRIAL............................................................99
</TABLE>

                                       iv

<PAGE>

SCHEDULES AND EXHIBITS

SCHEDULES

Schedule I-A  -       Commitment Amounts
Schedule I-B  -       List of Applicable Lending Offices
Schedule II   -       Existing Liens
Schedule III  -       Change of Control
Schedule IV   -       Outstanding Balance of Existing Letters of Credit
Schedule V    -       LC Subsidiaries
Schedule VI   -       Subsidiary Borrowers
Schedule VII  -       Permitted Investments
Schedule VIII -       Plans
Schedule IX   -       Special Purpose Subsidiaries
Schedule X    -       ERISA Matters
Schedule XI   -       Subsidiaries of the Borrower
Schedule XII  -       Environmental Matters
Schedule XIII -       Existing Debt
Schedule XIV  -       Excluded Subsidiaries
Schedule XV   -       Hedge Subsidiaries

EXHIBITS

Exhibit A     -       Notice of Borrowing
Exhibit B     -       Form of Promissory Note
Exhibit C     -       Form of Assignment and Acceptance
Exhibit D     -       Form of Subsidiary Guaranty
Exhibit E     -       Form of Security Agreement
Exhibit F-1   -       Form of Opinion of Counsel to the Loan Parties
Exhibit F-2   -       Form of UCC Opinion of Special New York Counsel to the
                      Loan Parties
Exhibit F-3   -       Form of Corporate Opinion of Special New York Counsel to
                      the Loan Parties
Exhibit G     -       Form of Opinion of Special New York Counsel to the Agent
Exhibit H     -       Form of Assumption Agreement
Exhibit I     -       Form of Compliance Certificate

<PAGE>

                CREDIT AGREEMENT, dated as of June 24, 2003 (this "Agreement"),
among The Gap, Inc., a Delaware corporation (the "Borrower"), the LC
Subsidiaries (as hereinafter defined), the Subsidiary Borrowers (as hereinafter
defined), the banks and financial institutions (the "Lenders") listed on the
signature pages hereof, the Issuing Banks (as hereinafter defined), Citigroup
Global Markets Inc. ("CGMI") and Banc of America Securities LLC ("BAS") as joint
book managers (the "Joint Book Managers"), BAS, HSBC Bank USA ("HSBC") and J.P.
Morgan Securities Inc. ("JP Morgan") as co-syndication agents (the
"Co-Syndication Agents"), CGMI, BAS and JP Morgan as joint lead arrangers (the
"Joint Lead Arrangers"), and Citicorp USA, Inc. ("CUSA"), as agent (the "Agent")
for the Lenders and the Issuing Banks hereunder.

                PRELIMINARY STATEMENTS:

                (1)     The Borrower, certain of its subsidiaries, certain banks
        and financial institutions, and the Agent entered into a Credit
        Agreement dated as of March 7, 2002 (the "Existing Credit Agreement").

                (2)     The Borrower, the LC Subsidiaries, the Subsidiary
        Borrowers, the Lenders, the Issuing Banks, the Joint Book Managers, the
        Co-Syndication Agents, the Joint Lead Arrangers and the Agent desire to
        enter into this Agreement to replace in part the Existing Credit
        Agreement and provide other financing facilities to the Borrower, the LC
        Subsidiaries and the Subsidiary Borrowers as set forth below.

                NOW THEREFORE, the Borrower, the LC Subsidiaries, the Subsidiary
Borrowers, the Lenders, the Issuing Banks, the Joint Book Managers, the
Co-Syndication Agents, the Joint Lead Arrangers and the Agent agree as follows:

                                    ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

                SECTION 1.01 Certain 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):

                "Advance" means an advance by Lender to the Borrower as part of
        a Borrowing and refers to a Base Rate Advance or a Eurodollar Rate
        Advance, each of which shall be a "Type" of Advance; and means a Swing
        Line Advance by a Swing Line Lender to a Subsidiary Borrower as the
        context may require.

                "Affiliate" means, as to any Person, any other Person that,
        directly or indirectly, controls, is controlled by, or is under common
        control with, such Person.

                "Alternative Currency" means any lawful currency other than
        Dollars which is freely transferable and convertible into Dollars and
        which an Issuing Bank or Swing Line Lender can obtain in the ordinary
        course of its business.

<PAGE>

                "Applicable Facility Fee" means, as of any date a percentage per
        annum determined by reference to the applicable Performance Level in
        effect on such date as set forth below:

<TABLE>
<CAPTION>

        PERFORMANCE
        LEVEL                        LEVEL I     LEVEL II   LEVEL III    LEVEL IV    LEVEL V     LEVEL VI
        -------------------------------------------------------------------------------------------------
        <S>                             <C>         <C>         <C>         <C>         <C>         <C>
        Applicable Facility
         Fee                            .175%       .300%       .500%       .500%       .750%       .750%
</TABLE>

                "Applicable Lending Office" means, with respect to each Lender,
        such Lender's Domestic Lending Office in the case of a Base Rate
        Advance, and such Lender's Eurodollar Lending Office in the case of a
        Eurodollar Rate Advance.

                "Applicable Letter of Credit Fee" means as of any date, a
        percentage per annum determined by reference to the applicable
        Performance Level in effect on such date as set forth below:

<TABLE>
<CAPTION>
        PERFORMANCE
        LEVEL                        LEVEL I     LEVEL II   LEVEL III    LEVEL IV    LEVEL V     LEVEL VI
        -------------------------------------------------------------------------------------------------
        <S>                            <C>         <C>         <C>         <C>         <C>         <C>
        Applicable Letter of           .5625%      .6875%      .8750%      1.125%      1.500%      1.750%
         Credit Fee
</TABLE>

                "Applicable Margin" means as of any date, a percentage per annum
        determined by reference to the applicable Performance Level in effect on
        such date as set forth below:

<TABLE>
<CAPTION>
        PERFORMANCE
        LEVEL                        LEVEL I     LEVEL II   LEVEL III    LEVEL IV    LEVEL V     LEVEL VI
        -------------------------------------------------------------------------------------------------
        <S>                             <C>         <C>         <C>         <C>         <C>         <C>
        Base Rate Applicable            .000%       .250%       .500%       1.00%       2.00%       2.50%
         Margin

        Eurodollar Rate                 .700%       .825%       1.00%       1.50%       2.00%       2.50%
         Applicable Margin
</TABLE>

                "Assignment and Acceptance" means an assignment and acceptance
        entered into by a Lender and an Eligible Assignee, and accepted by the
        Agent (if such acceptance is required by this Agreement), in
        substantially the form of Exhibit C hereto.

                "Assuming Lender" means an Eligible Assignee acceptable to the
        Agent and each Issuing Bank and not previously a Lender that becomes a
        Lender hereunder pursuant to Section 2.04(c) hereof and which has a
        Commitment of not less than $25,000,000.

                "Assumption Agreement" means an agreement, substantially in the
        form of Exhibit H hereto, by which an Eligible Assignee agrees to become
        a Lender hereunder pursuant to Section 2.04(c) hereof, agreeing to be
        bound by all obligations of a Lender hereunder.

                                        2

<PAGE>

                "Base Rate" means, for any period, a fluctuating interest rate
        per annum as shall be in effect from time to time which rate per annum
        shall at all times be equal to the highest of:

                        (a)     the rate of interest announced publicly by
                Citibank in New York, New York, from time to time, as Citibank's
                base rate;

                        (b)     1/2% per annum above the latest three-week
                moving average of secondary market morning offering rates in the
                United States for three-month certificates of deposit of major
                United States money market banks, such three-week moving average
                being determined weekly on each Monday (or, if any such date is
                not a Business Day, on the next succeeding Business Day) for the
                three-week period ending on the previous Friday by the Agent on
                the basis of such rates reported by certificate of deposit
                dealers to and published by the Federal Reserve Bank of New York
                or, if such publication shall be suspended or terminated, on the
                basis of quotations for such rates received by the Agent from
                three New York certificate of deposit dealers of recognized
                standing selected by the Agent, in either case adjusted to the
                nearest 1/4 of one percent or, if there is no nearest 1/4 of one
                percent, to the next higher 1/4 of one percent; and

                        (c)     1/2% per annum above the Federal Funds Rate.

                "Base Rate Advance" means an Advance which bears interest as
        provided in Section 2.06(a) hereof.

                "Borrowing" means a borrowing, consisting of simultaneous
        Advances of the same Type made by each of the Lenders pursuant to
        Section 2.01(a) hereof.

                "Business Day" means a day of the year on which banks are not
        required or authorized to close in New York City or San Francisco,
        California and a day on which wire transfers may be effectuated among
        member banks of the Federal Reserve System through use of the fedwire
        funds transfer system and (i) if the applicable Business Day relates to
        any Eurodollar Rate Advances, a day on which dealings are carried on in
        the London interbank market and (ii) if the applicable Business Day
        relates to any Swing Line Advance or Letter of Credit denominated in an
        Alternative Currency, a day on which commercial banks are open for
        business in the country of issue of such Alternative Currency and on
        which dealings in such Alternative Currency are carried on by such
        commercial banks in such country of issue (if such Alternative Currency
        is other than the Euro) or if such Alternative Currency is the Euro, a
        day on which the Trans-European Automated Real-Time Gross Settlement
        Express Transfer (TARGET) System is in operation.

                "Capital Assets" means, with respect to any Person, all
        equipment, fixed assets and real property or improvements of such
        Person, or replacements or substitutions therefor or additions thereto,
        that, in accordance with generally accepted accounting principles, have
        been or should be reflected as additions to property, plant or equipment
        on the balance sheet of such Person.

                                        3

<PAGE>

                "Capital Expenditures" means, with respect to any Person for any
        period, all expenditures made directly or indirectly by such Person
        during such period for Capital Assets (whether paid in cash or other
        consideration or accrued as a liability and including, without
        limitation, all expenditures for maintenance and repairs which are
        required, in accordance with generally accepted accounting principles,
        to be capitalized on the books of such Person). For purposes of this
        definition, the purchase price of equipment or other fixed assets that
        are purchased simultaneously with the trade-in of existing assets or
        with insurance proceeds shall be included in Capital Expenditures only
        to the extent of the gross amount by which such purchase price exceeds
        the credit granted by the seller of such assets for the assets being
        traded in at such time or the amount of such insurance proceeds, as the
        case may be.

                "Capital Lease" of any Person means any lease of any property
        (whether real, personal or mixed) by such Person as lessee, which lease
        should, in accordance with generally accepted accounting principles, be
        required to be accounted for as a capital lease on the balance sheet of
        such Person.

                "Capital Lease Obligations" means the obligations of any Person
        to pay rent or other amounts under a Capital Lease, the amount of which
        is required to be capitalized on the balance sheet of such Person in
        accordance with generally accepted accounting principles.

                "CERCLA" means the Comprehensive Environmental Response,
        Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section
        9601 et seq.), and any regulations promulgated thereunder.

                "Change of Control" means the occurrence, after the date of this
        Agreement, of (i) any Person or two or more Persons acting in concert
        acquiring beneficial ownership (within the meaning of Rule 13d-3 of the
        Securities and Exchange Commission under the Securities Exchange Act of
        1934, as amended), directly or indirectly, of securities of the Borrower
        (or other securities convertible into such securities) representing 50%
        or more of the combined voting power of all securities of the Borrower
        entitled to vote in the election of directors; or (ii) during any period
        of up to 24 consecutive months, commencing before or after the date of
        this Agreement, individuals who at the beginning of such 24-month period
        were directors of the Borrower ceasing for any reason to constitute a
        majority of the Board of Directors of the Borrower unless the Persons
        replacing such individuals were nominated by the Board of Directors of
        the Borrower; or (iii) any Person or two or more Persons acting in
        concert acquiring by contract or otherwise, or entering into a contract
        or arrangement which upon consummation will result in its or their
        acquisition of, control over securities of the Borrower (or other
        securities convertible into such securities) representing 50% or more of
        the combined voting power of all securities of the Borrower entitled to
        vote in the election of directors; provided, that, the Person or group
        of Persons referred to in clauses (i) and (iii) of this definition of
        Change of Control shall not include any Person listed on Schedule III
        hereto or any group of Persons in which one or more of the Persons
        listed on Schedule III are members.

                                       4

<PAGE>

                "Citibank" means Citibank, N.A..

                "Collateral" means all of the "Collateral" referred to in the
        Collateral Documents and all of the other property and assets that are
        or are intended under the terms of the Collateral Documents to be
        subject to Liens in favor of the Collateral Agent for the benefit of the
        Lender Parties.

                "Collateral Agent" has the meaning specified therefor in the
        Security Agreement.

                "Collateral Documents" means, collectively, the Security
        Agreement (as amended, and any supplements thereto), collateral
        assignments, security agreements, pledge agreements or other similar
        agreements delivered to the Agent and the Lender Parties pursuant to
        Section 5.01 or Section 7.01 hereof, and each of the other agreements,
        instruments or documents that creates or purports to create a Lien in
        favor of the Collateral Agent for the benefit of the Lender Parties.

                "Commitment" means, as to each Lender, the amount set forth
        opposite such Lender's name on Schedule I-A hereto under the caption
        "Commitment" or, if such Lender has entered into one or more Assignment
        and Acceptances, the amount set forth for such Lender with respect
        thereto in the Register maintained by the Agent pursuant to Section
        10.07 hereof, in each case as such amount may be reduced or increased
        pursuant to Section 2.04 hereof.

                "Commitment Percentage" means, with respect to each Lender, the
        percentage which the then existing Commitment of such Lender is of the
        Commitments of all Lenders; provided, however, that with respect to
        Letters of Credit which expire after the Termination Date has occurred,
        the Commitment Percentage of each Lender shall be the percentage which
        Lender's Commitment immediately prior to the Termination Date is of the
        Commitment of all Lenders immediately prior to the Termination Date.

                "Confidential Information" means certain non-public,
        confidential or proprietary information and material disclosed, from
        time to time, either orally, in writing, electronically or in some other
        form by the Borrower in connection with the Loan Documents. Confidential
        Information shall include, but not be limited to non-public,
        confidential or proprietary information, trade secrets, know-how,
        inventions, techniques, processes, algorithms, software programs,
        documentation, screens, icons, schematics, software programs, source
        documents and other MIS related information; contracts, customer lists,
        financial information, financial forecasts, sales and marketing plans
        and information and business plans, products and product designs;
        textile projections and results; ideas, designs and artwork for all
        types of marketing, advertising, public relations and commerce
        (including ideas, designs and artwork related to the World Wide Web and
        any Web Site of the Borrower or any Subsidiary); textile designs;
        advertising, strategies, plans and results; sourcing information; vendor
        lists, potential product labeling and marking ideas; all materials
        including, without limitation, documents, drawings, samples, sketches,
        designs, and any other information concerning, color palette and color
        standards furnished to a Recipient by the Borrower or any Subsidiary;
        customer base(s); and other non-public information relating to the
        Borrower's or any Subsidiary's business.

                                       5

<PAGE>

                "Consolidated" and any derivative thereof each means, with
        reference to the accounts or financial reports of any Person, the
        consolidated accounts or financial reports of such Person and each
        Subsidiary of such Person determined in accordance with generally
        accepted accounting principles, including principles of consolidation,
        consistent with those applied in the preparation of the Consolidated
        financial statements of the Borrower referred to in Section 6.01(e)
        hereof.

                "Constitutive Documents" means, with respect to any Person, the
        certificate of incorporation or registration (including, if applicable,
        certificate of change of name), articles of incorporation or
        association, memorandum of association, charter, bylaws, certificate of
        limited partnership, partnership agreement, trust agreement, joint
        venture agreement, certificate of formation, articles of organization,
        limited liability company operating or members agreement, joint venture
        agreement or one or more similar agreements, instruments or documents
        constituting the organization or formation of such Person.

                "Convert," "Conversion" and "Converted" each refers to a
        conversion of Advances of one Type into Advances of another Type
        pursuant to Section 2.08 or 2.09 hereof.

                "Debt" of any Person means, without duplication, (i) all
        indebtedness of such Person for borrowed money or for the deferred
        purchase price (excluding any deferred purchase price that constitutes
        an account payable incurred in the ordinary course of business) of
        property or services, (ii) all obligations of such Person in connection
        with any agreement to purchase, redeem, exchange, convert or otherwise
        acquire for value any capital stock of such Person or to purchase,
        redeem or acquire for value any warrants, rights or options to acquire
        such capital stock, now or hereafter outstanding, (iii) all obligations
        of such Person evidenced by bonds, notes, debentures, convertible
        debentures or other similar instruments, (iv) all indebtedness created
        or arising under any conditional sale or other title retention agreement
        (other than under any such agreement which constitutes or creates an
        account payable incurred in the ordinary course of business) with
        respect to property acquired by such Person (even though the rights and
        remedies of the seller or lender under such agreement in the event of
        default, acceleration, or termination are limited to repossession or
        sale of such property), (v) all Capital Lease Obligations, (vi)
        obligations under direct or indirect guaranties in respect of, and
        obligations (contingent or otherwise) to purchase or acquire, or
        otherwise to assure a creditor against loss in respect of, indebtedness
        or obligations of others of the kinds referred to in clauses (i) through
        (v) above, (vii) all Debt referred to in clause (i), (ii), (iii), (iv),
        (v), or (vi) above secured by (or for which the holder of such Debt has
        an existing right, contingent or otherwise, to be secured by) any lien,
        security interest or other charge or encumbrance upon or in property
        (including, without limitation, accounts and contract rights) owned by
        such Person, even though such Person has not assumed or become liable
        for the payment of such Debt and (viii) all mandatorily redeemable
        preferred stock of such Person, valued at the applicable redemption
        price, plus accrued and unpaid dividends payable in respect of such
        redeemable preferred stock.

                                       6

<PAGE>

                "Default" means an event which would constitute an Event of
        Default but for the requirement that notice be given or time elapse, or
        both.

                "Dollars," "dollars" and the sign "$" each means lawful money of
        the United States.

                "Domestic Lending Office" means, with respect to any Lender, the
        office of such Lender specified as its "Domestic Lending Office"
        opposite its name on Schedule I-B hereto or in the Assignment and
        Acceptance pursuant to which it became Lender, or such other office of
        such Lender as such Lender may from time to time specify to the Borrower
        and the Agent.

                "Domestic Subsidiary" means, at any time, any of the direct or
        indirect Subsidiaries of the Borrower that is incorporated or organized
        under the laws of any state of the United States of America or the
        District of Columbia.

                "EBITDA" means, for any period, Net Income plus, to the extent
        deducted in determining such Net Income, the sum of (a) Interest
        Expense, (b) income tax expense, (c) depreciation expense and (d)
        amortization expense, all determined on a Consolidated basis for the
        Borrower and its Subsidiaries in accordance with generally accepted
        accounting principles.

                "Effective Date" has the meaning specified in Section 5.01
        hereof.

                "Eligible Assignee" means (i) a commercial bank organized under
        the laws of the United States, or any State thereof, and having a
        combined capital and surplus of at least $100,000,000; (ii) a commercial
        bank organized under the laws of any other country which is a member of
        the OECD, or a political subdivision of any such country, and having a
        combined capital and surplus of at least $100,000,000; provided, that,
        such bank is acting through a branch or agency located in the United
        States; (iii) a Person that is primarily engaged in the business of
        commercial banking and that is (a) a Subsidiary of a Lender, (b) a
        Subsidiary of a Person of which a Lender is a Subsidiary, or (c) a
        Person of which a Lender is a Subsidiary; (iv) any Lender or Affiliate
        of a Lender; (v) any other entity which is an "accredited investor" (as
        defined in Regulation D under the Securities Act of 1933, as amended)
        which extends credit or buys loans as one of its businesses, including
        but not limited to, insurance companies, mutual funds and lease
        financing companies; and (vi) any other Person acceptable to the Issuing
        Banks and the Agent and, provided no Event of Default is continuing, the
        Borrower. No Loan Party or any Affiliate thereof shall be an Eligible
        Assignee.

                "Environmental Action" means any outstanding action, suit,
        demand, demand letter, claim, notice of noncompliance or violation,
        notice of liability or potential liability, investigation, proceeding,
        consent order or consent agreement, abatement order or other order or
        directive (conditional or otherwise) relating in any way to any
        Environmental Law, any Environmental Permit or any Hazardous Substances
        or arising from alleged injury or threat to health, safety, natural
        resources or the environment, including, without limitation, (a) by any
        Governmental Authority for enforcement, cleanup, removal,

                                       7

<PAGE>

        response, remedial or other actions or damages and (b) by any applicable
        Governmental Authority or any other third party for damages,
        contribution, indemnification, cost recovery, compensation or injunctive
        relief.

                "Environmental Law" means any Requirement of Law relating to (a)
        the generation, use, handling, transportation, treatment, storage,
        disposal, release or discharge of Hazardous Substances, (b) pollution or
        the protection of the environment, health, safety or natural resources
        or (c) occupational safety and health, industrial hygiene, land use or
        the protection of human, plant or animal health or welfare, including,
        without limitation, CERCLA, in each case as amended from time to time,
        and including the regulations promulgated and the rulings issued from
        time to time thereunder.

                "Environmental Permit" means any permit, approval,
        identification number, license or other authorization required under any
        Environmental Law.

                "Equity Interests" means, with respect to any Person, all of the
        shares of capital stock of (or other ownership or profit interests in)
        such Person, all of the warrants, options or other rights for the
        purchase or other acquisition from such Person of shares of capital
        stock of (or other ownership or profit interests in) such Person, all of
        the securities convertible into or exchangeable for shares of capital
        stock of (or other ownership or profit interests in) such Person or
        warrants, rights or options for the purchase or other acquisition from
        such Person of such shares (or such other interests), and all of the
        other ownership or profit interests in such Person (including, without
        limitation, partnership, member or trust interests therein), whether
        voting or nonvoting, and whether or not such shares, warrants, options,
        rights or other interests are authorized or otherwise existing on any
        date of determination.

                "ERISA Affiliate" means any trade or business (whether or not
        incorporated) which is a member of a controlled group of which the
        Borrower or any Subsidiary of the Borrower is a member or which is under
        common control with the Borrower or any Subsidiary of the Borrower
        within the meaning of Section 414 of the Internal Revenue Code of 1986,
        as amended from time to time, and the regulations promulgated and
        rulings issued thereunder.

                "ERISA" means the Employee Retirement Income Security Act of
        1974, as amended from time to time, and the regulations promulgated and
        rulings issued thereunder.

                "ERISA Event" means a reportable event with respect to a Plan
        within the meaning of Section 4043 of ERISA.

                "Eurocurrency Liabilities" has the meaning assigned to that term
        in Regulation D of the Board of Governors of the Federal Reserve System,
        as in effect from time to time.

                "Eurodollar Lending Office" means, with respect to any Lender,
        the office of such Lender specified as its "Eurodollar Lending Office"
        opposite its name on Schedule I-B hereto or in the Assignment and
        Acceptance pursuant to which it became Lender (or, if

                                       8

<PAGE>

        no such office is specified, its Domestic Lending Office), or such other
        office of such Lender as such Lender may from time to time specify to
        the Borrower and the Agent.

                "Eurodollar Rate" means, for any Interest Period for each
        Eurodollar Rate Advance comprising part of the same Borrowing, an
        interest rate per annum equal to (i) the rate per annum (rounded
        upwards, if necessary, to the nearest 1/16 of 1%) at which deposits in
        U.S. dollars appear on page 3750 (or any successor page thereto) of the
        Dow Jones Telerate Screen two Business Days before the first day of such
        Interest Period and for a term comparable to such Interest Period, or
        (ii) if such rate does not so appear on the Dow Jones Telerate Screen on
        any date of determination, the rate per annum (rounded upwards, if
        necessary, to the nearest 1/16 of 1%) at which deposits in U.S. dollars
        appear on the Reuters Screen LIBO Page two Business Days before the
        first day of such Interest Period and for a term comparable to such
        Interest Period, provided, however, that if the Reuters Screen LIBO Page
        is being used to determine the Eurodollar Rate at any date of
        determination and more than one rate is specified thereon as the London
        interbank offered rate for deposits in U.S. dollars, the applicable rate
        shall be the average of all such rates (rounded upward, if necessary, to
        the nearest whole multiple of 1/16 of 1% per annum), or (iii) if such
        rate does not so appear on either the Dow Jones Telerate Screen or
        Reuters Screen LIBO Page on any date of determination, then, the average
        (rounded upward to the nearest whole multiple of 1/16 of 1% per annum)
        of the rates per annum at which deposits in Dollars are offered by the
        principal office of each of the Reference Banks in London, England, to
        prime banks in the London interbank market at 11:00 A.M. (London time)
        two Business Days before the first day of such Interest Period in an
        amount substantially equal to such Reference Bank's Eurodollar Rate
        Advance comprising part of such Borrowing and for a period equal to such
        Interest Period. In such circumstances, the Eurodollar Rate for the
        Interest Period for each Eurodollar Rate Advance comprising part of the
        same Borrowing shall be determined by the Agent on the basis of the
        applicable rates given to and received by the Agent from the Reference
        Banks two Business Days prior to the first day of such Interest Period,
        subject, however, to the provisions of Section 2.08 hereof.

                "Eurodollar Rate Advance" means an Advance which bears interest
        as provided in Section 2.06(b) hereof.

                "Eurodollar Rate Reserve Percentage" of any Lender for any
        Interest Period for any Eurodollar Rate Advance means the reserve
        percentage applicable during such Interest Period (or if more than one
        such percentage shall be so applicable, the daily average of such
        percentages for those days in such Interest Period during which any such
        percentage shall be so applicable) under regulations issued from time to
        time by the Board of Governors of the Federal Reserve System (or any
        successor) for determining the maximum reserve requirement (including,
        without limitation, any emergency, supplemental or other marginal
        reserve requirement) for such Lender with respect to liabilities or
        assets consisting of or including Eurocurrency Liabilities having a term
        equal to such Interest Period.

                "Events of Default" has the meaning specified in Section 8.01
        hereof.

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<PAGE>

                "Excluded Subsidiaries" means (a) Foreign Subsidiaries, (b)
        those Subsidiaries whose assets have a book value of less than $500,000,
        are dormant (as provided under any applicable law), or which are in the
        process of being liquidated as of the Effective Date, (c) Special
        Purpose Subsidiaries, (d) Subsidiaries of Foreign Subsidiaries and (e)
        Banana Republic (East) LP and Gap (Texas) LP, each a California Limited
        partnership, and in each case so long as any partnership interests
        therein is owned by a Special Purpose Subsidiary. Excluded Subsidiaries
        referred to in clause (b) as of the Effective Date are listed in
        Schedule XIV hereto.

                "Existing Credit Agreement" has the meaning specified in
        Preliminary Statement (1).

                "Existing Letter of Credit" has the meaning specified in Section
        3.11 hereof.

                "Federal Funds Rate" means, for any period, a fluctuating
        interest rate per annum 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 Agent from three Federal funds brokers of
        recognized standing selected by it.

                "Fiscal Quarter" means any quarter in any Fiscal Year, the
        duration of such quarter being defined in accordance with generally
        accepted accounting principles consistent with those applied in the
        preparation of the Borrower's financial statements referred to in
        Section 6.01(e) hereof.

                "Fiscal Year" means a fiscal year of the Borrower and its
        Subsidiaries.

                "Fixed Charge Coverage Ratio" means, for any period, the ratio
        of (a) the amount equal to the sum of (i) Consolidated EBITDA and (ii)
        Lease Expense in each case for the Borrower and its Subsidiaries for
        such period, to (b) the sum of (i) Consolidated Interest Expense and
        (ii) Lease Expense, in each case for the Borrower and its Subsidiaries
        for such period.

                "Foreign Subsidiary" means, at any time, any direct or indirect
        Subsidiary of the Borrower that is not a Domestic Subsidiary.

                "Funded Debt" means, as of any date of determination, all
        indebtedness (including Capital Lease Obligations but excluding all
        accounts payable incurred in the ordinary course of business) of the
        Borrower and its Subsidiaries on a Consolidated basis that would (or
        would be required to) appear as liabilities for long-term Debt,
        short-term Debt, current maturities of Debt, and other similar
        interest-bearing obligations on a Consolidated balance sheet of the
        Borrower and its Subsidiaries in accordance with generally accepted
        accounting principles.

                                       10

<PAGE>

                "Governmental Authority" means any nation or government, any
        state, province, city, municipal entity or other political subdivision
        thereof, and any governmental, executive, legislative, judicial,
        administrative or regulatory agency, department, authority,
        instrumentality, commission, board or similar body, whether federal,
        state, provincial, territorial, local or foreign.

                "Governmental Authorization" means any authorization, approval,
        consent, franchise, license, covenant, order, ruling, permit,
        certification, exemption, notice, declaration or similar right,
        undertaking or other action of, to or by, or any filing, qualification
        or registration with, any Governmental Authority.

                "Guarantee Supplement" has the meaning specified in the
        Subsidiary Guaranty.

                "Guaranteed Obligations" has the meaning specified in the
        Subsidiary Guaranty.

                "Guarantor" means each Domestic Subsidiary of the Borrower party
        to the Subsidiary Guarantee or, as the case may be, a Guarantee
        Supplement.

                "Hazardous Substance" means (i) any hazardous substance or toxic
        substance as such terms are presently defined or used in Section 101(14)
        of CERCLA (42 U.S.C. Section 9601(14)), in 33 U.S.C. Section 1251 et.
        seq. (Clean Water Act), or 15 U.S.C. Section 2601 et. seq. (Toxic
        Substances Control Act) and (ii) as of any date of determination, any
        additional substances or materials which are hereafter incorporated in
        or added to the definition of "hazardous substance" or "toxic substance"
        for purposes of CERCLA or any other applicable law.

                "Hedge Agreements" means (a) any and all interest rate swaps,
        basis swaps, credit derivative transactions, forward rate transactions,
        commodity swaps, commodity options, forward commodity contracts, equity
        or equity index swaps or options, bond or bond price or bond index swaps
        or options or forward bond or forward bond price or forward bond index
        transactions, interest rate options, forward foreign exchange
        transactions, cap transactions, floor transactions, collar transactions,
        currency swaps, cross-currency rate swaps, currency options, spot
        contracts or any other similar transactions or any combination of any of
        the foregoing (including any options to enter into any of the
        foregoing), whether or not any such transaction is governed by or
        subject to any master agreement, and (b) any and all transactions of any
        kind, and the related confirmations, which are subject to the terms and
        conditions of, or governed by, any form of master agreement published by
        the International Swaps and Derivatives Association, Inc., the
        International Foreign Exchange Master Agreement, or any other master
        agreement, including any such obligations or liabilities under any such
        agreement.

                "Hedge Agreements Exposure" means, with respect to all Hedge
        Agreements of the Hedge Banks, the amount, if any, by which the sum of
        the (a) product of 5% of the notional amount of foreign exchange Hedge
        Agreements with a tenor of 6 months or less; (b) the product of 15% of
        the notional amount of all foreign exchange Hedge Agreements with a
        tenor of more than 6 months but less than or equal to 18 months; (c) the
        product of 20% of the notional amount of both all foreign exchange Hedge
        Agreements with a tenor

                                       11

<PAGE>

        of more than 18 months but less than or equal to 24 months and all
        foreign exchange Hedge Agreements for transactions denominated in
        currencies other than U.S. Dollars, Canadian Dollars, EURO, British
        Pounds Sterling, Japanese Yen, Hong Kong Dollars or Singapore Dollars
        (and any other currencies as determined by the Agent in consultation
        with the Borrower); (d) the product of 12% of the notional amount of all
        interest rate Hedge Agreements with a tenor of 5 years or less; and (e)
        the product of 15% of the notional amount of all interest rate Hedge
        Agreements with a tenor of more than 5 years but less than or equal to
        10 years, in each case existing as of the Effective Date or permitted
        under Section 7.02(h) hereof, exceeds $250,000,000.

                "Hedge Bank" means any Lender or an Affiliate of a Lender, in
        its capacity as a party to a Hedge Agreement.

                "Hedge Subsidiary" means, as of the Effective Date, the
        Subsidiaries of the Borrower listed on Schedule XVI hereto and, after
        the Effective Date, any other Subsidiary of the Borrower that may from
        time to time enter into a Hedge Agreement with a Hedge Bank.

                "Information Memorandum" means the information memorandum dated
        May 28, 2003 prepared in connection with this Agreement.

                "Intercreditor Agreement" means an Intercreditor and Collateral
        Agency Agreement dated as of the date hereof duly executed by the Agent
        on behalf of the Lender Parties, the Collateral Agent, as defined
        therein, and any Lender who is as of such date or thereafter a party to
        a Hedge Agreement.

                "Interest Expense" of any Person for any period means the
        aggregate amount of interest or fees paid, accrued or scheduled to be
        paid or accrued in respect of any Debt (including the interest portion
        of rentals under Capital Leases) and all but the principal component of
        payments in respect of conditional sales, equipment trust or other title
        retention agreements paid, accrued or scheduled to be paid or accrued by
        such Person during such period, net of interest income, determined in
        accordance with generally accepted accounting principles.

                "Interest Period" means, for each Eurodollar Rate Advance
        comprising part of the same Borrowing, the period commencing on the date
        of such Type of Advance or the date of the Conversion of any Advance
        into such Type of an Advance and ending on the last day of the period
        selected by the Borrower pursuant to the provisions below and,
        thereafter, each subsequent period commencing on the last day of the
        immediately preceding Interest Period and ending on the last day of the
        period selected by the Borrower pursuant to the provisions below. The
        duration of each such Interest Period shall be 1, 2, 3, 6 or, if
        acceptable to the Lenders, 9 or 12 months in the case of a Eurodollar
        Rate Advance, in each case as the Borrower may, upon notice received by
        the Agent not later than 12:00 noon (New York City time) on the third
        Business Day prior to the first day of such Interest Period, select;
        provided, however, that:

                                       12

<PAGE>

                        (i)     the Borrower may not select any Interest Period
                which ends after the Termination Date;

                        (ii)    Interest Periods commencing on the same date for
                Advances comprising part of the same Borrowing shall be of the
                same duration;

                        (iii)   whenever the last day of any Interest Period
                would otherwise occur on a day other than a Business Day, the
                last day of such Interest Period shall be extended to occur on
                the next succeeding Business Day, provided, in the case of any
                Interest Period for a Eurodollar Rate Advance, that if such
                extension would cause the last day of such Interest Period to
                occur in the next following calendar month, the last day of such
                Interest Period shall occur on the next preceding Business Day;
                and

                        (iv)    the Borrower may request in a Notice of
                Borrowing an Interest Period of 9 or 12 months for a Eurodollar
                Rate Advance and the Interest Period for such Eurodollar Rate
                Advance shall be 9 or 12 months, if, and only if, the Agent
                determines a Eurodollar Rate for the tenor of such Interest
                Period and the Lenders do not notify the Agent pursuant to
                Section 2.08(b) hereof that the Eurodollar Rate for such
                Interest Period will not adequately reflect the cost to the
                Lenders of making, funding or maintaining their respective
                Eurodollar Rate Advances for such Interest Period; if both of
                the preceding conditions are not satisfied with respect to such
                requested 9 or 12 month Interest Period, the duration of the
                requested Interest Period shall be the alternative specified in
                the Notice of Borrowing, or, if no alternative Interest Period
                is selected, 6 months.

                "Investment" has the meaning specified therefor in Section
        7.02(d)(ii) hereof.

                "Issue" means, with respect to any Letter of Credit, either to
        issue, or to extend the expiry of, or to renew, or to increase the
        amount of, such Letter of Credit, and the term "Issued" or "Issuance"
        shall have corresponding meanings.

                "Issuing Bank" means Citibank, HSBC or Bank of America, N.A., or
        any other Lender which agrees to become, and is designated as an Issuing
        Bank under Section 2.04(d) hereof or any Affiliate thereof as agreed to
        from time to time by the Borrower and such Issuing Bank, that may from
        time to time Issue Letters of Credit for the account of the Borrower or
        for the account of any LC Subsidiary.

                "Issuing Commitment" means, as to any Issuing Bank, the amount
        set forth opposite such Issuing Bank's name on Schedule I-A hereto under
        the caption Issuing Commitment, as such amount may be reduced or
        increased pursuant to Section 2.04 or 3.10 hereof.

                "LC Facility" means each three year letter of credit facility
        agreement entered into or to be entered into on or about the date of
        this Agreement between the Borrower, certain of its Subsidiaries and,
        respectively, Bank of America, N.A., Citibank and HSBC, and the letter
        of credit agreement proposed to be entered into by the Borrower, certain
        of its Subsidiaries and JPMorgan Chase Bank subsequent to the date of
        this Agreement, as

                                       13

<PAGE>

        any such agreement may be replaced, amended, supplemented or otherwise
        modified from time to time.

                "LC Subsidiary" means, as of the date hereof, the Subsidiaries
        of the Borrower listed on Schedule V hereto and, after the date hereof,
        any other Subsidiary of the Borrower that may from time to time become a
        party hereto (with respect to Letters of Credit only) and in connection
        therewith such other Subsidiary shall execute such documents as are
        reasonably requested by the Agent to evidence its agreement to be bound
        hereunder as an LC Subsidiary, and for whose account an Issuing Bank may
        from time to time Issue Letters of Credit.

                "Lease Expense" means, with respect to any Person, for any
        period for such Person and its subsidiaries on a Consolidated basis,
        lease and rental expense accrued during such period under all leases and
        rental agreements, other than Capital Leases and leases of personal
        property, determined in conformity with generally accepted accounting
        principles.

                "Lender Party" means any Lender and any Issuing Bank.

                "Lenders" means the Lenders listed on the signature pages hereof
        as Lenders and as Swing Line Lenders, as the context may require, and
        each Eligible Assignee that shall become a party hereto pursuant to
        Section 10.07 hereof.

                "Letter of Credit" means either a Trade Letter of Credit or a
        Standby Letter of Credit which in either case is in form satisfactory to
        the respective Issuing Bank, which is at any time Issued by such Issuing
        Bank pursuant to Article III, in each case as amended, supplemented or
        otherwise modified from time to time.

                "Letter of Credit Liability" means, as of any date of
        determination, all then existing liabilities of the Borrower and the LC
        Subsidiaries to the Issuing Banks in respect of the Letters of Credit
        Issued for the Borrower's account and for the account of the LC
        Subsidiaries, whether such liability is contingent or fixed, and shall,
        in each case, consist of the sum of (i) the aggregate maximum amount
        (the determination of such maximum amount to assume compliance with all
        conditions for drawing) then available to be drawn under such Letters of
        Credit (including, without limitation, amounts available under such
        Letters of Credit for which a draft has been presented but not yet
        honored) and (ii) the aggregate amount which has then been paid by, and
        not been reimbursed to, the Issuing Banks under such Letters of Credit.
        For the purposes of determining the Letter of Credit Liability, the face
        amount of Letters of Credit outstanding in an Alternative Currency shall
        be expressed as the equivalent of such Alternative Currency in Dollars.

                "Leverage Ratio" means, as of any date of determination, the
        ratio of (a) the amount equal to the sum of (i) Consolidated Funded Debt
        and (ii) an amount equal to eight times Lease Expense for the most
        recently completed four consecutive Fiscal Quarters ending on or prior
        to such date, to (b) the sum of (i) Consolidated EBITDA for the most
        recently completed four consecutive Fiscal Quarters ending on or prior
        to such

                                       14

<PAGE>

        date and (ii) Lease Expense for the most recently completed four
        consecutive Fiscal Quarters ending on or prior to such date, in each
        case for the Borrower and its Subsidiaries as of such date.

                "Lien" means any assignment, chattel mortgage, pledge or other
        security interest or any mortgage, deed of trust or other lien, or other
        charge or encumbrance, upon property or rights (including after-acquired
        property or rights), or any preferential arrangement with respect to
        property or rights (including after-acquired property or rights) which
        has the practical effect of constituting a security interest or lien.

                "Loan Documents" means, collectively, this Agreement, any note
        delivered pursuant to Section 2.02(a) hereof, the Subsidiary Guaranty,
        the Collateral Documents, each application or agreement and other
        documents delivered in connection with Letters of Credit pursuant to
        Section 3.03 hereof, in each case as amended, supplemented or otherwise
        modified hereafter from time to time in accordance with the terms
        thereof and Section 8.01 hereof.

                "Loan Parties" means, collectively, the Borrower and each of the
        Subsidiaries of the Borrower party to any Loan Document.

                "Majority Lenders" means the Lenders having at least 51% of the
        aggregate "Credit Exposure." For the purposes hereof, "Credit Exposure"
        of any Lender shall mean, at any date of determination, the maximum
        dollar amount that such Lender could be then required by the terms
        hereof (assuming all conditions to Borrowings and Issuances were
        satisfied) to expend to (i) purchase participations in Letters of Credit
        pursuant to Section 3.05 hereof (including any amounts so expended and
        not reimbursed at the date of determination) and (ii) fund Advances
        (including any amounts so expended to fund Advances outstanding on the
        date of determination).

                "Margin Stock" has the meaning assigned to such term in
        Regulation U of the Board of Governors of the Federal Reserve System, as
        in effect from time to time.

                "Material Adverse Change" means any material adverse change in
        the business, condition (financial or otherwise), results of operations,
        or prospects of the Borrower and its Subsidiaries, taken as a whole;
        provided, that a downgrade of the Borrower's public debt ratings or a
        Negative Pronouncement shall not by itself be deemed to be a material
        adverse change; provided, further, the occurrence or subsistence of any
        such material adverse change which has been disclosed (a) by the
        Borrower in any filing made with the Securities and Exchange Commission
        prior to the date of this Agreement, (b) by the Borrower in a public
        announcement prior to the date of this Agreement, or (c) in the
        Information Memorandum prior to the date of this of this Agreement,
        shall not constitute a Material Adverse Change.

                "Material Adverse Effect" means a material adverse effect on the
        financial condition or results of operations of the Borrower and its
        Subsidiaries taken as a whole.

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

                                       15

<PAGE>

                "Multiemployer Plan" means a "multiemployer plan" as defined in
        Section 4001(a)(3) of ERISA to which the Borrower or any Subsidiary of
        the Borrower or any ERISA Affiliate is making or accruing an obligation
        to make contributions or has within any of the preceding five plan years
        made or accrued an obligation to make contributions.

                "Negative Pronouncement" means a public announcement by either
        S&P or Moody's in respect to a possible downgrade of, or negative
        outlook with respect to, the public debt rating of the Borrower.

                "Net Income" of any Person means, for any period, net income
        before (i) extraordinary items, (ii) the results of discontinued
        operations and (iii) the effect of any cumulative change in accounting
        principles, determined in accordance with generally accepted accounting
        principles.

                "Notice of Borrowing" has the meaning specified in Section
        2.02(a) hereof.

                "Obligation" means, with respect to any Person, any payment,
        performance or other obligation of such Person of any kind, including,
        without limitation, any liability of such Person on any claim, whether
        or not the right of any creditor to payment in respect of such claim is
        reduced to judgment, liquidated, unliquidated, fixed, contingent,
        matured, disputed, undisputed, legal, equitable, secured or unsecured,
        and whether or not such claim is discharged, stayed or otherwise
        affected by any proceeding referred to in Section 8.01(e) hereof.
        Without limiting the generality of the foregoing, the Obligations of the
        Loan Parties under the Loan Documents include (a) the obligation to pay
        principal, interest, commissions, charges, expenses, fees, attorneys'
        fees and disbursements, indemnity payments and other amounts payable by
        any Loan Party under any Loan Document and (b) the obligation of any
        Loan Party to reimburse any amount in respect of any of the foregoing
        items that any Lender Party, in its sole discretion, may elect to pay or
        advance on behalf of such Loan Party.

                "OECD" means the Organization for Economic Cooperation and
        Development.

                "Operating Indebtedness" means Debt to any Operating Lender
        arising under (i) any purchasing card program established to enable
        headquarters and field staff of the Borrower or any of its Subsidiaries
        to purchase goods and supplies from vendors and (ii) any travel and
        entertainment card program established to enable headquarters and field
        staff of the Borrower or any of its Subsidiaries to make payments for
        expenses incurred related to travel and entertainment, provided, that
        the aggregate amount of such Debt shall not exceed $10,000,000 at any
        time outstanding.

                "Operating Indebtedness Agreement" means the agreement which
        governs the terms of the Operating Indebtedness between an Operating
        Lender and the Borrower or its respective Subsidiary.

                "Operating Lender" means a Lender or an Affiliate thereof which
        has extended Operating Indebtedness to the Borrower or one of its
        Subsidiaries pursuant to an Operating Indebtedness Agreement and which
        has become party to the Intercreditor Agreement in that capacity.

                                       16

<PAGE>

                "Other Taxes" has the meaning specified in Section 4.02(b)
        hereof.

                "Payment Office" means the office of the respective Issuing Bank
        as shall be from time to time selected by such Issuing Bank and notified
        by such Issuing Bank to the Borrower, the LC Subsidiaries, and the
        Lenders.

                "Performance Level" means Performance Level I, Performance Level
        II, Performance Level III, Performance Level IV, Performance Level V, or
        Performance Level VI, as identified by reference to the Public Debt
        Rating and Leverage Ratio in effect on such date as set forth below:

    PERFORMANCE LEVEL                  PUBLIC DEBT RATING
-----------------------   ------------------------------------------------------
Level I                   Long-Term Senior Unsecured Debt of the Borrower Rated
                          at least BBB by S&P or Baa2 by Moody's or the Leverage
                          Ratio is less than or equal to 3.00:1.00

Level II                  Long-Term Senior Unsecured Debt of the Borrower Rated
                          less than Level I but at least BBB- by S&P or Baa3 by
                          Moody's or the Leverage Ratio is less than or equal to
                          3.25:1.00

Level III                 Long-Term Senior Unsecured Debt of the Borrower Rated
                          less than Level II but at least BB+ by S&P or Ba1 by
                          Moody's or the Leverage Ratio is less than or equal to
                          3.50:1.00

Level IV                  Long-Term Senior Unsecured Debt of the Borrower Rated
                          less than Level III but at least BB by S&P or Ba2 by
                          Moody's or the Leverage Ratio is less than or equal to
                          3.75:1.00

Level V                   Long-Term Senior Unsecured Debt of the Borrower Rated
                          less than Level IV but at least BB- by S&P or Ba3 by
                          Moody's or the Leverage Ratio is less than or equal to
                          4.00:1.00

Level VI                  Long-Term Senior Unsecured Debt of the Borrower Rated
                          less than Level V or the Leverage Ratio is greater
                          than 4.00:1.00

For purposes of this definition, the Performance Level shall be determined by
the applicable public debt rating or Leverage Ratio as follows: (a) the public
debt ratings above shall be determined as follows: (i) the public debt ratings
shall be determined by the then-current rating announced by either S&P or
Moody's, as the case may be, for any class of non-credit-enhanced long-term
senior unsecured debt issued by the Borrower, (ii) if only one of S&P and
Moody's

                                       17

<PAGE>

shall have in effect a public debt rating, the Performance Level shall be
determined by reference to the available rating; (iii) if neither S&P nor
Moody's shall have in effect a public debt rating, the applicable Performance
Level will be Performance Level VI; (iv) if the ratings on the Borrower's
long-term senior unsecured debt established by S&P and Moody's shall fall within
different levels, the public debt rating will be determined by the higher of the
two ratings, provided, that, in the event that the lower of such ratings is more
than one level below the higher of such ratings, the public debt rating will be
determined based upon the level that is one level above the lower of such
ratings; (v) if any rating established by S&P or Moody's shall be changed, such
change shall be effective as of the date on which such change is first announced
publicly by the rating agency making such change; and (vi) if S&P or Moody's
shall change the basis on which ratings are established, each reference to the
public debt rating announced by S&P or Moody's, as the case may be, shall refer
to the then equivalent rating by S&P or Moody's, as the case may be; (b) the
Leverage Ratio shall be determined on the basis of the most recent certificate
of the Borrower with respect to the financial statements to be delivered
pursuant to, as applicable, Section 7.04(i) or (iii) hereof for the most
recently ended Fiscal Quarter and any change in the Leverage Ratio shall be
effective one Business Day after the date on which the Agent receives such
certificate; provided, that until the Borrower has delivered to the Agent such
certificate pursuant to Section 7.04(i) hereof in respect of the second Fiscal
Quarter of 2003, the Leverage Ratio shall be deemed to be at Level IV; provided,
further, that for so long as the Borrower has not delivered such certificate
when due pursuant to Section 7.04(i) or (iii) hereof, as the case may be, the
Leverage Ratio shall be deemed to be at Level VI until the respective
certificate is delivered to the Agent; and (c) the Performance Level shall be
determined in accordance with the Borrower's respective public debt rating and
Leverage Ratio, provided, that, if the Borrower's public debt rating and the
Leverage Ratio shall fall within different levels, the Performance Level will be
determined by the higher of the public debt rating and the Leverage Ratio,
provided, further, that, in the event that the lower of the Borrower's public
debt rating and the Leverage Ratio is more than one level below the higher of
the Borrower's public debt rating and the Leverage Ratio, the Performance Level
shall be determined based upon the level that is one level above the lower of
the Borrower's public debt rating and the Leverage Ratio.

                "Permitted Lien" means:

                (i)     Liens for taxes, assessments or governmental charges or
        levies to the extent not past due or to the extent contested, in good
        faith, by appropriate proceedings and for which adequate reserves have
        been established;

                (ii)    Liens imposed by law, such as materialman's, mechanic's,
        carrier's, worker's, landlord's and repairman's Liens and other similar
        Liens arising in the ordinary course of business which relate to
        obligations which are not overdue for a period of more than 30 days or
        which are being contested in good faith, by appropriate proceedings and
        for which reserves required by generally accepted accounting principles
        have been established;

                (iii)   pledges or deposits in the ordinary course of business
        to secure obligations under worker's compensation or unemployment laws
        or similar legislation or to secure the performance of leases or
        contracts (including insurance contracts issued by insurance

                                       18

<PAGE>

        companies which are Subsidiaries of the Borrower) entered into in the
        ordinary course of business or of public or statutory obligations, bids,
        or appeal bonds;

                (iv)    zoning restrictions, easements, licenses, landlord's
        Liens or restrictions on the use of property which do not materially
        impair the use of such property in the operation of the business of the
        Borrower or any of its Subsidiaries;

                (v)     Liens upon assets subject to a Capital Lease and
        securing payment of the obligations arising under such Capital Lease;

                (vi)    Liens of the Borrower and its Subsidiaries not described
        in the foregoing clauses (i) through (v) existing on the Effective Date
        and listed on Schedule II hereto and any extensions, renewals or
        replacements of such Liens for the same or lesser amount, provided,
        that, no such extension, renewal or replacement shall extend to or cover
        any property not theretofore subject to the Lien being extended, renewed
        or replaced;

                (vii)   judgment Liens in respect of judgments that do not
        constitute an Event of Default under Section 8.01(f) hereof; and

                (viii)  Liens arising out of or pursuant to this Agreement or
        any Collateral Document.

                "Person" means an individual, partnership, limited liability
        company, corporation (including a business trust), joint stock company,
        trust, unincorporated association, joint venture or other entity, or a
        government or any political subdivision or agency thereof.

                "Plan" means an employee benefit plan (other than a
        Multiemployer Plan) maintained by the Borrower, any Subsidiary of the
        Borrower or any ERISA Affiliate for its employees and subject to Title
        IV of ERISA.

                "RCRA" means the Resource Conservation and Recovery Act of 1976,
        as amended (42 U.S.C. Section 6901 et seq.), and any regulations
        promulgated thereunder.

                "Recipient" has the meaning specified in Section 10.10 hereof.

                "Reference Banks" means Citibank, JPMorgan Chase Bank, HSBC and
        Bank of America, N.A.

                "Responsible Officer" means, with respect to any certificate,
        report or notice to be delivered or given hereunder, unless the context
        otherwise requires, the president, chief executive officer, chief
        financial officer or treasurer of the Borrower or other executive
        officer of the Borrower who in the normal performance of his or her
        operational duties would have knowledge of the subject matter relating
        to such certificate, report or notice.

                "Register" has the meaning specified in Section 10.07(c) hereof.

                "Requirements of Law" means, with respect to any Person, all
        laws, constitutions, statutes, treaties, ordinances, rules and
        regulations, all orders, writs, decrees, injunctions,

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<PAGE>

        judgments, determinations and awards of an arbitrator, a court or any
        other Governmental Authority, and all Governmental Authorizations,
        binding upon or applicable to such Person or to any of its properties,
        assets or businesses.

                "Retail Assets" means property (tangible and intangible) that is
        used, sold or consumed in a Retail Business.

                "Retail Business" means, with respect to any Person, that such
        Person is engaged in the business of manufacturing, producing,
        supplying, distributing or selling apparel, home furnishings,
        accessories, specialty foods and related products or goods.

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

                "Secured Obligations" has the meaning specified in Section 2 of
        the Security Agreement.

                "Secured Parties" means, collectively, the Agent, the Lender
        Parties, and the other Persons the Obligations owing to which are or are
        purported to be secured by the Collateral under the terms of the
        Collateral Documents.

                "Securities Act" means the Securities Act of 1933, as amended,
        and the regulations promulgated and the rulings issued thereunder.

                "Security Agreement" has the meaning specified in Section
        5.01(b) hereof.

                "Solvent" and "Solvency" mean, with respect to any Person on any
        date of determination, that on such date (a) the fair value of the
        property and assets of such Person is greater than the total amount of
        liabilities (including, without limitation, contingent liabilities), of
        such Person, (b) the present fair salable value of the property and
        assets of such Person is not less than the amount that will be required
        to pay the probable liability of such Person on its debts as they become
        absolute and matured, (c) such Person does not intend to, and does not
        believe that it will, incur debts or liabilities beyond such Person's
        ability to pay such debts and liabilities as they mature and (d) such
        Person is not engaged in business or in a transaction, and is not about
        to engage in business or in a transaction, for which such Person's
        property and assets would constitute an unreasonably small capital. The
        amount of contingent liabilities of any such Person at any time shall be
        computed as the amount that, in the light of all of the facts and
        circumstances existing at such time, represents the amount that can
        reasonably be expected to become an actual or matured liability.

                "Special Purpose Subsidiary" means a Domestic Subsidiary of the
        Borrower that holds certain trademarks and service marks and
        Subsidiaries thereof. Special Purpose Subsidiaries as of the Effective
        Date are listed on Schedule IX hereto.

                "Standby Letter of Credit" means a letter of credit or other
        credit support instrument issued for the benefit of a Person party to a
        contractual arrangement with the

                                       20

<PAGE>

        Borrower or any of its Subsidiaries as credit support for the
        obligations of the Borrower or such Subsidiary thereunder.

                "Subsidiary" means, with respect to any Person, any corporation,
        partnership, trust or other Person of which more than 50% of the
        outstanding capital stock (or similar property right in the case of
        partnerships and trusts and other Persons) having ordinary voting power
        to elect a majority of the board of directors of such corporation (or
        similar governing body or Person with respect to partnerships and trusts
        and other Persons) (irrespective of whether or not at the time capital
        stock of any other class or classes of such corporation shall or might
        have voting power upon the occurrence of any contingency) is at the time
        directly or indirectly owned by such Person, by such Person and one or
        more other Subsidiaries of such Person, or by one or more other
        Subsidiaries of such Person.

                "Subsidiary Borrower" means, as of the date hereof, the
        Subsidiaries of the Borrower listed on Schedule VI and, after the date
        hereof, any other Subsidiary of the Borrower that may from time to time
        become a party hereto (with respect to Swing Line Advances only) and in
        connection therewith such other Subsidiary shall execute such documents
        as are reasonably requested by the Agent to evidence its agreement to be
        bound hereunder as a Subsidiary Borrower, and to whom the Swing Line
        Lenders may from time to time make Swing Line Advances.

                "Subsidiary Guaranty" has the meaning specified in Section
        5.01(b) hereof.

                "Subsidiary Swing Line Obligations" has the meaning specified in
        Section 2.13(b) hereof.

                "Subsidiary LC Obligations" has the meaning specified in Section
        3.13(b) hereof.

                "Swing Line Advance" means an advance made by a Swing Line
        Lender pursuant to Section 2.01(b) hereof.

                "Swing Line Lender" means each Lender designated as such on the
        signature pages hereto and each other Lender which agrees from time to
        time to act as a Swing Line Lender.

                "Swing Line Commitment" means $3,000,000 on the Effective Date,
        as such amount may be increased or reduced from time to time pursuant to
        Section 2.04(b) hereof, provided, that the Swing Line Commitment may not
        be more than $75,000,000 (or its equivalent in the respective
        Alternative Currencies).

                "Taxes" has the meaning specified in Section 4.02(a) hereof.

                "Termination Date" means June 24, 2006, or the earlier date of
        termination in whole of the Commitments pursuant to Section 2.04(a) or
        8.01 hereof.

                "Total Assets" of any Person means all property, whether real,
        personal, tangible, intangible or otherwise, which, in accordance with
        generally accepted accounting

                                       21

<PAGE>

        principles, should be included in determining total assets as shown on
        the assets portion of a balance sheet of such Person.

                "Trade Letter of Credit" means a direct-pay trade or documentary
        letter of credit issued for the benefit of a vendor in connection with
        the purchase of goods by the Borrower or any of its Subsidiaries in the
        ordinary course of business.

                "Type" refers to the distinction among Advances bearing interest
        at the Base Rate and Advances bearing interest at the Eurodollar Rate.

                "UCP" has the meaning specified in Section 3.09 hereof.

                "Withdrawal Liability" has the meaning specified in Part I of
        Subtitle E of Title IV of ERISA.

                SECTION 1.02 Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each means "to but excluding".

                SECTION 1.03 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 6.01(e) hereof.

                                   ARTICLE II

                        AMOUNTS AND TERMS OF THE ADVANCES

                SECTION 2.01 The Advances. (a) Each Lender severally agrees, on
the terms and conditions hereinafter set forth, to make Advances to the Borrower
from time to time on any Business Day during the period from the date hereof
until the Termination Date in an aggregate amount not to exceed at any time
outstanding such Lender's Commitment, provided, that, the Lenders shall not be
obligated to, and shall not, make any Advances as part of a Borrowing if after
giving effect to such Borrowing, the sum of the then outstanding aggregate
amount of all Borrowings, the aggregate Swing Line Commitment then in effect
(computed without giving regard to usage), the then outstanding Hedge Agreements
Exposure and the then outstanding aggregate amount of all Letter of Credit
Liability shall exceed the aggregate amount of the Commitments in effect from
time to time. Each Borrowing shall be in an aggregate amount not less than (A)
$10,000,000, in the case of a Borrowing consisting of Eurodollar Rate Advances
and (B) $1,000,000, in the case of a Borrowing consisting of Base Rate Advances,
or, in each case, in integral multiples of $1,000,000 in excess thereof and
shall consist of Advances of the same Type made on the same day by the Lenders
ratably according to their respective Commitments. Within the limits of each
Lender's Commitment, the Borrower may from time to time borrow, prepay pursuant
to Section 2.10 hereof and reborrow under this Section 2.01.

                (b)     The Swing Line Advances. A Subsidiary Borrower may
        request the respective Swing Line Lender to make, and such Swing Line
        Lender shall on the terms and conditions hereinafter set forth, make
        Swing Line Advances in Dollars or the

                                       22

<PAGE>

        respective Alternative Currency to such Subsidiary Borrower from time to
        time on any Business Day during the period from the Effective Date until
        the Termination Date in an amount, when combined with all Swing Line
        Advances of all Swing Line Lenders, not to exceed the lesser of (i) the
        Swing Line Commitment then in effect and (ii) such Swing Line Lender's
        Commitment. Each Swing Line Advance shall be in an amount of $100,000
        (or its equivalent in the respective Alternative Currency) or an
        integral multiple thereof and shall bear interest at a rate to be agreed
        on by the respective Subsidiary Borrower and the respective Swing Line
        Lender. Within the limits of the first sentence of this Section 2.01(b),
        the respective Subsidiary Borrower may borrow under this Section
        2.01(b), repay pursuant to Section 2.05(b) hereof, prepay pursuant to
        Section 2.10(b) hereof and reborrow under this Section 2.01(b).

                SECTION 2.02 Making the Advances. (a) Each Borrowing shall be
made on notice given not later than (i) 12:00 noon (New York City time) on the
third Business Day prior to the date of the proposed Borrowing, if such proposed
Borrowing consists of Eurodollar Rate Advances and (ii) 10:00 A.M. (New York
City time) on the day of such proposed Borrowing, if such proposed Borrowing
consists of Base Rate Advances, by the Borrower to the Agent, which shall give
to each Lender prompt notice thereof by telecopier. Each such notice of a
Borrowing (a "Notice of Borrowing") shall be by telecopier or telephone (and if
by telephone, confirmed immediately in writing), in substantially the form of
Exhibit A hereto, specifying therein the requested (i) date of such Borrowing,
(ii) Type of Advances comprising such Borrowing, (iii) aggregate amount of such
Borrowing and (iv) in the case of a Borrowing comprised of Eurodollar Rate
Advances, initial Interest Period for each such Advance. Each Lender shall,
before 2:00 p.m. (New York City time) on the date of such Borrowing, make
available for the account of its Applicable Lending Office to the Agent at its
address referred to in Section 10.02 hereof, in same day funds, such Lender's
ratable portion of such Borrowing. After the Agent's receipt of such funds and
upon fulfillment of the applicable conditions set forth in Article V, the Agent
will make such funds available to the Borrower at the Agent's aforesaid address.

                (b)     (i)     Each Swing Line Advance shall be made on such
        notice and on such terms (subject to the provisions of Section 2.05(b)
        hereof) as are agreed to from time to time between the respective
        Subsidiary Borrower and the respective Swing Line Lender. Upon
        fulfillment of the applicable conditions set forth in Article V, the
        respective Swing Line Lender will make such funds available to the
        respective Subsidiary Borrower. No later than 30 days after the end of
        each calendar quarter, each Swing Line Lender shall deliver to the Agent
        a report as to the outstanding amount of Swing Line Advances by such
        Swing Line Lender as of the end of such quarter and the identity of the
        respective Subsidiary Borrower. In addition, each Swing Line Lender will
        provide such information as to the Swing Line Advances made by such
        Swing Line Lender as is requested by the Agent from time to time.

                        (ii)    Upon demand by the respective Swing Line Lender,
                with a copy of such demand to the Agent (which shall give prompt
                notice thereof to each Lender), each Lender shall purchase from
                such Swing Line Lender, and such Swing Line Lender shall sell
                and assign to each such Lender, such Lender's ratable share (as
                determined by reference to such Lender's Commitment Percentage)
                of any outstanding Swing Line Advance by such Swing Line Lender

                                       23

<PAGE>

                as of the date of such demand, by making available to the
                respective Swing Line Lender, an amount equal to such ratable
                share. If such Swing Line Advance is denominated in an
                Alternative Currency, the payment to be made by the Lenders
                pursuant to the preceding sentence shall be Converted into
                Dollars by the Swing Line Lender at a rate determined by such
                Swing Line Lender as provided in Section 3.12(a) hereof. Each
                Lender hereby agrees to purchase its ratable share of an
                outstanding Swing Line Advance on (A) the Business Day on which
                demand therefor is made by the respective Swing Line Lender so
                long as notice of such demand is given not later than one
                Business Day prior to such Business Day or (B) the first
                Business Day next succeeding such demand if notice of such
                demand is given after such time. The respective Subsidiary
                Borrower, hereby agrees to each such sale and assignment. Upon
                any such assignment by the respective Swing Line Lender to any
                Lender of a portion of a Swing Line Advance, the respective
                Swing Line Lender represents and warrants to such Lender that
                such Swing Line Lender is the legal and beneficial owner of such
                interest being assigned by it, but makes no other representation
                or warranty and assumes no responsibility with respect to such
                Swing Line Advance, the Loan Documents or any Loan Party. If and
                to the extent that any Lender shall not have so made its ratable
                share of any applicable Swing Line Advance available to the
                respective Swing Line Lender in accordance with the foregoing
                provisions of this Section 2.02(b)(ii), such Lender hereby
                agrees to pay to the respective Swing Line Lender forthwith on
                demand the amount of its ratable share, together with interest
                thereon, for each day from the date of demand by such Swing Line
                Lender therefor until the date such amount is paid to such Swing
                Line Lender, at the Federal Funds Rate. If such Lender shall pay
                to such Swing Line Lender the amount of its ratable share on any
                Business Day, such amount so paid in respect of principal shall
                constitute a Swing Line Advance made by such Lender on such
                Business Day for all purposes of this Agreement, and the
                outstanding principal amount of the Swing Line Advance made by
                the respective Swing Line Lender shall be reduced by such amount
                on such Business Day.

                        (iii)   The obligation of each Lender to purchase its
                ratable share of each outstanding Swing Line Advance upon demand
                by the respective Swing Line Lender therefor pursuant to clause
                (ii) of this Section 2.02(b) shall be absolute, unconditional
                and irrevocable, and shall be made strictly in accordance with
                the terms of clause (ii) of this Section 2.02(b) under all
                circumstances, including, without limitation, the following
                circumstances:

                        (A)     any lack of validity or enforceability of any
                Loan Document or any other agreement or instrument relating
                thereto;

                        (B)     the existence of any claim, set-off, defense or
                other right that such Lender may have at any time against the
                respective Swing Line Lender, the respective Subsidiary Borrower
                or any other Person, whether in connection with the transactions
                contemplated by the Loan Documents or any unrelated transaction;

                                       24

<PAGE>

                        (C)     the occurrence and continuance of any Default or
                Event of Default;

                        (D)     any other circumstance or happening whatsoever,
                whether or not similar to any of the foregoing; or

                        (E)     the failure of the respective Subsidiary
                Borrower to comply with the applicable conditions set forth in
                Article V.

                (c)     Anything in subsection (a) above to the contrary
        notwithstanding, the Borrower may not select Eurodollar Rate Advances
        for any Borrowing if the aggregate amount of such Borrowing is less than
        $1,000,000 multiplied by the number of Lenders.

                (d)     Each Notice of Borrowing shall be irrevocable and
        binding on the Borrower or the respective Subsidiary Borrower, as the
        case may be. In the case of any Borrowing which the related Notice of
        Borrowing specifies is to be comprised of Eurodollar Rate Advances, the
        Borrower shall indemnify each Lender against any loss, cost or expense
        incurred by such Lender as a result of any failure to fulfill on or
        before the date specified in such Notice of Borrowing for such Borrowing
        the applicable conditions set forth in Article V, including, without
        limitation, any loss (including loss of anticipated profits), cost or
        expense incurred by reason of the liquidation or reemployment of
        deposits or other funds acquired by such Lender to fund the Eurodollar
        Rate Advance to be made by such Lender as part of such Borrowing when
        such Advance, as a result of such failure, is not made on such date.

                (e)     Unless the Agent shall have received notice from a
        Lender (i) in the case of any Borrowing consisting of (A) Eurodollar
        Rate Advances or (B) Base Rate Advances for which the Notice of
        Borrowing is given other than on the date thereof, prior to the date of
        such Borrowing or (ii) in the case of any Borrowing consisting of Base
        Rate Advances for which the Notice of Borrowing is given on the date
        thereof, prior to the time at which such Lender is required to fund such
        Borrowing, which notice shall in either case state that such Lender will
        not make available to the Agent such Lender's ratable portion of such
        Borrowing, the Agent may assume that such Lender has made such portion
        available to the Agent on the date of such Borrowing in accordance with
        subsection (a) of this Section 2.02 and the Agent may, in reliance upon
        such assumption, make available to the Borrower or the respective
        Subsidiary Borrower on such date a corresponding amount. If and to the
        extent that such Lender shall not have so made such ratable portion
        available to the Agent, such Lender and the Borrower or the respective
        Subsidiary Borrower severally agree to repay to the Agent forthwith on
        demand such corresponding amount together with interest thereon, for
        each day from the date such amount is made available to the Borrower or
        the respective Subsidiary Borrower until the date such amount is repaid
        to the Agent at (x) in the case of the Borrower or the respective
        Subsidiary Borrower, the interest rate applicable at the time to
        Advances comprising such Borrowing and (y) in the case of such Lender,
        the Federal Funds Rate. If such Lender shall repay to the Agent such
        corresponding amount, such amount so repaid shall constitute such
        Lender's Advance as part of such Borrowing for purposes of this
        Agreement.

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<PAGE>

                (f)     The failure of any Lender to make the Advance to be made
        by it as part of any Borrowing shall not relieve any other Lender of its
        obligation, if any, hereunder to make its Advance on the date of such
        Borrowing, but no Lender shall be responsible for the failure of any
        other Lender to make the Advance to be made by such other Lender on the
        date of any Borrowing.

                (g)     The Borrower shall, if requested by any Lender, execute
        and deliver a promissory note, in substantially the form of Exhibit B
        hereto, payable to the order of such Lender in an original principal
        amount equal to such Lender's Commitment, duly executed by the Borrower.

                SECTION 2.03 Fees. (a) Facility Fee. The Borrower agrees to pay
to the Agent for the account of each Lender a facility fee, from the date hereof
in the case of each initial Lender and from the effective date specified in the
Assumption Agreement or in the Assignment and Acceptance, respectively, pursuant
to which it became Lender in the case of each other Lender until the Termination
Date at a rate per annum equal to the Applicable Facility Fee in effect from
time to time, (i) on the amount of such Lender's Commitment (computed without
giving effect to any usage of the Commitment of such Lender), payable quarterly
in arrears on the last day of each January, April, July and October and on the
Termination Date; and (ii) on the aggregate amount of Letter of Credit Liability
under all Letters of Credit that are outstanding beyond the Termination Date
(regardless of the actual or deemed usage thereof) payable in arrears on the
last day of each January, April, July and October after the Termination Date and
on the first day after the Termination Date on which no Letters of Credit are
outstanding.

                (b)     Utilization Fee. The Borrower agrees to pay to the Agent
        for the account of each Lender a utilization fee, accruing, during all
        periods from and after the date hereof when the aggregate amount of
        outstanding Advances (including any outstanding Swing Line Advances)
        exceeds 25% of the aggregate Commitments (without regard to any usage
        thereof), at the rate of 0.25% per annum on the aggregate amount of
        Advances (including any Swing Line Advances) by such Lender outstanding
        from time to time during such periods, payable quarterly in arrears on
        the last day of each January, April, July and October and on the
        Termination Date.

                (c)     Other Fees. The Borrower hereby agrees to pay the fees
        and charges referred to in that certain letter agreement, dated as of
        the date hereof, among the Borrower, the Issuing Banks and the Agent.

                SECTION 2.04 Reduction and Increase of the Commitments;
Reduction and Increase of the Swing Line Commitment; Additional Issuing Banks.
(a) The Borrower shall have the right, upon at least three Business Days' notice
to the Agent, to irrevocably terminate in whole or reduce ratably in part the
unused portions of the respective Commitments of the Lenders, provided, that,
after giving effect to such reduction, the Commitments are not less than the sum
of the aggregate amount of all Letter of Credit Liability, the aggregate Swing
Line Commitment then in effect (computed without giving regard to usage), and
the then outstanding amount of all Borrowings; provided, further, that, each
partial reduction shall be in the aggregate amount of $25,000,000 or an integral
multiple of $1,000,000 in excess thereof.

                                       26

<PAGE>

                (b)     Not more frequently than four times in any calendar year
        starting on the Effective Date, the Borrower shall have the right, upon
        at least three Business Days' notice to the Agent and the Swing Line
        Lenders to reduce in whole or in part the unused portion of the Swing
        Line Commitment or increase the amount of the Swing Line Commitment;
        provided, that, after giving effect to any such reduction, the Swing
        Line Commitment is not less than the outstanding amount of all Swing
        Line Advances; provided, further, that, each partial reduction or
        increase shall be in the amount of $5,000,000 or an integral multiple of
        $1,000,000 in excess thereof (or, in each case, the equivalent amount in
        the respective Alternative Currency), provided, further, that, the Swing
        Line Commitment, after giving effect to any increase thereof proposed
        herein, shall not exceed $75,000,000 and, together with the then
        outstanding aggregate amount of all Borrowings, the then outstanding
        Hedge Agreements Exposure and the then outstanding aggregate amount of
        all Letter of Credit Liability, shall not exceed the aggregate amount of
        the Commitments in effect from time to time and at the time of any
        proposed increase in the Swing Line Commitment and after giving effect
        thereto, no event has occurred and is continuing which constitutes an
        Event of Default or Default and, provided, further, that, the Agent
        shall record any such increase or decrease in the Swing Line Commitment
        in the Register.

                (c)     Not more frequently than twice in any calendar year, the
        Borrower shall have the right prior to the Termination Date to (i)
        increase the amount of the Commitments of one or more Lenders (subject
        to the consent of such Lenders in their sole and absolute discretion),
        (ii) add one or more Assuming Lenders as Lenders (subject to the consent
        of the Agent and the Issuing Banks in their sole and absolute
        discretion) and (iii) increase the Issuing Commitment of an Issuing Bank
        (subject to the consent of such Issuing Bank in its sole and absolute
        discretion) (each such increase under clause (i), (ii) or (iii) being a
        "Commitment Increase"), on and subject to the following terms:

                        (i)     The aggregate amount of the increase in the
                Commitments shall not exceed $100,000,000 after the date hereof;

                        (ii)    The amount of each Commitment Increase by any
                Lender or any Assuming Lender shall be in a minimum amount of
                $25,000,000 or an integral multiple of $1,000,000 in excess
                thereof.

                        (iii)   No proposed Commitment Increase shall occur
                unless each of the following requirements in respect thereof
                shall have been satisfied:

                        (A)     The Agent shall have received from the Borrower
                an irrevocable written notice (a "Commitment Increase Notice"),
                dated not earlier than 60 days before the proposed Commitment
                Increase Effective Date (as defined below) therefor and not
                later than 30 days (or such shorter period agreed to by the
                Agent) before such proposed Commitment Increase Effective Date,
                that (1) specifies (w) (if applicable) the proposed Issuing
                Commitment increase of each Issuing Bank and/or of the Lenders
                which are to become Issuing Banks and the amount of each Issuing
                Bank's Issuing Commitment after giving effect thereto, (x) the
                aggregate amount of the proposed Commitment Increase, (y) the
                Lenders whose

                                       27

<PAGE>

                Commitments are to be increased by the proposed Commitment
                Increase and/or the Assuming Lenders which are to become Lenders
                and the amount by which each such Lender's Commitment is to be
                so increased and/or the amount of each such Assuming Lender's
                Commitment and (z) the date (the "Commitment Increase Effective
                Date") on which the proposed Commitment Increase shall become
                effective, and (2) has been signed by each Lender whose
                Commitment is to be increased, evidencing the consent of such
                Lender to the proposed Commitment Increase and each Issuing Bank
                whose Issuing Commitment is to be increased evidencing the
                consent of such Issuing Bank thereto and/or by each such
                Assuming Lender; and

                        (B)     On and as of the Commitment Increase Effective
                Date of the proposed Commitment Increase (1) the following
                statements shall be true (and the giving of the applicable
                Commitment Increase Notice shall constitute a representation and
                warranty by the Borrower that on such Commitment Increase
                Effective Date such statements are true):

                                (x)     The representations and warranties
                        contained in Section 6.01 hereof are correct on and as
                        of such Commitment Increase Effective Date before and
                        after giving effect to the proposed Commitment Increase,
                        as though made on and as of such date; and

                                (y)     No event has occurred and is continuing,
                        or would result from such Commitment Increase, which
                        constitutes an Event of Default or Default; and

                                (z)     the Agent shall have received such other
                        approvals, opinions or documents as the Agent may
                        reasonably request.

                        (iv)    Promptly following its receipt of a Commitment
                Increase Notice in proper form, the Agent shall deliver copies
                thereof to each Lender and Issuing Bank. If, and only if, all of
                the terms, conditions and requirements specified in paragraphs
                (i) through (iv) are satisfied in respect of any proposed
                Commitment Increase on and as of the proposed Commitment
                Increase Effective Date thereof and in the case of each such
                Assuming Lender, an Assumption Agreement, duly executed by such
                Assuming Lender, the Agent and the Borrower, has been received
                by the Agent, then, as of such Commitment Increase Effective
                Date and from and after such date, (1) the Commitments of the
                Lenders consenting to such Commitment Increase shall be
                increased by the respective amounts specified in the Commitment
                Increase Notice pertaining thereto, (2) references herein to the
                amounts of the Lenders' respective Commitments shall refer to
                respective amounts giving effect to such Commitment Increase,
                and (3) each such Assuming Lender shall be a Lender and Issuing
                Bank, if applicable, for all purposes hereof, and the Agent
                shall record all relevant information with respect to such
                Assuming Lender and its Commitment and, if applicable, with
                respect to any increased Issuing Commitment of an Issuing Bank
                in the Register;

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<PAGE>

                        (v)     It is understood that no Lender or Issuing Bank
                shall have any obligation whatsoever to agree to any request
                made by the Borrower for a Commitment Increase;

                        (vi)    As part of such Commitment Increase, such Lender
                or Assuming Lender shall purchase assignments in the Advances
                and Commitments of the other Lenders so that after giving effect
                thereto, the percentage held by each Lender of the aggregate
                Commitments is the same as prior to such Commitment Increase and
                such Lender or Assuming Lender shall have acquired a ratable
                participation in all Swing Line Advances as contemplated by
                Section 2.02(b) hereof. In connection therewith, on each
                Commitment Increase Effective Date, (A) each Lender whose
                Commitment has been increased (each such Lender being an
                "Increasing Lender") shall, before 2:00 p.m. (New York City
                time) on such Commitment Increase Effective Date, make available
                for the account of its Applicable Lending Office to the Agent at
                the address specified in Section 10.02 hereof, in same day
                funds, an amount equal to the excess of (1) such Increasing
                Lender's ratable portion of the Advances then outstanding
                (calculated based on its Commitment as a percentage of the
                aggregate Commitments of the Lenders (including each such
                Assuming Lender) outstanding after giving effect to the relevant
                Commitment Increase) over (2) the aggregate principal amount of
                then outstanding Advances made by such Increasing Lender and (B)
                each such Assuming Lender shall before 2:00 p.m. (New York City
                time) on such Commitment Increase Effective Date, make available
                for the account of its Applicable Lending Office to the Agent at
                the address specified in Section 10.02 hereof in same day funds,
                an amount equal to such Assuming Lender's ratable portion of the
                Advances then outstanding (calculated based on its Commitment as
                a percentage of the aggregate Commitments of the Lenders
                (including each such Assuming Lender) outstanding after giving
                effect to the relevant Commitment Increase); and

                        (vii)   After the Agent's receipt of such funds from
                each such Increasing Lender and such Assuming Lender, the Agent
                will promptly thereafter cause to be distributed like funds to
                the other Lenders for the account of their respective Applicable
                Lending Offices in an amount to each other Lender such that the
                aggregate amount of the outstanding Advances owing to each
                Lender (including each such Assuming Lender) after giving effect
                to such distribution equals such Lender's ratable portion of the
                Advances then outstanding (calculated based on its Commitment as
                a percentage of the aggregate Commitments of the Lenders
                outstanding after giving effect to the relevant Commitment
                Increase).

                (d)     The Borrower may at any time, upon at least five
        Business Days' prior written notice to the Agent and the Lenders or as
        part of a proposed Commitment Increase pursuant to this Section 2.04,
        designate (i) as an Issuing Bank any Lender that has agreed in writing
        to act as an Issuing Bank and (ii) the Issuing Commitment of such
        Lender. Thereupon, any Lender so designated as an Issuing Bank shall
        thenceforth issue Letters of Credit on the terms and subject to the
        conditions herein, and the Agent shall

                                       29

<PAGE>

        record all relevant information with respect to such Lender as such
        Issuing Bank in the Register.

                SECTION 2.05 Repayment of Advances. (a) The Borrower shall repay
in full the principal amount of each Advance made pursuant to Section 2.01(a)
hereof owing to each Lender, together with accrued interest and fees thereon, on
the Termination Date.

                (b)     Swing Line Advances. The respective Subsidiary Borrower
        shall repay the respective Swing Line Lender and each Lender that has
        made a Swing Line Advance on the earlier of (i) the maturity date for
        each Swing Line Advance (which maturity shall be no later than 30 days
        after the date of such Advance) and (ii) the Termination Date, the
        principal amount of each such Swing Line Advance made by the Swing Line
        Lender and each such Lender and outstanding on such date.

                SECTION 2.06 Interest on Advances. The Borrower or the
respective Subsidiary Borrower, as the case may be, shall pay interest on the
unpaid principal amount of each Advance made by each Lender from the date of
such Advance until such principal amount shall be paid in full, at the following
rates per annum:

                (a)     Base Rate Advances. If such Advance is a Base Rate
        Advance, a rate per annum equal at all times to the sum of (x) the Base
        Rate in effect from time to time plus (y) the respective Applicable
        Margin in effect from time to time, payable quarterly on the last day of
        each April, July, October, and January and on the date such Base Rate
        Advance shall be Converted or paid in full; provided, that, any amount
        of principal which is not paid when due (whether at stated maturity, by
        acceleration or otherwise) shall bear interest, from the date on which
        such amount is due until such amount is paid in full, payable on demand,
        at a rate per annum equal at all times to 2% per annum above the rate
        per annum required to be paid on such Advance immediately prior to the
        date on which such principal amount become due.

                (b)     Eurodollar Rate Advances. If such Advance is a
        Eurodollar Rate Advance, a rate per annum equal at all times during each
        Interest Period for such Advance to the sum of (x) the Eurodollar Rate
        for such Interest Period plus (y) the respective Applicable Margin in
        effect from time to time, payable on the last day of such Interest
        Period and, if such Interest Period has a duration of more than three
        months, on each day which occurs during such Interest Period every three
        months from the first day of such Interest Period; provided, that, any
        amount of principal which is not paid when due (whether at stated
        maturity, by acceleration or otherwise) shall bear interest, from the
        date on which such amount is due until such amount is paid in full,
        payable on demand, at a rate per annum equal at all times to 2% per
        annum above the rate per annum required to be paid on such Advance (as
        if such Advance were a Base Rate Advance) immediately prior to the date
        on which such principal amount became due.

                (c)     Swing Line Advances. If such Advance is a Swing Line
        Advance, a rate per annum as agreed upon by the respective Swing Line
        Lender and respective Subsidiary Borrower.

                                       30

<PAGE>

                SECTION 2.07 Additional Interest on Eurodollar Rate Advances.
The Borrower shall pay to each Lender, so long as such Lender shall be required
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the unpaid principal
amount of each Eurodollar Rate Advance of such Lender, from the date of such
Advance until such principal amount is paid in full, at an interest rate per
annum equal at all times to the remainder obtained by subtracting (i) the
Eurodollar Rate for the Interest Period for such Advance from (ii) the rate
obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus
the Eurodollar Rate Reserve Percentage of such Lender for such Interest Period,
payable on each date on which interest is payable on such Advance. Such
additional interest shall be determined by such Lender and notified to the
Borrower through the Agent.

                SECTION 2.08 Interest Rate Determination. (a) Each Reference
Bank agrees to furnish to the Agent timely information for the purpose of
determining the Eurodollar Rate. If any one or more of the Reference Banks shall
not furnish such timely information to the Agent for the purpose of determining
such interest rate, the Agent shall determine such interest rate on the basis of
timely information furnished by the remaining Reference Banks. The Agent shall
give prompt notice to the Borrower and the Lenders of the applicable interest
rate determined by the Agent for purposes of Section 2.06(a) or (b) hereof, and
the applicable rate, if any, furnished by each Reference Bank for the purpose of
determining the applicable interest rate under Section 2.06(b) hereof.

                (b)     If, with respect to any Eurodollar Rate Advances, the
        Majority Lenders notify the Agent that the Eurodollar Rate for any
        Interest Period for such Advances will not adequately reflect the cost
        to such Majority Lenders of making, funding or maintaining their
        respective Eurodollar Rate Advances for such Interest Period, the Agent
        shall forthwith so notify the Borrower and the Lenders, whereupon:

                        (i)     each outstanding Eurodollar Rate Advance will
                automatically, on the last day of the then existing Interest
                Period therefor, Convert into a Base Rate Advance, and

                        (ii)    the obligation of the Lenders to make, or to
                Convert Advances into, Eurodollar Rate Advances shall be
                suspended until the Agent shall notify the Borrower and the
                Lenders that the circumstances causing such suspension no longer
                exist.

                (c)     If the Borrower shall fail to select the duration of any
        Interest Period for any Eurodollar Rate Advances in accordance with the
        provisions contained in the definition of "Interest Period" in Section
        1.01 hereof, the Agent will forthwith so notify the Borrower and the
        Lenders and such Advances will automatically, on the last day of the
        then existing Interest Period therefor, Convert into Base Rate Advances.

                (d)     On the date on which the aggregate unpaid principal
        amount of Advances comprising any Borrowing shall be reduced, by payment
        or prepayment or otherwise, to less than $1,000,000 multiplied by the
        number of Lenders, such Advances shall, if they are Advances of a Type
        other than Base Rate Advances, automatically Convert on the

                                       31

<PAGE>

        last day of the Interest Period with respect to such Advance into Base
        Rate Advances, and on and after such date the right of the Borrower to
        Convert such Advances into Advances of a Type other than Base Rate
        Advances shall terminate; provided, however, that if and so long as each
        such Advance shall be of the same Type and have the same Interest Period
        as Advances comprising another Borrowing or other Borrowings, and the
        aggregate unpaid principal amount of all such Advances shall equal or
        exceed $1,000,000 multiplied by the number of Lenders, the Borrower
        shall have the right to continue all such Advances as, or to Convert all
        such Advances into, Advances of such Type having such Interest Period.

                (e)     Upon the occurrence and during the continuance of any
        Event of Default, (i) each Eurodollar Rate Advance will automatically,
        on the last day of the then existing Interest Period therefor, convert
        into a Base Rate Advance and (ii) the obligations of the Lenders to
        make, or to convert Advances into, Eurodollar Rate Advances will be
        suspended.

                (f)     If fewer than two Reference Banks furnish timely
        information to the Agent for determining the Eurodollar Rate for any
        Eurodollar Rate Advances,

                        (i)     the Agent shall forthwith notify the Borrower
                and the Lenders that the interest rate cannot be determined for
                such Eurodollar Rate Advances,

                        (ii)    each such Advance will automatically, on the
                last day of the then existing Interest Period therefor, Convert
                into a Base Rate Advance (or if such Advance is then a Base Rate
                Advance, will continue as a Base Rate Advance), and

                        (iii)   the obligation of the Lenders to make, or to
                Convert Advances into, Eurodollar Rate Advances shall be
                suspended until the Agent shall notify the Borrower and the
                Lenders that the circumstances causing such suspension no longer
                exist.

                SECTION 2.09 Voluntary Conversion of Advances. The Borrower may
on any Business Day, upon notice given to the Agent not later than 12:00 noon
(New York City time) on the third Business Day prior to the date of the proposed
Conversion and subject to the provisions of Sections 2.08 and 2.12 hereof,
Convert all Advances of one Type comprising the same Borrowing into Advances of
another Type; provided, however, that any Conversion of any Eurodollar Rate
Advances into Advances of another Type shall be made on, and only on, the last
day of an Interest Period for such Eurodollar Rate Advances. Each such notice of
a Conversion shall, within the restrictions specified above, specify (i) the
date of such Conversion, (ii) the Advances to be Converted, and (iii) if such
Conversion is into Eurodollar Rate Advances, the duration of the Interest Period
for each such Advance.

                SECTION 2.10 Prepayments of Advances.

                (a)     The Borrower may (i) upon at least two Business Days',
        in the case of Eurodollar Rate Advances and (ii) on the same Business
        Day, in the case of Base Rate Advances, notice to the Agent (to be
        received by the Agent prior to 12:00 noon (New

                                       32

<PAGE>

        York City time)) stating the proposed date and aggregate principal
        amount of the prepayment, and if such notice is given the Borrower
        shall, prepay the outstanding principal amounts of the Advances
        comprising part of the same Borrowing in whole or ratably in part,
        together with accrued interest to the date of such prepayment on the
        principal amount prepaid (provided that any prepayment in connection
        with the termination and refinancing of this Agreement may be
        conditioned on the closing of such refinancing); provided, however, that
        (x) each partial prepayment shall be in an aggregate principal amount
        not less than $10,000,000 if made with respect to Eurodollar Rate
        Advances, or $1,000,000, if made with respect to Base Rate Advances, and
        in each case in $1,000,000 integral multiples in excess thereof and (y)
        in the case of any such prepayment of a Eurodollar Rate Advance, the
        Borrower shall be obligated to reimburse the Lenders in respect thereof
        pursuant to Section 10.04(b) hereof.

                (b)     The right of any Subsidiary Borrower to prepay any Swing
        Line Advance shall be as set forth in an agreement between the
        respective Swing Line Lender and the respective Subsidiary Borrower.

                SECTION 2.11 Increased Costs. (a) If, due to either (i) the
introduction of or any change at any time after the date of this Agreement
(other than any change by way of imposition or increase of reserve requirements
in the case of Eurodollar Rate Advances, included in the Eurodollar Rate Reserve
Percentage) in or in the interpretation of any law or regulation or (ii) the
compliance after the date of this Agreement with any guideline or request from
any central bank or other governmental authority (whether or not having the
force of law), there shall be any increase in the cost (other than an increase
in taxes, which increase is dealt with exclusively in Article IV) to any Lender
of agreeing to make or making, funding or maintaining Eurodollar Rate Advances,
then the Borrower shall from time to time, upon demand by such Lender (with a
copy of such demand to the Agent), pay to the Agent for the account of such
Lender additional amounts sufficient to compensate such Lender for such
increased cost; provided, that, the Borrower shall have no obligation to
reimburse any Lender for increased costs incurred more than 60 days prior to the
date of such demand. A certificate as to the amount of such increased cost
setting forth the basis for the calculation of such increased costs, submitted
to the Borrower and the Agent by such Lender, shall be conclusive and binding
for all purposes, absent manifest error.

                (b)     If, at any time after the date of this Agreement, any
        Lender determines that compliance with any law or regulation or any
        guideline or request from any central bank or other governmental
        authority (whether or not having the force of law) affects or would
        affect the amount of capital required or expected to be maintained by
        such Lender or any corporation controlling such Lender and that the
        amount of such capital is increased by or based upon the existence of
        such Lender's commitment to lend hereunder and other commitments of this
        type, then, upon demand by such Lender (with a copy of such demand to
        the Agent), the Borrower shall immediately pay to the Agent for the
        account of such Lender, from time to time as specified by such Lender,
        additional amounts sufficient to compensate such Lender or such
        corporation in the light of such circumstances, to the extent that such
        Lender reasonably determines such increase in capital to be allocable to
        the existence of such Lender's commitment to lend hereunder; provided,
        that, the Borrower shall have no obligation to pay such compensatory
        amounts

                                       33

<PAGE>

        that relate to an actual increase in the capital of such Lender
        undertaken by such Lender more than 60 days prior to the date of such
        demand. A certificate as to such amounts submitted to the Borrower and
        the Agent by such Lender and setting forth the basis for the calculation
        of such amount shall be conclusive and binding for all purposes, absent
        manifest error.

                (c)     Without affecting its rights under Sections 2.11(a) or
        2.11(b) hereof or any other provision of this Agreement, each Lender
        agrees that if there is any increase in any cost to or reduction in any
        amount receivable by such Lender with respect to which the Borrower
        would be obligated to compensate such Lender pursuant to Sections
        2.11(a) or 2.11(b) hereof, such Lender shall use reasonable efforts to
        select an alternative Applicable Lending Office which would not result
        in any such increase in any cost to or reduction in any amount
        receivable by such Lender; provided, however, that no Lender shall be
        obligated to select an alternative Applicable Lending Office if such
        Lender determines that (i) as a result of such selection such Lender
        would be in violation of any applicable law, regulation, treaty, or
        guideline, or would incur additional costs or expenses or (ii) such
        selection would be inadvisable for regulatory reasons or inconsistent
        with the interests of such Lender.

                (d)     Without prejudice to the survival of any other agreement
        of the Borrower hereunder, the agreements and obligations of the
        Borrower contained in this Section 2.11 shall survive the payment in
        full (after the Termination Date) of all Obligations.

                SECTION 2.12 Illegality. (a) Notwithstanding any other provision
of this Agreement, if any Lender shall notify the Agent that the introduction of
or any change in or in the interpretation of any law or regulation makes it
unlawful or impossible, or any central bank or other governmental authority
asserts that it is unlawful, for any Lender or its Eurodollar Lending Office to
perform its obligations hereunder to make Eurodollar Rate Advances or to fund or
maintain Eurodollar Rate Advances hereunder, (i) the obligation of the Lenders
to make, or to Convert Advances into, Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist and (ii) the Borrower
shall forthwith prepay in full all Eurodollar Rate Advances of all Lenders then
outstanding, together with interest accrued thereon, unless the Borrower, within
five Business Days of notice from the Agent, Converts all Eurodollar Rate
Advances of all Lenders then outstanding into Advances of another Type in
accordance with Section 2.09 hereof.

                (b)     Without affecting its rights under Section 2.12(a)
        hereof or under any other provision of this Agreement, each Lender
        agrees that if it becomes unlawful or impossible for such Lender to
        make, maintain or fund its Eurodollar Rate Advances as contemplated by
        this Agreement, such Lender shall use reasonable efforts to select an
        alternative Applicable Lending Office from which such Lender may
        maintain and give effect to its obligations under this Agreement with
        respect to making, funding and maintaining such Eurodollar Rate
        Advances; provided, however, that no Lender shall be obligated to select
        an alternative Applicable Lending Office if such Lender determines that
        (i) as a result of such selection such Lender would be in violation of
        any applicable law, regulation, or treaty, or would incur additional
        costs or expenses or (ii) such

                                       34

<PAGE>

        selection would be inadvisable for regulatory reasons or inconsistent
        with the interests of such Lender.

                SECTION 2.13 Borrower Guaranty.

                (a)     Generally. The Swing Line Lenders may, from time to
        time, make Swing Line Advances for the account of each Subsidiary
        Borrower as provided herein, the Hedge Banks may, from time to time,
        enter into Hedge Agreements with one or more Hedge Subsidiaries and the
        Operating Lenders now have and hereafter may, from time to time, extend
        Operating Indebtedness to one or more Subsidiaries of the Borrower,
        provided, that, the repayment and other obligations of each such
        Subsidiary Borrower in respect of such Swing Line Advances and each
        Hedge Subsidiary in respect of such Hedge Agreements and of each such
        Subsidiary in respect of Operating Indebtedness are and remain
        unconditionally guaranteed by the Borrower pursuant to this Section
        2.13.

                (b)     Guaranty.

                        (i)     The Borrower hereby unconditionally and
                irrevocably guarantees the punctual payment when due, whether at
                stated maturity, by acceleration or otherwise, of all
                obligations of the Subsidiary Borrowers now or hereafter
                existing under this Agreement with respect to the Swing Line
                Advances issued for the account of any of the Subsidiary
                Borrowers, including any extensions, modifications,
                substitutions, amendments and renewals thereof, whether for
                repayment obligations, interest, fees, expenses or otherwise
                (such obligations being the "Subsidiary Swing Line
                Obligations"), and agrees to pay any and all expenses (including
                reasonable counsel fees and expenses in accordance with Section
                10.04 hereof) incurred by the Swing Line Lenders or the Lenders
                in enforcing any rights hereunder with respect to the Subsidiary
                Swing Line Obligations. Without limiting the generality of the
                foregoing, the Borrower's liability shall extend to all amounts
                which constitute part of the Subsidiary Swing Line Obligations
                and would be owed by any Subsidiary Borrower to the Swing Line
                Lenders or the Lenders hereunder, or under the Swing Line
                Advances issued for the account of a Subsidiary Borrower, but
                for the fact that they are unenforceable or not allowable due to
                the existence of a bankruptcy, reorganization or similar
                proceeding involving such Subsidiary Borrower.

                        (ii)    The Borrower hereby unconditionally and
                irrevocably guarantees the punctual payment when due of all
                obligations of the Hedge Subsidiaries now or hereafter existing
                under any Hedge Agreements entered into by a Hedge Subsidiary
                with a Hedge Bank, including any extensions, modifications,
                substitutions, amendments and renewals thereof (such obligations
                being the "Hedge Subsidiary Obligations"), and agrees to pay any
                and all expenses (including reasonable counsel fees and expenses
                in accordance with Section 10.04 hereof) incurred by the Hedge
                Banks in enforcing any rights thereunder with respect to the
                Hedge Subsidiary Obligations. Without limiting the generality of
                the foregoing, the Borrower's liability shall extend to all
                amounts which constitute part of the Hedge Subsidiary
                Obligations and would be owed by any

                                       35

<PAGE>

                Hedge Subsidiary to the respective Hedge Bank thereunder, but
                for the fact that they are unenforceable or not allowable due to
                the existence of a bankruptcy, reorganization or similar
                proceeding involving such Hedge Subsidiary.

                        (iii)   The Borrower hereby unconditionally and
                irrevocably guarantees the punctual payment when due of all
                obligations of Subsidiaries of the Borrower now or hereafter
                existing under any Operating Indebtedness Agreement entered into
                by such Subsidiary with an Operating Lender, including any
                extensions, modifications, substitutions, amendments and
                renewals thereof such obligations being the "Subsidiary
                Operating Indebtedness Obligations", and agrees to pay any and
                all expenses (including reasonable counsel fees and expenses in
                accordance with Section 10.04 hereof) incurred by the Operating
                Lender in enforcing any rights thereunder with respect to the
                Subsidiary Operating Indebtedness Obligations. Without limiting
                the generality of the foregoing, the Borrower's liability shall
                extend to all amounts which constitute part of the Subsidiary
                Operating Indebtedness Obligations and would be owed by any such
                Subsidiary to the respective Operating Lender thereunder, but
                for the fact that they are unenforceable or not allowable due to
                the existence of a bankruptcy, reorganization or similar
                proceeding involving such Subsidiary.

                (c)     Guaranty Absolute. The Borrower guarantees that the
        Subsidiary Swing Line Obligations, Hedge Subsidiary Obligations and
        Subsidiary Operating Indebtedness Obligations will be paid strictly in
        accordance with their respective terms, regardless of any law,
        regulation or order now or hereafter in effect in any jurisdiction
        affecting any of such terms or the rights of the Swing Line Lenders, the
        Lenders, the Hedge Banks or the Operating Lenders, respectively, with
        respect thereto. The obligations of the Borrower hereunder are
        independent of the Subsidiary Swing Line Obligations, Hedge Subsidiary
        Obligations and Subsidiary Operating Indebtedness Obligations and a
        separate action or actions may be brought and prosecuted against the
        Borrower to enforce the guaranty contained in this Section 2.13,
        irrespective of whether any action is brought against any Subsidiary
        Borrower or Hedge Subsidiary or Subsidiary of the Borrower party to an
        Operating Indebtedness Agreement or whether any Subsidiary Borrower or
        Hedge Subsidiary or such Subsidiary is joined in any such action or
        actions. The liability of the Borrower under the guaranty contained in
        this Section 2.13 shall be absolute and unconditional irrespective of:

                        (i)     any lack of validity or enforceability of any of
                the Subsidiary Swing Line Obligations, Hedge Subsidiary
                Obligations, Subsidiary Operating Indebtedness Obligations or
                any agreement or instrument relating thereto against any Swing
                Line Borrower, Hedge Subsidiary, such Subsidiary of the Borrower
                or any other Person;

                        (ii)    any change in the time, manner or place of
                payment of, or in any other term of, all or any of the
                Subsidiary Swing Line Obligations or of the Hedge Subsidiary
                Obligations or of the Subsidiary Operating Indebtedness
                Obligations or any other amendment or waiver of or any consent
                to departure with respect to Swing Line Advances issued for the
                account of a Subsidiary Borrower or with

                                       36

<PAGE>

                respect to Hedge Agreements entered into by any Hedge Subsidiary
                or with respect to Operating Indebtedness Agreements entered
                into by any such Subsidiary of the Borrower including, without
                limitation, any increase in the Subsidiary Swing Line
                Obligations resulting from the Issuance of Swing Line Advances
                beyond the aggregate limitation specified in Section 2.01 hereof
                to any and all Subsidiary Borrowers or otherwise;

                        (iii)   any taking, exchange, release or non-perfection
                of any collateral, or any taking, release or amendment or waiver
                of or consent to departure from any other guaranty, for all or
                any of the Subsidiary Swing Line Obligations or of the Hedge
                Subsidiary Obligations or of the Subsidiary Operating
                Indebtedness Obligations;

                        (iv)    any manner of application of collateral, or
                proceeds thereof, to all or any of the Subsidiary Swing Line
                Obligations or of the Hedge Subsidiary Obligations or of the
                Subsidiary Operating Indebtedness Obligations, or any manner of
                sale or other disposition of any collateral for all or any of
                the Subsidiary Swing Line Obligations or of the Hedge Subsidiary
                Obligations or of the Subsidiary Operating Indebtedness
                Obligations or any other assets of a Subsidiary Borrower or a
                Hedge Subsidiary or such Subsidiary of the Borrower;

                        (v)     any change, restructuring or termination of the
                corporate structure or existence of a Subsidiary Borrower or a
                Hedge Subsidiary or such Subsidiary of the Borrower or any
                Subsidiary Borrower's or any Hedge Subsidiary's or any such
                Subsidiary's lack of corporate power or authority; or

                        (vi)    any other circumstance which might otherwise
                constitute a defense available to, or a discharge of, a third
                party guarantor.

The guaranty provided in this Section 2.13 shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Subsidiary Swing Line Obligations or the Hedge Subsidiary Obligations or the
Subsidiary Operating Indebtedness Obligations is rescinded or must otherwise be
returned by any Swing Line Lender, any Lender, any Hedge Bank or any Operating
Lender, respectively, upon the insolvency, bankruptcy or reorganization of a
Subsidiary Borrower, a Hedge Subsidiary or any such Subsidiary of the Borrower,
as the case may be, or otherwise, all as though such payment had not been made.

                (d)     Waivers. The Borrower hereby waives, to the extent
        permitted by applicable law:

                        (i)     any requirement that any Swing Line Lender or
                any Hedge Bank or any Operating Lender secure or insure any
                security interest or lien or any property subject thereto or
                exhaust any right or take any action against any Subsidiary
                Borrower or any Hedge Subsidiary, any such Subsidiary of the
                Borrower or any other Person or any collateral;

                        (ii)    any defense arising by reason of any claim or
                defense based upon an election of remedies by any Swing Line
                Lender, any Hedge Bank or any

                                       37

<PAGE>

                Operating Lender (including, without limitation, an election to
                nonjudicially foreclose on any real or personal property
                collateral) which in any manner impairs, reduces, releases or
                otherwise adversely affects its subrogation, reimbursement or
                contribution rights or other rights to proceed against any
                Subsidiary Borrower, Hedge Subsidiary, any such Subsidiary of
                the Borrower or any other Person or any collateral;

                        (iii)   any defense arising by reason of the failure of
                any Subsidiary Borrower, any Hedge Subsidiary or any such
                Subsidiary of the Borrower to properly execute any letter of
                credit application and agreement or otherwise comply with
                applicable legal formalities;

                        (iv)    any defense or benefits that may be derived from
                California Civil Code Sections 2808, 2809, 2810, 2819, 2845 or
                2850, or California Code of Civil Procedure Sections 580a, 580d
                or 726, or comparable provisions of the laws of any other
                jurisdiction and all other suretyship defenses it would
                otherwise have under the laws of California or any other
                jurisdiction;

                        (v)     any duty on the part of any Swing Line Lender,
                any Hedge Bank or any Operating Lender to disclose to the
                Borrower any matter, fact or thing relating to the business,
                operation or condition of any Subsidiary Borrower, any Hedge
                Subsidiary, any such Subsidiary of the Borrower, or its
                respective assets now known or hereafter known by any Swing Line
                Lender, any Hedge Bank or any Operating Lender;

                        (vi)    all benefits of any statute of limitations
                affecting the Borrower's liability under or the enforcement of
                the guaranty provided in this Section 2.13 or any of the
                Subsidiary Swing Line Obligations, Hedge Subsidiary Obligations,
                or the Subsidiary Operating Indebtedness Obligations or any
                collateral;

                        (vii)   all setoffs and counterclaims;

                        (viii)  promptness, diligence, presentment, demand for
                performance and protest;

                        (ix)    notice of nonperformance, default, acceleration,
                protest or dishonor;

                        (x)     except for any notice otherwise required by
                applicable laws that may not be effectively waived by the
                Borrower, notice of sale or other disposition of any collateral;
                and

                        (xi)    notice of acceptance of the guaranty provided in
                this Section 2.13 and of the existence, creation or incurring of
                new or additional Subsidiary Swing Line Obligations, Hedge
                Subsidiary Obligations or Subsidiary Operating Indebtedness
                Obligations.

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                (e)     Notwithstanding any other provision of this Agreement to
        the contrary, it is understood and agreed by the parties hereto and by
        any Hedge Bank seeking to enforce the guaranty under this Section 2.13
        or to otherwise obtain any benefit under this Section 2.13, that:

                        (A)     to the extent that the Borrower is required to
                make any payment with respect to the obligations of a Hedge
                Subsidiary pursuant to the guaranty contained in this Section
                2.13, such payment shall be governed by the provisions of
                Section 4.02 hereof by treating the recipient of such payment as
                a Lender Party that first became a party to this Agreement
                immediately prior to the receipt of such payment; and

                        (B)     (i) any such Hedge Bank shall be bound by all
                the provisions of this Section 2.13, (ii) the Obligations under
                this Agreement in favor of the Lender Parties with respect to
                the Credit Agreement and the Obligations guaranteed under this
                Section 2.13 in favor of the Hedge Banks with respect to the
                Hedge Agreements entered into by the Hedge Subsidiaries are
                separate, (iii) no Lender Party shall have any claim hereunder
                or under any other Loan Document solely as a result of a claim
                by any Hedge Bank under this Section 2.13 or the Subsidiary
                Guaranty, and no Hedge Bank shall have any claim under this
                Section 2.13 solely as a result of a claim by any Lender Party
                hereunder or under any other Loan Document or by any other Hedge
                Bank under this Section 2.13 or the Subsidiary Guaranty, and
                (iv) with respect to the Obligations under the Hedge Agreements
                entered into by the Hedge Subsidiaries, the guaranty under this
                Section 2.13 shall operate in favor of only those Lenders or
                Affiliates of a Lender which are Hedge Banks Lenders prior to
                the termination of this Agreement, and then only with respect to
                the Obligations incurred under Hedge Agreements with Hedge
                Subsidiaries in effect prior to such termination.

                (f)     Notwithstanding any other provision of this Agreement to
        the contrary, it is understood and agreed by the parties hereto and by
        any Operating Lender seeking to enforce the guaranty under this Section
        2.13 or to otherwise obtain any benefit under this Section 2.13, that:

                        (A)     to the extent that the Borrower is required to
                make any payment with respect to the obligations of any of its
                Subsidiaries pursuant to the guaranty contained in this Section
                2.13, such payment shall be governed by the provisions of
                Section 4.02 hereof by treating the recipient of such payment as
                a Lender Party that first became a party to this Agreement
                immediately prior to the receipt of such payment; and

                        (B)     (i) any such Operating Lender shall be bound by
                all the provisions of this Section 2.13, (ii) the Obligations
                under this Agreement in favor of the Lender Parties with respect
                to the Credit Agreement and the Obligations guaranteed under
                this Section 2.13 in favor of the Operating Lenders with respect
                to the Operating Indebtedness Agreements entered into by the
                Subsidiaries of the Borrower are separate, (iii) no Lender Party
                shall have any claim hereunder or

                                       39

<PAGE>

                under any other Loan Document solely as a result of a claim by
                any Operating Lender under this Section 2.13 or the Subsidiary
                Guaranty, and no Operating Lender shall have any claim under
                this Section 2.13 solely as a result of a claim by any Lender
                Party hereunder or under any other Loan Document or by any other
                Operating Lender under this Section 2.13 or the Subsidiary
                Guaranty, and (iv) with respect to the Obligations under the
                Operating Indebtedness Agreements entered into by the
                Subsidiaries of the Borrower, the guaranty under this Section
                2.13 shall operate in favor of only those Lenders or Affiliates
                of a Lender which are Operating Lenders prior to the termination
                of this Agreement, and then only with respect to the Obligations
                incurred under Operating Indebtedness Agreements with such
                Subsidiaries in effect prior to such termination.

                SECTION 2.14 Subsidiary Borrowers. Any Subsidiary of the
Borrower not a Subsidiary Borrower on the date hereof may become a "Subsidiary
Borrower" hereunder by delivering to the Agent appropriate authorizations in
respect of it entering into this Agreement, an agreement, in form and substance
satisfactory to the Agent, wherein such Subsidiary agrees to be bound by all
terms and provisions of this Agreement relating to Swing Line Advances to be
made to such Subsidiary Borrower and delivers a written consent of the Borrower
assenting to the inclusion of such Subsidiary as a "Subsidiary Borrower"
hereunder. Unless objected to by the Majority Lenders within the 10 day period
referred to below, such Subsidiary shall become a "Subsidiary Borrower"
hereunder 10 days after the Agent notifies the Borrower that such agreement and
consent are in form and substance satisfactory to it.

                                   ARTICLE III

                         AMOUNT AND TERMS OF LETTERS OF

                        CREDIT AND PARTICIPATIONS THEREIN

                SECTION 3.01 Letters of Credit. (a) Each Issuing Bank agrees, on
the terms and conditions hereinafter set forth, to Issue for the account of the
Borrower or any LC Subsidiary, one or more Letters of Credit (in an aggregate
amount not in excess of the Issuing Commitment of such Issuing Bank) from time
to time during the period from the date of this Agreement until the Termination
Date in an aggregate undrawn amount not to exceed at any time the Commitments of
the Lenders in effect at such time (inclusive of the Dollar equivalent of
Letters of Credit Issued in an Alternative Currency), each such Letter of Credit
(except Standby Letter of Credit) upon its Issuance to expire on or before the
date which occurs one year from the date of its Issuance but in any event prior
to the Termination Date; provided, however, that an Issuing Bank shall not be
obligated to, and shall not, Issue any Letter of Credit if:

                        (i)     after giving effect to the Issuance of such
                Letter of Credit, the sum of the then outstanding aggregate
                amount of all Letter of Credit Liability, the then outstanding
                principal amount of all Borrowings, the then outstanding Hedge
                Agreements Exposure and the aggregate Swing Line Commitment then
                in effect (computed without giving regard to usage) shall exceed
                the aggregate amount of the Commitments in effect from time to
                time;

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<PAGE>

                        (ii)    after giving effect to the Issuance of such
                Letter of Credit, the then outstanding aggregate amount of all
                Letter of Credit Liability in respect of Letters of Credit
                Issued by such Issuing Bank shall exceed the Issuing Commitment
                of such Issuing Bank; or

                        (iii)   the Agent or the Majority Lenders shall have
                notified the Issuing Banks and the Borrower that no further
                Letters of Credit are to be Issued by the Issuing Banks due to
                failure to meet any of the applicable conditions set forth in
                Article V, and such notice has not been withdrawn.

                (b)     Each Issuing Bank shall provide to the Agent in writing,
        no later than 5 days after the end of each month, a report with respect
        to the outstanding Letters of Credit issued by such Issuing Bank, which
        report shall set forth the undrawn amount and drawn but unreimbursed
        amount as of the end of each day during that month of all such Letters
        of Credit. Promptly after receiving all of such reports, the Agent shall
        forward copies thereof to each Lender.

Within the limits of the obligations of the Issuing Banks set forth above and in
Section 3.02 hereof, the Borrower and each LC Subsidiary may request the Issuing
Banks to Issue one or more Letters of Credit, reimburse the Issuing Banks for
payments made thereunder pursuant to Section 3.04(a) hereof and request the
Issuing Banks to Issue one or more additional Letters of Credit under this
Section 3.01.

                SECTION 3.02 Limitation on the Issuance of Letters of Credit
Denominated in Alternative Currencies. The Issuing Banks shall not be obligated
to, and shall not, Issue any Letter of Credit denominated in an Alternative
Currency if, after giving effect to the Issuance of any Letter of Credit
denominated in an Alternative Currency, the then outstanding aggregate amount of
all Letter of Credit Liability with respect to all Letters of Credit denominated
in an Alternative Currency equals or exceeds (on a Dollar equivalent basis)
$75,000,000.

                SECTION 3.03 Issuing the Letters of Credit. Each Letter of
Credit shall be Issued on notice from the Borrower or any LC Subsidiary, as the
case may be, to the respective Issuing Bank as provided in the application and
agreement governing such Letter of Credit specifying the date, amount, currency,
expiry and beneficiary thereof and whether such Letter of Credit is a Trade
Letter of Credit or Standby Letter of Credit and, if it is a Standby Letter of
Credit, the amount of all Standby Letters of Credit then outstanding,
accompanied by such documents as such Issuing Bank may specify to the Borrower
or LC Subsidiary, as the case may be, in form and substance satisfactory to such
Issuing Bank. On the date specified by the Borrower or LC Subsidiary, as the
case may be, in such notice and upon fulfillment of the applicable conditions
set forth in Section 3.01 hereof, such Issuing Bank will Issue such Letter of
Credit and shall promptly notify the Agent thereof.

                SECTION 3.04 Reimbursement Obligations. (a) The Borrower or the
appropriate LC Subsidiary, as the case may be, shall:

                        (i)     pay to the respective Issuing Bank an amount
                equal to, and in reimbursement for, each amount which such
                Issuing Bank pays under any Letter

                                       41

<PAGE>

                of Credit not later than the date which occurs one Business Day
                after notice from the Issuing Bank to the Borrower or the
                appropriate LC Subsidiary of payment of such amount by such
                Issuing Bank under such Letter of Credit; and

                        (ii)    pay to such Issuing Bank interest on any amount
                paid by such Issuing Bank under any Letter of Credit from the
                date on which such Issuing Bank pays such amount under any
                Letter of Credit until such amount is reimbursed in full to such
                Issuing Bank pursuant to clause (i) above, payable on demand, at
                a fluctuating rate per annum equal to 2% per annum above the
                rate per annum required to be paid on Base Rate Advances
                immediately prior to the date on which such Issuing Bank makes
                such payment under such Letter of Credit.

                (b)     All amounts to be reimbursed to an Issuing Bank in
        accordance with subsection (a) above may, subject to the limitations set
        forth in Section 2.01 hereof (inclusive of the minimum borrowing
        limitations), be paid from the proceeds of Advances.

                SECTION 3.05 Participations Purchased by the Lenders. (a) On the
date of Issuance of each Letter of Credit the respective Issuing Bank shall be
deemed irrevocably and unconditionally to have sold and transferred to each
Lender without recourse or warranty, and each Lender shall be deemed to have
irrevocably and unconditionally purchased and received from such Issuing Bank,
an undivided interest and participation, to the extent of such Lender's
Commitment Percentage in effect from time to time, in such Letter of Credit and
all Letter of Credit Liability relating to such Letter of Credit and all
documents securing, guaranteeing, supporting, or otherwise benefiting the
payment of such Letter of Credit Liability. The Agent or such Issuing Bank will
notify each Lender promptly after the close of each calendar month of all
Letters of Credit then outstanding and of their respective dates of Issue,
outstanding amounts (on a Dollar equivalent basis) as at the end of such month,
currency, expiry dates and reference numbers.

                (b)     In the event that any reimbursement obligation under
        Section 3.04(a) hereof is not paid when due to the respective Issuing
        Bank with respect to any Letter of Credit, such Issuing Bank shall
        promptly notify the Agent who shall promptly notify the Lenders of the
        amount of such reimbursement obligation (on a Dollar equivalent basis in
        the case of Letters of Credit denominated in an Alternative Currency)
        and each Lender shall pay to such Issuing Bank, in lawful money of the
        United States and in same day funds, an amount equal to such Lender's
        Commitment Percentage then in effect of the amount of such unpaid
        reimbursement obligation with such payment to be made on the date of
        notification to such Lender, if such notification is made prior to 12:00
        noon (New York City time) on a Business Day and if such notification is
        made after 12:00 noon (New York City time) on a Business Day, such
        payment to be made on the immediately succeeding Business Day, and in
        each case with interest at the Federal Funds Rate for each day after
        such payment is due until such amount is paid to such Issuing Bank.

                (c)     Promptly after the respective Issuing Bank receives a
        payment (including interest payments) on account of a reimbursement
        obligation with respect to any Letter of Credit, such Issuing Bank shall
        promptly pay to each Lender which funded its

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<PAGE>

        participation therein, in lawful money of the United States, the Dollar
        equivalent of funds so received, in an amount equal to such Lender's
        Commitment Percentage thereof.

                (d)     Upon the request of any Lender, the Agent shall furnish,
        or cause the respective Issuing Bank to furnish, to such Lender copies
        of any outstanding Letter of Credit and any application and agreement
        for letter of credit as may be reasonably requested by such Lender.

                (e)     The obligation of each Lender to make payments under
        subsection (b) above shall be unconditional and irrevocable and shall
        remain in effect after the occurrence of the Termination Date with
        respect to any Letter of Credit that was Issued by the respective
        Issuing Bank on behalf of the Borrower or any LC Subsidiary on or before
        the Termination Date and such payments shall be made under all
        circumstances, including, without limitation, any of the circumstances
        referred to in Section 3.07(b) hereof other than in connection with
        circumstances involving any willful misconduct or gross negligence of
        such Issuing Bank in Issuing a Letter of Credit or in determining
        whether documents presented under a Letter of Credit comply with the
        terms thereof.

                (f)     If any payment received on account of any reimbursement
        obligation with respect to a Letter of Credit and distributed to a
        Lender as a participant under Section 3.05(c) hereof is thereafter
        recovered from the respective Issuing Bank in connection with any
        bankruptcy or insolvency proceeding relating to the Borrower or an LC
        Subsidiary, each Lender which received such distribution shall, upon
        demand by such Issuing Bank, repay to such Issuing Bank such Lender's
        ratable share of the amount so recovered together with an amount equal
        to such Lender's ratable share (according to the proportion of (i) the
        amount of such Lender's required repayment to (ii) the total amount so
        recovered) of any interest or other amount paid or payable by such
        Issuing Bank in respect of the total amount so recovered.

                SECTION 3.06 Letter of Credit Fees.

                (a)     Letter of Credit Fee. The Borrower hereby agrees to pay
        to the Agent for the account of each Lender (in accordance with its
        Commitment Percentage), a letter of credit fee at a rate per annum equal
        in the case of Trade Letters of Credit to the Applicable Letter of
        Credit Fee in effect from time to time, and in the case of Standby
        Letters of Credit, to the Applicable Margin applicable to Eurodollar
        Rate Advances in effect from time to time, on the maximum amount
        available to be drawn under each such Letter of Credit from time to time
        (the determination of such maximum amount to assume compliance with all
        conditions for drawing) from the date of Issuance of each such Letter of
        Credit until the expiry date of each such Letter of Credit, payable in
        arrears on the last day of each January, April, July and October prior
        to the expiry date of each such Letter of Credit and on the expiry date
        of each such Letter of Credit.

                (b)     Issuing Bank Fees. The Borrower hereby agrees to pay to
        each Issuing Bank the fees and charges as agreed to from time to time by
        such Issuing Bank and the Borrower.

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<PAGE>

                SECTION 3.07 Indemnification; Nature of the Issuing Banks'
Duties. (a) The Borrower agrees to indemnify and save harmless the Agent, the
Issuing Banks and each Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys' fees) which the Agent, the respective Issuing Bank or such Lender may
incur or be subject to as a consequence, direct or indirect, of (i) the Issuance
of any Letter of Credit or (ii) any action or proceeding relating to a court
order, injunction, or other process or decree restraining or seeking to restrain
an Issuing Bank from paying any amount under any Letter of Credit; provided,
that, an Issuing Bank shall not be indemnified for any of the foregoing caused
by its gross negligence or willful misconduct.

                (b)     The obligations of the Borrower and each LC Subsidiary
        hereunder with respect to Letters of Credit shall be unconditional and
        irrevocable, and shall be paid strictly in accordance with the terms
        hereof under all circumstances, including, without limitation, any of
        the following circumstances:

                        (i)     any lack of validity or enforceability of any
                Letter of Credit or this Agreement or any agreement or
                instrument relating thereto;

                        (ii)    the existence of any claim, setoff, defense or
                other right which the Borrower or any LC Subsidiary may have at
                any time against the beneficiary, or any transferee, of any
                Letter of Credit, or the Issuing Banks, any Lender, or any other
                Person;

                        (iii)   any draft, certificate, or 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)    any lack of validity, effectiveness, or
                sufficiency of any instrument transferring or assigning or
                purporting to transfer or assign any Letter of Credit or the
                rights or benefits thereunder or proceeds thereof, in whole or
                in part;

                        (v)     any loss or delay in the transmission or
                otherwise of any document required in order to make a drawing
                under any Letter of Credit or of the proceeds thereof;

                        (vi)    any exchange, release or non-perfection of any
                collateral, or any release or non-perfection of any collateral,
                or any release or amendment or waiver of or consent to departure
                from any guarantee, for all or any of the obligations of the
                Borrower or an LC Subsidiary in respect of the Letters of
                Credit;

                        (vii)   any change in the time, manner or place of
                payment of, or in any other terms of, all or any of the
                obligations of the Borrower or any LC Subsidiary in respect of
                the Letters of Credit or any other amendment or waiver of or any
                consent to departure from all or any of this Agreement;

                        (viii)  any failure of the beneficiary of a Letter of
                Credit to strictly comply with the conditions required in order
                to draw upon any Letter of Credit;

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<PAGE>

                        (ix)    any misapplication by the beneficiary of any
                Letter of Credit of the proceeds of any drawing under such
                Letter of Credit; or

                        (x)     any other circumstance or happening whatsoever,
                whether or not similar to the foregoing;

provided, that, notwithstanding the foregoing, an Issuing Bank shall not be
relieved of any liability it may otherwise have as a result of its gross
negligence or willful misconduct.

                SECTION 3.08 Increased Costs. (a) Change in Law. If, at any time
after the date of this Agreement, any change in any law or regulation or in the
interpretation thereof by any court or administrative or governmental authority
charged with the administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit or similar requirement against letters
of credit or guarantees issued by, or assets held by or deposits in or for the
account of, the Issuing Banks or any Lender or (ii) impose on the Issuing Banks
or any Lender any other condition regarding this Agreement or the Letters of
Credit or any collateral thereon, and the result of any event referred to in
clause (i) or (ii) above shall be to increase the cost (other than an increase
in taxes, which increase is dealt with exclusively in Article IV) to such
Issuing Bank or such Lender of issuing or maintaining, funding or purchasing
participations in the Letters of Credit, then, upon demand by such Issuing Bank
or such Lender (with a copy of such demand to the Agent), the Borrower shall pay
to the Agent for the account of such Issuing Bank or such Lender, from time to
time as specified by such Issuing Bank or such Lender, additional amounts
sufficient to compensate such Issuing Bank or such Lender for such increased
cost; provided, that, the Borrower shall have no obligation to reimburse an
Issuing Bank or any Lender for increased costs incurred more than 60 days prior
to the date of such demand. A certificate as to the amount of such increased
cost setting forth the basis for the calculation of such increased costs,
submitted by an Issuing Bank or a Lender to the Borrower, shall be conclusive
and binding for all purposes, absent manifest error.

                (b)     Capital. If, at any time after the date of this
        Agreement, an Issuing Bank or any Lender determines that compliance with
        any law or regulation or any guideline or request from any central bank
        or other governmental authority (whether or not having the force of law)
        affects or would affect the amount of capital required or expected to be
        maintained by such Issuing Bank or such Lender or any corporation
        controlling such Issuing Bank or such Lender and that the amount of such
        capital is increased by or based upon the existence of such Issuing
        Bank's or Lender's commitment hereunder and other commitments of this
        type or the issuance of (or commitment to purchase of participations in)
        the Letters of Credit (or similar contingent obligations), then, upon
        written demand by such Issuing Bank or such Lender (with a copy of such
        demand to the Agent), the Borrower shall pay to the Agent for the
        account of such Issuing Bank or such Lender, from time to time as
        specified by such Issuing Bank or such Lender, additional amounts
        sufficient to compensate such Issuing Bank or such Lender or such
        corporation in the light of such circumstances, to the extent that such
        Issuing Bank or such Lender reasonably determines such increase in
        capital to be allocable to the existence of such Issuing Bank's or such
        Lender's commitment hereunder; provided, that, the Borrower shall have
        no obligation to pay such compensatory amounts that relate to an actual
        increase in the capital of such Issuing Bank or such Lender undertaken
        by such Issuing

                                       45

<PAGE>

        Bank or such Lender more than 60 days prior to the date of such demand.
        A certificate as to such amounts setting forth the basis for the
        calculation of such amount submitted to the Borrower and the Agent by an
        Issuing Bank or a Lender shall be conclusive and binding for all
        purposes, absent manifest error.

                (c)     Without prejudice to the survival of any other agreement
        of the Borrower hereunder, the agreements and obligations of the
        Borrower contained in this Section 3.08 shall survive the payment in
        full (after the Termination Date) of all Obligations.

                (d)     Without affecting its rights under Sections 3.08(a) or
        3.08(b) or any other provision of this Agreement, the Issuing Banks and
        each Lender agree that if there is any increase in any cost to or
        reduction in any amount receivable by the respective Issuing Bank or
        Lender with respect to which the Borrower would be obligated to
        compensate such Lender pursuant to Sections 3.08(a) or 3.08(b) hereof,
        the respective Issuing Bank or Lender shall use reasonable efforts to
        select an alternative issuing office or Applicable Lending Office, as
        the case may be, which would not result in any such increase in any cost
        to or reduction in any amount receivable by such Issuing Bank or such
        Lender; provided, however, that the Issuing Banks and each Lender shall
        not be obligated to select an alternative issuing office or Applicable
        Lending Office if the respective Issuing Bank or such Lender determines
        that (i) as a result of such selection such Issuing Bank or such Lender
        would be in violation of any applicable law, regulation, treaty, or
        guideline, or would incur additional costs or expenses or (ii) such
        selection would be inadvisable for regulatory reasons or inconsistent
        with the interests of such Issuing Bank or such Lender.

                SECTION 3.09 Uniform Customs and Practice. The Uniform Customs
and Practice for Documentary Credits as most recently published by the
International Chamber of Commerce ("UCP") shall in all respects be deemed a part
of this Article III as if incorporated herein and shall apply to the Letters of
Credit.

                SECTION 3.10 Reductions and Increases in Issuing Commitment. (a)
The Borrower shall have the right, upon at least three Business Days' notice to
the Issuing Banks and the Agent, to irrevocably reduce in whole or in part an
Issuing Bank's Issuing Commitment, provided, that, each partial reduction shall
be in the aggregate amount of $25,000,000 or an integral multiple of $1,000,000
in excess thereof and no such reduction shall reduce such Issuing Bank's Issuing
Commitment below the then outstanding aggregate amount of all Letter of Credit
Liability in respect of Letters of Credit Issued by such Issuing Bank.

                (b)     The Borrower may at any time, upon at least five
        Business Days' prior written notice to the respective Issuing Bank and
        the Agent, increase the Issuing Commitment of an Issuing Bank and at the
        same time reduce by an equivalent amount the Issuing Commitment of one
        or more of the other Issuing Banks; provided, that such notice is
        consented to by each Issuing Bank affected by such increase and decrease
        and provided, further, that the Agent shall record each such increase
        and decrease of the Issuing Commitment of the respective Issuing Bank in
        the Register.

                SECTION 3.11 Existing Letters of Credit. There currently are
outstanding certain Standby Letters of Credit issued pursuant to the Existing
Credit Agreement (collectively,

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<PAGE>

the "Existing Letters of Credit"), the outstanding balance of each of which is
set forth on Schedule IV hereto (as such Schedule may be modified between the
date hereof and the fifth Business Day after the Effective Date). From and after
the date hereof and upon fulfillment of the conditions to initial Issuance
specified in Section 5.01 hereof, each such Existing Letter of Credit shall be
deemed and treated for all purposes hereof (including, without limitation, the
calculation of fees payable under Section 3.06 hereof, and calculating the usage
of the respective Issuing Bank's commitment under Section 3.01 hereof) as a
"Letter of Credit" hereunder, any participation interest existing prior to the
date hereof of any Lender in such Existing Letters of Credit shall, without
further action on its part, be deemed extinguished in full and each Lender,
without further act on its part, shall be deemed to have purchased a
participation in each such Existing Letter of Credit as provided in Section 3.05
hereof in accordance with its Commitment Percentage.

                SECTION 3.12 Currency Provisions.

                (a)     Equivalents. For purposes of the provisions of Article
        II and III, (i) the equivalent in Dollars of any Alternative Currency
        shall be determined by using the mean of the bid and offer quoted spot
        rates at which the respective Issuing Bank's or Swing Line Lender's
        principal office in New York, New York offers to exchange Dollars for
        such Alternative Currency in New York, New York at 11:00 A.M. (New York
        City time) on the Business Day on which such equivalent is to be
        determined and (ii) the equivalent in any Alternative Currency of
        Dollars shall be determined by using the mean of the bid and offer
        quoted spot rates at which such Issuing Bank's or Swing Line Lender's
        principal office in New York, New York offers to exchange such
        Alternative Currency for Dollars in New York, New York at 11:00 A.M.
        (New York City time) on the Business Day on which such equivalent is to
        be determined.

                (b)     Issuing Banks' Commitment/Lenders' Commitments. For
        purposes of determining the unused portion of an Issuing Bank's Issuing
        Commitment specified in Section 3.01 and of each Lender's Commitment,
        the equivalent in Dollars of each Letter of Credit issued by an Issuing
        Bank in an Alternative Currency as determined on the date of the
        Issuance of such Letter of Credit shall be the amount of such Issuing
        Bank's Issuing Commitment used in connection with the Issuance of such
        Letter of Credit and the resulting proportionate amount of each Lender's
        Commitment used, such reduction to be calculated in accordance with its
        Commitment Percentage. Further adjustments shall be made with respect to
        the unused portion of an Issuing Bank's Issuing Commitment to Issue
        Letters of Credit and each such Lender's Commitment based upon
        fluctuations thereafter in the value of the Alternative Currency of such
        Letter of Credit as provided in subsection (c) below.

                (c)     Mark to Market. If, on any day, the equivalent in
        Dollars of the aggregate face amount of all Letters of Credit then
        outstanding (less the aggregate amount of cash collateral held by all
        the Issuing Banks with respect to outstanding Letters of Credit) exceeds
        the total of (x) the Commitments then in effect minus (y) the sum of the
        then outstanding aggregate amount of all Borrowings and the aggregate
        Swing Line Commitment then in effect (computed without giving regard to
        usage), the Borrower shall, upon demand by the Agent, immediately
        deposit into the L/C Collateral Account

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<PAGE>

        (as defined in the Security Agreement) held by the Collateral Agent, in
        Dollars, (i) the Dollar amount of such excess plus (ii) a Dollar amount
        equal to the lesser of (A) $1,000,000 and (B) 10% of the Dollar
        equivalent of all then existing Letter of Credit Liability relating to
        Letters of Credit denominated in Alternative Currencies, which amount
        shall be held by the Collateral Agent in accordance with the terms of
        the Security Agreement as cash collateral for the Borrowers' and LC
        Subsidiaries' obligations with respect to outstanding Letters of Credit.
        Amounts on deposit with the Collateral Agent as cash collateral in the
        L/C Collateral Account shall be invested as provided in the Security
        Agreement and shall (so long as no Default has occurred and is
        continuing) be released to the Borrower (1) if the Termination Date has
        not occurred, on the date on which the aggregate of all Letter of Credit
        Liability does not exceed 99% of the aggregate amount of the Commitments
        then in effect (without regard to any usage thereof) minus the sum of
        the then outstanding aggregate amount of all Borrowings and the
        aggregate Swing Line Commitment then in effect (computed without giving
        regard to usage), or (2) if the Termination Date has occurred, in
        accordance with Section 3.15 hereof.

                (d)     Monthly Report. Each Issuing Bank, on the last Business
        Day of each month until the Termination Date, shall calculate the Letter
        of Credit Liability on such date (converting any amounts of the Letter
        of Credit Liability which are denominated in an Alternative Currency to
        Dollars for purposes of such calculation) and shall promptly send notice
        of such Letter of Credit Liability to the Agent, the Borrower and each
        Lender, and the Agent shall then determine the excess amount, if any,
        referred to in the first sentence of Section 3.12(c) above and shall
        promptly inform the Borrower of such amount and the Borrower shall
        promptly upon receipt thereof make the payments provided for in Section
        3.12(c) above if applicable.

                SECTION 3.13 Borrower Guaranty.

                (a)     Generally. The Issuing Banks may, from time to time,
        Issue Letters of Credit for the account of each LC Subsidiary provided,
        that, the reimbursement and other obligations of each such LC Subsidiary
        are and remain unconditionally guaranteed by the Borrower pursuant to
        this Section 3.13.

                (b)     Guaranty. The Borrower hereby unconditionally and
        irrevocably guarantees the punctual payment when due, whether at stated
        maturity, by acceleration or otherwise, of all obligations of the LC
        Subsidiaries now or hereafter existing under this Agreement with respect
        to Letters of Credit issued for the account of any of the LC
        Subsidiaries, including any extensions, modifications, substitutions,
        amendments and renewals thereof, whether for reimbursement obligations,
        interest, fees, expenses or otherwise (such obligations being the
        "Subsidiary LC Obligations"), and agrees to pay any and all expenses
        (including reasonable counsel fees and expenses in accordance with
        Section 10.04 hereof) incurred by the Issuing Banks or the Lenders in
        enforcing any rights hereunder with respect to the Subsidiary
        Obligations. Without limiting the generality of the foregoing, the
        Borrower's liability shall extend to all amounts which constitute part
        of the Subsidiary LC Obligations and would be owed by any LC Subsidiary
        to the Issuing Banks or the Lenders hereunder, or under the Letters of
        Credit issued for the account of an LC Subsidiary, but for the fact that
        they are unenforceable or

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        not allowable due to the existence of a bankruptcy, reorganization or
        similar proceeding involving such LC Subsidiary.

                (c)     Guaranty Absolute. The Borrower guarantees that the
        Subsidiary LC Obligations will be paid strictly in accordance with the
        terms hereof regardless of any law, regulation or order now or hereafter
        in effect in any jurisdiction affecting any of such terms or the rights
        of the Issuing Banks or the Lenders with respect thereto. The
        obligations of the Borrower hereunder are independent of the Subsidiary
        LC Obligations and a separate action or actions may be brought and
        prosecuted against the Borrower to enforce the guaranty contained in
        this Section 3.13, irrespective of whether any action is brought against
        any LC Subsidiary or whether any LC Subsidiary is joined in any such
        action or actions. The liability of the Borrower under the guaranty
        contained in this Section 3.13 shall be absolute and unconditional
        irrespective of:

                        (i)     any lack of validity or enforceability of any of
                the Subsidiary LC Obligations or any agreement or instrument
                relating thereto against any LC Subsidiary or any other Person;

                        (ii)    any change in the time, manner or place of
                payment of, or in any other term of, all or any of the
                Subsidiary Obligations, or any other amendment or waiver of or
                any consent to departure herefrom with respect to Letters of
                Credit issued for the account of an LC Subsidiary including,
                without limitation, any increase in the Subsidiary LC
                Obligations resulting from the Issuance of Letters of Credit
                beyond the aggregate limitation specified in Section 3.01 hereof
                to any and all LC Subsidiaries or otherwise;

                        (iii)   any taking, exchange, release or non-perfection
                of any collateral, or any taking, release or amendment or waiver
                of or consent to departure from any other guaranty, for all or
                any of the Subsidiary Obligations;

                        (iv)    any manner of application of collateral, or
                proceeds thereof, to all or any of the Subsidiary Obligations,
                or any manner of sale or other disposition of any collateral for
                all or any of the Subsidiary LC Obligations or any other assets
                of an LC Subsidiary;

                        (v)     any change, restructuring or termination of the
                corporate structure or existence of an LC Subsidiary or any LC
                Subsidiary's lack of corporate power or authority; or

                        (vi)    any other circumstance which might otherwise
                constitute a defense available to, or a discharge of, a third
                party guarantor.

The guaranty provided in this Section 3.13 shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Subsidiary LC Obligations is rescinded or must otherwise be returned by the
Issuing Banks or any Lender upon the insolvency, bankruptcy or reorganization of
an LC Subsidiary or otherwise, all as though such payment had not been made.

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                (d)     Waivers. The Borrower hereby waives, to the extent
        permitted by applicable law:

                        (i)     any requirement that the Issuing Banks or any
                Lender secure or insure any security interest or lien or any
                property subject thereto or exhaust any right or take any action
                against any LC Subsidiary or any other Person or any collateral;

                        (ii)    any defense arising by reason of any claim or
                defense based upon an election of remedies by the Issuing Banks
                or any Lender (including, without limitation, an election to
                nonjudicially foreclose on any real or personal property
                collateral) which in any manner impairs, reduces, releases or
                otherwise adversely affects its subrogation, reimbursement or
                contribution rights or other rights to proceed against any LC
                Subsidiary or any other Person or any collateral;

                        (iii)   any defense arising by reason of the failure of
                any LC Subsidiary to properly execute any letter of credit
                application and agreement or otherwise comply with applicable
                legal formalities;

                        (iv)    any defense or benefits that may be derived from
                California Civil Code Sections 2808, 2809, 2810, 2819, 2845 or
                2850, or California Code of Civil Procedure Sections 580a, 580d
                or 726, or comparable provisions of the laws of any other
                jurisdiction and all other suretyship defenses it would
                otherwise have under the laws of California or any other
                jurisdiction;

                        (v)     any duty on the part of the Issuing Banks or any
                Lender to disclose to the Borrower any matter, fact or thing
                relating to the business, operation or condition of any LC
                Subsidiary and its respective assets now known or hereafter
                known by the Issuing Banks or any Lender;

                        (vi)    all benefits of any statute of limitations
                affecting the Borrower's liability under or the enforcement of
                the guaranty provided in this Section 3.13 or any of the
                Subsidiary LC Obligations or any collateral;

                        (vii)   all setoffs and counterclaims;

                        (viii)  promptness, diligence, presentment, demand for
                performance and protest;

                        (ix)    notice of nonperformance, default, acceleration,
                protest or dishonor;

                        (x)     except for any notice otherwise required by
                applicable laws that may not be effectively waived by the
                Borrower, notice of sale or other disposition of any collateral;
                and

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<PAGE>

                        (xi)    notice of acceptance of the guaranty provided in
                this Section 3.13 and of the existence, creation or incurring of
                new or additional Subsidiary Obligations.

                SECTION 3.14 Dollar Payment Obligation. Notwithstanding any
other term or provision hereof to the contrary, if the Borrower or any LC
Subsidiary fails to reimburse the respective Issuing Bank for any payment made
by such Issuing Bank under a Letter of Credit denominated in an Alternative
Currency by the close of business on the Business Day when due at the Payment
Office specified for such reimbursement payment, then the payment made by such
Issuing Bank in such Alternative Currency shall be converted into Dollars (the
"Dollar Payment Amount") by such Issuing Bank as provided for herein, and each
of the Borrower and each LC Subsidiary for whose account such Letter of Credit
was Issued agrees that it shall be unconditionally obligated to, and shall
immediately, reimburse such Issuing Bank the Dollar Payment Amount at such
Issuing Bank's then Payment Office for Dollars.

                SECTION 3.15 Applications; Survival of Provisions; Cash
Collateral. This Agreement shall control over any provision of any application
and agreement for Letters of Credit to the contrary, but additive or
supplemental provisions of any such application and agreement shall apply to
each Letter of Credit Issued pursuant to such application and agreement. The
provisions in this Article shall survive the Termination Date in respect of all
Letters of Credit outstanding thereafter. On the Termination Date, the Borrower
shall deposit into the L/C Collateral Account (as defined in the Security
Agreement) held by the Collateral Agent cash (in Dollars) in an amount equal to
the undrawn amount of all Letters of Credit as security for the reimbursement of
drawings thereunder which shall be used to reimburse the respective Issuing Bank
promptly upon a drawing under its respective Letter of Credit, with the
respective portion thereof to be returned to the Borrower when the respective
Letter of Credit expires, and in connection therewith the Borrower shall execute
all documents as reasonably requested by the Collateral Agent in accordance with
the Security Agreement.

                SECTION 3.16 LC Subsidiaries. Any Subsidiary of the Borrower not
an LC Subsidiary on the date hereof may become an "LC Subsidiary" hereunder by
delivering to the respective Issuing Bank (which shall promptly forward a copy
thereof to each Lender and the Agent) an agreement, in form and substance
satisfactory to such Issuing Bank, wherein such Subsidiary agrees to be bound by
all terms and provisions of this Agreement relating to Letters of Credit to be
issued for the account of such Subsidiary and delivers a written consent of the
Borrower assenting to the inclusion of such Subsidiary as an "LC Subsidiary"
hereunder. Unless objected to by the Majority Lenders within the 10 day period
referred to below, such Subsidiary shall become an "LC Subsidiary" hereunder 10
days after such Issuing Bank notifies the Borrower that such agreement and
consent are in form and substance satisfactory to it; provided, that, no
Subsidiary shall become an "LC Subsidiary" until such Issuing Bank shall have
notified the Borrower in writing that such agreement and consent are in form and
substance satisfactory to such Issuing Bank.

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                                   ARTICLE IV

                        PAYMENTS, TAXES, EXTENSIONS, ETC.

                SECTION 4.01 Payments and Computations/Borrowings. (a) Except as
otherwise provided in Section 4.02 hereof, the Borrower and each Subsidiary
Borrower, as the case may be, shall make each payment hereunder with respect to
Article II, the Advances, the Lenders and the Agent free and clear of all
claims, charges, offsets or deductions whatsoever not later than 12:00 noon (New
York City time) on the day when due in U.S. dollars to the Agent at its address
referred to in Section 10.02 hereof in same day funds. The Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal or interest or facility or utilization fees ratably (other than
amounts payable pursuant to Sections 2.04(c), 2.07, 2.11 or 4.02 hereof) to the
Lenders for the account of their respective Applicable Lending Offices, and like
funds relating to the payment of any other amount payable to such Lender to be
distributed to the appropriate Lender or Lenders and applied in accordance with
the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance
and recording of the information contained therein in the Register pursuant to
Section 10.07(d) hereof, from and after the effective date specified in such
Assignment and Acceptance, the Agent shall make all payments hereunder in
respect of the interest assigned thereby to the Lender assignee thereunder, and
the parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date directly
between themselves.

                (b)     The Borrower, each Subsidiary Borrower and each LC
        Subsidiary hereby authorize the Agent and each Lender if and to the
        extent payment owed to the Agent or such Lender is not paid when due
        hereunder to charge from time to time against any or all of the
        Borrower's, such Subsidiary Borrower's or such LC Subsidiary's accounts
        with the Agent or such Lender any amount so due (it being understood and
        agreed that, notwithstanding anything in this Agreement or any of the
        other Loan Documents to the contrary, accounts, deposits, sums,
        securities or other property of any Foreign Subsidiary or of any
        Subsidiary of a Foreign Subsidiary (including any Foreign Subsidiary or
        any Subsidiary of a Foreign Subsidiary that is a Subsidiary Borrower or
        LC Subsidiary) will not serve at any time, directly or indirectly, to
        collateralize or otherwise offset the Obligations of the Borrower or any
        Domestic Subsidiary, and, in addition, unless otherwise agreed to by the
        Borrower, the accounts, deposits, sums, securities or other property of
        a Foreign Subsidiary or Subsidiary of a Foreign Subsidiary will only
        serve to collateralize or offset the Obligations of another Foreign
        Subsidiary or Subsidiary of a Foreign Subsidiary that is a Subsidiary
        Borrower or LC Subsidiary if such former Foreign Subsidiary or
        Subsidiary of a Foreign Subsidiary is owned by such latter Foreign
        Subsidiary or Subsidiary of a Foreign Subsidiary that is a Subsidiary
        Borrower or LC Subsidiary).

                (c)     All computations of interest based on the Base Rate and
        of facility fees shall be made by the Agent on the basis of a year of
        365 or 366 days, as the case may be, and all computations of interest
        relating to utilization fees, or based on the Eurodollar Rate or the
        Federal Funds Rate shall be made by the Agent, and all computations of
        interest pursuant to Section 2.07 hereof shall be made by a Lender, on
        the basis of a year of 360 days, in each case for the actual number of
        days (including the first day but

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<PAGE>

        excluding the last day) occurring in the period for which such interest
        or fees are payable. Each determination by the Agent (or, in the case of
        Section 2.07 hereof, by a Lender) of an interest rate hereunder shall be
        conclusive and binding for all purposes, absent manifest error.

                (d)     Whenever any payment hereunder shall be stated to be due
        on a day other than a Business Day, such payment shall be made on the
        next succeeding Business Day, and such extension of time shall in such
        case be included in the computation of payment of interest or facility
        or utilization fee, as the case may be; provided, however, if such
        extension would cause payment of interest on or principal of Eurodollar
        Rate Advances to be made in the next following calendar month, such
        payment shall be made on the next preceding Business Day.

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

                SECTION 4.02 Taxes/Borrowings. (a) Any and all payments by the
Borrower and each Subsidiary Borrower hereunder shall be made free and clear of
and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender Party and the Agent, taxes imposed on its
overall net income, and franchise taxes imposed on such Lender Party or the
Agent, by the jurisdiction under the laws of which such Lender Party or the
Agent (as the case may be) is organized or any political subdivision thereof
and, in the case of each Lender Party, taxes imposed on its overall net income,
and franchise taxes imposed on such Lender Party, by the jurisdiction of such
Lender Party's Applicable Lending Office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Taxes"). If the Borrower or
any Subsidiary Borrower shall be required by applicable Requirements of Law to
deduct any Taxes from or in respect of any sum payable under any Loan Document
to any Lender Party or the Agent, (i) the sum payable shall be increased as may
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 4.02) such Lender Party
or the Agent (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower and such
Subsidiary Borrower shall make such deductions, (iii) the Borrower or respective
Subsidiary Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable Requirements of Law
and (iv) as soon as practicable after the date of any payment of Taxes, the
Borrower or respective Subsidiary Borrower shall furnish to the Agent, at its
address referred to in Schedule I-B, the original or a certified copy of a
receipt evidencing payment

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<PAGE>

thereof, to the extent such a receipt is issued therefore, or other evidence of
payment thereof that is reasonably satisfactory to the Agent.

                (b)     In addition, the Borrower agrees to pay any present or
        future stamp or documentary taxes or any other excise or property taxes,
        charges or similar levies which arise from any payment made hereunder or
        from the execution, delivery or registration of, performance under or
        otherwise with respect to, this Agreement or the Letters of Credit
        (hereinafter referred to as "Other Taxes").

                (c)     The Borrower or the respective Subsidiary Borrower will
        indemnify each of the Lender Parties and the Agent for the full amount
        of Taxes and Other Taxes (including, without limitation, any taxes of
        any kind imposed or asserted by any jurisdiction on amounts payable
        under this Section 4.02) imposed on or paid by such Lender Party or the
        Agent (as the case may be) and any liability (including penalties,
        additions to tax, interest and expenses) arising therefrom or with
        respect thereto, whether or not such Taxes or Other Taxes were correctly
        or legally asserted. A reimbursement shall be made within 30 days from
        the date such Lender Party or the Agent (as the case may be) makes
        written demand therefor. The Agent and each Lender Party, as the case
        may be, shall give prompt (within 10 Business Days) notice to the
        Borrower of the payment by the Agent or such Lender Party, as the case
        may be, of such amounts payable by the Borrower under the indemnity set
        forth in this subsection (c), and of the assertion by any governmental
        or taxing authority that such amounts are due and payable, but the
        failure to give such notice shall not affect the Borrower's or any
        Subsidiary Borrower's obligations hereunder to reimburse the Agent and
        each Lender Party for such Taxes or Other Taxes or taxes imposed or
        asserted on amounts payable under this Section 4.02, except that neither
        the Borrower nor any Subsidiary Borrower shall be liable for penalties
        or interest accrued or incurred after such 10 Business Day period until
        such time as it receives the notice contemplated above, after which time
        it shall be liable for interest and penalties accrued or incurred prior
        to or during such 10 Business Day period and accrued or incurred after
        such receipt. Neither the Borrower nor any Subsidiary Borrower shall be
        liable for any penalties, interest, expense or other liability with
        respect to such Taxes or Other Taxes after it has reimbursed the amount
        thereof to the Agent or the appropriate Lender Party.

                (d)     Each Lender Party organized under the laws of a
        jurisdiction outside the United States, on or prior to the date of its
        execution and delivery of this Agreement in the case of each initial
        Lender Party and on the date of the Assignment and Acceptance pursuant
        to which it becomes a Lender Party in the case of each other Lender
        Party, and from time to time thereafter if requested in writing by the
        Borrower (but only so long as such Lender Party remains lawfully able to
        do so), shall provide the Borrower with Internal Revenue Service form
        W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by
        the Internal Revenue Service, certifying that such Lender Party is
        entitled to benefits under an income tax treaty to which the United
        States is a party which reduces the rate of withholding tax on payments
        of interest payable by the Borrower or certifying that the interest is
        effectively connected with the conduct of a trade or business in the
        United States. Similarly, with respect to each Subsidiary Borrower
        organized under the laws of a jurisdiction outside of the United States,
        each Lender Party, on or

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<PAGE>

        prior to the date of its execution and delivery of this Agreement in the
        case of each initial Lender Party and on the date of the Assignment and
        Acceptance pursuant to which it becomes a Lender Party in the case of
        each other Lender Party, and from time to time thereafter if requested
        in writing by the Borrower or such Subsidiary Borrower (but only so long
        as such Lender Party remains lawfully able to do so), shall provide the
        Borrower or such Subsidiary Borrower with appropriate documentation
        certifying applicable exemptions from withholding tax imposed by any
        jurisdiction on payments of interest payable by such Subsidiary
        Borrower. If the forms provided by a Lender Party at the time such
        Lender Party first becomes a party to this Agreement indicate a
        withholding tax (including, without limitation, United States interest
        withholding tax) rate in excess of zero, withholding tax at such rate
        shall be considered excluded from "Taxes" unless and until such Lender
        Party provides the appropriate forms certifying that a lesser rate
        applies, whereupon withholding tax at such lesser rate only shall be
        considered excluded from Taxes for periods governed by such forms;
        provided however, that, if at the date of the Assignment and Acceptance
        pursuant to which a Lender Party becomes a party to this Agreement, the
        Lender Party assignor was entitled to payments under subsection (a) of
        this Section 4.02 in respect of withholding tax with respect to interest
        paid at such date, then, to such extent, the term Taxes shall include
        (in addition to withholding taxes that may be imposed in the future or
        other amounts otherwise includible in Taxes) withholding tax, if any,
        applicable with respect to the Lender Party assignee on such date.

                (e)     For any period with respect to which a Lender Party has
        failed to provide the Borrower or any Subsidiary Borrower with the
        appropriate form described in Section 4.02(d) hereof (other than if such
        failure is due to a change in law occurring subsequent to the date on
        which a form originally was required to be provided, or if such form
        otherwise is not required under the first two sentences of subsection
        (d) above), such Lender Party shall not be entitled to indemnification
        under Section 4.02(a) hereof with respect to Taxes imposed by any
        jurisdiction (including, without limitation, the United States);
        provided, however, that should a Lender Party become subject to Taxes
        because of its failure to deliver a form required hereunder, the
        Borrower shall take such steps as the Lender Party shall reasonably
        request to assist the Lender Party to recover such Taxes.

                (f)     Without affecting its rights under this Section 4.02 or
        any provision of this Agreement, each Lender Party agrees that if any
        Taxes or Other Taxes are imposed and required by law to be paid or to be
        withheld from any amount payable to any Lender Party or its Applicable
        Lending Office with respect to which the Borrower or any Subsidiary
        Borrower would be obligated pursuant to this Section 4.02 to increase
        any amounts payable to such Lender Party or to pay any such Taxes or
        Other Taxes, such Lender Party shall use reasonable efforts to select an
        alternative Applicable Lending Office which would not result in the
        imposition of such Taxes or Other Taxes; provided, however, that no
        Lender Party shall be obligated to select an alternative Applicable
        Lending Office if such Lender Party determines that (i) as a result of
        such selection such Lender Party would be in violation of an applicable
        law, regulation, or treaty, or would incur unreasonable additional costs
        or expenses or (ii) such selection would be inadvisable for regulatory
        reasons or inconsistent with the interests of such Lender Party.

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<PAGE>

                (g)     In the event that an additional payment is made under
        this Section 4.02 for the account of any Lender Party and such Lender
        Party, in its sole discretion, determines that it has finally and
        irrevocably received or been granted a credit against or release or
        remission for, or repayment of, any tax paid or payable by it in respect
        of or calculated with reference to the deduction or withholding giving
        rise to such payment, such Lender Party shall, to the extent that it
        determines that it can do so without prejudice to the retention of the
        amount of such credit, relief, remission or repayment, pay to the
        Borrower or Subsidiary Borrower, as the case may be, such amount as such
        Lender Party shall, in its sole discretion, have determined to be
        attributable to such deduction or withholding and which will leave such
        Lender Party (after such payment) in no worse position than it would
        have been in if the Borrower or Subsidiary Borrower had not been
        required to make such deduction or withholding. Nothing herein contained
        shall interfere with the right of a Lender Party to arrange its tax
        affairs in whatever manner it thinks fit nor oblige any Lender Party to
        claim any tax credit or to disclose any information relating to its tax
        affairs or any computations in respect thereof or require any Lender
        Party to do anything that would prejudice its ability to benefit from
        any other credits, reliefs, remissions or repayments to which it may be
        entitled.

                (h)     Each Lender Party agrees with the Borrower that it will
        take all reasonable actions by all usual means (i) to secure and
        maintain the benefit of all benefits available to it under the
        provisions of any applicable double tax treaty concluded by the United
        States of America to which it may be entitled by reason of the location
        of such Lender Party's Applicable Lending Office or place of
        incorporation or its status as an enterprise of any jurisdiction having
        any such applicable double tax treaty, if such benefit would reduce the
        amount payable by the Borrower or any Subsidiary Borrower in accordance
        with this Section 4.02 and (ii) otherwise to cooperate with the Borrower
        to minimize the amount payable by the Borrower or any Subsidiary
        Borrower pursuant to this Section 4.02; provided, however, that no
        Lender Party shall be obliged to disclose to the Borrower or any
        Subsidiary Borrower any information regarding its tax affairs or tax
        computations nor to reorder its tax affairs or tax planning pursuant
        thereto.

                (i)     Without prejudice to the survival of any other agreement
        of the Borrower or any Subsidiary Borrower hereunder, the agreements and
        obligations of the Borrower and the Subsidiary Borrowers contained in
        this Section 4.02 shall survive the payment in full of the Obligations.

                SECTION 4.03 Sharing of Payments, Etc./Borrowings. If any Lender
Party shall obtain any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) on account of the Advances made
by it (other than pursuant to Section 2.07, 2.11 or 4.02 hereof) in excess of
its ratable share of payments on account of the Advances obtained by all the
Lender Parties, such Lender Party shall forthwith purchase from the other Lender
Parties such participations in the Advances made by them as shall be necessary
to cause such purchasing Lender Party to share the excess payment ratably with
each of them, provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender Party, such purchase
from each Lender Party shall be rescinded and such Lender Party shall repay to
the purchasing Lender Party the purchase price to the extent of such recovery
together with an amount equal to such Lender Party's ratable share (according to
the proportion of (i) the

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<PAGE>

amount of such Lender Party's required repayment to (ii) the total amount so
recovered from the purchasing Lender Party) of any interest or other amount paid
or payable by the purchasing Lender Party in respect of the total amount so
recovered. The Borrower agrees that any Lender Party so purchasing a
participation from another Lender Party pursuant to this Section 4.03 may, to
the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender Party were the direct creditor of the Borrower in the amount of
such participation.

                SECTION 4.04 Evidence of Debt/Borrowings. (a) Each Lender Party
shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower to such Lender Party resulting from
each Advance owing to such Lender Party from time to time, including the amounts
of principal and interest payable and paid to such Lender Party from time to
time hereunder.

                (b)     The Register maintained by the Agent pursuant to Section
        10.07(c) hereof shall include a control account, and a subsidiary
        account for each Lender Party, in which accounts (taken together) shall
        be recorded (i) the date and amount of each Borrowing made hereunder,
        the Type of Advances comprising such Borrowing and the Interest Period
        applicable thereto, (ii) the terms of each Assignment and Acceptance
        delivered to and accepted by it, (iii) the amount of any principal or
        interest due and payable or to become due and payable from the Borrower
        to each Lender Party hereunder, and (iv) the amount of any sum received
        by the Agent from the Borrower hereunder and each Lender Party's share
        thereof.

                (c)     The entries made in the Register shall be conclusive and
        binding for all purposes, absent manifest error.

                SECTION 4.05 Payments and Computations/Letters of Credit. (a)
Except as otherwise provided in Section 4.06 hereof, the Borrower and each LC
Subsidiary, as the case may be, shall make each payment with respect to the
Letters of Credit, the Issuing Banks or the Lenders to be made by it free and
clear of all claims, charges, offsets or deductions whatsoever not later than
(i) if such payment relates to letter of credit facility fees or amounts (other
than reimbursements for payments in an Alternative Currency made under Letters
of Credit) or if such payment relates to a Letter of Credit denominated in
Dollars, 12:00 noon (New York City time) on the day when due in Dollars to the
respective Issuing Bank at its address referred to in Section 10.02 hereof in
same day funds and (ii) if such payment relates to reimbursement of a Letter of
Credit denominated in an Alternative Currency, (A) in such Alternative Currency,
at the respective Issuing Bank's Payment Office therefor so long as such payment
is made by the close of business on the Business Day when due and (B) thereafter
in Dollars (at the then Dollar equivalent of the amount due on such preceding
Business Day), by 12:00 noon (New York City time) to the respective Issuing Bank
at its address referred to in Section 10.02 hereof in same day funds as provided
in Section 3.14 above. The respective Issuing Bank will promptly thereafter (if
amounts are owed to the Lenders by the terms hereof) cause to be distributed
like funds relating to the payment of reimbursement obligations or letter of
credit facility fees ratably (other than amounts payable pursuant to Section
3.04(a), 3.08, or 4.06 hereof) to the Lenders for the account of their
respective Applicable Lending Offices, and like funds relating to the payment of
any other amount payable to such Issuing Bank or to such Lender to be
distributed to the

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appropriate Lender or Lenders and applied in accordance with the terms of this
Agreement. Upon the Agent's acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to
Section 10.07(d) hereof, from and after the effective date specified in such
Assignment and Acceptance, the respective Issuing Bank shall make all payments
hereunder in respect of the interest assigned thereby to the Lender assignee
thereunder, and the parties to such Assignment and Acceptance shall make all
appropriate adjustments in such payments for periods prior to such effective
date directly between themselves.

                (b)     The Borrower and each LC Subsidiary hereby authorize
        each Lender and the Issuing Banks, if and to the extent payment owed to
        such Lender or such Issuing Bank (including the immediate repayments of
        participations purchased and funded by a Lender pursuant to Section 3.05
        hereof) is not paid when due hereunder to charge from time to time
        against any or all of the Borrower's or such LC Subsidiary's accounts
        with such Lender or such Issuing Bank any amount so due (it being
        understood and agreed that, notwithstanding anything in this Agreement
        or any of the other Loan Documents to the contrary, accounts, deposits,
        sums, securities or other property of any Foreign Subsidiary or of any
        Subsidiary of a Foreign Subsidiary (including any Foreign Subsidiary or
        any Subsidiary of a Foreign Subsidiary that is a Subsidiary Borrower or
        LC Subsidiary) will not serve at any time, directly or indirectly, to
        collateralize or otherwise offset the Obligations of the Borrower or any
        Domestic Subsidiary, and, in addition, unless otherwise agreed to by the
        Borrower, the accounts, deposits, sums, securities or other property of
        a Foreign Subsidiary or Subsidiary of a Foreign Subsidiary will only
        serve to collateralize or offset the Obligations of another Foreign
        Subsidiary or Subsidiary of a Foreign Subsidiary that is a Subsidiary
        Borrower or LC Subsidiary if such former Foreign Subsidiary or
        Subsidiary of a Foreign Subsidiary is owned by such latter Foreign
        Subsidiary or Subsidiary of a Foreign Subsidiary that is a Subsidiary
        Borrower or LC Subsidiary).

                (c)     All computations of interest based on the Base Rate and
        of letter of credit facility fees shall be made by the respective
        Issuing Bank on the basis of a year of 365 or 366 days, as the case may
        be, and all computations of interest based on the Federal Funds Rate and
        of Letter of Credit fees shall be made by the respective Issuing Bank on
        the basis of a year of 360 days, in each case for the actual number of
        days (including the first day but excluding the last day) occurring in
        the period for which such interest or letter of credit facility fees are
        payable. Each determination by an Issuing Bank of an interest rate
        hereunder shall be conclusive and binding for all purposes, absent
        manifest error.

                (d)     Whenever any payment hereunder shall be stated to be due
        on a day other than a Business Day, such payment shall be made on the
        next succeeding Business Day, and such extension of time shall in such
        case be included in the computation of payment of interest or letter of
        credit facility fee, as the case may be.

                (e)     Unless the respective Issuing Bank shall have received
        notice from the Borrower or an LC Subsidiary prior to the date on which
        any payment is due to such Issuing Bank or Lenders hereunder that the
        Borrower or such LC Subsidiary will not make such payment in full, such
        Issuing Bank may assume that the Borrower or such LC Subsidiary has made
        such payment in full to such Issuing Bank on such date and such

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        Issuing Bank may, in reliance upon such assumption, cause to be
        distributed to such Lender or Lenders on such due date an amount equal
        to the amount then due such Lender or Lenders. If and to the extent that
        the Borrower or such LC Subsidiary shall not have so made such payment
        in full to such Issuing Bank, each such Lender shall repay to such
        Issuing Bank forthwith on demand such amount distributed to such Lender
        together with interest thereon, for each day from the date such amount
        is distributed to such Lender until the date such Lender repays such
        amount to such Issuing Bank, at the Federal Funds Rate.

                SECTION 4.06 Taxes/Letters of Credit. (a) Any and all payments
by the Borrower and each LC Subsidiary hereunder shall be made free and clear of
and without deduction for any and all present or future Taxes. If the Borrower
or any LC Subsidiary shall be required by applicable Requirements of Law to
deduct any Taxes from or in respect of any sum payable under any Loan Document
to any Lender or Issuing Bank, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 4.06) such Lender or
Issuing Bank (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower and such LC
Subsidiary shall make such deductions, (iii) the Borrower or respective LC
Subsidiary shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable Requirements of Law and (iv) as
soon as practicable after the date of any payment of Taxes, the Borrower or
respective LC Subsidiary shall furnish to the Issuing Bank, at its address
referred to in Schedule I-B, the original or a certified copy of a receipt
evidencing payment thereof, to the extent such a receipt is issued therefore, or
other evidence of payment thereof that is reasonably satisfactory to the Issuing
Bank.

                (b)     The Borrower or the respective LC Subsidiary will
        indemnify each of the Lenders and any Issuing Bank for the full amount
        of Taxes and Other Taxes (including, without limitation, any taxes of
        any kind imposed or asserted by any jurisdiction on amounts payable
        under this Section 4.06) imposed on or paid by such Lender or Issuing
        Bank (as the case may be) and any liability (including penalties,
        additions to tax, interest and expenses) arising therefrom or with
        respect thereto, whether or not such Taxes or Other Taxes were correctly
        or legally asserted. A reimbursement shall be made within 30 days from
        the date such Lender or Issuing Bank (as the case may be) makes written
        demand therefor. Any Issuing Bank and each Lender, as the case may be,
        shall give prompt (within 10 Business Days) notice to the Borrower of
        the payment by such Issuing Bank or such Lender, as the case may be, of
        such amounts payable by the Borrower under the indemnity set forth in
        this subsection (c), and of the assertion by any governmental or taxing
        authority that such amounts are due and payable, but the failure to give
        such notice shall not affect the Borrower's or any LC Subsidiary's
        obligations hereunder to reimburse each Issuing Bank and each Lender for
        such Taxes or Other Taxes or taxes imposed or asserted on amounts
        payable under this Section 4.06, except that neither the Borrower nor
        any LC Subsidiary shall be liable for penalties or interest accrued or
        incurred after such 10 Business Day period until such time as it
        receives the notice contemplated above, after which time it shall be
        liable for interest and penalties accrued or incurred prior to or during
        such 10 Business Day period and accrued or incurred after such receipt.
        Neither the Borrower nor any LC Subsidiary shall be liable

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        for any penalties, interest, expense or other liability with respect to
        such Taxes or Other Taxes after it has reimbursed the amount thereof to
        an Issuing Bank or the appropriate Lender.

                (c)     Each Lender Party organized under the laws of a
        jurisdiction outside the United States, on or prior to the date of its
        execution and delivery of this Agreement in the case of each initial
        Lender party and on the date of the Assignment and Acceptance pursuant
        to which it becomes a Lender Party in the case of each other Lender
        Party, and from time to time thereafter if requested in writing by the
        Borrower (but only so long as such Lender Party remains lawfully able to
        do so), shall provide the Borrower with Internal Revenue Service form
        W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by
        the Internal Revenue Service, certifying that such Lender Party is
        entitled to benefits under an income tax treaty to which the United
        States is a party which reduces the rate of withholding tax on payments
        of interest payable by the Borrower or certifying that the interest is
        effectively connected with the conduct of a trade or business in the
        United States. Similarly, with respect to each LC Subsidiary organized
        under the laws of a jurisdiction outside the United States, each Lender
        Party, on or prior to the date of its execution and delivery of this
        Agreement in the case of each initial Lender Party and on the date of
        the Assignment and Acceptance pursuant to which it becomes a Lender
        Party in the case of each other Lender Party, and from time to time
        thereafter if requested in writing by the Borrower or such LC Subsidiary
        (but only so long as such Lender Party remains lawfully able to do so),
        shall provide the Borrower or such LC Subsidiary with appropriate
        documentation certifying applicable exemptions from withholding tax
        imposed by any jurisdiction on payments of interest payable by such LC
        Subsidiary. If the forms provided by a Lender Party at the time such
        Lender Party first becomes a party to this Agreement indicate a
        withholding tax (including, without limitation, United States interest
        withholding) tax rate in excess of zero, withholding tax at such rate
        shall be considered excluded from "Taxes" unless and until such Lender
        Party provides the appropriate forms certifying that a lesser rate
        applies, whereupon withholding tax at such lesser rate only shall be
        considered excluded from Taxes for periods governed by such forms;
        provided, however, that, if at the date of the Assignment and Acceptance
        pursuant to which a Lender Party becomes a party to this Agreement, the
        Lender Party assignor was entitled to payments under subsection (a) of
        this Section 4.06 in respect of withholding tax with respect to interest
        paid at such date, then, to such extent, the term Taxes shall include
        (in addition to withholding taxes that may be imposed in the future or
        other amounts otherwise includible in Taxes) withholding tax, if any,
        applicable with respect to the Lender Party assignee on such date.

                (d)     For any period with respect to which a Lender Party has
        failed to provide the Borrower or any LC Subsidiary with the appropriate
        form described in Section 4.06(c) (other than if such failure is due to
        a change in law occurring subsequent to the date on which a form
        originally was required to be provided, or if such form otherwise is not
        required under the first two sentences of subsection (c) above), such
        Lender Party shall not be entitled to indemnification under Section
        4.06(a) hereof with respect to Taxes imposed by any jurisdiction
        (including, without limitation, the United States); provided, however,
        that should a Lender Party become subject to Taxes because of its
        failure to deliver a form required hereunder, the Borrower shall take
        such steps as

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        the Lender Party shall reasonably request to assist the Lender Party to
        recover such Taxes.

                (e)     Without affecting its rights under this Section 4.06 or
        any provision of this Agreement, each Lender Party agrees that if any
        Taxes or Other Taxes are imposed and required by law to be paid or to be
        withheld from any amount payable to any Lender Party or its Applicable
        Lending Office with respect to which the Borrower or any LC Subsidiary
        would be obligated pursuant to this Section 4.06 to increase any amounts
        payable to such Lender Party or to pay any such Taxes or Other Taxes,
        such Lender Party shall use reasonable efforts to select an alternative
        Applicable Lending Office which would not result in the imposition of
        such Taxes or Other Taxes; provided, however, that no Lender Party shall
        be obligated to select an alternative Applicable Lending Office if such
        Lender Party determines that (i) as a result of such selection such
        Lender Party would be in violation of an applicable law, regulation, or
        treaty, or would incur unreasonable additional costs or expenses or (ii)
        such selection would be inadvisable for regulatory reasons or
        inconsistent with the interests of such Lender Party.

                (f)     In the event that an additional payment is made under
        this Section 4.06 for the account of any Lender Party and such Lender
        Party, in its sole discretion, determines that it has finally and
        irrevocably received or been granted a credit against or release or
        remission for, or repayment of, any tax paid or payable by it in respect
        of or calculated with reference to the deduction or withholding giving
        rise to such payment, such Lender Party shall, to the extent that it
        determines that it can do so without prejudice to the retention of the
        amount of such credit, relief, remission or repayment, pay to the
        Borrower or LC Subsidiary, as the case may be, such amount as such
        Lender Party shall, in its sole discretion, have determined to be
        attributable to such deduction or withholding and which will leave such
        Lender Party (after such payment) in no worse position than it would
        have been in if the Borrower or LC Subsidiary had not been required to
        make such deduction or withholding. Nothing herein contained shall
        interfere with the right of a Lender Party to arrange its tax affairs in
        whatever manner it thinks fit nor oblige any Lender Party to claim any
        tax credit or to disclose any information relating to its tax affairs or
        any computations in respect thereof or require any Lender Party to do
        anything that would prejudice its ability to benefit from any other
        credits, reliefs, remissions or repayments to which it may be entitled.

                (g)     Each Lender Party agrees with the Borrower that it will
        take all reasonable actions by all usual means (i) to secure and
        maintain the benefit of all benefits available to it under the
        provisions of any applicable double tax treaty concluded by the United
        States of America to which it may be entitled by reason of the location
        of such Lender Party's Applicable Lending Office or place of
        incorporation or its status as an enterprise of any jurisdiction having
        any such applicable double tax treaty, if such benefit would reduce the
        amount payable by the Borrower or any LC Subsidiary in accordance with
        this Section 4.06 and (ii) otherwise to cooperate with the Borrower to
        minimize the amount payable by the Borrower or any LC Subsidiary
        pursuant to this Section 4.06; provided, however, that no Lender Party
        shall be obliged to disclose to the Borrower or any LC Subsidiary any
        information regarding its tax affairs or tax computations nor to reorder
        its tax affairs or tax planning pursuant hereto.

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                (h)     Without prejudice to the survival of any other agreement
        of the Borrower or any LC Subsidiary hereunder, the agreements and
        obligations of the Borrower and the LC Subsidiaries contained in this
        Section 4.06 shall survive the payment in full of the Obligations.

                SECTION 4.07 Sharing of Payments, Etc./Letters of Credit. If any
Lender shall obtain any payment (whether voluntary, involuntary, through the
exercise of any right of set-off, or otherwise) on account of any Letter of
Credit Liability of the Borrower or any LC Subsidiary hereunder (other than
pursuant to Section 3.08 or 4.06 hereof) in excess of its Commitment Percentage
of any such payments on account of such Letter of Credit Liability obtained by
all the Lenders, such Lender shall forthwith purchase from the other Lenders
such participations in such other Lenders' participations purchased pursuant to
Section 3.05 hereof as shall be necessary to cause such purchasing Lender to
share the excess payment ratably with each other Lender, provided, however, that
if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender such purchase from each other Lender shall be rescinded and
each such Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery together with an amount equal to each such Lender's
ratable share (according to the proportion of (i) the amount of such Lender's
required repayment to (ii) the total amount so recovered from the purchasing
Lender) of any interest or other amount paid or payable by the purchasing Lender
in respect of the total amount so recovered. The Borrower and each LC Subsidiary
agree that any Lender so purchasing a sub-participation from another Lender
pursuant to this Section 4.07 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such sub-participation as fully as if such Lender were the direct creditor of
the Borrower or each LC Subsidiary in the amount of such participation.

                                    ARTICLE V

                              CONDITIONS OF LENDING

                SECTION 5.01 Conditions Precedent to Effectiveness of this
Agreement. This Agreement shall become effective on and as of the first date
(the "Effective Date") on which the following conditions precedent have been
satisfied:

                (a)     All governmental and third party consents and approvals
        necessary in connection with the transactions contemplated hereby shall
        have been obtained (without the imposition of any conditions that are
        not acceptable to the Lenders) and shall remain in effect, and no law or
        regulation shall be applicable in the reasonable judgment of the Lenders
        that restrains, prevents or imposes materially adverse conditions upon
        the transactions contemplated hereby.

                (b)     The Agent shall have received the following in form and
        substance satisfactory to the Agent:

                        (i)     The notes to the order of the Lenders to the
                extent requested by any Lender pursuant to Section 2.02(g)
                hereof.

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                        (ii)    Certified copies of the resolutions of the board
                of directors (or persons performing similar functions) of each
                domestic Loan Party approving the Agreement and each of the Loan
                Documents to which it is or is to be a party, and of all
                documents evidencing other necessary Governmental
                Authorizations, or other necessary consents, approvals,
                authorizations, notices, filings or actions, with respect to
                this Agreement and any of the Loan Documents to which it is or
                is to be a party.

                        (iii)   A copy of a certificate of the Secretary of
                State (or equivalent Governmental Authority) of the jurisdiction
                of organization of each domestic Loan Party listing the
                certificate or articles of incorporation (or similar
                Constitutive Document) of each such Loan Party and each
                amendment thereto on file in the office of such Secretary of
                State (or such governmental authority) and certifying (A) that
                such amendments are the only amendments to such Person's
                certificate or articles of incorporation (or similar
                constitutive document) on file in its office, (B) if customarily
                available in such jurisdiction, that such Person has paid all
                franchise taxes (or the equivalent thereof) to the date of such
                certificate and (C) that such Person is duly organized and is in
                good standing under the laws of the jurisdiction of its
                organization.

                        (iv)    A certificate of the Secretary or an Assistant
                Secretary of each domestic Loan Party certifying the names and
                true signatures of the officers of such Loan Party authorized to
                sign each Loan Document to which it is a party and the other
                documents to be delivered hereunder.

                        (v)     A guarantee, in substantially the form of
                Exhibit D hereto (the "Subsidiary Guaranty"), duly executed by
                each wholly-owned Domestic Subsidiary (other than the Excluded
                Subsidiaries).

                        (vi)    A security agreement in substantially the form
                of Exhibit E hereto (together with each other security agreement
                and security agreement supplement delivered pursuant to Section
                7.01(i) hereof, the "Security Agreement"), duly executed by the
                Borrower and each wholly-owned Domestic Subsidiary (other than
                the Excluded Subsidiaries), together with:

                        (A)     to the extent available on the Effective Date,
                certificates representing the Initial Pledged Equity (as defined
                in the Security Agreement, other than equity interests in
                Excluded Subsidiaries, but including equity interests in
                first-tier Special Purpose Subsidiaries) accompanied by undated
                stock powers (or similar instruments) executed in blank;

                        (B)     appropriate UCC-1 financing statements under the
                Uniform Commercial Code of all jurisdictions that the Agent may
                deem necessary or desirable in order to perfect and protect the
                first priority Liens created under the Security Agreement,
                covering the Collateral described in the Security Agreement;

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                        (C)     evidence that all other action that the Agent
                and, as the case may be, the Collateral Agent may deem necessary
                or desirable in order to perfect and protect the first priority
                liens and security interests created under the Security
                Agreement has been taken.

                        (vii)   The Intercreditor Agreement duly executed by the
                Agent on behalf of the Lenders, the Collateral Agent, as defined
                therein, and any Lender who is then a party to a Hedge
                Agreement.

                        (viii)  A favorable opinion of General Counsel or
                Associate General Counsel to the Loan Parties, substantially in
                the form of Exhibit F-1 hereto and as to such other matters as
                any Lender through the Agent may reasonably request.

                        (ix)    Favorable opinions of Skadden, Arps, Slate,
                Meagher & Flom LLP, special New York counsel to the Loan
                Parties, in substantially the forms of Exhibits F-2 and F-3
                hereto and as to such other matters as any Lender through the
                Agent may reasonably request.

                        (x)     A favorable opinion of Shearman & Sterling,
                special New York counsel to the Agent, in substantially the form
                of Exhibit G hereto and as to such other matters as any Lender
                through the Agent may reasonably request.

                        (xi)    Such other approvals, opinions or documents as
                the Agent may reasonably request.

                (c)     The Borrower shall have paid all accrued fees and
        expenses of the Agent and the Lenders (including the accrued fees and
        expenses of counsel to the Agent).

                (d)     All amounts owing by the Borrower or any of its
        Subsidiaries to the lenders and agents under the Existing Credit
        Agreement shall have been, or concurrently with the initial extension of
        credit made on the Effective Date shall be, paid in full, and all
        commitments of the lenders under the Existing Credit Agreement (except
        for the Existing Letters of Credit issued thereunder and except for
        Trade Letters of Credit issued under the Existing Credit Agreement that
        will be deemed issued under the LC Facilities) shall have been, or
        concurrently with the initial extension of credit made on the Effective
        Date shall be, terminated in accordance with the terms of the Existing
        Credit Agreement, and all guarantees given, and all security interests
        granted, in connection therewith shall have been terminated.

                (e)     A preliminary updated valuation review of the domestic
        inventories of the Loan Parties that is satisfactory to the Agent and
        the Joint Lead Arrangers.

                SECTION 5.02 Conditions Precedent to Each Advance/Issuance. The
obligation of each Lender to make an Advance (including a Swing Line Advance),
including on the occasion of each Borrowing (including the initial Borrowing),
and the obligation of each Issuing Bank to Issue each Letter of Credit
(including the initial Letter of Credit) shall be subject to the further
conditions precedent that on the date of such Advance or Issuance the following
statements shall be true (and each of the giving of the applicable Notice of
Borrowing and the

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acceptance by the Borrower or the respective Subsidiary Borrower of the proceeds
of such Advance and the request for Issuance by the Borrower, a Subsidiary
Borrower or an LC Subsidiary shall constitute a representation and warranty by
the Borrower, such Subsidiary Borrower or such LC Subsidiary that on the date of
such Borrowing or Issuance such statements are true):

                (a)     The representations and warranties contained in Section
        6.01 hereof (other than, in the case of any Advance or Issuance that
        does not increase the outstanding principal amount of the Advances or
        Letter of Credit Liability, the representations and warranties contained
        in Section 6.01(f) hereof and in Section 6.01(g) hereof), Section 6 of
        the Security Agreement and Section 6 of the Subsidiary Guaranty are
        correct on and as of the date of such Borrowing or Issuance, before and
        after giving effect to such Borrowing or Issuance, and to the
        application of the proceeds therefrom, as though made on and as of such
        date;

                (b)     No event has occurred and is continuing, or would result
        from such Borrowing or from the application of the proceeds therefrom or
        from such Issuance, which constitutes an Event of Default or Default;
        and

                (c)     The making of such Advance will be in compliance with
        the respective criteria set forth in Section 2.01(a) and Section
        2.01(b)(i) and (ii) hereof, as the case may be, or the Issuance of such
        Letter of Credit will be in compliance with the criteria set forth in
        Section 3.01(a)(i) and (ii) hereof, as the case may be.

                                   ARTICLE VI

                         REPRESENTATIONS AND WARRANTIES

                SECTION 6.01 Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:

                (a)     The Borrower is a corporation duly organized, validly
        existing and in good standing under the laws of Delaware; each LC
        Subsidiary and each Subsidiary Borrower is a corporation duly organized,
        validly existing and in good standing under the laws of its jurisdiction
        of incorporation. The Borrower and each of its Subsidiaries possess all
        powers (corporate or otherwise) and all other authorizations and
        licenses necessary to engage in their respective businesses, except
        where the failure to so possess would not have a Material Adverse
        Effect.

                (b)     The execution, delivery and performance by each Loan
        Party of the Loan Documents to which it is a party and the consummation
        of the transactions contemplated thereby are within such Loan Party's
        respective powers (corporate or otherwise), have been duly authorized by
        all necessary action (corporate or otherwise), and do not (i) contravene
        such Loan Party's Constitutive Documents, (ii) violate any Requirements
        of Law, (iii) conflict with or result in the breach of, or constitute a
        default or require any payment to be made under, any material contract,
        loan agreement, indenture, mortgage, deed of trust, lease or other
        instrument binding on or affecting any Loan Party or any of

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        its properties or (iv) except for the Liens created under the Loan
        Documents, result in or require the creation or imposition of any Lien
        upon or with respect to any of the properties of any Loan Party. No Loan
        Party is in violation of any such Requirements of Law or in breach of
        any such contract, loan agreement, indenture, mortgage, deed of trust,
        lease or other instrument, the violation or breach of which would be
        reasonably likely to have a Material Adverse Effect.

                (c)     No authorization or approval or other action by, and no
        notice to or filing with, any governmental authority or regulatory body
        is required for the due execution, delivery and performance by any Loan
        Party of the Loan Documents to which it is a party.

                (d)     Each Loan Document is the legal, valid and binding
        obligation of the Loan Party thereto enforceable against such Loan Party
        in accordance with its terms, except as limited by bankruptcy,
        insolvency or other laws of general application relating to or affecting
        the enforcement of creditors' rights generally and general principles of
        equity (regardless of whether considered in a proceeding in equity or at
        law).

                (e)     The Consolidated balance sheets of the Borrower and its
        Subsidiaries as of February 1, 2003, and the related Consolidated
        statements of income and retained earnings of the Borrower and its
        Subsidiaries for the Fiscal Year then ended, certified by Deloitte &
        Touche LLP, copies of which have been furnished to each Lender Party,
        fairly present the Consolidated financial condition of the Borrower and
        its Subsidiaries as at such date and the results of the operations of
        the Borrower and its Subsidiaries for the period ended on such date, all
        in accordance with generally accepted accounting principles consistently
        applied.

                (f)     Since February 1, 2003, there has been no Material
        Adverse Change.

                (g)     There is no pending or, to the best of Borrower's
        knowledge, threatened action or proceeding affecting the Borrower or any
        of its Subsidiaries before any court, governmental agency or arbitrator,
        (i) which has a reasonable probability (taking into account the
        exhaustion of all appeals and the assertion of all defenses) of having a
        Material Adverse Effect or (ii) which purports to affect the legality,
        validity or enforceability of any Loan Document.

                (h)     The Borrower is not engaged in the business of extending
        credit for the purpose of purchasing or carrying Margin Stock, and no
        proceeds of any Advance or drawing under any Letter of Credit will be
        used to purchase any Margin Stock or to extend credit to others for the
        purpose of purchasing or carrying any Margin Stock.

                (i)     Neither the Borrower nor any of its Subsidiaries is an
        "investment company," or an "affiliated person" of, or "promoter" or
        "principal underwriter" for, an "investment company," as such terms are
        defined in the Investment Company Act of 1940, as amended.

                (j)     Set forth on Schedule VIII hereto is a complete and
        accurate list, as of the date hereof, of all Plans of the Borrower and
        its Subsidiaries. Neither the Borrower nor

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        any ERISA Affiliate is a party or subject to, or has any obligation to
        make payments, or incur any material Withdrawal Liability, to, any
        Multiemployer Plan.

                (k)     Except as provided in Schedule X, no ERISA Event has
        occurred with respect to any Plan or is reasonably expected to occur
        with respect to any Plan that, when taken together with all other such
        ERISA Events for which liability is reasonably expected to occur would
        reasonably be likely to result in a Material Adverse Effect.

                (l)     Except as provided in Schedule X, Schedule B (Actuarial
        Information) to the most recently completed annual report (Form 5500
        Series) for each Plan of the Borrower or its Subsidiaries, copies of
        which have been or will be filed with the Internal Revenue Service, is
        complete and accurate in all material respects and fairly presents the
        funding status of such Plan, and since the date of such Schedule B there
        has been no material adverse change in such funding status which would
        reasonably be likely to result in a Material Adverse Effect.

                (m)     Except as provided in Schedule X, neither the Borrower
        nor any ERISA Affiliate has been notified by the sponsor of a
        Multiemployer Plan that such Multiemployer Plan is in reorganization or
        has been terminated, within the meaning of Title IV of ERISA and no
        Multiemployer Plan is reasonably expected to be in reorganization or to
        be terminated, within the meaning of Title IV of ERISA.

                (n)     Each of Borrower and its Subsidiaries is in compliance
        with all Requirements of Law applicable to their properties, assets and
        business where the failure to so comply would (as to all such failures
        to comply in the aggregate) have a Material Adverse Effect. There are no
        proceedings pending or, to the knowledge of any Loan Party, threatened
        in writing, to terminate or modify any license, permit or other approval
        issued by a Governmental Authority, the termination or modification of
        which (in the aggregate as to all such matters) would have a Material
        Adverse Effect.

                (o)     The Borrower is, individually and together with its
        Subsidiaries, Solvent.

                (p)     As of the Effective Date, set forth on Schedule XI
        hereto is a complete and accurate list of all Subsidiaries of the
        Borrower (except Excluded Subsidiaries but including Special Purpose
        Subsidiaries), showing as of the Effective Date hereof (as to each such
        Subsidiary) the jurisdiction of its organization, the number of shares
        or other units of each class of its Equity Interests authorized, and the
        number outstanding, on the date hereof and the percentage of each such
        class of its Equity Interests owned (directly or indirectly) by the
        Borrower or any Subsidiary thereof and the number of shares or other
        units covered by all outstanding options, warrants, rights of conversion
        or purchase and similar rights at the date hereof, except for any
        obligations or rights of the Borrower or any of its Subsidiaries to
        acquire any minority interest in any Subsidiary of the Borrower that is
        a partnership; and in the case of each Special Purpose Subsidiary a
        summary of the material assets in each such Special Purpose Subsidiary.
        All of the outstanding Equity Interests in each such Subsidiary have (A)
        (in the case of Subsidiaries that are corporations) been validly issued,
        are fully paid and non-assessable and are (B) to

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        the extent owned by the Borrower or one or more of its Subsidiaries,
        free and clear of all Liens, except those created under the Collateral
        Documents or Permitted Liens.

                (q)     As of the Effective Date, neither the Information
        Memorandum nor any other information, exhibit or report furnished by any
        Loan Party to any Agent or any Lender Party in connection with the
        negotiation and syndication of the Loan Documents or pursuant to the
        terms of the Loan Documents contained any untrue statement of a material
        fact or omitted to state a material fact necessary to make the
        statements made therein not misleading; provided that all financial
        projections, if any, that have been or will be prepared by the Borrower
        and made available to the Joint Lead Arrangers, the Agent, any Lender or
        any potential Lender, or any other party hereto, including, without
        limitation, any projections described in or otherwise contemplated by
        Section 7.04(ix) hereof, have been or will be prepared in good faith
        based upon reasonable assumptions, it being understood by the Lenders
        and all the other parties hereto that such projections are subject to
        significant uncertainties and contingencies, many of which are beyond
        the Borrower's control, and that no assurances can be given that the
        projections will be realized.

                (r)     Except as described on Schedule XII hereto, the
        operations and properties of each Loan Party comply in all material
        respects with all applicable Environmental Laws and Environmental
        Permits, except where any such failure to comply would not be reasonably
        expected to have a Material Adverse Effect, and no Environmental Action
        is pending or, to Borrower's knowledge, is threatened against any Loan
        Party or any of their properties that would be reasonably likely to have
        a Material Adverse Effect.

                                   ARTICLE VII

                            COVENANTS OF THE BORROWER

                SECTION 7.01 Affirmative Covenants. The Borrower will, unless
the Majority Lenders shall otherwise consent in writing:

                (a)     Compliance with Laws, Etc. Comply, and cause each of its
        Subsidiaries to comply, in all material respects with all applicable
        laws (including, without limitation, all Environmental Laws), rules,
        regulations and orders, such compliance to include, without limitation,
        paying before the same become delinquent all taxes, assessments and
        governmental charges imposed upon it or upon its property except to the
        extent contested in good faith or where the failure to comply would not
        have a Material Adverse Effect.

                (b)     Preservation of Existence, Etc. Preserve and maintain,
        and cause each of its Subsidiaries to preserve and maintain, its
        existence (corporate or otherwise), rights (charter and statutory), and
        franchises except if, in the reasonable business judgment of the
        Borrower or such Subsidiary, as the case may be, it is in its best
        economic interest not to preserve and maintain such rights or franchises
        and such failure to preserve and maintain such rights or franchises
        would not materially adversely affect the rights of the Lenders or the
        Issuing Banks hereunder or the ability of any Loan Party to perform its
        obligations under the respective Loan Documents (it being understood
        that the foregoing

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        shall not prohibit, or be violated as a result of, any transactions by
        or involving any Loan Party or other Subsidiary otherwise permitted
        under Section 7.02 below).

                (c)     Visitation Rights. Permit, and cause each of its
        Subsidiaries to permit, the Agent, any Issuing Bank and any Lender or
        any agents or representatives thereof from time to time, during
        reasonable business hours, without hindrance or delay, and upon
        reasonable prior notice, to examine and make copies of and abstracts
        from its records and books of account, to visit its properties, and to
        discuss the affairs, finances and accounts of the Borrower and its
        Subsidiaries with any of their respective directors, officers or agents.

                (d)     Keeping of Books. Keep, and cause each of its
        Subsidiaries to keep, proper books of record and account, in which full
        and correct entries shall be made of all financial transactions and the
        assets and business of the Borrower and each of its Subsidiaries in
        accordance with sound business practice.

                (e)     Maintenance of Properties, Etc. Maintain and preserve,
        and cause each of its Subsidiaries to maintain and preserve, all of its
        properties which are used or useful in the conduct of its business in
        good working order and condition, ordinary wear and tear excepted,
        consistent with sound business practice, except where the failure to so
        maintain and preserve would not have a Material Adverse Effect.

                (f)     Maintenance of Insurance. Maintain, and cause each of
        its Subsidiaries to maintain, insurance (other than earthquake or
        terrorism insurance) in amounts, from responsible and reputable
        insurance companies or associations, with limitations, of types and on
        terms as is customary for the industry; provided, that, the Borrower and
        each of its Subsidiaries may self-insure risks and liabilities in
        accordance with its practice as of the date hereof and may in addition
        self-insure risks and liabilities in amounts as are customarily
        self-insured by similarly situated Persons in the industry.

                (g)     Employment of Technology, Disposal of Hazardous
        Materials, Etc. (i) Employ, and cause each of its Subsidiaries to
        employ, appropriate technology and compliance procedures to maintain
        compliance with any applicable Environmental Laws except where the
        failure to so employ would not have a Material Adverse Effect, (ii)
        obtain and maintain, and cause each of its Subsidiaries to obtain and
        maintain, any and all material permits required by applicable
        Environmental Laws in connection with its or its Subsidiaries'
        operations and (iii) dispose of, and cause each of its Subsidiaries to
        dispose of, any and all Hazardous Substances only at facilities and with
        carriers reasonably believed to possess valid permits under RCRA, if
        applicable, and any applicable state and local Environmental Laws except
        where the failure to so dispose would not have a Material Adverse
        Effect. The Borrower shall use its best efforts, and cause each of its
        Subsidiaries to use its best efforts, to obtain all certificates
        required by law to be obtained by the Borrower and its Subsidiaries from
        all contractors employed by the Borrower or any of its Subsidiaries in
        connection with the transport or disposal of any Hazardous Substances
        except where failure to transport or dispose in accordance with any
        applicable Environmental Laws would not have a Material Adverse Effect.

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                (h)     Environmental Matters. If the Borrower or any of its
        Subsidiaries shall:

                        (i)     receive written notice that any material
                violation of any Environmental Laws may have been committed or
                is about to be committed by the Borrower or any of its
                Subsidiaries the cure of which would result in expenditures
                exceeding $20,000,000;

                        (ii)    receive written notice that any administrative
                or judicial complaint or order has been filed or is about to be
                filed against the Borrower or any of its Subsidiaries alleging
                any material violation of any Environmental Laws or requiring
                the Borrower or any of its Subsidiaries to take any action
                (which, if taken, would result in expenditures exceeding
                $20,000,000) in connection with the release or threatened
                release of Hazardous Substances or solid waste into the
                environment; or

                        (iii)   receive written notice from a federal, state,
                foreign or local governmental agency or private party alleging
                that the Borrower or any of its Subsidiaries is liable or
                responsible for costs in excess of $20,000,000 associated with
                the response to cleanup, stabilization or neutralization of any
                Environmental Activity;

then it shall provide the Agent with a copy of such notice within five Business
Days of the Borrower's or such Subsidiary's receipt thereof.

                (i)     Covenant to Guarantee Obligations and Give Security. The
        Borrower shall, in each case at the Borrower's expense:

                        (i)     in connection with the formation or acquisition
                of a wholly-owned Domestic Subsidiary or in the event a
                wholly-owned Domestic Subsidiary which was an Excluded
                Subsidiary (pursuant to clause (b) or (e) of the definition
                thereof) ceases to be such, within 45 days after each such
                circumstance (A) furnish to the Agent a description of the
                material personal properties of such wholly-owned Domestic
                Subsidiary and (B) cause each such Domestic Subsidiary (except
                any Excluded Subsidiary) to duly execute and deliver to the
                Agent a counterpart to the Subsidiary Guaranty (in the form of
                the supplement attached as an exhibit thereto),

                        (ii)    (A) within 45 days after the formation or
                acquisition of a wholly-owned Domestic Subsidiary (except any
                Excluded Subsidiary) or after a wholly-owned Domestic Subsidiary
                which was an Excluded Subsidiary (pursuant to clause (b) or (e)
                of the definition thereof) ceases to be such, duly execute and
                deliver, and cause each such wholly-owned Domestic Subsidiary
                and each direct and indirect parent of such wholly-owned
                Domestic Subsidiary (if it has not already done so) to duly
                execute and deliver, to the Collateral Agent a counterpart to
                the Security Agreement (in the form of the supplement attached
                as an exhibit thereto), with respect to the Equity Interests in
                and assets of such wholly-owned Domestic Subsidiary, to the
                extent contemplated by the Security Agreement, (B)

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                within 45 days after the formation or acquisition of a
                non-wholly-owned Domestic Subsidiary (except any Excluded
                Subsidiary), duly execute and deliver, and cause each direct and
                indirect Domestic Subsidiary which is a direct or indirect
                parent of such non-wholly-owned Domestic Subsidiary (if it has
                not already done so) to duly execute and deliver, to the
                Collateral Agent a counterpart to the Security Agreements (in
                the form of the supplement attached as an exhibit thereto), with
                respect to the Equity Interests held by the Borrower or such
                Domestic Subsidiaries in such non-wholly owned Domestic
                Subsidiary and (C) within 45 days after the formation or
                acquisition of a first-tier Special Purpose Subsidiary, duly
                execute and deliver, and cause each respective Domestic
                Subsidiary which is a direct parent of such Special Purpose
                Subsidiary (if it has not already done so) to duly execute and
                deliver to the Collateral Agent a counterpart to the Security
                Agreement (in the form of a supplement attached as an exhibit
                thereto) with respect to the Equity Interests held by the
                Borrower or such Domestic Subsidiaries in such Special Purpose
                Subsidiary.

                        (iii)   within 45 days after such formation or
                acquisition of a wholly-owned Domestic Subsidiary (except any
                Excluded Subsidiary) or after a wholly-owned Domestic Subsidiary
                which was an Excluded Subsidiary (pursuant to clause (b) or (e)
                of the definition thereof) ceases to be such, take, and cause
                such wholly-owned Domestic Subsidiary or such parent to take,
                whatever action (including, without limitation, the filing of
                Uniform Commercial Code financing statements, the giving of
                notices and the endorsement of notices on title documents) may
                be necessary or advisable in the opinion of the Collateral Agent
                to vest in the Collateral Agent valid and subsisting Liens on
                the properties purported to be subject to the pledges,
                assignments, security agreements and security agreement
                supplements delivered pursuant to this Section 7.01(i),
                enforceable against all third parties in accordance with their
                terms,

                        (iv)    within 60 days after such formation or
                acquisition of a wholly-owned Domestic Subsidiary (except any
                Excluded Subsidiary) or after a wholly-owned Domestic Subsidiary
                which was an Excluded Subsidiary (pursuant to clause (b) or (e)
                of the definition thereof) ceases to be such deliver to the
                Agent, upon the request of the Agent in its sole discretion, a
                signed copy of a favorable opinion (subject to customary
                qualifications, limitations and exceptions), addressed to the
                Agent and the other Lender Parties, of counsel for such Domestic
                Subsidiary as a Loan Party acceptable to the Agent as to the
                matters contained in clauses (i) and (ii) above, as to such
                guaranties, guaranty supplements, pledges, assignments, security
                agreements and security agreement supplements being legal, valid
                and binding obligations of the respective Domestic Subsidiary as
                a Loan Party thereto enforceable in accordance with their terms,
                as to the matters contained in clause (iii) above, as to such
                recordings, filings, notices, endorsements and other actions
                being sufficient to create valid perfected Liens on such
                properties, and as to such other matters as the Agent may
                reasonably request, which opinions shall be substantially
                equivalent to the opinions of counsel to the Loan Parties as to
                such matters delivered on the Effective Date, and

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                        (v)     at any time and from time to time, promptly
                execute and deliver any and all further instruments and
                documents and take all such other action as the Agent may deem
                necessary or desirable in obtaining the full benefits of, or in
                perfecting and preserving the Liens of, such guaranties,
                pledges, assignments, security agreements and security agreement
                supplements, to the extent required by this Agreement, the
                Security Agreement or the Subsidiary Guaranty.

        Provided that nothing in this Section 7.01(i) shall require any Excluded
        Subsidiary to guarantee the Obligations of any Loan Party hereunder or
        grant a Security Interest in any of its assets to secure the payment of
        such Obligations.

                (j)     Further Assurances.

                        (i)     Promptly upon request by the Agent, or any

                Lender Party through the Agent, correct, and cause each of its
                Subsidiaries promptly to correct, any material defect or error
                that may be discovered in any Loan Document or in the execution,
                acknowledgment, filing or recordation thereof.

                        (ii)    Within 30 days of the Borrower or any domestic
                Loan Party obtaining any rights in any trademarks or service
                marks, unless within such period such rights are transferred to
                a Special Purpose Subsidiary, the Borrower will, or will cause
                such Loan Party, to enter into such Security Agreements,
                Security Agreement Supplements and other documents and take such
                other actions, in each case as reasonably requested by the
                Collateral Agent so that the Collateral Agent will obtain a
                first priority security interest in such trademarks and service
                marks.

                        (iii)   Promptly upon request by the Agent, or any
                Lender Party through the Agent, do, execute, acknowledge,
                deliver, record, re-record, file, re-file, register and
                re-register any and all such further acts, pledge agreements,
                assignments, financing statements and continuations thereof,
                termination statements, notices of assignment, transfers,
                certificates, assurances and other instruments as the Agent, or
                any Lender Party through the Agent, may reasonably require from
                time to time in order to (A) carry out more effectively the
                purposes of the Loan Documents, (B) to the fullest extent
                permitted by applicable law, subject any Loan Party's
                properties, assets, rights or interests to the Liens now or
                hereafter intended to be covered by any of the Collateral
                Documents, (C) perfect and maintain the validity, effectiveness
                and priority of any of the Collateral Documents and any of the
                Liens intended to be created thereunder and (D) assure, convey,
                grant, assign, transfer, preserve, protect and confirm more
                effectively unto the Secured Parties the rights granted or now
                or hereafter intended to be granted to the Secured Parties under
                any Loan Document or under any other instrument executed in
                connection with any Loan Document to which any Loan Party is or
                is to be a party, and cause each of its Subsidiaries to do so.

                        (iv)    No later than sixty (60) days after the
                Effective Date, deliver to the Agent certified copies of
                resolutions of the board of directors (or persons performing
                similar functions) of each foreign Loan Party approving this

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                Agreement and each of the other Loan Documents to which it is or
                is to be a party, and of all documents evidencing other
                necessary Governmental Authorizations, if any, or other
                necessary consents, approvals, authorizations, notices, filings
                or actions, with respect to this Agreement and any of the other
                documents to which it is or is to be a party, together with a
                certificate of the Secretary or an Assistant Secretary (or
                equivalent officer) certifying the names of each such Loan Party
                authorized to sign each Loan Document to which it is or is to be
                a party and the other documents delivered hereunder and that its
                Constitutive Documents are still in force and effect, and if
                customarily available, with a certificate from the appropriate
                Governmental Authority as to the good standing of such Loan
                Party under the laws of the jurisdiction of its organization,
                with such resolutions and certificates, if in another language,
                to be translated into English. To the extent that such documents
                with respect to any foreign Loan Party are not delivered within
                the time period specified in this Section 7.01(j)(iv) and
                thereafter until such documents are delivered to the Agent, (A)
                in the case of a Subsidiary Borrower, such Subsidiary Borrower
                may not request, and no Swing Line Lender shall make to such
                Subsidiary Borrower, any Swing Line Advance; and (B) in the case
                of an LC Subsidiary, such LC Subsidiary may not request the
                Issuance of, and no Issuing Bank shall Issue, any Letter of
                Credit for its account, and (x) the failure to make such
                deliveries shall not constitute a Default or Event of Default
                hereunder and (y) the remedies provided in clauses (A) and (B)
                of this Section 7.01(j)(iv) are the exclusive remedies for the
                failure to timely deliver the respective documents herein
                referred to.

                (k)     Use of Proceeds. Use the proceeds of the Advances and
        issuances of Letters of Credit solely to repay amounts owing under the
        Existing Credit Agreement and for general corporate purposes of the
        Borrower and its Subsidiaries.

                SECTION 7.02 Negative Covenants. The Borrower will not, without
the written consent of the Majority Lenders:

                (a)     Liens, Etc. Create or suffer to exist, or permit any of
        its Subsidiaries to create or suffer to exist, any Lien (including an
        assignment of any right to receive income), other than:

                        (i)     Permitted Liens;

                        (ii)    Liens upon or in any real property, equipment,
                fixed asset or capital asset acquired, constructed, improved or
                held by the Borrower or any Subsidiary in the ordinary course of
                business to secure the cost of acquiring, constructing or
                improving such property, equipment or asset or to secure Debt
                incurred solely for the purpose of financing the acquisition of
                such property, equipment or asset, or Liens existing on such
                property, equipment or asset at the time of its acquisition
                (other than any such Liens created in contemplation of such
                acquisition, construction or improvement that were not incurred
                to finance the acquisition, construction or improvement of such
                property, equipment or asset) or extensions, renewals or
                replacements of any of the foregoing for the same or a

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                lesser amount, provided, however, that no such Lien shall extend
                to or cover any properties of any character other than the real
                property, equipment or asset being acquired, constructed or
                improved, and no such extension, renewal or replacement shall
                extend to or cover any properties not theretofore subject to the
                Lien being extended, renewed or replaced,

                        (iii)   Liens upon existing real property interests of
                the Borrower or any of its Subsidiaries to secure Debt in an
                aggregate principal amount not in excess of $600,000,000, less
                (without duplication) the value of real property interests sold
                as contemplated by Section 7.02(g)(iv) hereof,

                        (iv)    Liens existing on property prior to the
                acquisition thereof by the Borrower or any of its Subsidiaries
                in the ordinary course of business or on property of a Person
                existing at the time such Person is merged into or consolidated
                with the Borrower or any Subsidiary of the Borrower or becomes a
                Subsidiary of the Borrower; provided that such Liens were not
                created in contemplation of such merger, consolidation or
                acquisition and do not extend to any other assets of the
                Borrower or such Subsidiary, and the replacement, extension or
                renewal of any such Lien upon or in the same property subject
                thereto or the replacement, extension or renewal (without
                increase in the amount, shortening the maturity or change in any
                direct or contingent obligor if such change would be adverse to
                the Borrower) of the Debt permitted hereunder secured thereby,

                        (v)     Liens arising pursuant to the LC Facilities
                securing obligations in respect of letters of credit issued
                thereunder in an aggregate amount outstanding at any time not in
                excess of the maximum amount of letters of credit available to
                be issued under the LC Facilities on the date of this Agreement,

                        (vi)    Liens securing obligations, in an aggregate
                amount outstanding at any time not in excess of $400,000,000,
                arising under or from letters of credit issued (and outstanding)
                for the account of the Borrower or any of its Subsidiaries, and

                        (vii)   other Liens securing Debt and Hedge Agreements,
                provided that the aggregate amount of the Obligations secured
                thereby does not exceed $70,000,000 at any time outstanding.

                (b)     Debt. Permit any of its Subsidiaries to create, incur,
        assume or suffer to exist, any Debt, except:

                        (i)     Debt under the Loan Documents;

                        (ii)    Debt under the LC Facilities and in respect of
                the letters of credit referred to in Section 7.02(a)(vi) hereof;

                        (iii)   Debt existing on the Effective Date and
                described on Schedule XIII hereto;

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                        (iv)    Debt of any Subsidiary of the Borrower which is
                not a Guarantor owed to any other such Subsidiary, and Debt of a
                Guarantor owed to the Borrower or any Subsidiary of the
                Borrower;

                        (v)     Debt incurred after the date of this Agreement
                and secured by Liens expressly permitted under Section
                7.02(a)(ii) hereof in an aggregate principal amount not to
                exceed, when aggregated with the principal amount of all Debt
                incurred under clause (vi) of this Section 7.02(b), $50,000,000
                any time outstanding;

                        (vi)    Capitalized Leases incurred after the date of
                this Agreement which, when the principal amount thereof is
                aggregated with the principal amount of all Debt incurred under
                clause (v) of this Section 7.02(b), do not exceed $50,000,000 at
                any time outstanding;

                        (vii)   Unsecured Debt not otherwise permitted under
                this Section 7.02(b) in an aggregate amount not to exceed
                $200,000,000 at any time outstanding;

                        (viii)  Endorsement of negotiable instruments for
                deposit or collection or similar transactions in the ordinary
                course of business;

                        (ix)    Debt referred to in Section 7.02(a)(iii) hereof
                in a principal amount not in excess of the amount referred to
                therein;

                        (x)     Debt extending the maturity of, or refunding,
                refinancing or replacing, in whole or in part, any Debt incurred
                under clause (iii) of this Section 7.02(b); provided, however,
                that (A) the aggregate principal amount of such extended,
                refunding, refinancing or replacement Debt shall not be
                increased above the principal amount thereof and the premium, if
                any, thereon outstanding immediately prior to such extension,
                refunding, refinancing or replacement, (B) the direct and
                contingent obligors therefor shall not be changed as a result of
                or in connection with such extension, refunding, refinancing or
                replacement if such change would be adverse to the interests of
                the Borrower, (C) such extended, refunding, refinancing or
                replacement Debt shall not mature prior to the stated maturity
                date or mandatory redemption date of the Debt being so extended,
                refunded, refinanced or replaced, and (D) if the Debt being so
                extended, refunded, refinanced or replaced is subordinated in
                right of payment or otherwise to the Obligations or any of the
                Borrower's Subsidiaries under and in respect of the Loan
                Documents, such extended, refunding, refinancing or replacement
                Debt shall be subordinated to such Obligations to at least the
                same extent;

                        (xi)    Guarantees by a Guarantor of Debt of another
                Guarantor permitted hereunder or Guarantees by a Subsidiary of
                the Borrower which is not a Guarantor of Debt permitted
                hereunder of a Guarantor or of another such Subsidiary; and

                        (xii)   Debt of any Subsidiary of the Borrower which is
                not a Guarantor owed to the Borrower or a Guarantor in an
                outstanding principal amount, when

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                combined with the aggregate purchase price of securities and
                dollar amount of capital contributions made pursuant to Section
                7.02(d)(ii) hereof, not in excess of the then applicable
                limitation on Investments in such Section.

                (c)     Mergers, Etc.  Merge or consolidate with or into, or
        convey, transfer, lease or otherwise dispose of (whether in one
        transaction or in a series of transactions) all or substantially all of
        its assets (whether now owned or hereafter acquired) to, any Person, or
        permit any of its Subsidiaries to do so, except (i) that any Guarantor
        may merge or consolidate with or into, or dispose of assets to, any
        other Guarantor or the Borrower, (ii) that any Subsidiary of the
        Borrower (which is not a Guarantor but including a Special Purpose
        Subsidiary) may merge or consolidate with or into, or dispose of assets
        to, any other Subsidiary of the Borrower or the Borrower and (iii) as
        otherwise provided in Section 7.02(d) or (g) hereof. Notwithstanding any
        other provision of this Agreement, (x) a Subsidiary that is not a
        Guarantor may liquidate or dissolve if the Borrower determines in good
        faith that such liquidation or dissolution is in the best interests of
        the Borrower and (y) a Guarantor may liquidate or dissolve if the
        Borrower determines in good faith that such liquidation or dissolution
        is in the best interests of the Borrower and the assets or proceeds from
        the liquidation or dissolution of such Guarantor are transferred to the
        Borrower or another Guarantor.

                (d)     Acquisition, Investments.

                        (i)     Acquisitions.  Without limitation of Section
                7.02(c) above or Section 7.02(d)(ii) below, purchase, or permit
                any of its Subsidiaries to purchase, all or substantially all
                the assets of any Person (which is not a Loan Party) or merge or
                consolidate with, or permit any Subsidiary to merge or
                consolidate with, any Person (which is not a Loan Party) (in
                each case, an "Acquisition") unless (A) each such Acquisition is
                for the purchase of Retail Assets and the purchase price in
                respect of any such Acquisition is less than 10% for each year
                of the initial two-year period beginning on the Effective Date,
                and 15% for the third year of this Agreement, of the amount
                equal to the "stockholders' equity" of the Borrower (as
                reflected in the respective financial statements delivered to
                the Lenders) as of end of the Fiscal Quarter immediately
                preceding such Acquisition less the aggregate purchase price in
                respect of all Acquisitions during the period from the Effective
                Date to the date of such Acquisition, (B) immediately prior to
                and after giving effect to such Acquisition no Event of Default
                or Default shall exist, and (C) in the case of any merger or
                consolidation, the Borrower or such Subsidiary is the surviving
                entity, except in the case of any Subsidiary to the extent
                permitted by Section 7.02(g) hereof.

                        (ii)    Investments.  Without limitation of Section
                7.02(c) above or Section 7.02(j) below, make, or permit any of
                its Subsidiaries to make, an investment in any Person by way of
                the purchase of such Person's capital stock or securities or the
                making of capital contributions with respect thereto (an
                "Investment") unless (A) each such Investment is in a Person
                predominantly engaged in the Retail Business or is in a
                Subsidiary of the Borrower and the purchase price and dollar
                amount of capital contributions made with respect to

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                any such Investment is less than 10% for each year of the
                initial two-year period beginning on the Effective Date, and 15%
                for the third year of this Agreement, in each case (for each
                such year) reduced by the principal amount of the Debt then
                outstanding and incurred (for such year) under Section
                7.02(b)(xii) hereof, of the amount equal to the "stockholders'
                equity" of the Borrower (as reflected in the respective
                financial statements delivered to the Lenders) as of the end of
                the Fiscal Quarter immediately preceding such Investment less
                the aggregate purchase price and dollar amount of capital
                contributions made with respect to all Investments during the
                period from the Effective Date to the date of such Investment
                and (B) at the time such Investment is initially announced, such
                Investment is made with the permission of the Board of Directors
                of the Person in whom the Investment is being made and
                immediately prior to and after giving effect to such Investment
                no Event of Default or Default shall exist, provided, that this
                Section 7.02(d)(ii) shall not permit any transaction otherwise
                prohibited by Section 7.02(f) hereof. The foregoing limitation
                shall not restrict (v) the Borrower's and its Subsidiaries'
                ability to form a Subsidiary in which the Borrower or any
                Subsidiary owns, individually or collectively, all of the
                capital stock, securities or other ownership interests of such
                Subsidiary, (w) Investments by the Borrower or a Guarantor in
                any other Guarantor which is a Subsidiary of the Borrower or
                such Guarantor, (x) Investments by a Subsidiary of the Borrower
                which is not a Guarantor in any of the Borrower's Subsidiaries,
                (y) the Borrower's and its Subsidiaries' ability to make an
                investment in the instruments described in Schedule VII hereto
                (provided, that with respect to securities of tax-exempt
                issuers, the Borrower and its Subsidiaries will use commercially
                reasonable efforts to invest in such securities rated Aa by
                Moody's or AA by S&P) as such Schedule may be amended from time
                to time by the Borrower with consent of the Agent or to make any
                Investments specifically permitted pursuant to the LC Facilities
                or (z) the conversion of Debt of a Subsidiary of the Borrower
                which is not a Guarantor owed to the Borrower or a Guarantor
                identified on Schedule XIII to common Equity Interests of such
                Subsidiary. The Borrower shall provide the Agent and each Lender
                a copy of each change or amendment made to Schedule VII hereto
                promptly after each such change or amendment thereof.

                (e)     Change in Nature of Business.  Make any material change
        in the nature of the business of the Borrower and its Subsidiaries as
        conducted as of the date hereof.

                (f)     Restricted Payments.  Declare or pay any dividends,
        purchase, redeem, retire, defease or otherwise acquire for value any of
        its Equity Interests now or hereafter outstanding, return any capital to
        its stockholders, partners or members (or the equivalent Persons
        thereof) as such, make any distribution of assets, Equity Interests,
        obligations or securities to its stockholders, partners or members (or
        the equivalent Persons thereof) as such, or permit any of its
        Subsidiaries to do any of the foregoing, or permit any of its
        Subsidiaries to purchase, redeem, retire, defease or otherwise acquire
        for value any Equity Interests in the Borrower, except that, so long as
        no Default shall have occurred and be continuing at the time of any
        action described below or would result therefrom:

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                        (i)     the Borrower may (A) declare and pay dividends
                and distributions, or make other purchases or redemptions,
                payable either (1) in its common Equity Interests or (2) in cash
                dividends in respect of each share of its common stock in an
                amount with respect to such cash dividends not in excess of
                $.0888 per year per share, with such per share amount to be
                adjusted ratably in respect of common stock distributions to
                holders of its Equity Interests, recapitalizations, stock splits
                or any similar event, (B) purchase, redeem, retire, defease or
                otherwise acquire Equity Interests with the proceeds received
                contemporaneously from the issue of new Equity Interests with
                equal or inferior voting powers, designations, preferences and
                rights, provided, that with respect to Equity Interests that
                also constitute Funded Debt, such transaction shall also be
                permitted to the extent provided in Section 7.02(j) hereof, and
                (C) repurchase its Equity Interests owned by management or
                employees and consultants under contract with the Borrower or
                any of its Subsidiaries in an amount not in excess of
                $10,000,000 in the aggregate for all such repurchases in any
                twelve month period;

                        (ii)    any Subsidiary of the Borrower may declare and
                pay or make dividends and other distributions (A) to the
                Borrower or any other Loan Party and (B) to a Subsidiary of any
                Loan Party (including, without limitation, in connection with
                any transaction permitted by Section 7.02(c) hereof);

                        (iii)   any of the non-wholly owned Subsidiaries of the
                Borrower may declare and pay or make dividends and other
                distributions to its shareholders, partners or members (or the
                equivalent persons thereof) generally so long as the Borrower
                and each of the Subsidiaries that own any of the Equity
                Interests therein receive at least their respective
                proportionate shares of any such dividend, distribution (based
                on upon their relative holdings of the Equity Interests therein
                and taking into account the relative preferences, if any, of the
                various classes of the Equity Interests therein); and

                        (iv)    the Borrower and any of its Subsidiaries may
                purchase, redeem, retire, defease or otherwise acquire any of
                its Equity Interests in any transaction permitted by Section
                7.02(j) hereof.

                (g)     Sale of Assets. Sell, lease, transfer or otherwise
        dispose of, or permit any of its Subsidiaries to sell, lease, transfer
        or otherwise dispose of, any assets, or grant any option or other right
        to purchase, lease or otherwise acquire any assets, except:

                        (i)     the Borrower and its Subsidiaries may sell
                inventory in the ordinary course of business;

                        (ii)    (A) the Borrower may sell, lease, transfer or
                otherwise dispose of any of its property or assets to any
                Guarantor or, to the extent permitted by Section 7.02(i) hereof,
                to any Special Purpose Subsidiary, (B) any Guarantor may sell,
                lease, transfer or otherwise dispose of any of its property or
                assets to the Borrower or any other Guarantor or, to the extent
                permitted by Section 7.02(i) hereof, to any Special Purpose
                Subsidiary, and (C) any Subsidiary of the

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                Borrower which is not a Guarantor may sell, lease transfer or
                otherwise dispose of any of its property or assets to the
                Borrower, any Guarantor or to any other such Subsidiary;

                        (iii)   the Borrower and its Subsidiaries may, directly
                or indirectly through the Borrower or one or more of its
                Subsidiaries, sell, lease, transfer or otherwise dispose of any
                obsolete, damaged or worn-out property or any other property
                that is otherwise no longer useful in the conduct of their
                business;

                        (iv)    the Borrower and its Subsidiaries may sell real
                property interests as part of one or more sale leaseback
                transactions provided that the value of such real property
                interests shall not be in excess of $600,000,000 less, without
                duplication, the amount of Debt incurred as contemplated by
                Section 7.02(a)(iii) hereof;

                        (v)     the Borrower and its Subsidiaries may sell cash
                equivalents and other instruments described in Schedule VII
                hereto in which it has invested from time to time; and

                        (vi)    the Borrower and its Subsidiaries may sell,
                lease, transfer or otherwise dispose of property and assets not
                otherwise permitted pursuant to this Section 7.02(g) hereof so
                long as the aggregate net book value of all of the property and
                assets of the Borrower and its Subsidiaries sold, leased,
                transferred or otherwise disposed of pursuant to this clause
                (vi) in any year does not exceed 15% of the net book value of
                the Total Assets of the Borrower and its Subsidiaries as of the
                beginning of such year, provided, that, the gross proceeds
                received from such sale, lease, transfer or other disposition
                shall be at least equal to the fair market value of the property
                and assets so sold, transferred or otherwise disposed of,
                determined at the time of such sale, lease, transfer or other
                disposition.

                (h)     Hedge Agreements.  Enter into, or permit any of its
        Subsidiaries to enter into, after the date hereof any Hedge Agreement,
        except that the Borrower or any Hedge Subsidiary may enter into ordinary
        course non-speculative interest rate or currency swaps or exchange
        agreements with a tenor, in the case of such currency agreements, not in
        excess of two years and, in the case of such interest rate agreements,
        not in excess of ten years, in each case from the date the Borrower or
        such Hedge Subsidiary enters into any such agreement, provided, that, at
        the time the Borrower or Hedge Subsidiary enters into any such Hedge
        Agreement, and after giving effect thereto, the amount of Advances then
        available to the Borrower under Section 2.01(a) hereof is not less than
        the then outstanding Hedge Agreements Exposure, provided, further, that
        at the time the Borrower or any Hedge Subsidiary enters into any such
        Hedge Agreement with any Lender or Affiliate thereof, such Lender or
        Affiliate is then a party to the Intercreditor Agreement.

                (i)     Special Purpose Subsidiaries. Transfer any property or
        assets (other than trademarks and service marks) or make any capital
        contribution (other than in the ordinary course of business), or permit
        any other Loan Party to transfer any property or assets (other than
        trademarks and service marks) or make any capital contribution (other

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        than in the ordinary course of business), to any Special Purpose
        Subsidiary, except as provided in Section 7.02(g)(iii) hereof; or permit
        any Special Purpose Subsidiary to engage in any material activities
        other than those of the type conducted as of the date hereof or to incur
        any Liens or to incur any obligations to third parties other than
        obligations of an amount and of a nature not materially greater or
        different than those incurred prior to the date hereof; or modify or
        amend any, or permit any other Loan Party to modify or amend any,
        royalty or similar agreements with any Special Purpose Subsidiary
        (except changes in connection with Requirements of Law) if such
        modification or amendment would materially increase the financial
        obligations of the Borrower or such Loan Party thereunder in excess of
        its financial obligations on the date hereof, or enter into, or permit
        any other Loan Party to enter into, a royalty or similar agreement with
        any Special Purpose Subsidiary which contains financial obligations of
        the Borrower or such Loan Party materially more burdensome (other than
        additional financial obligations resulting from changes in connection
        with Requirements of Law) than in such agreements on the date hereof; or
        permit any Special Purpose Subsidiary to transfer any assets to any
        Person other than a Loan Party or another Special Purpose Subsidiary (or
        to a Subsidiary of the Borrower that becomes or otherwise qualifies as a
        Special Purpose Subsidiary as a result of any such transfer), except for
        transfers in the ordinary course of business of such Special Purpose
        Subsidiary as conducted prior to the date hereof; provided, that,
        notwithstanding any other provision of this Agreement, any Loan Party or
        any Subsidiary thereof may convey or otherwise transfer trademarks and
        service marks to a Special Purpose Subsidiary (or to a Subsidiary of the
        Borrower that becomes or otherwise qualifies as a Special Purpose
        Subsidiary as a result of any such transfer).

                (j)     Prepayment, Etc. of Debt. Prepay, redeem, purchase,
        defease or otherwise satisfy prior to the scheduled maturity thereof in
        any manner, in each case in whole or in part (each an "Early
        Redemption"), any Funded Debt, except (i) Early Redemptions of Funded
        Debt during the term of this Agreement in an aggregate principal amount
        not in excess of $1,000,000,000 (the "Maximum Repurchase Amount"),
        provided, that, the Maximum Repurchase Amount shall be reinstated to the
        extent of any proceeds received by the Borrower or any of its
        Subsidiaries from the issuance of Funded Debt or Equity Interests not
        more than 90 days after any such Early Redemption, provided, that any
        such Funded Debt shall not have a stated maturity or have any scheduled
        mandatory principal redemption, sinking fund, repayment or similar
        payments prior to the Termination Date; (ii) any Early Redemption of
        Funded Debt with proceeds received by the Borrower or any of its
        Subsidiaries from the issuance of Funded Debt or Equity Interests within
        90 days prior to such Early Redemption, provided, that any such Debt
        shall not have a stated maturity or have any scheduled mandatory
        principal redemption, sinking fund, repayment or similar payments prior
        to the Termination Date; (iii) payments of regularly scheduled principal
        or interest, or other amounts as and when due (including, without
        limitation, any mandatory prepayments or redemptions); or (iv) any Early
        Redemption of Funded Debt made solely with common Equity Interests.

                SECTION 7.03 Financial Covenants. So long as any Advance or any
other Obligation of any Loan Party under any Loan Document shall remain unpaid,
any Letter of

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Credit shall be outstanding or any Lender Party shall have any Commitment
hereunder, the Borrower will, unless it has the written consent of the Majority
Lenders to do otherwise:

                (a)     Leverage Ratio. Maintain a Leverage Ratio as of the last
        day of each Fiscal Quarter, determined on the basis of the most recently
        completed four consecutive Fiscal Quarters ending on such day, of not
        greater than 5.00:1.00.

                (b)     Fixed Charge Coverage Ratio. Maintain a Fixed Charge
        Coverage Ratio as of the last day of each Fiscal Quarter set forth
        below, determined on the basis of the most recently completed four
        consecutive Fiscal Quarters ending on such day, of not less than the
        amount set forth below opposite such Fiscal Quarter:

     FISCAL QUARTER                                     RATIO
-------------------------                             ---------
Second Fiscal Quarter 2003                            1.75:1.00
Third Fiscal Quarter 2003                             1.75:1.00
Fourth Fiscal Quarter 2003                            1.75:1.00
First Fiscal Quarter 2004                             1.90:1.00
Second Fiscal Quarter 2004                            1.90:1.00
Third Fiscal Quarter 2004                             1.90:1.00
Fourth Fiscal Quarter 2004                            1.90:1.00
First Fiscal Quarter 2005                             2.00:1.00
Second Fiscal Quarter 2005                            2.00:1.00
Third Fiscal Quarter 2005                             2.00:1.00
Fourth Fiscal Quarter 2005                            2.00:1.00
First Fiscal Quarter 2006                             2.00:1.00
Second Fiscal Quarter 2006                            2.00:1.00

                (c)     Maximum Capital Expenditures.  Not make Capital
        Expenditures, and cause its Subsidiaries not to make Capital
        Expenditures, in any Fiscal Year in an aggregate amount for the Borrower
        and its Subsidiaries in excess of $625,000,000.

                SECTION 7.04 Reporting Requirements. The Borrower will furnish
to the Lenders:

                        (i)     as soon as available and in any event within 45
                days after the end of each of the first three Fiscal Quarters of
                the Borrower, Consolidated balance sheets of the Borrower and
                its Subsidiaries as of the end of such Fiscal Quarters and
                Consolidated statements of income and retained earnings of the
                Borrower and its Subsidiaries for the period commencing at the
                end of the previous Fiscal Year

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                and ending with the end of such Fiscal Quarter, certified by the
                chief financial officer or treasurer of the Borrower and
                accompanied by a certificate of said officer stating (i) that
                such have been prepared in accordance with generally accepted
                accounting principles, (ii) whether or not he or she has
                knowledge of the occurrence of any Event of Default or Default
                and, if so, stating in reasonable detail the facts with respect
                thereto and (iii) whether or not the Borrower is in compliance
                with the requirements set forth in Section 7.03 hereof (which
                certificate shall contain the computations used by such chief
                financial officer or treasurer in determining such compliance or
                non-compliance and shall be in the form of the Compliance
                Certificate attached hereto as Exhibit I);

                        (ii)    as soon as available and in any event within 90
                days after the end of each Fiscal Year of the Borrower, a copy
                of the annual report for such year for the Borrower and its
                Subsidiaries, containing Consolidated financial statements of
                the Borrower and its Subsidiaries for such Fiscal Year certified
                by Deloitte & Touche LLP or other independent public accountants
                reasonably acceptable to the Majority Lenders;

                        (iii)   within 90 days after the end of each Fiscal Year
                of the Borrower, a certificate of the chief financial officer or
                treasurer of the Borrower stating (i) whether or not he or she
                has knowledge of the occurrence of any Event of Default or
                Default and, if so, stating in reasonable detail the facts with
                respect thereto, and (ii) whether or not the Borrower is in
                compliance with the requirements set forth in Section 7.03
                hereof (which certificate shall contain the computations used by
                such chief financial officer or treasurer in determining such
                compliance or non-compliance and shall be in the form of the
                Compliance Certificate attached hereto as Exhibit I);

                        (iv)    as soon as possible and in any event within five
                days after a Responsible Officer becomes aware of each Event of
                Default and Default, a statement of a Responsible Officer of the
                Borrower setting forth details of such Event of Default or
                Default and the action which the Borrower has taken and proposes
                to take with respect thereto;

                        (v)     promptly after the sending or filing thereof,
                copies of all reports which the Borrower sends to any of its
                security holders, and copies of all reports and registration
                statements which the Borrower or any Subsidiary files with the
                Securities and Exchange Commission (the "SEC") or any national
                securities exchange;

                        (vi)    promptly after the filing or receiving thereof,
                copies of all reports and notices which the Borrower or any
                Subsidiary files under ERISA with the Internal Revenue Service
                or the Pension Benefit Guaranty Corporation or the U.S.
                Department of Labor or which the Borrower or any Subsidiary
                receives from such entities other than immaterial regular
                periodic notices and reports and notices and reports of general
                circulation;

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                        (vii)   within 90 days after the end of each Fiscal Year
                of the Borrower, a summary, prepared by a Responsible Officer of
                the Borrower, of the Borrower's (and its Subsidiaries') major
                insurance coverages (and the amount of self-insurance) then in
                effect;

                        (viii)  within 30 days after the end of each Fiscal
                Quarter of the Borrower, a schedule of each Hedge Agreement
                outstanding as at the end of each Fiscal Quarter, containing
                calculations in reasonable detail used in determining the Hedge
                Agreements Exposure, if any, as of the end of such Fiscal
                Quarter; and

                        (ix)    within 30 days after the end of Fiscal Year
                2003, projections for Fiscal Year 2004, and within 30 days after
                the end of Fiscal Year 2004, projections for Fiscal Year 2005,
                in each case prepared on the basis of the most current
                information then available to the Borrower in substantially the
                same format and containing substantially the same types of
                information as the projections for Fiscal Year 2003 which were
                set forth in the Information Memorandum and with the projections
                to be prepared on a quarterly basis; and

                        (x)     such other information respecting the condition
                or operations, financial or otherwise, of the Borrower or any of
                its Subsidiaries as any Issuing Bank, or any Lender through the
                Agent, may from time to time reasonably request, including,
                without limitation, the condition, status or other information
                relating to the Collateral as provided in Section 7(c) of the
                Security Agreement.

Notwithstanding the foregoing, the financial statements required to be delivered
by the Borrower pursuant to clauses (i) and (ii) above and the reports and
statements required to be delivered by the Borrower pursuant to clause (v) above
shall be deemed to have been delivered on the date on which the Borrower posts
reports containing such financial statements or other materials on the
Borrower's website on the internet at "www.gapinc.com" or when such reports
containing such financial statements or other materials are posted on the SEC's
website on the internet at "www.sec.gov"; provided, however, that the Borrower
shall deliver paper copies of such financial statements or other materials to
any Lender who so requests until the Borrower receives written notice from such
Lender to cease delivering paper copies.

                                  ARTICLE VIII

                                EVENTS OF DEFAULT

                SECTION 8.01 Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:

                (a)     Any Loan Party shall fail to pay any principal of any
        Advance or any reimbursement obligation under any Letter of Credit when
        the same becomes due and payable; or shall fail to pay any interest on
        any Advance, fees or any other amounts hereunder within five days after
        the same become due and payable by it; or

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                (b)      Any representation or warranty made by any Loan Party
        in any Loan Document (whether made on behalf of itself or otherwise) or
        by any Loan Party (or any of its officers) in connection with any Loan
        Document shall prove to have been incorrect in any material respect when
        made; or

                (c)     Any Loan Party shall fail to perform or observe (i) any
        covenant contained in Section 7.02 or 7.03 hereof or Section 4, 5 or 12
        of the Security Agreement (to the extent such Loan Party is a party
        thereto); or (ii) such other term, covenant or agreement contained in
        any Loan Document on its part to be performed or observed if the failure
        to perform or observe such other term, covenant or agreement shall
        remain unremedied for 30 days after written notice thereof shall have
        been given to such Loan Party by an Issuing Bank, the Agent or any
        Lender; or

                (d)     Any Loan Party shall fail to pay any principal of or
        premium or interest on any Debt which is outstanding in a principal
        amount of at least $50,000,000 in the aggregate (but excluding Debt
        hereunder) of such Loan Party or any Obligations under any Hedge
        Agreement to which it is a party, with a "Hedge Principal Amount" (as
        hereinbelow defined) of not less than $50,000,000, when the same becomes
        due and payable (whether by scheduled maturity, required prepayment,
        acceleration, demand or otherwise), and such failure shall continue
        after the applicable grace period, if any, specified in the agreement or
        instrument relating to such Debt or in such Hedge Agreement; or any
        other event shall occur or condition shall exist under any agreement or
        instrument relating to any such Debt or in such Hedge Agreement and
        shall continue after the applicable grace period, if any, specified in
        such agreement or instrument, if the effect of such event or condition
        is to accelerate, or to permit the acceleration of, the maturity of such
        Debt or in such Hedge Agreement; or any such Debt shall be declared to
        be due and payable, or required to be prepaid (other than by a regularly
        scheduled required prepayment), redeemed, purchased or defeased, or an
        offer to prepay, redeem, purchase or defease such Debt shall be required
        to be made as a result of a default thereunder, in each case prior to
        the stated maturity thereof or the Obligations under such Hedge
        Agreement shall be accelerated (for purposes of this paragraph, "Hedge
        Principal Amount" in respect of any Hedge Agreement at any time shall be
        the maximum aggregate amount (after giving effect to any netting
        arrangements) that the respective Loan Party would be required to pay if
        such Hedge Agreement were terminated at such time); or

                (e)     Any Loan Party shall generally not pay its debts as such
        debts become due, or shall admit in writing its inability to pay its
        debts generally, or shall make a general assignment for the benefit of
        creditors; or any proceeding shall be instituted by or against any Loan
        Party seeking to adjudicate it a bankrupt or insolvent, or seeking
        liquidation, winding up, reorganization, arrangement, adjustment,
        protection, relief, or composition of it or its debts under any law
        relating to bankruptcy, insolvency or reorganization or relief of
        debtors, or seeking the entry of an order for relief or the appointment
        of a receiver, trustee, custodian or other similar official for it or
        for any substantial part of its property and, in the case of any such
        proceeding instituted against it (but not instituted by it), either such
        proceeding shall remain undismissed or unstayed for a period of 60 days,
        or any of the actions sought in such proceeding (including, without

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        limitation, the entry of an order for relief against, or the appointment
        of a receiver, trustee, custodian or other similar official for, it or
        for any substantial part of its property) shall occur; or any Loan Party
        shall take any corporate action to authorize any of the actions set
        forth above in this subsection (e); or

                (f)     One or more judgments or orders for the payment of money
        in excess of $50,000,000 in the aggregate shall be rendered against any
        Loan Party and either (i) enforcement proceedings shall have been
        commenced by any creditor upon such judgment or order or (ii) there
        shall be any period of forty-five (45) consecutive days during which a
        stay of enforcement of such judgment or order, by reason of a pending
        appeal or otherwise, shall not be in effect; provided, however, that any
        such judgment or order shall not give rise to an Event of Default under
        this Section 8.01(f) if and so long as (A) the amount of such judgment
        or order which remains unsatisfied is covered by a valid and binding
        policy of insurance between the respective Loan Party and the insurer
        covering full payment of such unsatisfied amount and (B) such insurer
        has been notified, and has not disputed the claim made for payment, of
        the amount of such judgment or order; or

                (g)     A Change of Control shall have occurred; or

                (h)     Any material provision of any of the Loan Documents
        after delivery thereof pursuant to Sections 5.01, 7.01(i) or 7.01(j)
        hereof shall for any reason (other than pursuant to the terms thereof)
        cease to be valid and binding on or enforceable against any of the Loan
        Parties intended to be a party to it, or any such Loan Party shall so
        state in writing; or

                (i)     Any Collateral Document after delivery thereof pursuant
        to Sections 5.01, 7.01(i) or 7.01(j) hereof shall for any reason (other
        than pursuant to the terms thereof) cease to create a valid and
        perfected Lien on any material portion of the Collateral purported to be
        covered thereby subject only to Liens permitted thereby; or

                (j)     Any of the following events or conditions shall have
        occurred and such event or condition, when aggregated with any and all
        other such events or conditions set forth in this subsection (j), has
        resulted or is reasonably expected to result in liabilities of the Loan
        Parties and/or the ERISA Affiliates in an aggregate amount that would
        have a Material Adverse Effect:

                        (i)     any ERISA Event shall have occurred with respect
                to a Plan; or

                        (ii)    any of the Loan Parties or any of the ERISA
                Affiliates shall have been notified by the sponsor of a
                Multiemployer Plan that it has incurred Withdrawal Liability to
                such Multiemployer Plan; or

                        (iii)   any of the Loan Parties or any of the ERISA
                Affiliates shall have been notified by the sponsor of a
                Multiemployer Plan that such Multiemployer Plan is in
                reorganization, is insolvent or is being terminated, within the
                meaning of Title IV of ERISA, and, as a result of such
                reorganization, insolvency or termination, the aggregate annual
                contributions of the Loan Parties and the

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                ERISA Affiliates to all of the Multiemployer Plans that are in
                reorganization, are insolvent or being terminated at such time
                have been or will be increased over the amounts contributed to
                such Multiemployer Plans for the plan years of such
                Multiemployer Plans immediately preceding the plan year in which
                such reorganization, insolvency or termination occurs; or

                        (iv)    any "accumulated funding deficiency" (as defined
                in Section 302 of ERISA and Section 412 of the Internal Revenue
                Code), whether or not waived, shall exist with respect to one or
                more of the Plans; or

                        (v)     or any Lien shall exist on the property and
                assets of any of the Loan Parties or any of the ERISA Affiliates
                in favor of the PBGC,

then, and in any such event, the Agent shall at the request, or may with the
consent, of the Majority Lenders, by notice to the Borrower, (A) declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, (B) declare the Advances, all interest thereon and
all other amounts payable under this Agreement to be forthwith due and payable,
whereupon the Advances, all such interest and all such amounts shall become and
be forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower,
(C) declare the obligation of the Issuing Banks to issue further Letters of
Credit to be terminated, whereupon the same shall forthwith terminate, and/or
(D) demand from time to time that the Borrower, and if such demand is made the
Borrower shall, pay to the Agent for the benefit of the Issuing Banks, an amount
in immediately available funds equal to the then outstanding Letter of Credit
Liability (plus the additional amounts specified by Section 3.12(c) hereof, if
applicable) which shall be held by the Agent (or the applicable Issuing Bank) as
cash collateral in a cash collateral account under the exclusive control and
dominion of the Agent (or applicable Issuing Bank) and applied to the reduction
of such Letter of Credit Liability as drawings are made on outstanding Letters
of Credit; provided, however, that in the event of an actual or deemed entry of
an order for relief with respect to any Loan Party under the Federal Bankruptcy
Code, the obligation of each Lender to make Advances shall automatically be
terminated, the then outstanding Advances, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Borrower and the obligation of the Issuing Bank to Issue Letters
of Credit shall automatically be terminated.

                                   ARTICLE IX

                                    THE AGENT

                SECTION 9.01 Authorization and Action. Each Lender and each
Issuing Bank hereby appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Advances), the Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining

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from acting) upon the instructions of the Majority Lenders, and such
instructions shall be binding upon all Lenders; provided, however, that the
Agent shall not be required to take any action which exposes the Agent to
personal liability or which is contrary to this Agreement or applicable law. The
Agent agrees to give to each Lender prompt notice of each notice given to it by
the Borrower pursuant to the terms of this Agreement and any other Loan Document
unless the distribution of such notice is otherwise provided for herein or
therein.

                Each Issuing Bank shall act on behalf of the Lenders with
respect to any Letters of Credit Issued by it and the documents associated
therewith until such time and except for so long as the Agent may elect to act
for each Issuing Bank with respect thereto; provided, however, that such Issuing
Bank shall have all of the benefits and immunities (i) provided to the Agent in
this Article IX with respect to any acts taken or omissions suffered by such
Issuing Bank in connection with Letters of Credit Issued by it or proposed to be
Issued by it and the applications and agreements for letters of credit
pertaining to the Letters of Credit as fully as if the term "Agent," as used in
this Article IX, included such Issuing Bank with respect to such acts or
omissions, and (ii) as additionally provided in this Agreement with respect to
such Issuing Bank.

                SECTION 9.02 Agent's Reliance, Etc. Neither the Agent nor any of
its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent: (i) may treat
the Lender which made any Advance (or purchased or funded a participation with
respect to a Letter of Credit) as the holder and owner of the Debt resulting
therefrom until the Agent receives and accepts an Assignment and Acceptance
entered into by such Lender, as assignor, and an Eligible Assignee, as assignee,
as provided in Section 10.07 hereof; (ii) may consult with legal counsel
(including counsel for the Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of the Borrower or to inspect the property (including the
books and records) of the Borrower or its Subsidiaries; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; and (vi) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier)
believed by it to be genuine and signed or sent by the proper party or parties.

                SECTION 9.03 CUSA, Citibank and Affiliates. With respect to
CUSA's Commitment and the Advances made by it, and with respect to Citibank as
an Issuing Bank, CUSA and Citibank shall have the same rights and powers under
this Agreement as any other Lender and may exercise the same as though it were
not the Agent or an Issuing Bank, as the case may be; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include CUSA and Citibank
in their individual capacities. CUSA, Citibank and each of their respective
Affiliates (and, as applicable, any of their respective officers and directors)
may

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accept deposits from, lend money to, act as trustee under indentures of, and
generally engage in any kind of business with, the Borrower, any of its
Subsidiaries and any Person who may do business with or own securities of the
Borrower or any such Subsidiary, all as if CUSA were not the Agent or Citibank
were not an Issuing Bank, as the case may be, and without any duty to account
therefor to the Lenders.

                SECTION 9.04 Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Agent, any Issuing Bank
or any other Lender and based on the financial statements referred to in Section
6.01 hereof and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent, any Issuing Bank or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement.

                SECTION 9.05 Indemnification.

                (a)     Agent.  The Lenders agree to indemnify the Agent (to the
        extent not reimbursed by the Borrower or any Guarantor), ratably,
        according to their respective Credit Exposures, from and against any and
        all liabilities, obligations, losses, damages, penalties, actions,
        judgments, suits, costs, expenses or disbursements of any kind or nature
        whatsoever which may be imposed on, incurred by, or asserted against the
        Agent in any way relating to or arising out of this Agreement or any
        action taken or omitted by the Agent under this Agreement, provided,
        that, no Lender shall be liable for any portion of such liabilities,
        obligations, losses, damages, penalties, actions, judgments, suits,
        costs, expenses or disbursements resulting from the Agent's gross
        negligence or willful misconduct. Without limitation of the foregoing,
        each Lender agrees to reimburse the Agent promptly upon demand for its
        ratable share of any out-of-pocket expenses (including reasonable
        counsel fees) incurred by the Agent in connection with the preparation,
        execution, delivery, administration, modification, amendment or
        enforcement (whether through negotiations, legal proceedings or
        otherwise) of, or legal advice in respect of rights or responsibilities
        under, this Agreement, to the extent that the Agent is not reimbursed
        for such expenses by the Borrower. In the case of any investigation,
        litigation or proceeding giving rise to any such liabilities,
        obligations, losses, damages, penalties, actions, judgments, suits,
        costs expenses or disbursements, this Section 9.05(a) applies whether
        any such investigation, litigation or proceeding is brought by the
        Agent, an Issuing Bank, any Lender or a third party.

                (b)     Issuing Bank. The Lenders agree to indemnify each
        Issuing Bank (to the extent not reimbursed by the Borrower or any
        Guarantor), ratably according to their respective Commitment
        Percentages, from and against any and all liabilities, obligations,
        losses, damages, penalties, actions, judgments, suits, costs, expenses
        or disbursements of any kind or nature whatsoever which may be imposed
        on, incurred by, or asserted against such Issuing Bank in any way
        relating to or arising out of this Agreement and the Letters of Credit
        issued by it or any action taken or omitted by such Issuing Bank under
        this Agreement or the Letters of Credit Issued by it, provided, that, no
        Lender shall be liable for any portion of such liabilities, obligations,
        losses, damages, penalties, actions,

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        judgments, suits, costs, expenses or disbursements resulting from such
        Issuing Bank's gross negligence or willful misconduct. Without
        limitation of the foregoing, each Lender agrees to reimburse such
        Issuing Bank promptly upon demand for its ratable share of any
        out-of-pocket expenses (including reasonable counsel fees) incurred by
        such Issuing Bank in connection with the preparation, execution,
        administration, modification, amendment or enforcement (whether through
        negotiations, legal proceedings or otherwise) of, or legal advice in
        respect of rights or responsibilities under, this Agreement or the
        Letters of Credit Issued by it, to the extent that the Issuing Bank is
        not reimbursed for such expenses by the Borrower. In the case of any
        investigation, litigation or proceeding giving rise to any such
        liabilities, obligations, losses, damages, penalties, actions,
        judgments, suits, costs expenses or disbursements, this Section 9.05(b)
        applies whether any such investigation, litigation or proceeding is
        brought by the Issuing Bank, the Agent, any Lender or a third party.

                SECTION 9.06 Successor Agent. The Agent may resign at any time
by giving 30 days' prior written notice thereof to the Lenders and the Borrower
and may be removed at any time with or without cause by the Majority Lenders;
provided, that, the Agent may resign without having given such notice if it is
required to do so as a matter of law. Upon any such resignation or removal, the
Majority Lenders, after consulting with the Borrower and giving due
consideration to any successor agent recommended by the Borrower, shall have the
right to appoint a successor Agent with the consent of the Borrower (which shall
not be unreasonably withheld). If no successor Agent shall have been so
appointed by the Majority Lenders and consented to by the Borrower, and shall
have accepted such appointment, within 30 days after the retiring Agent's giving
of notice of resignation or the Majority Lenders' removal of the retiring Agent,
then the retiring Agent may, after consulting with the Borrower and giving due
consideration to any successor agent recommended by the Borrower, on behalf of
the Lenders, appoint a successor Agent, which shall be a commercial bank
organized or licensed to do business under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of this Article IX shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.

                SECTION 9.07 Co-Syndication Agents, Joint Book Managers and
Joint Lead Arrangers. The financial institutions identified as Co-Syndication
Agents, the Joint Book Managers and the Joint Lead Arrangers herein shall not
have any rights, powers, obligations, responsibilities or duties under this
Agreement. Without limiting the foregoing, any Lender so identified as a
Co-Syndication Agent, Joint Book Manager or Joint Lead Arranger shall not have
or be deemed to have any fiduciary relationship with any Lender. Each Lender
acknowledges that it has not relied, and will not rely, on any of the financial
institutions so identified as a Co-Syndication Agent, Joint Book Manager or
Joint Lead Arranger in deciding to enter into this Agreement or in taking or not
taking action hereunder.

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                SECTION 9.08 Release of Collateral. Without limitation of the
provisions of the Collateral Documents with respect thereto, upon the sale,
lease, transfer or other disposition of any item of Collateral of any Loan Party
as permitted under the terms of the Loan Documents, the Lender Parties hereby
agree that such item of Collateral shall be released from the security interest
granted under the respective Collateral Documents. In connection with the
foregoing, the Lender Parties hereby irrevocably authorize the Agent and the
Collateral Agent to release any such Collateral. The Agent will, at the
Borrower's expense, execute and deliver to the respective Loan Party such
documents as such Loan Party may reasonably request to evidence the release of
such item of Collateral from the security interest granted under the Collateral
Documents.

                SECTION 9.09 Release of Guarantor/Domestic Subsidiary. Without
limitation of the provisions of the Collateral Documents with respect thereto,
upon (a) the sale of outstanding shares of capital stock and other equity,
ownership and profit interests in any Guarantor or other Domestic Subsidiary in
a transaction which is permitted under Section 7.02(g) hereof, (b) the
dissolution, liquidation, consolidation or merger of a Guarantor or other
Domestic Subsidiary in a transaction permitted by Section 7.02(c) hereof or (c)
any transfer of trademarks or service marks to a Guarantor such that it becomes
or otherwise qualifies as a Special Purpose Subsidiary, then, in each such case,
upon request by the Borrower, the Agent, on behalf of each Lender Party, shall
confirm in writing that the liability of such Guarantor or other Domestic
Subsidiary under the Subsidiary Guaranty in respect of the Obligations hereunder
and under any of the Collateral Documents is released and discharged effective
when such transaction is consummated and all requirements hereunder in
connection therewith are satisfied, including with respect to the application of
the proceeds of such sale. Each Lender Party hereby irrevocably authorizes the
Agent to release any Guarantor or other Domestic Subsidiary from time to time to
the extent provided for herein and to execute any document reasonably required
in connection therewith.

                SECTION 9.10 Actions in Respect of Intercreditor Agreement. The
Lenders and the Issuing Banks hereby authorize the Agent, in its capacity as
Agent on behalf of the Lenders and the Issuing Banks, to enter into the
Intercreditor Agreement and hereby consent to the Agent acting as Collateral
Agent under the Intercreditor Agreement.

                                   ARTICLE X

                                  MISCELLANEOUS

                SECTION 10.01 Amendments, Etc.

                (a)     Majority Lenders. Except as is otherwise expressly
        provided in this Section 10.01, no amendment or waiver of any provision
        of this Agreement, nor consent to any departure by the Borrower
        therefrom, shall in any event be effective unless the same shall be in
        writing and signed by the Majority Lenders, provided, however, that no
        amendment, waiver or consent by the Majority Lenders shall, unless in
        writing and signed by all the Lenders, do any of the following: (i)
        waive any of the conditions specified in Section 5.01 or 5.02 hereof,
        (ii) increase the Commitments of the Lenders (other than as provided for
        in Section 2.04(b) and 2.04(c) hereof), (iii) reduce the principal of,
        or interest on, the Advances made pursuant to Section 2.01(a) hereof or
        any

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        reimbursement obligation in respect of any Letter of Credit or any fees
        or other amounts payable hereunder to the Lenders, (iv) postpone any
        date fixed for any payment of principal of, or interest on, the Advances
        made pursuant to Section 2.01(a) hereof or any reimbursement obligation
        in respect of any Letter of Credit or any fees or other amounts payable
        hereunder to the Lenders, (v) change the percentage of the Commitments
        or of the aggregate unpaid principal amount of the Advances made
        pursuant to Section 2.01(a) hereof or Letter of Credit Liability
        hereunder, or the number of Lenders, which shall be required for the
        Lenders or any of them to take any action hereunder, (vi) release all or
        substantially all the Collateral or all or substantially all the
        Guarantors, (vii) release the Borrower as a guarantor under Section 2.13
        or Section 3.13 hereof, (viii) subordinate any liens granted under the
        Security Agreement or (ix) amend this subsection (a) of this Section
        10.01.

                (b)     Agent and Issuing Banks. No amendment, waiver or consent
        given or effected pursuant to this Section 10.01 shall, unless in
        writing and signed by the Agent or each Issuing Bank, as the case may
        be, in addition to the Lenders required above to take such action,
        affect the rights, obligations or duties of the Agent or such Issuing
        Bank, as the case may be, under this Agreement.

                (c)     Limitation of Scope. All waivers and consents granted
        under this Section 10.01 shall be effective only in the specific
        instance and for the specific purpose for which given.

                SECTION 10.02 Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier or electronic
mail) and mailed, sent by overnight courier, telecopied, emailed, or delivered,
if to the Borrower or any other Loan Party, at its address at 2 Folsom Street,
San Francisco, California 94105 Attention: Treasurer, Telecopier: 415-427-6982,
email __________; with a copy to 2 Folsom Street, San Francisco, CA 94105,
Attention: General Counsel, Telecopier: 415-427-6982, email __________ and to 2
Folsom Street, San Francisco, CA 94105, Attention: Associate General Counsel,
Telecopier: 415-427-7475, email tom_lima@gap.com; if to any Lender, at its
Domestic Lending Office specified opposite its name on Schedule I-B hereto; if
to any other Lender, at its Domestic Lending Office specified in the Assignment
and Acceptance pursuant to which it became Lender; if to the Agent, at its
address at 399 Park Avenue, New York, New York 10043, Attention: Credit
Administration, Telecopier: 302-894-6120, email __________; and if to an Issuing
Bank, at its Domestic Lending Office specified opposite its name in Schedule I-B
hereto; with a copy, in the case of notices to the Agent, to Citicorp North
America, Inc., One Sansome Street, San Francisco, California, Attention: Carolyn
Wendler, Telecopier: 415-433-0307, email carolyn.wendler@citigroup.com, or, as
to each party, at such other address or to such other person as shall be
designated by such party in a written notice to the other parties. All such
notices and communications shall, when mailed, be effective three days after
being deposited in the mails, when sent by overnight courier, be effective one
day after being sent by overnight courier, and when telecopied or sent by
electronic mail, be effective when received (and, with respect to notices and
communications sent by electronic mail, upon confirmation by the recipient of
the receipt of such notice or communication), respectively; and when delivered
by hand, be effective upon delivery except that notices and communications to
the Agent pursuant

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to Article II or IX and to an Issuing Bank pursuant to Article III or IX shall
not be effective until received by the Agent or such Issuing Bank, as the case
may be.

                SECTION 10.03 No Waiver; Remedies. No failure on the part of any
Lender, the Issuing Bank or the Agent to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.

                SECTION 10.04 Costs and Expenses.

                (a)     The Borrower agrees to pay on demand all reasonable and
        documented costs and expenses of the Agent incurred in connection with
        the preparation, execution, delivery, modification and amendment of this
        Agreement, and the other documents to be delivered hereunder, including,
        without limitation, the reasonable and documented fees and out-of-pocket
        expenses of one counsel for the Agent (and appropriate local counsel)
        with respect thereto and with respect to advising the Agent as to its
        rights and responsibilities under this Agreement. The Borrower further
        agrees to pay on demand all costs and expenses of the Agent, each
        Issuing Bank, each Swing Line Lender and each other Lender Party
        (including, without limitation, reasonable counsel fees and expenses),
        incurred in connection with the enforcement (whether through
        negotiations, legal proceedings or otherwise) of the Loan Documents, the
        Letters of Credit, the documents delivered in connection with the Swing
        Line Advances and the other documents to be delivered hereunder and
        thereunder.

                (b)     If any payment of principal of, or Conversion of, any
        Eurodollar Rate Advance is made other than on the last day of the
        Interest Period for such Advance, as a result of a payment or Conversion
        pursuant to Sections 2.08(d), 2.10, 2.12 hereof, acceleration of the
        maturity of the Advances pursuant to Section 8.01 hereof or for any
        other reason, or by an Eligible Assignee to a Lender other than on the
        last day of an Interest Period for such Advance upon an assignment of
        rights and obligations under this Agreement pursuant to Section 10.07
        hereof as a result of a demand by the Borrower pursuant to Section
        10.07(a) hereof, or if the Borrower fails for any reason to make any
        payment or prepayment of an Advance for which a notice of prepayment was
        given or that is otherwise required to be made, whether pursuant to
        Sections 2.05, 2.10, 8.01 hereof or otherwise, the Borrower shall, upon
        demand by any Lender (with a copy of such demand to the Agent), pay to
        the Agent for the account of such Lender any amounts required to
        compensate such Lender for any additional losses, costs or expenses
        which it may reasonably incur as a result of such payment or Conversion
        or such failure to pay or prepay, as the case may be, including, without
        limitation, any loss (including loss of anticipated profits), cost or
        expense incurred by reason of the liquidation or reemployment of
        deposits or other funds acquired by any Lender to fund or maintain such
        Advance.

                (c)     The Borrower agrees to indemnify and hold harmless each
        of the Agent, each Lender, each Issuing Bank, each Joint Lead Arranger,
        each Co-Syndication Agent and each of their Affiliates and their
        respective officers, directors, employees, agents and

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        advisors (each, an "Indemnified Party") from and against any and all
        claims (other than lost profits), damages, liabilities and expenses
        (including, without limitation, reasonable fees and disbursements of
        counsel), which may be incurred by or asserted against any Indemnified
        Party in connection with or arising out of any investigation,
        litigation, or proceeding (whether or not such Indemnified Party is
        party thereto) related to any acquisition or proposed acquisition by the
        Borrower, or by any Subsidiary of the Borrower, of all or any portion of
        the stock or substantially all the assets of any Person or any use or
        proposed use of the Advances or Letters of Credit by any Loan Party,
        except to the extent such claim, damage, liability or expense shall have
        resulted from such Indemnified Party's gross negligence or willful
        misconduct. In the event this indemnity is unenforceable as a matter of
        law as to a particular matter or consequence referred to herein, it
        shall be enforceable to the full extent permitted by law. The
        indemnification provisions set forth above shall be in addition to any
        liability the Borrower may otherwise have. Without prejudice to the
        survival of any other obligation of the Borrower hereunder, the
        indemnities and obligations of the Borrower contained in this Section
        10.04 shall survive the payment in full of all the Obligations.

                (d)     The Borrower hereby acknowledges that the funding method
        by each Lender of its Advances hereunder shall be in the sole discretion
        of such Lender. The Borrower agrees that for purposes of any
        determination to be made under Sections 2.07, 2.11(a), 2.12 or 10.04(b)
        hereof each Lender shall be deemed to have funded its Eurodollar Rate
        Advances with proceeds of Dollar deposits in the London interbank
        market.

                SECTION 10.05 Right of Set-off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 8.01 hereof to
authorize the Agent to declare the Advances due and payable pursuant to the
provisions of Section 8.01 hereof or to demand payment of (or cash
collateralization of) all then outstanding Letter of Credit Liability, each
Lender and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Lender or such
Affiliate to or for the credit or the account of any Loan Party against any and
all of the obligations of the Loan Parties now or hereafter existing under this
Agreement to such Lender (including, to the fullest extent permitted by law,
obligations indirectly owed to such Lender by virtue of its purchase of a
participation or sub-participation of the Letter of Credit Liability pursuant to
Section 3.05 hereof), whether or not such Lender shall have made any demand
under this Agreement and although such obligations may be unmatured (it being
understood and agreed that, notwithstanding anything in this Agreement or any of
the other Loan Documents to the contrary, accounts, deposits, sums, securities
or other property of any Foreign Subsidiary or of any Subsidiary of a Foreign
Subsidiary (including any Foreign Subsidiary or any Subsidiary of a Foreign
Subsidiary that is a Subsidiary Borrower or LC Subsidiary) will not serve at any
time, directly or indirectly, to collateralize or otherwise offset the
Obligations of the Borrower or any Domestic Subsidiary, and, in addition, unless
otherwise agreed to by the Borrower, the accounts, deposits, sums, securities or
other property of a Foreign Subsidiary or Subsidiary of a Foreign Subsidiary
will only serve to collateralize or offset the Obligations of another Foreign
Subsidiary or Subsidiary of a Foreign Subsidiary that is a Subsidiary Borrower
or LC Subsidiary if such

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former Foreign Subsidiary or Subsidiary of a Foreign Subsidiary is owned by such
latter Foreign Subsidiary or Subsidiary of a Foreign Subsidiary that is a
Subsidiary Borrower or LC Subsidiary). Each Lender agrees promptly to notify the
Borrower and the Agent after any such set-off and application made by such
Lender or any of its Affiliates, provided, that, the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
each Lender and its Affiliates under this Section 10.05 are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which such Lender and its Affiliates may have.

                SECTION 10.06 Binding Effect. This Agreement shall become
effective when it shall have been executed by the Borrower, each LC Subsidiary
and each Subsidiary Borrower to be a party hereto on the date hereof, each
Issuing Bank to be a party hereto on the date hereof, and the Agent and when the
Agent shall have been notified by each Lender that such Lender has executed it
and thereafter shall be binding upon and inure to the benefit of the Borrower,
each LC Subsidiary, each Subsidiary Borrower, each Issuing Bank, the Agent and
each Lender and their respective successors and assigns, except that the
Borrower, each LC Subsidiary and each Subsidiary Borrower shall not have the
right to assign its respective rights hereunder or any interest herein without
the prior written consent of the Lenders.

                SECTION 10.07 Assignments and Participations. (a) Each Lender
may, and if demanded by the Borrower (following a demand by such Lender pursuant
to Section 2.07, 2.11, 3.08, 4.02 or 4.06 hereof, upon at least 10 days' notice
to such Lender and the Agent) will, assign to one or more banks or other
entities all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion, respectively, of its
Commitment, the Advances owing to it, its Issuing Commitment and participations
in Letter of Credit Liability and Swing Line Advances); provided, however, that
(i) each such respective assignment shall be of a percentage of all rights and
obligations under this Agreement in respect of the assigning Lender's
Commitment, Advances, its Issuing Commitment and participations in Letter of
Credit Liability and Swing Line Advances, that is constant and not varying over
time, (ii) the respective amounts of the rights and obligations under the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such partial assignment) shall in no event be less than $5,000,000
(or an integral multiple of $1,000,000 in excess thereof), (iii) except during
the continuance of a Default, each such assignment shall be to an Eligible
Assignee consented to by the Borrower (following reasonable advance written
notice to the Borrower, which consent shall not be unreasonably withheld);
provided, that, the Borrower's consent need not be obtained if such assignment
is made to another Lender or to an Affiliate of the assigning Lender, provided
that any Lender so assigning to any of its Affiliates shall give prompt notice
thereof to the Borrower and the Agent, (iv) each such assignment made as a
result of a demand by the Borrower pursuant to this Section 10.07(a) shall be
arranged by the Borrower (at its expense, including, without limitation, payment
of the processing and recordation fee referred to in subclause (vi) hereof)
after consultation with the Agent and shall be either an assignment of all of
the rights and obligations of the assigning Lender under this Agreement or an
assignment of a portion of such rights and obligations made concurrently with
another such assignment or other such assignments which together cover all of
the rights and obligations of the assigning Lender under this Agreement, (v) no
Lender shall be obligated to make any such assignment as a result of a demand by
the Borrower pursuant to this Section 10.07(a) unless and until such Lender
shall have received one

                                       94

<PAGE>

or more payments from either the Borrower or one or more Eligible Assignees in
an aggregate amount at least equal to the aggregate outstanding principal amount
of the Advances owing to such Lender, together with accrued interest thereon to
the date of payment of such principal amount and all other amounts payable to
such Lender under this Agreement, (vi) each such assignment shall be consented
to by each Issuing Bank and the Agent (which consent of the Agent shall not be
unreasonably withheld) and (vii) the parties to each such assignment shall
execute and deliver to the Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with a processing and
recordation fee of $3,500; provided, that, no such fee shall be payable in
connection with an assignment by an assigning Lender to an Affiliate of such
assigning Lender. Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in each Assignment and Acceptance, (x)
the assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, have the rights and obligations of Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).

                (b)     By executing and delivering an Assignment and
        Acceptance, the Lender assignor thereunder and the assignee thereunder
        confirm to and agree with each other and the other parties hereto as
        follows: (i) other than as provided in such Assignment and Acceptance,
        such assigning Lender makes no representation or warranty and assumes no
        responsibility with respect to any statements, warranties or
        representations made in or in connection with this Agreement or the
        execution, legality, validity, enforceability, genuineness, sufficiency
        or value of this Agreement or any other instrument or document furnished
        pursuant hereto; (ii) such assigning Lender makes no representation or
        warranty and assumes no responsibility with respect to the financial
        condition of the Borrower, any LC Subsidiary, any Subsidiary Borrower or
        any other Loan Party or the performance or observance by the Borrower,
        any LC Subsidiary, any Subsidiary Borrower or any other Loan Party of
        any of its obligations under this Agreement or any other instrument or
        document furnished pursuant hereto; (iii) such assignee confirms that it
        has received a copy of this Agreement, together with copies of the
        financial statements referred to in Section 6.01 hereof and such other
        documents and information as it has deemed appropriate to make its own
        credit analysis and decision to enter into such Assignment and
        Acceptance; (iv) such assignee will, independently and without reliance
        upon the Agent, any Issuing Bank, such assigning Lender or any other
        Lender and based on such documents and information as it shall deem
        appropriate at the time, continue to make its own credit decisions in
        taking or not taking action under this Agreement; (v) such assignee
        confirms that it is an Eligible Assignee; (vi) such assignee appoints
        and authorizes the Agent or the respective Issuing Bank to take such
        action as agent on its behalf and to exercise such powers under this
        Agreement as are delegated to the Agent or such Issuing Bank by the
        terms hereof, together with such powers as are reasonably incidental
        thereto; and (vii) such assignee agrees that it will perform in
        accordance with their terms all of the obligations which by the terms of
        this Agreement are required to be performed by it as Lender.

                                       95

<PAGE>

                (c)     The Agent shall maintain at its address referred to in
        Section 10.02 hereof a copy of each Assignment and Acceptance delivered
        to and accepted by it and a register for the recordation of the names
        and addresses of the Lenders and the Commitment of, and principal amount
        of the Advances owing to, each Lender from time to time and the names
        and addresses and the Issuing Commitments of each Issuing Bank from time
        to time (the "Register"). The entries in the Register shall be
        conclusive and binding for all purposes, absent manifest error, and the
        Borrower, the Agent and the Lenders may treat each Person whose name is
        recorded in the Register as Lender hereunder for all purposes of this
        Agreement. The Register shall be available for inspection by the
        Borrower or any Lender at any reasonable time and from time to time upon
        reasonable prior notice.

                (d)     Upon its receipt of an Assignment and Acceptance
        executed by an assigning Lender and an assignee representing that it is
        an Eligible Assignee, the Agent shall, if such Assignment and Acceptance
        has been completed and is in substantially the form of Exhibit C hereto,
        (i) accept such Assignment and Acceptance, (ii) record the information
        contained therein in the Register and (iii) give prompt notice thereof
        to the Borrower and the Issuing Banks.

                (e)     Each Lender may sell participations to one or more banks
        or other entities in or to all or a portion of its rights and
        obligations under this Agreement (including, without limitation, all or
        a portion of its Commitment and the Advances owing to it; provided,
        however, that (i) such Lender's obligations under this Agreement
        (including, without limitation, its Commitment) shall remain unchanged,
        (ii) such Lender shall remain solely responsible to the other parties
        hereto for the performance of such obligations, (iii) such Lender shall
        remain the owner of any Advance for all purposes of this Agreement, and
        (iv) the Borrower, the Issuing Banks, the Agent and the other Lenders
        shall continue to deal solely and directly with such Lender in
        connection with such Lender's rights and obligations under this
        Agreement, provided, further, that, to the extent of any such
        participation (unless otherwise stated therein and subject to the
        preceding proviso), the purchaser of such participation shall, to the
        fullest extent permitted by law, have the same rights and benefits
        hereunder as it would have if it were Lender hereunder; and provided,
        further, that each such participation shall be granted pursuant to an
        agreement providing that the purchaser thereof shall not have the right
        to consent or object to any action by the selling Lender (who shall
        retain such right) other than an action which would (i) reduce principal
        of or interest on any Advance, any amount due hereunder with respect to
        the Letters of Credit or other amounts or fees in which such purchaser
        has an interest, (ii) postpone any date fixed for payment of principal
        of or interest on any such Advance, such amounts due with respect to
        Letters of Credit or other amounts or such fees, (iii) extend the
        Termination Date or (iv) release all or substantially all the
        Collateral, all or substantially all the Guarantors or the Borrower as a
        guarantor under Section 2.13 or Section 3.13 hereof.

                (f)     Upon written request of the Borrower to a Lender, such
        Lender shall, to the extent consistent with the policies of such Lender,
        inform the Borrower of the Dollar amount of any Full Term Participation
        (as hereinafter defined) that such Lender has entered into; provided,
        however, that no Lender shall be obligated to disclose such information
        if the disclosure thereof would constitute a violation of law or
        regulation or

                                       96

<PAGE>

        violate any confidentiality agreement to which such Lender is subject.
        For the purposes of this subsection (f), "Full Term Participation" means
        a participation by a Lender to another Person whereby such other Person
        has purchased (pursuant to a participation agreement) all or a portion
        of such Lender's Commitment from the effective date of such
        participation agreement to the Termination Date.

                (g)     Notwithstanding anything herein contained to the
        contrary, each Lender may assign any of its rights and obligations under
        this Agreement to any of its Affiliates without the consent of the
        Borrower or the Agent, provided that any Lender so assigning to any of
        its Affiliates shall give prior notice thereof to the Borrower and the
        Agent; and each Lender or any of its Affiliates may assign any of its
        rights (including, without limitation, rights to payment of principal
        and/or interest hereunder) under this Agreement to any Federal Reserve
        Bank without notice to or consent of the Borrower or the Agent.

                (h)     If any Lender requests any payment from the Borrower
        under Section 2.07, 2.11, 3.08, 4.02 or 4.06 hereof, then, subject to
        Section 10.07(a) hereof and provided no Default or Event of Default
        shall have occurred and be continuing, the Borrower may request such
        Lender to (and, upon such request, such Lender, without any obligation
        to pay any fees in respect thereof, shall) assign all of its rights and
        obligations under this Agreement to one or more Eligible Assignees
        acceptable to the Agent in accordance with Section 10.07(a) hereof
        provided that at the time of any such assignment the Borrower has paid
        to the Lender all amounts due it hereunder.

                SECTION 10.08 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.

                SECTION 10.09 Independence of Provisions. All agreements and
covenants hereunder shall be given independent effect such that if a particular
action or condition is prohibited by the terms of any such agreement or
covenant, the fact that such action or condition would be permitted within the
limitations of another agreement or covenant shall not be construed as allowing
such action to be taken or condition to exist.

                SECTION 10.10 Confidentiality. Each Lender, each Issuing Bank
and the Agent (for purposes of this Section 10.10, each a "Recipient") agrees
that it will not disclose to any third party any Confidential Information
provided to it by the Borrower; provided, that, the foregoing will not (i)
restrict the ability of the Agent, the Issuing Banks, the Lenders and any loan
participants from freely exchanging Confidential Information among themselves
(and their respective Affiliates, employees, attorneys, agents and advisors),
(ii) restrict the ability to disclose Confidential Information to a prospective
Eligible Assignee or participant, provided, that, such Eligible Assignee or
participant executes a confidentiality agreement with the selling Lender
agreeing to be bound by the terms hereof prior to disclosure of Confidential
Information to such Eligible Assignee or participant or (iii) prohibit the
disclosure of Confidential Information to the extent: (a) the Confidential
Information is or has already become part of the public domain at the time of
disclosure, by publication or otherwise, except by breach of this

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<PAGE>

Section 10.10, (b) the Confidential Information can be established by written
evidence to have already been in the lawful possession of the Recipient prior to
the time of disclosure; or (c) the Confidential Information is received by the
Recipient from a third party not known to have a similar restriction and without
breach of this Section 10.10, or (d) the Confidential Information is required to
be disclosed by order of a court of competent jurisdiction, administrative
agency or governmental body, or by subpoena, summons or other legal process, or
by law, rule or regulation, or by applicable regulatory or professional
standards provided that prior to such disclosure the Borrower and the
non-disclosing party are each given reasonable advance notice of such order and
an opportunity to object to such disclosure; provided, that, no such notice or
opportunity shall be required if disclosure is required in connection with an
examination by a regulatory authority or is required in such circumstances where
the applicable Governmental Authority does not permit such notice or opportunity
(it being understood the Recipient will inform such authority of the
confidential nature of the Confidential Information being disclosed).
Notwithstanding anything herein to the contrary, each Loan Party and each
Recipient, and each of their respective officers, directors, employees,
accountants, attorneys and other advisors, agents and representatives, may
disclose to any and all persons, without limitation of any kind, any information
with respect to the United States tax treatment and tax structure of the
transactions contemplated by the Loan Documents and all materials of any kind
(including opinions or other tax analyses) that are provided to the respective
Loan Party or Recipient, as the case may be, relating to such United States tax
treatment and tax structure, provided, that, the foregoing shall not apply to
the extent reasonably necessary to comply with applicable securities laws.

                SECTION 10.11 Headings. Article and Section headings in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.

                SECTION 10.12 Entire Agreement. This Agreement sets forth the
entire agreement of the parties with respect to its subject matter and, except
for the letter agreements referred to in Sections 2.03(c) and 3.06(b) hereof,
supersedes all previous understandings, written or oral, in respect thereof.

                SECTION 10.13 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.

                SECTION 10.14 Consent to Jurisdiction. (a) Each of the parties
hereto hereby irrevocably submits to the non-exclusive jurisdiction of any New
York State or Federal court sitting in the County of New York, The City of New
York, in any action or proceeding arising out of or relating to this Agreement,
and each of the parties hereby irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such New York State
court or such Federal court. Each of the parties hereby irrevocably agrees, to
the fullest extent each may effectively do so, that each will not assert any
defense that such courts do not have subject matter or personal jurisdiction of
such action or proceeding or over any party hereto. Each of the parties hereby
irrevocably consents to the service of copies of the summons and complaint and
any other process which may be served in any such action or proceeding by

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<PAGE>

certified mail, return receipt requested, or by delivering of a copy of such
process to such party at its address specified in Section 10.02 hereof or by any
other method permitted by law. Each of the parties hereby agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or by any other manner
provided by law.

                (b)     Nothing in this Section 10.14 shall affect the right of
        any of the parties hereto to serve legal process in any other manner
        permitted by law or affect the right of any of the parties to bring any
        action or proceeding against any of the parties or their property in the
        courts of other jurisdictions.

                SECTION 10.15 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT,
IN THE CASE OF ARTICLE III, TO THE EXTENT SUCH LAWS ARE INCONSISTENT WITH THE
UCP.

                SECTION 10.16 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE LC
SUBSIDIARIES, THE SUBSIDIARY BORROWERS, THE AGENT, THE LENDERS AND EACH ISSUING
BANK HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE ADVANCES OR THE LETTERS OF CREDIT, OR THE ACTIONS OF THE AGENT, ANY LENDER
OR THE ISSUING BANK IN CONNECTION WITH THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT THEREOF.

             [The remainder of this page intentionally left blank.]

                                       99

<PAGE>

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

                                                THE BORROWER:

                                                THE GAP, INC.

                                                By: /s/ SABRINA SIMMONS
                                                    -------------------
                                                Name: Sabrina Simmons
                                                Title: Senior Vice President and
                                                           Treasurer

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                THE LC SUBSIDIARIES:

                                                BANANA REPUBLIC, INC.

                                                By: /s/ SABRINA SIMMONS
                                                    -------------------
                                                Name: Sabrina Simmons
                                                Title: Senior Vice President and
                                                           Treasurer

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                GAP (CANADA) INC.

                                                By: /s/ SABRINA SIMMONS
                                                    -------------------
                                                Name: Sabrina Simmons
                                                Title: Senior Vice President and
                                                           Treasurer

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                       100

<PAGE>

                                                GAP (DEUTSCHLAND) GMBH

                                                By: /s/ ANNE GUST
                                                    --------------
                                                Name: Anne Gust
                                                Title: Director
                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                GAP (FRANCE) S.A.S.

                                                By: /s/ LISA MERTENS
                                                    -----------------
                                                Name: Lisa Mertens
                                                Title: President
                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                GAP INTERNATIONAL B.V.

                                                By: /s/ JULIE KANBERG
                                                    ------------------
                                                Name: Julie Kanberg
                                                Title: Director
                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                GAP INTERNATIONAL SOURCING FZE

                                                By: /s/ ANNE GUST
                                                    -------------
                                                Name: Anne Gust
                                                Title: Director
                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

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<PAGE>

                                                GAP INTERNATIONAL SOURCING
                                                (HOLDINGS) LIMITED

                                                By: /s/ ANNE GUST
                                                    -------------
                                                Name: Anne Gust
                                                Title: Director

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                GAP INTERNATIONAL SOURCING
                                                LIMITED

                                                By: /s/ ANNE GUST
                                                    -------------
                                                Name: Anne Gust
                                                Title: Director

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                GAP INTERNATIONAL SOURCING
                                                (MEXICO) S.A. DE C.V.

                                                By: /s/ ANNE GUST
                                                    -------------
                                                Name: Anne Gust
                                                Title: Director

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                GAP INTERNATIONAL SOURCING
                                                PTE. LTD.

                                                By: /s/ ANNE GUST
                                                    -------------
                                                Name: Anne Gust
                                                Title: Director
                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                       102

<PAGE>

                                                GAP (JAPAN) K.K.

                                                By: /s/ CHRISTOPHER GAREK
                                                    ----------------------
                                                Name: Christopher Garek
                                                Title: Director
                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                       103

<PAGE>

                                                GAP (RHC) B.V.

                                                By: /s/ JULIE KANBERG
                                                    -----------------
                                                Name: Julie Kanberg
                                                Title: Director
                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                       104

<PAGE>

                                                GAP (NETHERLANDS) B.V.

                                                By: /s/ JULIE KANBERG
                                                    -----------------
                                                Name: Julie Kanberg
                                                Title: Director

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                GPS CONSUMER DIRECT, INC.

                                                By: /s/ SABRINA SIMMONS
                                                    -------------------
                                                Name: Sabrina Simmons
                                                Title: Senior Vice President and
                                                           Treasurer

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                GPS (GREAT BRITAIN) LIMITED

                                                By: /s/ ANNE GUST
                                                    -------------
                                                Name: Anne Gust
                                                Title: Director

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                OLD NAVY (CANADA) INC.

                                                By: /s/ SABRINA SIMMONS
                                                    -------------------
                                                Name: Sabrina Simmons
                                                Title: Senior Vice President and
                                                           Treasurer

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                       105

<PAGE>

                                                OLD NAVY INC.

                                                By: /s/ SABRINA SIMMONS
                                                    -------------------
                                                Name: Sabrina Simmons
                                                Title: Senior Vice President and
                                                           Treasurer

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                       106

<PAGE>

                                                SUBSIDIARY BORROWERS:

                                                GAP (CANADA) INC.

                                                By: /s/ SABRINA SIMMONS
                                                    -------------------
                                                Name: Sabrina Simmons
                                                Title: Senior Vice President and
                                                           Treasurer

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                GAP (DEUTSCHLAND) GMBH

                                                By: /s/ ANNE GUST
                                                    -------------
                                                Name: Anne Gust
                                                Title: Director

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                GAP (FRANCE) S.A.S.

                                                By: /s/ LISA MERTENS
                                                    ----------------
                                                Name: Lisa Mertens
                                                Title: President

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                GAP INTERNATIONAL B.V.

                                                By: /s/ JULIE KANBERG
                                                    ----------------
                                                Name: Julie Kanberg
                                                Title: Director

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                       107

<PAGE>

                                                GAP INTERNATIONAL SOURCING
                                                (HOLDINGS) LIMITED

                                                By: /s/ ANNE GUST
                                                    -------------
                                                Name: Anne Gust
                                                Title: Director

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                GAP INTERNATIONAL SOURCING
                                                LIMITED

                                                By: /s/ ANNE GUST
                                                    -------------
                                                Name: Anne Gust
                                                Title: Director

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                                GAP INTERNATIONAL SOURCING
                                                PTE. LTD.

                                                By: /s/ ANNE GUST
                                                    -------------
                                                Name: Anne Gust
                                                Title: Director

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                       108

<PAGE>

                                                GAP (JAPAN) K.K.

                                                By: /s/ CHRISTOPHER GAREK
                                                    ---------------------
                                                Name: Christopher Garek
                                                Title: Director

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                       109

<PAGE>

                                                GAP (RHC) B.V.

                                                By: /s/ JULIE KANBERG
                                                    -----------------
                                                Name: Julie Kanberg
                                                Title: Director

                                                Address for Notices:
                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                       110

<PAGE>

                                                GAP (NETHERLANDS) B.V.

                                                By:  /s/ JULIE KANBERG
                                                     -----------------
                                                Name:  Julie Kanberg
                                                Title:  Director

                                                Address for Notices:

                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn:  General Counsel

                                                GPS (GREAT BRITAIN) LIMITED

                                                By: /s/ ANNE GUST
                                                    -------------
                                                Name:  Anne Gust
                                                Title:  Director

                                                Address for Notices:

                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn:  General Counsel

                                                OLD NAVY (CANADA) INC.

                                                By: /s/ SABRINA SIMMONS
                                                    -------------------
                                                Name:  Sabrina Simmons

                                                Title: Senior Vice President and
                                                       Treasurer

                                                Address for Notices:

                                                    2 Folsom Street
                                                    San Francisco, CA  94105
                                                    Attn: General Counsel

                                       111

<PAGE>

                              THE AGENT:

                              CITICORP USA, INC.

                              By: /s/ Judith Green
                                  ---------------------------------------------
                                  Name:  Judith Green
                                  Title: Vice President

                              THE JOINT BOOK MANAGERS:

                              CITIGROUP GLOBAL MARKETS INC.

                              By: /s/ Wajeeh Faheem
                                  ---------------------------------------------
                                  Name:  Wajeeh Faheem
                                  Title: Attorney-in-Fact

                              BANC OF AMERICA SECURITIES LLC

                              By: /s/ Jeffrey H. Duncan
                                  ---------------------------------------------
                                  Name:  Jeffrey H. Duncan
                                  Title: Principal

<PAGE>

                              THE CO-SYNDICATION AGENTS:

                              BANC OF AMERICA SECURITIES LLC

                              By: /s/ Jeffrey H. Duncan
                                  ---------------------------------------------
                                  Name:  Jeffrey H. Duncan
                                  Title: Principal

                              HSBC BANK USA

                              By: /s/ Anne Serewicz
                                  ---------------------------------------------
                                  Name:  Anne Serewicz
                                  Title: Senior Vice President

                              J.P. MORGAN SECURITIES INC.

                              By: /s/ Patricia B. Bril
                                  ---------------------------------------------
                                  Name:  Patricia B. Bril
                                  Title: Managing Director

<PAGE>

                              THE JOINT LEAD ARRANGERS:

                              CITIGROUP GLOBAL MARKETS INC.

                              By: /s/ Wajeeh Faheem
                                  ---------------------------------------------
                                  Name:  Wajeeh Faheem
                                  Title: Attorney-in-Fact

                              BANC OF AMERICA SECURITIES LLC

                              By: /s/ Jeffrey H. Duncan
                                  ---------------------------------------------
                                  Name:  Jeffrey H. Duncan
                                  Title: Principal

                              J.P. MORGAN SECURITIES INC.

                              By: /s/ Patricia B. Bril
                                  ---------------------------------------------
                                  Name:  Patricia B. Bril
                                  Title: Managing Director

<PAGE>

                              THE SENIOR MANAGING AGENTS:

                              GENERAL ELECTRIC CAPITAL CORPORATION

                              By: /s/ Todd A. Gronski
                                  ---------------------------------------------
                                  Name:  Todd A. Gronski
                                  Title: Duly Authorized Signatory

                              THE BANK OF NOVA SCOTIA

                              By: /s/ Mark Sparrow
                                  ---------------------------------------------
                                  Name:  Mark Sparrow
                                  Title: Director

                              U.S. BANK NATIONAL ASSOCIATION

                              By: /s/ Janet Jordan
                                  ---------------------------------------------
                                  Name:  Janet Jordan
                                  Title: Vice President

                              FLEET NATIONAL BANK

                              By: /s/ Stephen J. Garvin
                                  ---------------------------------------------
                                  Name:  Stephen J. Garvin
                                  Title: Managing Director

<PAGE>

                              THE MANAGING AGENTS:

                              ABN AMRO BANK N.V.

                              By: /s/ Angela Noique
                                  ---------------------------------------------
                                  Name:  Angela Noique
                                  Title: Group Vice President

                              By: /s/ Edward John Hill III
                                  ---------------------------------------------
                                  Name:  Edward John Hill III
                                  Title: Assistant Vice President

                              WELLS FARGO BANK N.A.

                              By: /s/ Jeff Bailard
                                  ---------------------------------------------
                                  Name:  Jeff Bailard
                                  Title: Vice President

<PAGE>

                              THE LENDERS:

                              CITICORP USA, INC.

                              By: /s/ Judith Green
                                  ---------------------------------------------
                                  Name:  Judith Green
                                  Title: Vice President

<PAGE>

                              JPMORGAN CHASE BANK

                              By: /s/ Barry K. Bergman
                                  ---------------------------------------------
                                  Name:  Barry K. Bergman
                                  Title: Vice President

<PAGE>

                              BANK OF AMERICA, N.A.

                              By: /s/ Amy Krovocheck
                                  ---------------------------------------------
                                  Name:  Amy Krovocheck
                                  Title: Vice President

<PAGE>

                              HSBC BANK USA

                              By:  /s/ Anne Serewicz
                                  ---------------------------------------------
                                  Name: Anne Serewicz
                                  Title: Senior Vice President

<PAGE>

                              GENERAL ELECTRIC CAPITAL CORPORATION

                              By: /s/ Todd A. Gronski
                                  ---------------------------------------------
                                  Name:  Todd A. Gronski
                                  Title: Duly Authorized Signatory

<PAGE>

                              THE BANK OF NOVA SCOTIA

                              By: /s/ Maarten Van Otterloo
                                  ---------------------------------------------
                                  Name:  Maarten Van Otterloo
                                  Title: Managing Director

<PAGE>

                              U.S. BANK NATIONAL ASSOCIATION

                              By: /s/ Janet E. Jordan
                                  ---------------------------------------------
                                  Name:  Janet E. Jordan
                                  Title: U.S. Bank

<PAGE>

                              FLEET NATIONAL BANK

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

<PAGE>

                              ABN AMRO BANK N.V.

                              By: /s/ Angela Noique
                                  ---------------------------------------------
                                  Name:  Angela Noique
                                  Title: Group Vice President

                              By: /s/ Edward John Hill III
                                  ---------------------------------------------
                                  Name:  Edward John Hill III
                                  Title: Assistant Vice President

<PAGE>

                              WELLS FARGO BANK N.A.

                              By: /s/ Jeff Bailard
                                  ---------------------------------------------
                                  Name:  Jeff Bailard
                                  Title: Vice President

<PAGE>

                              KEYBANK NATIONAL ASSOCIATION

                              By: /s/ James J. Teichman
                                  ---------------------------------------------
                                  Name:  James J. Teichman
                                  Title: Portfolio Manager

<PAGE>

                              FIFTH THIRD BANK

                              By: /s/ Gary S. Losey
                                  ---------------------------------------------
                                  Name:  Gary S. Losey
                                  Title: Relationship Manager-Large Corporate

<PAGE>

                              FIRST NATIONAL BANK OF OMAHA

                              By: /s/ Martha H. Baratta
                                  ---------------------------------------------
                                  Name:  Martha H. Baratta
                                  Title: Vice President

<PAGE>

                              THE ISSUING BANKS:

                              CITIBANK, N.A.

                              By: /s/ Judith Green
                                  ---------------------------------------------
                                  Name:  Judith Green
                                  Title: Vice President

                              HSBC BANK USA

                              By: /s/ Anne Serewicz
                                  ---------------------------------------------
                                  Name:  Anne Serewicz
                                  Title: Senior Vice President

                              BANK OF AMERICA, N.A.

                              By: /s/ Amy Krovocheck
                                  ---------------------------------------------
                                  Name:  Amy Krovocheck
                                  Title: Vice President

<PAGE>

                              THE SWING LINE LENDERS:

                              CITIBANK, N.A.

                              By: /s/ Judith Green
                                  ---------------------------------------------
                                  Name:  Judith Green
                                  Title: Vice President

<PAGE>

                              HSBC BANK USA

                              By: /s/ Anne Serewicz
                                  ---------------------------------------------
                                  Name:  Anne Serewicz
                                  Title: Senior Vice President

<PAGE>

                              BANK OF AMERICA, N.A.

                              By: /s/ Amy Krovocheck
                                  ---------------------------------------------
                                  Name:  Amy Krovocheck
                                  Title: Vice President

<PAGE>

                              ABN AMRO BANK N.V.

                              By: /s/ Angela Noique
                                  ---------------------------------------------
                                  Name:  Angela Noique
                                  Title: Group Vice President

                              By: /s/ Edward John Hill III
                                  ---------------------------------------------
                                  Name:  Edward John Hill III
                                  Title: Assistant Vice President

<PAGE>

                              JPMORGAN CHASE BANK

                              By: /s/ Barry K. Bergman
                                  ---------------------------------------------
                                  Name:  Barry K. Bergman
                                  Title: Vice President

<PAGE>

                              THE BANK OF NOVA SCOTIA

                              By: /s/ Mark Sparrow
                                  ---------------------------------------------
                                  Name:  Mark Sparrow
                                  Title: Director

<PAGE>

                Schedule I-B: List of Applicable Lending Offices

Citi provides

<PAGE>

                                  Schedule I-A

                               COMMITMENT AMOUNTS

        LENDER / ISSUING BANK                  COMMITMENT    ISSUING COMMITMENT
------------------------------------------   --------------  ------------------

Citicorp USA, Inc., as Lender                $   90,000,000                 N/A

JPMorgan Chase Bank, as Lender               $   90,000,000                 N/A

Bank of America, N.A., as Lender             $   90,000,000                 N/A

HSBC Bank USA, as Lender                     $   90,000,000                 N/A

GE Capital Corporation, as Lender            $   55,000,000                 N/A

The Bank of Nova Scotia, as Lender           $   55,000,000                 N/A

U.S. Bank National Association, as Lender    $   55,000,000                 N/A

Fleet Bank, as Lender                        $   55,000,000                 N/A

ABN Amro Bank N.V., as Lender                $   45,000,000                 N/A

Wells Fargo Bank N.A., as Lender             $   45,000,000                 N/A

KeyBank National Association, as Lender      $   37,500,000                 N/A

Fifth Third Bank, as Lender                  $   25,000,000                 N/A

First National Bank of Omaha, as Lender      $   17,500,000                 N/A

Citibank, N.A., as Issuing Bank                         N/A    $    250,000,000

Bank of America, N.A., as Issuing Bank                  N/A    $    250,000,000

HSBC Bank USA, as Issuing Bank                          N/A    $    250,000,000

TOTAL                                        $  750,000,000*   $    750,000,000

----------
*       The total of $750,000,000 of Commitments includes the Swing Line
        Commitment as then in effect.

<PAGE>

                                  Schedule I-B

                       LIST OF APPLICABLE LENDING OFFICES

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
           Lender                       Domestic Lending Office                Eurodollar Lending Office
           ------                       -----------------------                -------------------------
------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                                    <C>
Citicorp USA Inc./                   2 Penns Way                            2 Penns Way
Citibank, N.A.                       New Castle, DE 19720                   New Castle, DE 19720
                                     Attn: Lisa Rodriguez                   Attn: Lisa Rodriguez
                                     Tel: 302-894-6070                      Tel: 302-894-6070
                                     Fax: 212-994-0961                      Fax: 212-994-09610
------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank                  1111 Fannin, 10/th/ Floor              1111 Fannin, 10/th/ Floor
                                     Houston, TX 77002                      Houston, TX 77002
                                     Attn: Jennifer Anyigbo                 Attn: Jennifer Anyigbo
                                     Tel: 713-750-2110                      Tel: 713-750-2110
                                     Fax: 713-750-2782                      Fax: 713-750-2782
------------------------------------------------------------------------------------------------------------------
HSBC Bank USA                        One HSBC Center, 26/th/ Floor          One HSBC Center, 26/th/ Floor
                                     Buffalo, NY 14203                      Buffalo, NY 14203
                                     Attn: Tanysia Hunter                   Attn: Tanysia Hunter
                                     Tel: 716-841-1930                      Tel: 716-841-1930
                                     Fax: 716 841-0269                      Fax: 716 841-0269
------------------------------------------------------------------------------------------------------------------
ABN AMRO Bank N.V.                   208 South LaSalle Street, Suite 1500   208 South LaSalle Street, Suite 1500
                                     Chicago, IL 60604-1003                 Chicago, IL 60604-1003
                                     Attn: Sherry Manning or Loan           Attn: Sherry Manning or Loan
                                                  Administration                         Administration
                                     Tel: 312-992-5118 or 312-992-5152      Tel: 312-992-5118 or 312-992-5152
                                     Fax: 312-992-5111 or 312-992-5157      Fax: 312-992-5111 or 312-992-5157
------------------------------------------------------------------------------------------------------------------
Bank of America N.A.                 1850 Gateway Blvd                      1850 Gateway Blvd
                                     Concord, CA 94520                      Concord, CA 94520
                                     Attn: Nina Lemmer                      Nina Lemmer
                                     Tel: 925-675-7478                      Tel: 925-675-7478
                                     Fax: 888-969-9281                      Fax: 888-969-9281
------------------------------------------------------------------------------------------------------------------
U.S. Bank National Association       555 S.W. Oak Street                    555 S.W. Oak Street
                                     Mail Code PD-OR-P7LN                   Mail Code PD-OR-P7LN
                                     Portland, Oregon 97204                 Portland, Oregon 97204
                                     Attn: Lennie Regalado                  Attn: Lennie Regalado
                                     Tel: 503-275-4395                      Tel: 503-275-4395
                                     Fax: 503-275-4600                      Fax: 503-275-4600
------------------------------------------------------------------------------------------------------------------
First National Bank of Omaha         1620 Dodge Street                      1620 Dodge Street
                                     Omaha, NE 68197                        Omaha, NE 68197
                                     Attn: Mark Baratta                     Attn: Mark Baratta
                                     Tel: 402-633-3512                      Tel: 402-633-3512
                                     Fax: 402-633-3519                      Fax: 402-633-3519
------------------------------------------------------------------------------------------------------------------
The Bank of Nova Scotia              580 California Street, suite 2100      580 California Street, suite 2100
                                     San Francisco, CA 94104                San Francisco, CA 94104
                                     Attn: John Quick                       Attn: John Quick
                                     Tel: 415-986-1100                      Tel: 415-986-1100
                                     Fax: 415-397-0791                      Fax: 415-397-0791
------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       1

<PAGE>

<TABLE>
<S>                                  <C>                                    <C>
------------------------------------------------------------------------------------------------------------------
Wells Fargo Bank NA                  201 Third Street                       201 Third Street
                                     MAC A0187-081                          MAC A0187-081
                                     San Francisco, CA 94103                San Francisco, CA 94103
                                     Attn: Ginnie Padget                    Attn: Ginnie Padget
                                     Tel: 415-396-1648                      Tel: 415-396-1648
                                     Fax: 415-512-1943                      Fax: 415-512-1943
------------------------------------------------------------------------------------------------------------------
Fifth Third Bank                     38 Fountain Square Plaza               38 Fountain Square Plaza
                                     Cincinnati, OH 45202                   Cincinnati, OH 45202
                                     Attn: Brooke Hart                      Attn: Brooke Hart
                                     Tel: 513-534-3853                      Tel: 513-534-3853
                                     Fax: 513-534-5947                      Fax: 513-534-5947
------------------------------------------------------------------------------------------------------------------
KeyBank National Association         127 Public Square, 6/th/ Floor         127 Public Square, 6/th/ Floor
                                     Mail Code OH-01-27-0606                Mail Code OH-01-27-0606
                                     Cleveland, OH 44114                    Cleveland, OH 44114
                                     Attn: Kathy Koenig                     Attn: Kathy Koenig
                                     Tel: 216-689-4228                      Tel: 216-689-4228
                                     Fax: 216-689-4987                      Fax: 216-689-4987
------------------------------------------------------------------------------------------------------------------
General Electric Capital             500 West Monroe                        500 West Monroe
Corporation                          Chicago, IL 60661                      Chicago, IL 60661
                                     Attn: Wendy Sherden or Patti Coughin   Attn: Wendy Sherden or Patti Coughin
                                     Tel: 312-463-2237 or 312-463-2218      Tel: 312-463-2237 or 312-463-2218
                                     Fax: 312-463-3842 or 312-463-3854      Fax: 312-463-3842 or 312-463-3854
------------------------------------------------------------------------------------------------------------------
Fleet National Bank                  100 Federal Street                     100 Federal Street
                                     Boston, MA 02110                       Boston, MA 02110
                                     Attn: Debbie Phinney or Stephen        Attn: Debbie Phinney or Stephen
                                                  Garvin                                 Garvin
                                     Tel: 617-434-1645 or 617-434-9399      Tel: 617-434-1645 or 617-434-9399
                                     Fax: 617-434-9933 or 617-434-6685      Fax: 617-434-9933 or 617-434-6685
------------------------------------------------------------------------------------------------------------------
</TABLE>

                                        2

<PAGE>

                                   Schedule II

                                 EXISTING LIENS

LANDLORD LIENS:

Lease Agreement, between Metropolitan Life Insurance Company, on behalf of the
Tower Fund, a commingled separate account, as Landlord and The Gap, Inc., as
Tenant for Gateway Business Center, Building #1, City of Grove City, Ohio, dated
January 29, 1998 (the Ohio Catalog Center)

Amended and Restated Industrial Lease Agreement, between Industrial Developments
International, Inc., as Landlord and The Gap, Inc., as Tenant for 1200 Worldwide
Blvd., Hebron, Kentucky, dated March 10, 1998 (the Gap Outlet Distribution
Center)

Industrial Lease Agreement, between Industrial Developments International, Inc.,
as Landlord, and The Gap, Inc., as Tenant for 1405 Worldwide Blvd., Hebron,
Kentucky, dated June 15, 2000 (the Old Navy Outlet Distribution Center)

<PAGE>

                                  Schedule III

                                CHANGE OF CONTROL

1.      Donald G. Fisher

2.      Doris F. Fisher

3.      Any person related by blood or marriage to any of the foregoing persons
        and any trust as to which any of such persons has beneficial ownership
        of the assets of the trust.

4.      The executive officers of The Gap, Inc. as of June 24, 2003.

<PAGE>

                                   Schedule IV
                Outstanding Balance of Existing Letters of Credit

<PAGE>

                                   Schedule V

                                 LC SUBSIDIARIES

1.      Banana Republic, Inc.

2.      Gap (Canada) Inc.

3.      Gap (Deutschland) GmbH

4.      Gap (France) S.A.S.

5.      Gap International BV

6.      Gap International Sourcing FZE

7.      Gap International Sourcing (Holdings) Limited

8.      Gap International Sourcing Limited

9.      Gap International Sourcing (Mexico) S.A. de C.V.

10.     Gap International Sourcing Pte. Ltd.

11.     Gap (Japan) K.K.

12.     Gap (Netherlands) B.V.

13.     GPS Consumer Direct, Inc.

14.     GPS (Great Britain) Limited

15.     Old Navy (Canada) Inc.

16.     Old Navy Inc.

17.     Gap (RHC) B.V.

<PAGE>

                                   Schedule VI

                              SUBSIDIARY BORROWERS

1.      Gap (Canada) Inc.

2.      Gap (Deutschland) GmbH

3.      Gap (France) S.A.S.

4.      Gap International B.V.

5.      Gap International Sourcing (Holdings) Limited

6.      Gap International Sourcing Limited

7.      Gap (Japan) K.K.

8.      Gap (Netherlands) B.V.

9.      GPS (Great Britain) Limited

10.     Old Navy (Canada) Inc.

11.     Gap International Sourcing Pte. Ltd.

12.     Gap (RHC) B.V.

<PAGE>

                                  Schedule VII

                              PERMITTED INVESTMENTS

1.      Obligations issued or guaranteed by the United States Government.

2.      Commercial paper of U.S. issuers having a rating of P-1 by Moodys or A-1
        by S&P.

3.      Dollar denominated investments in money market funds.

4.      Banker's acceptances, certificates of deposit, eurodollar time deposits
        (including bank money market funds) and secured repurchase agreements
        involving any of the investments referred to above and having the
        ratings specified above, as applicable, with an institution or
        institutions whose commercial paper satisfies the criteria specified in
        2 above.

5.      Tax-exempt securities and taxable securities issued by tax-exempt
        entities with maturities less than 365-days at the time of such
        investment rated Aaa by Moodys or AAA by S&P or Aa by Moodys or AA by
        S&P.

6.      Investments of a similar type by Foreign Subsidiaries in jurisdictions
        where such Foreign Subsidiaries do business.

Moodys = Moody's Investors Service, Inc.
S&P = Standard & Poor's Ratings Services, a division of the McGraw-Hill
      Companies, Inc.

<PAGE>

                                  Schedule VIII

                                      PLANS

1.      GapShare 401(k) Plan

2.      Gap Inc. Employee Benefits Premium Payment Plan

3.      Gap Inc. Life and Accidental Death and Dismemberment Plan (includes the
        Business Travel Accident Plan)

4.      Gap Inc. Health Insurance Plan

5.      Gap Inc. Short-Term Disability Plan

6.      Gap Inc. Long-Term Disability Plan

7.      Gap Inc. Tuition Reimbursement Program

8.      Gap Inc. Vision Plan

9.      Gap Inc. Dependent Care Flexible Spending Account Plan

10.     Gap Inc. Health Care Flexible Spending Account Plan

11.     The Gap, Inc. 2001 Workforce Review Transition Benefits Plan for
        Employees in Grades 23 and Below

12.     The Gap, Inc. 2001 Workforce Review Transition Benefits Plan for
        Employees in Grades 24 and Above

13.     Banana Republic, Inc. 2001 Field Reorganization Benefits Plan

14.     The Gap, Inc. 2002 Distribution Division Transition Benefits Plan for
        Employees in Grades 19 and Below

15.     The Gap, Inc. 2002 Distribution Division Transition Benefits Plan for
        Employees in Grades 20 and Above

16.     The Gap Inc. 2002 Transition Benefits Plan for Employees in Grades 19
        and Below

17.     The Gap Inc. 2002 Transition Benefits Plan for Employees in Grades 20
        and Above

<PAGE>

                                   Schedule IX

                          SPECIAL PURPOSE SUBSIDIARIES

1.      Banana Republic (Apparel) Inc.

2.      Banana Republic (ITM) Inc.

3.      Gap (Apparel) Inc.

4.      Gap (ITM) Inc.

5.      Old Navy (Apparel) Inc.

6.      Old Navy (ITM) Inc.

7.      GPSDC (Fresno) LLC

8.      GPSDC (CADC) LLC

9.      GPSDC (WDC) LLC

<PAGE>

                                   Schedule X
                                  ERISA Matters

None.

<PAGE>

                                   Schedule XI

                          SUBSIDIARIES OF THE BORROWER

<TABLE>
<CAPTION>
SUBSIDIARIES OF THE
  BORROWER (EXCEPT                                                                    NUMBER OF
      EXCLUDED                                                       PERCENTAGE      SHARES/UNITS
 SUBSIDIARIES, BUT                                     NUMBER OF       OWNED      COVERED BY OPTIONS,
 INCLUDING SPECIAL    JURISDICTION     NUMBER OF         EQUITY     BY BORROWER   WARRANTS, RIGHTS OF
      PURPOSE              OF         SHARES/UNITS     INTERESTS       OR ANY        CONVERSION OR        MATERIAL ASSETS (IF A
   SUBSIDIARIES)      ORGANIZATION     AUTHORIZED     OUTSTANDING    SUBSIDIARY         PURCHASE        SPECIAL PURPOSE SUBSIDIARY)
--------------------  -------------  --------------  -------------  ------------  -------------------  -----------------------------
<S>                        <C>          <C>          <C>                <C>              <C>           <C>
  Banana Republic                                                                                      Holds all U.S. trademarks for
   (Apparel) Inc.          CA            1,000           100            100%             None.          the Banana Republic brand.

  Banana Republic
  (California) LLC         DE              n/a           n/a            100%             None.                     n/a

  Banana Republic
   (Florida) LLC           CA              n/a           n/a            100%             None.                     n/a

  Banana Republic
   (Holdings) Inc.         CA            1,000           100            100%             None.                     n/a

                                                                                                         Holds all international
  Banana Republic                                                                                       trademarks for the Banana
    (ITM) Inc.             CA            1,000           100            100%             None.            Republic brand.

  Banana Republic
   (New York) LLC          DE             n/a            n/a            100%             None.                     n/a

  Banana Republic,
        Inc.               DE            1,000           100            100%             None.                     n/a

                                                                                                         Holds all U.S. trademarks
 Gap (Apparel) Inc.        CA            1,000          1,000           100%             None.              for the Gap brand.

 Gap (Florida) LLC         CA             n/a            Nn/a           100%             None.                     n/a

 Gap (Georgia) L.P.        CA             n/a        999 LP; 1 GP       100%             None.                     n/a

 Gap (Indiana) L.P.        CA             n/a        999 LP; 1 GP       100%             None.                     n/a

                                                                                                        Will hold all international
   Gap (ITM) Inc.          CA           100,000          100            100%             None.         trademarks for the Gap brand.

Gap (Kentucky) L.P.        CA             n/a        999 LP; 1 GP       100%             None.                     n/a

Gap (Tennessee) L.P.       CA             n/a        999 LP; 1 GP       100%             None.                     n/a

Gap (Wisconsin) L.P.       CA             n/a        999 LP; 1 GP       100%             None.                     n/a

 Gap Holdings, Inc.        CA            1,000           700            100%             None.                     n/a
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
SUBSIDIARIES OF THE
  BORROWER (EXCEPT                                                                    NUMBER OF
      EXCLUDED                                                       PERCENTAGE      SHARES/UNITS
 SUBSIDIARIES, BUT                                     NUMBER OF        OWNED     COVERED BY OPTIONS,
 INCLUDING SPECIAL    JURISDICTION     NUMBER OF         EQUITY     BY BORROWER   WARRANTS, RIGHTS OF
      PURPOSE              OF         SHARES/UNITS     INTERESTS       OR ANY        CONVERSION OR         MATERIAL ASSETS (IF A
   SUBSIDIARIES)      ORGANIZATION     AUTHORIZED     OUTSTANDING    SUBSIDIARY         PURCHASE        SPECIAL PURPOSE SUBSIDIARY)
--------------------  -------------  --------------  -------------  ------------  -------------------  -----------------------------
<S>                        <C>          <C>             <C>             <C>              <C>            <C>
 Gap International
Sourcing (Americas)
        LLC                CA             n/a            n/a            100%             None.                     n/a

 Gap International
      Sourcing
 (California), Inc.        CA            1,000           100            100%             None.                     n/a

 Gap International
 Sourcing (JV), LLC        CA             n/a            n/a            100%             None.                     n/a

 Gap International
 Sourcing (U.S.A.)
        Inc.               CA             100            100            100%             None.                     n/a

 Gap International
   Sourcing, Inc.          CA            1,000           1100           100%             None.                     n/a

GPS (Maryland), Inc.       MD           10,000           100            100%             None.                     n/a

GPS Brand Services,
        Inc.               CA           10,000          1,000           100%             None.                     n/a

    GPS Consumer
    Direct, Inc.           CA            1,000           100            100%             None.                     n/a

   GPS Corporate
  Facilities, Inc.         CA            1,000           100            100%             None.                     n/a

    GPS Employee
   Services, Inc.          CA            1,000           100            100%             None.                     n/a

                                                                                                        Holds distribution center
  GPSDC (CADC) LLC         CA             n/a            n/a            100%             None.                    assets.

                                                                                                        Holds distribution center
 GPSDC (Fresno) LLC        CA             n/a            n/a            100%             None.                    assets.

  GPSDC (New York)
        Inc.               DE            1,000           100            100%             None.                     n/a

                                                                                                        Holds distribution center
  GPSDC (WDC) LLC          CA             n/a            n/a            100%             None.                    assets.

  GPS Real Estate,
        Inc.               CA            1,000           100            100%             None.                     n/a

 Old Navy (Apparel)                                                                                     Holds all U.S. trademarks
        Inc.               CA            1,000           100            100%             None.           for the Old Navy brand.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
SUBSIDIARIES OF THE
  BORROWER (EXCEPT                                                                    NUMBER OF
      EXCLUDED                                                       PERCENTAGE      SHARES/UNITS
 SUBSIDIARIES, BUT                                     NUMBER OF       OWNED      COVERED BY OPTIONS,
 INCLUDING SPECIAL    JURISDICTION     NUMBER OF         EQUITY     BY BORROWER   WARRANTS, RIGHTS OF
      PURPOSE              OF         SHARES/UNITS     INTERESTS       OR ANY        CONVERSION OR         MATERIAL ASSETS (IF A
   SUBSIDIARIES)      ORGANIZATION     AUTHORIZED     OUTSTANDING    SUBSIDIARY         PURCHASE        SPECIAL PURPOSE SUBSIDIARY)
--------------------  -------------  --------------  -------------  ------------  -------------------  -----------------------------
<S>                        <C>           <C>         <C>                <C>              <C>            <C>
      Old Navy
  (California) LLC         DE             n/a            n/a            100%             None.                     n/a

Old Navy (East) L.P.       CA             n/a        99 LP; 1 GP        100%             None.                     n/a

 Old Navy (Florida)
        LLC                CA             n/a            n/a            100%             None.                     n/a

Old Navy (Holdings)
        Inc.               CA            1,000           100            100%             None.                     n/a

                                                                                                          Holds all international
                                                                                                        trademarks for the Old Navy
Old Navy (ITM) Inc.        CA            1,000           100            100%             None.                    brand.

   Old Navy Inc.           DE            1,000           100            100%             None.                     n/a

  The Fisher Gap
   Stores, Inc.            CA            7,500          1,000           100%             None.                     n/a

  WCB Twenty-Eight
Limited Partnership        DE             n/a        99 LP; 1 GP        100%             None.                     n/a
</TABLE>

<PAGE>

                                  Schedule XII
                              Environmental Matters

None.

<PAGE>

                                  Schedule XIII
                                  Existing Debt

<TABLE>
<CAPTION>
       BORROWER               AMOUNT             TYPE OF DEBT           EXPIRATION
----------------------   -----------------   -------------------    ------------------
<S>                      <C>                 <C>                    <C>
Gap International BV     Euro 250,000,000    5.0% 5-Year Notes      September 30, 2004

Gap (Japan) K.K.         US $50,000,000      6.25% 10-Year          March 1, 2009
                                             Notes

Gap (France) SAS         Euro 2,145,619      Bank Guarantee for     Evergreen
                                             lease payments in
                                             France Societe
                                             Generale

Gap (Deutschland) GmbH   Euro 3,536,078      Bank Guarantee for     Evergreen
                                             lease payments in
                                             Germany Deutsche
                                             Bank

Gap (RHC) BV             USD 2,000,000       Intercompany           Evergreen
                                             Revolver

Gap (RHC) BV             USD 40,000,000      Intercompany           Evergreen
                                             Revolver

Gap (RHC) BV             USD 23,000,000      Intercompany           Evergreen
                                             Revolver

Gap (France) SAS         USD 3,000,000       Intercompany           Evergreen
                                             Revolver

Old Navy (Canada) Inc.   USD 43,299,038      Intercompany           Evergreen
                                             Revolver

Gap (Canada) Inc.        USD 26,059,063      Intercompany           Evergreen
                                             Revolver

Banana Republic          USD 1,015,923       Intercompany           Evergreen
 (Canada) Inc.                               Revolver
</TABLE>

<PAGE>

                                  Schedule XIV

                              EXCLUDED SUBSIDIARIES

1.      GPS Distribution Facilities, LLC

2.      GPS (Japan) Limited

3.      GPS Management Services, Inc.

4.      GPS Park Restaurant, Inc.

5.      GPS Realty Company Inc.

6.      Real Estate Ventures (Glastonbury), Inc.

7.      Real Estate Ventures (Glen Eagle), Inc.

8.      Real Estate Ventures (Wheaton), Inc.

<PAGE>

                                   Schedule XV

                               HEDGE SUBSIDIARIES

1.      Banana Republic, Inc.

2.      Gap (Canada) Inc.

3.      Gap (France) SAS

4.      Gap International BV

5.      Gap International Sourcing (Holdings) Limited

6.      Gap International Sourcing Limited

7.      Gap (Japan) KK

8.      Gap (Netherlands) BV

9.      Gap (UK Holdings) Limited

10.     GPS (Great Britain) Limited

11.     Old Navy (Canada) Inc.

12.     Old Navy Inc.

13.     Gap (RHC) B.V.

14.     Gap (Deutschland) GmbH

<PAGE>

                                    EXHIBIT A

                               NOTICE OF BORROWING

Citicorp USA, Inc., as Agent
  for the Lenders Parties
  to the Credit Agreement referred to below

Attention:

                                     [Date]

Ladies and Gentlemen:

        The undersigned, The Gap, Inc., refers to the Credit Agreement, dated as
of June __, 2003 (as amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement", the terms defined therein being used
herein as therein defined), among the undersigned, certain of the undersigned's
Subsidiaries, certain Lenders parties thereto, certain Issuing Banks parties
thereto, certain Joint Book Managers parties thereto, certain Co-Syndication
Agents parties thereto, Citigroup Global Markets Inc., Banc of America
Securities LLC and J.P. Morgan Securities Inc. as Joint Lead Arrangers, and
Citicorp USA, Inc., as Agent for said Lenders and the Issuing Banks, and hereby
gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement
that the undersigned hereby requests a Borrowing under the Credit Agreement, and
in that connection sets forth below the information relating to such Borrowing
(the "Proposed Borrowing") as required by Section 2.02(a) of the Credit
Agreement:

        (i)     The Business Day of the Proposed Borrowing is _____________,
200_.

        (ii)    The Type of Advances comprising the Proposed Borrowing is [Base
Rate Advances] [Eurodollar Rate Advances].

        (iii)   The aggregate amount of the Proposed Borrowing is
$_______________.

        (iv)    [The Interest Period for each Eurodollar Rate Advance made as
part of the Proposed Borrowing is [ month[s]].]

        The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the Proposed Borrowing:

        (A)     the representations and warranties contained in Section 6.01 of
the Credit Agreement (other than, in the case of any Advance that does not
increase the outstanding principal amount of the Advances, the representations
and warranties contained in Sections 6.01(f) and 6.01(g) of the Credit
Agreement), Section 6 of the Security Agreement and Section 6 of the Subsidiary
Guaranty are correct, before and after giving effect to the Proposed Borrowing
and to the application of the proceeds therefrom, as though made on and as of
such date;

                                 Exh. A Page 1

<PAGE>

        (B)     no event has occurred and is continuing, or would result from
such Proposed Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default or Default; and

        (C)     the making of the Proposed Borrowing is in compliance with the
respective criteria set forth in Section 2.01(a) of the Credit Agreement.

                                  Very truly yours,

                                  THE GAP, INC.

                                  By
                                    --------------------------------------------
                                     Name:
                                     Title:

<PAGE>

                                    EXHIBIT B

                             FORM OF PROMISSORY NOTE

$_______________                                       Dated: ___________, 200_

        FOR VALUE RECEIVED, the undersigned, The Gap, Inc., a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
[_________________________] (the "Lender") for the account of its Applicable
Lending Office on the Termination Date (as those terms are defined in the Credit
Agreement referred to below) or prior thereto as provided in such Credit
Agreement the aggregate principal amount of the Advances (as defined below)
owing to the Lender by the Borrower pursuant to the Credit Agreement dated as of
June ___, 2003 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Credit Agreement," terms defined therein,
unless otherwise defined herein, being used herein as therein defined), among
the Borrower, certain subsidiaries of the Borrower, the Lender and certain other
banks and financial institutions party thereto as Lenders, certain Issuing
Banks, certain Joint Book Managers parties thereto, certain Co-Syndication
Agents parties thereto, Citigroup Global Markets Inc., Banc of America
Securities LLC and J.P. Morgan Securities Inc. as Joint Lead Arrangers, and
Citicorp USA, Inc. ("CUSA"), as Agent.

        The Borrower also promises to pay interest on the unpaid principal
amount of each Advance from the date of such Advance until such principal amount
is paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement. Both principal and interest are payable in
lawful money of the United States of America to CUSA, as Agent, at [399 Park
Avenue, New York, New York 10043] (or at such other address as the Agent may
specify to the Borrower in writing) in same day funds, free and clear of and
without any deduction, with respect to the payee named above, subject to Section
4.02 of the Credit Agreement, for any and all present and future taxes,
deductions, charges or withholdings, and all liabilities with respect thereto.

        The Lender is authorized to record the date of each Advance or
Conversion or continuation thereof, each payment or prepayment of principal with
respect thereto and, in the case of Eurodollar Rate Advances, each Interest
Period and the interest rate applicable thereto, in the Lender's internal
records and, prior to any transfer hereof, on a schedule annexed hereto and made
a part hereof, and any such notation shall constitute prima facie evidence of
the accuracy of the information so recorded.

        This Promissory Note is issued pursuant to Section 2.02(g) of, and is
entitled to the benefits of, the Credit Agreement. The Credit Agreement, among
other things, (i) provides for the making of advances (the "Advances") by the
Lender to the Borrower from time to time in an aggregate amount not to exceed at
any time outstanding the U.S. dollar amount first above mentioned, the
indebtedness of the Borrower resulting from each such Advance being evidenced by
this Promissory Note, and (ii) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified.

                                  Exh. B Page 1

<PAGE>

        The Borrower hereby waives presentment, demand, protest and notice of
any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.

        This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of New York, United States.

                                        THE GAP, INC.

                                        By
                                          --------------------------------------
                                          Name:
                                          Title:

                                  Exh. B Page 2

<PAGE>

                                    EXHIBIT C

                        FORM OF ASSIGNMENT AND ACCEPTANCE

                            Dated _____________, 200_

        Reference is made to the Credit Agreement, dated as of June __, 2003
(the "Credit Agreement"), among The Gap, Inc., a Delaware corporation (the
"Borrower"), certain Subsidiaries of the Borrower, as "LC Subsidiaries" and
"Subsidiary Borrowers," as the case may be, the Lenders (as defined in the
Credit Agreement), certain Issuing Banks, certain Joint Book Managers parties
thereto, certain Co-Syndication Agents parties thereto, Citigroup Global Markets
Inc., Banc of America Securities LLC and J.P. Morgan Securities Inc. as Joint
Lead Arrangers, and Citicorp USA, Inc., as Agent for the Lenders and Issuing
Banks (the "Agent"). Terms defined in the Credit Agreement are used herein with
the same meaning.

        ____________ (the "Assignor") and ____________ (the "Assignee") agree as
follows:

        1.      The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, such respective
interests in and to all of the Assignor's rights and obligations under the
Credit Agreement as of the date hereof which represent the respective percentage
interests specified on Schedule 1 of all outstanding rights and obligations
under the Credit Agreement in respect of (a) the Assignor's Commitment and the
Advances owing to the Assignor and (b) the Issuing Commitment and participations
in Letter of Credit Liability of the Assignor. After giving effect to such sale
and assignment, (i) the Assignee's Commitment and the amount of the Advances
owing to the Assignee and (ii) such Assignee's Issuing Commitment and
participations in Letter of Credit Liability will be as set forth, respectively,
in Section 2 of Schedule 1.

        2.      The Assignor (a) represents and warrants that it is the legal
and beneficial owner of the interests being assigned by it hereunder and that
such interests are free and clear of any adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto and (c) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower, any Subsidiary Borrower or any LC
Subsidiary or the performance or observance by the Borrower, any Subsidiary
Borrower or any LC Subsidiary of any of its respective obligations under the
Credit Agreement or any other instrument or document furnished pursuant thereto.

        3.      The Assignee (a) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 6.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (b) agrees that it will, independently and
without reliance upon the Agent, the Issuing Banks, the Assignor or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Credit

                                 Exh. C - Page 1

<PAGE>

Agreement; (c) confirms that it is an Eligible Assignee; (d) appoints and
authorizes the Agent and the Issuing Banks to take such action on its behalf and
to exercise such powers under the Credit Agreement as are delegated to the Agent
and the Issuing Banks by the terms thereof, together with such powers as are
reasonably incidental thereto; (e) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as Lender; [and] (f) specifies as
its Domestic Lending Office (and address for notices) and Eurodollar Lending
Office the offices set forth beneath its name on the signature pages hereof [and
(g) attaches the forms prescribed by the Internal Revenue Service of the United
States certifying as to the Assignee's status for purposes of determining
exemption from United States withholding taxes with respect to all payments to
be made to the Assignee under the Credit Agreement or such other documents as
are necessary to indicate that all such payments are subject to such rates at a
rate reduced by an applicable tax treaty].*

        4.      Following the execution of this Assignment and Acceptance by the
Assignor and the Assignee, it will be delivered to the Agent for acceptance and
recording by the Agent. The effective date of this Assignment and Acceptance
shall be the date of acceptance thereof by the Agent, unless otherwise specified
on Schedule 1 hereto (the "Effective Date").

        5.      Upon such acceptance and recording by the Agent, as of the
Effective Date, (a) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance, have the rights and
obligations of Lender thereunder and (b) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.

        6.      Upon such acceptance and recording by the Agent, from and after
the Effective Date, the Agent shall make (and shall direct the Issuing Banks to
make) all payments under the Credit Agreement in respect of the interests
assigned hereby (including, without limitation, all payments of principal,
interest and utilization fees, facility fees and letter of credit facility fees
with respect thereto) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments under the Credit Agreement for periods prior
to the Effective Date directly between themselves.

        7.      This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.

        IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective officers thereunto duly
authorized, as of the date first above written, such execution being made on
Schedule 1 hereto.

----------
..       If the Assignee is organized under the laws of a jurisdiction outside
        the United States.

                                 Exh. C - Page 2

<PAGE>

                                  Schedule 1 to
                            Assignment and Acceptance
                            Dated ____________, 200_

SECTION 1.

Percentage Interest in Commitment and Advances:                        _______%
Percentage Interest in participations in Letter of Credit Liability:   _______%

SECTION 2.

Assignee's Commitment:                                                 $________
Issuing Commitment                                                     $________
Aggregate outstanding principal amount of Advances owing to Assignee:  $________
Aggregate outstanding amount of Assignee's participations in
       Letter of Credit Liability:                                     $________

SECTION 3.

Effective Date1:       __________________, 200_

                                        [NAME OF ASSIGNOR]

                                        By:
                                           -------------------------------------
                                           Name
                                           Title:

                                        [NAME OF ASSIGNEE]

                                        By:
                                           -------------------------------------
                                           Name
                                           Title:

                                        Domestic Lending Office (and
                                        address for notices):
                                              [Address]

                                        Eurodollar Lending Office:
                                              [Address]

----------
1       This date should be no earlier than the date of acceptance by the Agent.

                Schedule I to Assignment and Acceptance - Page 1

<PAGE>

Accepted this _____ day
of  _____________, 200_

CITICORP USA, INC., as Agent

By:
   ------------------------------------
   Name
   Title:

   [Accepted this ____ day
    of ___, 200___

    THE GAP, INC.

By:------------------------------------
   Name:
   Title:]2

___________
2 If required under Section 10.07 (a) of the Credit Agreement

                Schedule I to Assignment and Acceptance - Page 2

<PAGE>

                                                                       EXHIBIT D

                SUBSIDIARY GUARANTY dated as of June __, 2003 made by the
Persons listed on the signature pages hereof and the Additional Guarantors (as
defined in Section 8(b) hereof) (such Persons so listed and the Additional
Guarantors being, collectively, the "Guarantors" and, individually, each a
"Guarantor") in favor of the Lender Parties (as defined in the Credit Agreement
referred to below).

                PRELIMINARY STATEMENTS.

                (1)     The Gap, Inc., a Delaware corporation (the "Borrower"),
is party to a Credit Agreement dated as of June __, 2003 (as amended, amended
and restated, supplemented or otherwise modified from time to time, the "Credit
Agreement"; the capitalized terms defined therein being used herein as therein
defined) with certain Subsidiaries of the Borrower, certain Lender Parties party
thereto, certain other financial institutions and Citicorp USA, Inc. as Agent
for such Lender Parties. Each Guarantor will derive substantial direct and
indirect benefits from the transactions contemplated by the Credit Agreement.

                (2)     It is a condition precedent to the making of Advances
and the issuance of Letters of Credit by the Lender Parties under the Credit
Agreement that each Guarantor shall have executed and delivered this Guaranty.

                NOW, THEREFORE, in consideration of the premises and in order to
induce the Lender Parties to make Advances and to issue Letters of Credit under
the Credit Agreement, each Guarantor, jointly and severally with each other
Guarantor, hereby agrees as follows:

                Section 1. Guaranty; Limitation of Liability. (a) Each Guarantor
hereby absolutely, unconditionally and irrevocably guarantees the punctual
payment when due, whether at scheduled maturity or on any date of a required
prepayment or by acceleration, demand or otherwise, of all Obligations of the
Borrower, each Subsidiary Borrower and each LC Subsidiary now or hereafter
existing under or in respect of the Credit Agreement, of all Obligations of the
Borrower and the Hedge Subsidiaries now or hereafter existing under the Hedge
Agreements, and of all Obligations of the Borrower and its Subsidiaries now or
hereafter existing under Operating Indebtedness Agreements (including, without
limitation, any extensions, modifications, substitutions, amendments or renewals
of any or all of the foregoing Obligations), whether direct or indirect,
absolute or contingent, and whether for principal, interest, premiums, fees,
indemnities, contract causes of action, costs, expenses or otherwise, (such
Obligations being the "Guaranteed Obligations"), and agrees to pay any and all
reasonable and documented expenses (including, without limitation, reasonable
and documented fees and out-of-pocket expenses of counsel) incurred by the
Agent, any other Lender Party, or any Hedge Bank in enforcing any rights under
this Guaranty. Without limiting the generality of the foregoing, each
Guarantor's liability shall extend to all amounts that constitute part of the
Guaranteed Obligations and would be owed to any Lender Party under or in respect
of the Credit Agreement or to any Hedge Bank under or in respect of a Hedge
Agreement or to any Operating Lender under or in respect of an Operating
Indebtedness Agreement but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving such other Loan Party.

<PAGE>

                                        2

                (b)     Each Guarantor, and by its acceptance of this Guaranty,
        the Agent and each other Lender Party, hereby confirm that it is the
        intention of all such Persons that this Guaranty and the Obligations of
        each Guarantor hereunder not constitute a fraudulent transfer or
        conveyance for purposes of Bankruptcy Law (as hereinafter defined), the
        Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act
        or any similar foreign, federal or state law to the extent applicable to
        this Guaranty and the Obligations of each Guarantor hereunder. To
        effectuate the foregoing intention, the Agent, the other Lender Parties,
        any Hedge Bank and the Guarantors hereby irrevocably agree that the
        Obligations of each Guarantor under this Guaranty at any time and all of
        the other liabilities of each of the Guarantors under this Guaranty
        shall be limited to the maximum amount as will, after giving effect to
        such maximum amount and all of the other contingent and fixed
        liabilities of such Guarantor that are relevant under such requirements
        of law, and after giving effect to any collections from, any rights to
        receive contributions from, or any payments made by or on behalf of, any
        of the other Guarantors in respect of the Obligations of such other
        Guarantor under this Guaranty, result in the Obligations of such
        Guarantor under this Guaranty not constituting a fraudulent transfer or
        conveyance. For purposes hereof, "Bankruptcy Law" means any proceeding
        of the type referred to in Section 8.01(e) of the Credit Agreement or
        Title 11, U.S. Code, or any similar foreign, federal or state law for
        the relief of debtors.

                (c)     Each Guarantor hereby unconditionally and irrevocably
        agrees that in the event any payment shall be required to be made to any
        Lender Party, or Hedge Bank or Operating Lender under this Guaranty or
        any other guaranty, such Guarantor will contribute, to the maximum
        extent permitted by law, such amounts to each other Guarantor and each
        other guarantor so as to maximize the aggregate amount paid to the
        Lender Parties under or in respect of the Credit Agreement, the Hedge
        Bank under or in respect of the respective Hedge Agreement, or the
        Operating Lender under or in respect of the respective Operating
        Indebtedness Agreement.

                (d)     Notwithstanding anything to the contrary set forth
        herein and, with respect to the Guarantors on the one hand, and the
        Lender Parties and the Hedge Banks on the other, the Intercreditor
        Agreement, it is understood and agreed by the parties hereto and by any
        Hedge Bank seeking to enforce this Guaranty or to otherwise obtain any
        benefit under this Guaranty or any Operating Lender seeking to enforce
        this Guaranty or otherwise obtain any benefit under this Guaranty that
        (i) any such Hedge Bank or Operating Lender shall be bound by all of the
        provisions of this Guaranty, (ii) the Guaranteed Obligations hereunder
        in favor of the Lender Parties with respect to the Credit Agreement, and
        the Guaranteed Obligations in favor of the Operating Lenders with
        respect to the Operating Indebtedness Agreements and the Guaranteed
        Obligations hereunder in favor of the Hedge Banks with respect to the
        Hedge Agreements entered into by the Hedge Subsidiaries are separate,
        (iii) no Lender Party or Operating Lender shall have any claim under
        this Guaranty or under any other Loan Document or any Operating
        Indebtedness Agreement solely as a result of a claim by any Hedge Bank
        under this Guaranty, and no Hedge Bank shall have any claim under this
        Guaranty solely as a result of a claim by any Lender Party or Operating
        Lender hereunder or under any other Loan Document or any Operating
        Indebtedness Agreement or by any other Hedge Bank under this Guaranty,
        (iv) with respect to Guaranteed Obligations under Hedge

<PAGE>

                                        3

        Agreements entered into by Hedge Subsidiaries, this Guaranty shall
        operate in favor of only those Lenders or Affiliates of a Lender which
        are Hedge Banks prior to the termination of this Guaranty, and then only
        with respect to the Obligations incurred under Hedge Agreements with
        Hedge Banks in effect prior to such termination, and (v) with respect to
        the Guaranteed Obligations under Operating Indebtedness Agreements, this
        Guaranty shall operate in favor of only those Lenders or Affiliates of
        Lenders which are Operating Lenders prior to the termination of this
        Guaranty, and then only with respect to the Obligations incurred under
        Operating Indebtedness Agreements in effect prior to such termination.

                Section 2. Guaranty Absolute. Each Guarantor jointly and
severally guarantees that all of the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Credit Agreement, the respective
Hedge Agreement or the respective Operating Indebtedness Agreement, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Lender Party, Hedge Bank or
Operating Lender with respect thereto. The Obligations of each Guarantor under
or in respect of this Guaranty are independent of the Guaranteed Obligations or
any other Obligations of any other Loan Party under or in respect of the Loan
Documents, the Hedge Agreements or the Operating Indebtedness Agreements and a
separate action or actions may be brought and prosecuted against each Guarantor
to enforce this Guaranty, irrespective of whether any action is brought against
the Borrower, any other Loan Party, any Hedge Subsidiary or any Subsidiary of
the Borrower party to an Operating Indebtedness Agreement or whether the
Borrower or any other Loan Party or any Hedge Subsidiary is joined in any such
action or actions. The liability of each Guarantor under this Guaranty shall be
irrevocable, absolute and unconditional irrespective of, and each Guarantor
hereby irrevocably waives any defenses it may now have or hereafter acquire in
any way relating to, any or all of the following:

                (a)     any lack of validity or enforceability of any Loan
        Document, Hedge Agreement, Operating Indebtedness Agreement or any
        agreement or instrument relating thereto;

                (b)     any change in the time, manner or place of payment of,
        or in any other term of, all or any of the Guaranteed Obligations or any
        other Obligations of any other Loan Party or any Hedge Subsidiary or any
        such Subsidiary of the Borrower under or in respect of the Loan
        Documents, the Hedge Agreements or the Operating Indebtedness
        Agreements, or any other amendment or waiver of or any consent to
        departure from any Loan Document, any Hedge Agreement or any Operating
        Indebtedness Agreement, including, without limitation, any increase in
        the Guaranteed Obligations resulting from the extension of additional
        credit to any Loan Party or the execution of additional Hedge Agreements
        or additional Operating Indebtedness Agreements or otherwise;

                (c)     any taking, exchange, release or non-perfection of any
        Collateral or any other collateral, or any taking, release or amendment
        or waiver of, or consent to departure from, any other guaranty, for all
        or any of the Guaranteed Obligations;

                (d)     any manner of application of Collateral or any other
        collateral, or proceeds thereof, to all or any of the Guaranteed
        Obligations, or any manner of sale or other

<PAGE>

                                        4

        disposition of any Collateral or any other collateral for all or any of
        the Guaranteed Obligations or any other Obligations of any Loan Party
        under the Loan Documents or of the Borrower or any Hedge Subsidiary
        under any Hedge Agreement or the Borrower or any of its Subsidiaries
        party to any Operating Indebtedness Agreement or any other assets of the
        Borrower, any Loan Party or any of its Subsidiaries;

                (e)     any change, restructuring or termination of the
        corporate structure or existence of the Borrower, any Loan Party or any
        of its Subsidiaries;

                (f)     any failure of any Lender Party or any Hedge Bank or
        Operating Lender to disclose to any Loan Party or Hedge Subsidiary or
        other Subsidiary of the Borrower any information relating to the
        business, condition (financial or otherwise), operations, liabilities
        (actual or contingent), performance, properties or prospects of any
        other Loan Party or Hedge Subsidiary or such Subsidiaries now or
        hereafter known to such Lender Party or such Hedge Bank or such
        Operating Lender (each Guarantor waiving any duty on the part of the
        Lender Parties or such Hedge Banks or such Operating Lenders to disclose
        such information);

                (g)     the failure of any other Person to execute or deliver
        this Guaranty, any Guaranty Supplement (as hereinafter defined) or any
        other guaranty or agreement or the release or reduction of liability of
        any Guarantor or other guarantor or surety with respect to the
        Guaranteed Obligations; or

                (h)     any other circumstance (including, without limitation,
        any statute of limitations) or any existence of or reliance on any
        representation by any Lender Party or any Hedge Bank or Operating Lender
        that might otherwise constitute a defense available to, or a discharge
        of, the Borrower, any Loan Party, any Hedge Subsidiary, any other such
        Subsidiary of the Borrower or any other guarantor or surety.

This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by any Lender Party or any Hedge Bank or any
Operating Lender or any other Person upon the insolvency, bankruptcy or
reorganization of the Borrower, any other Loan Party, any Hedge Subsidiary, any
other such Subsidiary of the Borrower, or otherwise, all as though such payment
had not been made.

        Each of the Guarantors hereby further agrees that, as between such
Guarantor, on the one hand, and the Agent and the Lender Parties on the other
hand, (i) the Guaranteed Obligations of such Guarantor in respect of the Credit
Agreement may be declared to be forthwith due and payable upon an Event of
Default as provided in Section 8.01 of the Credit Agreement (and shall be deemed
to have become automatically due and payable in the circumstances provided
therefor in Section 8.01 of the Credit Agreement) for all purposes of this
Guaranty, notwithstanding any stay, injunction or other prohibition preventing
such declaration in respect of the Obligations of any of the Loan Parties or any
of the Obligations guaranteed hereunder (or preventing such Guaranteed
Obligations from becoming automatically due and payable) as against any other
Person and (ii) in the event of any declaration of acceleration of such
Guaranteed Obligations (or such Guaranteed Obligations being deemed to have
become automatically due and payable) as

<PAGE>

                                        5

provided in Section 8.01 of the Credit Agreement, such Guaranteed Obligations
(whether or not due and payable by any other Person) with respect to the Lender
Parties (but not with respect to the Hedge Banks or the Operating Lenders) shall
forthwith become due and payable by such Guarantor for all purposes of this
Guaranty.

        Each of the Guarantors hereby further agrees that, as between such
Guarantor on the one hand, and each Hedge Bank, on the other hand, (i) the
Guaranteed Obligations of such Guarantor in respect of each Hedge Agreement may
be declared to be forthwith due and payable upon an event under such Hedge
Agreement that permits such Hedge Bank to exercise its remedies thereunder for
all purposes of this Guaranty, notwithstanding any stay, injunction or other
prohibition preventing such declaration in respect of the Obligations of the
Borrower or any of the Hedge Subsidiaries or any of the Obligations guaranteed
hereunder as against any other Person and (ii) in the event of any acceleration
of any such Guaranteed Obligations as provided in such Hedge Agreement, such
Guaranteed Obligations (whether or not due and payable by any other Person) with
respect to the Hedge Banks (but not with respect to the Lender Parties or the
Operating Lenders) shall forthwith become due and payable by such Guarantor for
all purposes of this Guaranty.

        Each of the Guarantors hereby further agrees that, as between such
Guarantor, on the one hand, and each Operating Lender, on the other hand, (i)
the Guaranteed Obligations of such Guarantor in respect of such Operating
Indebtedness Agreement may be declared to be forthwith due and payable upon an
event under such Operating Indebtedness Agreement that permits such Operating
Lender to exercise its remedies thereunder for all purposes of this Guaranty,
notwithstanding any stay, injunction or other prohibition preventing such
declaration in respect of the Obligations of the Borrower or any of its
Subsidiaries or any of the Obligations guaranteed hereunder as against any other
Person, and (ii) in the event of any acceleration of any such Guaranteed
Obligations as provided in such Operating Indebtedness Agreement, such
Guaranteed Obligations (whether or not due and payable by any other Person) with
respect to the Operating Lenders (but not with respect to the Lender Parties or
Hedge Banks) shall forthwith become due and payable by such Guarantor for all
purposes of this Guaranty.

                Section 3. Waivers and Acknowledgments. (a) Each Guarantor
hereby unconditionally and irrevocably waives promptness, diligence, notice of
acceptance, presentment, demand for performance, notice of nonperformance,
default, acceleration, protest or dishonor and any other notice with respect to
any of the Guaranteed Obligations and this Guaranty and any requirement that any
Lender Party, any Hedge Bank or any Operating Lender protect, secure, perfect or
insure any Lien or any property subject thereto or exhaust any right or take any
action against the Borrower, any Loan Party, any Hedge Subsidiary, any other
Subsidiary of the Borrower party to any Operating Indebtedness Agreement or any
other Person or any Collateral.

                (b)     Each Guarantor hereby unconditionally and irrevocably
        waives any right to revoke this Guaranty and acknowledges that this
        Guaranty is continuing in nature and applies to all Guaranteed
        Obligations, whether existing now or in the future.

                (c)     Each Guarantor hereby unconditionally and irrevocably
        waives (i) any defense arising by reason of any claim or defense based
        upon an election of remedies by

<PAGE>

                                        6

        any Lender Party or any Hedge Bank or any Operating Lender that in any
        manner impairs, reduces, releases or otherwise adversely affects the
        subrogation, reimbursement, exoneration, contribution or indemnification
        rights of such Guarantor or any other rights of such Guarantor to
        proceed against any of the other Loan Parties, any Hedge Subsidiary, any
        such Subsidiary of the Borrower, any other guarantor or any other Person
        or any Collateral and (ii) any defense based on any right of set-off or
        counterclaim against or in respect of the Obligations of such Guarantor
        hereunder.

                (d)     Each Guarantor acknowledges that the Agent may, without
        notice to or demand upon such Guarantor and without affecting the
        liability of such Guarantor under this Guaranty, foreclose under any
        mortgage by nonjudicial sale, and each Guarantor hereby waives any
        defense to the recovery by the Agent and the other Lender Parties and
        the Hedge Banks and the Operating Lenders against such Guarantor of any
        deficiency after such nonjudicial sale and any defense or benefits that
        may be afforded by applicable law.

                (e)     Each Guarantor hereby unconditionally and irrevocably
        waives any duty on the part of any Lender Party, any Hedge Bank, or any
        Operating Lender to disclose to such Guarantor any matter, fact or thing
        relating to the business, condition (financial or otherwise),
        operations, performance, properties or prospects of the Borrower, any
        other Loan Party or any of its Subsidiaries now or hereafter known by
        such Lender Party, Hedge Bank or Operating Lender.

                (f)     Each Guarantor acknowledges that it will receive
        substantial direct and indirect benefits from the financing arrangements
        contemplated by the Loan Documents, the Hedge Agreements and the
        Operating Indebtedness Agreements, and that the waivers set forth in
        Section 2 hereof and this Section 3 are knowingly made in contemplation
        of such benefits.

                Section 4. Subrogation. Each Guarantor hereby unconditionally
and irrevocably agrees not to exercise any rights that it may now have or may
hereafter acquire against the Borrower, any Loan Party, any Hedge Subsidiary,
any other Subsidiary of the Borrower party to any Operating Indebtedness
Agreement or any other insider guarantor that arise from the existence, payment,
performance or enforcement of such Guarantor's Obligations under or in respect
of this Guaranty or any other Loan Document, any Hedge Agreement, or any
Operating Indebtedness Agreement, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution or indemnification and any
right to participate in any claim or remedy of any Lender Party or any Hedge
Bank or Operating Lender against the Borrower, any Loan Party, any Hedge
Subsidiary, any such Subsidiary of the Borrower or any other insider guarantor
or any Collateral, whether or not such claim, remedy or right arises in equity
or under contract, statute or common law, including, without limitation, the
right to take or receive from the Borrower, any Loan Party, any Hedge
Subsidiary, any such Subsidiary of the Borrower or any other insider guarantor,
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim, remedy or right, unless
and until all of the Guaranteed Obligations and all other amounts payable under
this Guaranty shall have been paid in full in cash, all Letters of Credit shall
have expired or been terminated and all Commitments, all Hedge Agreements and
all Operating Indebtedness Agreements shall have

<PAGE>

                                        7

expired or been terminated. If any amount shall be paid to any Guarantor in
violation of the immediately preceding sentence at any time prior to the latest
of (a) the payment in full in cash of the Guaranteed Obligations and all other
amounts payable under this Guaranty, (b) the Termination Date and (c) the latest
date of expiration or termination of all Letters of Credit, all Hedge
Agreements, and all Operating Indebtedness Agreements such amount shall be
received and held in trust for the benefit of the Lender Parties, the Hedge
Banks or the Operating Lenders, as the case may be, shall be segregated from
other property and funds of such Guarantor and shall forthwith be paid or
delivered to the Agent in the same form as so received (with any necessary
endorsement or assignment) to be credited and applied to the Guaranteed
Obligations and all other amounts payable under this Guaranty, whether matured
or unmatured, or to be held as Collateral for any unpaid Guaranteed Obligations
or other amounts payable under this Guaranty thereafter arising. If (i) any
Guarantor shall make payment to any Lender Party, any Hedge Bank or any
Operating Lender of all or any part of the respective Guaranteed Obligations,
(ii) all of the Guaranteed Obligations and all other amounts payable under this
Guaranty shall have been paid in full in cash, (iii) the Termination Date shall
have occurred and (iv) all Letters of Credit, all Hedge Agreements, and all
Operating Indebtedness Agreements shall have expired or been terminated, the
Lender Parties, the Hedge Banks and Operating Lenders, respectively, will, at
such Guarantor's request and expense, execute and deliver to such Guarantor
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to such Guarantor of an
interest in the Guaranteed Obligations resulting from such payment made by such
Guarantor pursuant to this Guaranty.

                Section 5. Payments Free and Clear of Taxes, Etc. Any and all
payments by any Guarantor hereunder shall be made in accordance with Section
4.02 (as modified by Section 2.13(e)(A) thereof) and Section 4.06 of the Credit
Agreement by treating such Guarantor for all purposes of Section 4.02 (as
modified by Section 2.13(e)(A) thereof) and Section 4.06 of the Credit Agreement
as the Borrower, Subsidiary Borrower, LC Subsidiary or Subsidiary of the
Borrower party to an Operating Indebtedness Agreement, as the case may be, who
would otherwise be required to make such payment under the Credit Agreement with
all the benefits and burdens associated with such treatment.

                Section 6. Representations and Warranties. Each Guarantor hereby
makes each representation and warranty made in the Loan Documents, by the
Borrower, with respect to such Guarantor and each Guarantor hereby further
represents and warrants as follows:

                (a)     Each of the Guarantors is a corporation, limited
        liability company or other legal entity duly organized, validly existing
        and in good standing under the laws of the jurisdiction of its
        organization. Each of the Guarantors possesses all powers (corporate or
        otherwise) and all other authorizations and licenses necessary to engage
        in its respective businesses, except where the failure to so possess
        would not have a Material Adverse Effect.

                (b)     The execution, delivery and performance by such
        Guarantor of each Loan Document to which it is a party and the
        consummation of the transactions contemplated thereby are within such
        Guarantor's respective powers (corporate or otherwise), have been duly
        authorized by all necessary action (corporate or otherwise), and do not
        (i) contravene such Guarantor's Constitutive Documents, (ii) violate any
        Requirements of

<PAGE>

                                        8

        Law, (iii) conflict with or result in the breach of, or constitute a
        default or require any payment to be made under, any material contract,
        loan agreement, indenture, mortgage, deed of trust, lease or other
        instrument binding on or affecting any Loan Party or any of its
        properties or (iv) except for the Liens created under the Loan
        Documents, result in or require the creation or imposition of any Lien
        upon or with respect to any of the properties of any Loan Party. Such
        Guarantor is not in violation of any such Requirements of Law or in
        breach of any such contract, loan agreement, indenture, mortgage, deed
        of trust, lease or other instrument, the violation or breach of which
        would be reasonably likely to have a Material Adverse Effect.

                (c)     No authorization or approval or other action by, and no
        notice to or filing with, any governmental authority or regulatory body
        is required for the due execution, delivery and performance by such
        Guarantor of any Loan Document to which it is a party.

                (d)     Each Loan Document to which such Guarantor is a party
        has been duly executed and delivered by such Guarantor and is the legal,
        valid and binding obligation of such Guarantor enforceable against any
        such Guarantor in accordance with its terms, except as limited by
        bankruptcy, insolvency or other laws of general application relating to
        or affecting the enforcement of creditors' rights generally and general
        principles of equity (regardless of whether considered in a proceeding
        in equity or at law).

                (e)     Such Guarantor has, independently and without reliance
        upon any Lender Party, any Hedge Bank or any Operating Lender and based
        on such documents and information as it has deemed appropriate, made its
        own credit analysis and decision to enter into this Guaranty and each
        other Loan Document to which it is or is to be a party, and such
        Guarantor has established adequate means of obtaining from the Borrower,
        each Loan Party, each Hedge Subsidiary and each Subsidiary of the
        Borrower party to an Operating Indebtedness Agreement on a continuing
        basis information pertaining to, and is now and on a continuing basis
        will be completely familiar with, the business, condition (financial or
        otherwise), operations, performance, properties and prospects of such
        Person.

                Section 7. Covenants. Each Guarantor covenants and agrees that,
so long as any part of the Guaranteed Obligations shall remain unpaid, any
Letter of Credit shall be outstanding, or any Lender Party shall have any
Commitment or any Hedge Agreement or Operating Indebtedness Agreement shall be
in effect, such Guarantor will perform and observe, and cause each of its
Subsidiaries to perform and observe, all of the terms, covenants and agreements
set forth in the Loan Documents on its or their part to be performed or observed
or that the Borrower has agreed to cause such Guarantor or such Subsidiaries to
perform or observe.

                Section 8. Amendments, Guaranty Supplements, Etc. (a) No
amendment, modification or waiver of any provision of this Guaranty and no
consent to any departure by any Guarantor therefrom shall in any event be
effective unless the same shall be in writing and signed, (i) with respect to
the Lender Parties and any Guaranteed Obligations arising hereunder with respect
to the Lender Parties, and as long as the Credit Agreement is in effect, by the
Agent and the Majority Lenders, and (ii) with respect to any Hedge Bank and any
Guaranteed

<PAGE>

                                        9

Obligations arising hereunder with respect to such Hedge Bank, and as long as
any Hedge Agreement with respect to such Hedge Bank is in effect, by such Hedge
Bank, and (iii) with respect to any Operating Lender and any Guaranteed
Obligations arising hereunder with respect to such Operating Lender, and as long
as any Operating Indebtedness Agreement with respect to such Operating Lender is
in effect, by such Operating Lender, in the case of any such amendment or
modification, by the Guarantors, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, that this Guaranty may be modified by the execution of a
Guaranty Supplement by an Additional Guarantor in accordance with Section 8(b)
hereof; provided, however, (i) with respect to the Lender Parties and any
Guaranteed Obligations arising hereunder with respect to the Lender Parties, no
amendment, waiver or consent shall, unless in writing and signed by all of the
Lender Parties (other than any Lender Party that is, at such time, a Defaulting
Lender), (a) reduce or limit such Guaranteed Obligations of all or substantially
all Guarantors hereunder, release all or substantially all Guarantors hereunder
or otherwise limit the liability of all or substantially all Guarantors with
respect to such Guaranteed Obligations except as provided in Section 17 hereof,
(b) postpone any date fixed for payment hereunder or (c) change the number of
Lender Parties or the percentage of (x) the Obligations, (y) the aggregate
unpaid principal amount of the Advances or (z) the aggregate outstanding Letter
of Credit Liability that, in each case, shall be required for the Lender
Parties, or any of them to take any action hereunder.

                (b)     Upon the execution and delivery by any Person of a
        guaranty supplement in substantially the form of Exhibit A hereto (each,
        a "Guaranty Supplement"), (i) such Person shall be referred to as an
        "Additional Guarantor" and shall become and be a Guarantor hereunder,
        and each reference in this Guaranty to a "Guarantor" shall also mean and
        be a reference to such Additional Guarantor, and each reference in any
        other Loan Document to a "Guarantor" shall also mean and be a reference
        to such Additional Guarantor, and (ii) each reference herein to "this
        Guaranty", "hereunder", "hereof" or words of like import referring to
        this Guaranty, and each reference in any other Loan Document to the
        "Subsidiary Guaranty", "thereunder", "thereof" or words of like import
        referring to this Guaranty, shall mean and be a reference to this
        Guaranty as supplemented by such Guaranty Supplement.

                Section 9. Notices, Etc. All notices and other communications
provided for hereunder shall be either in writing (including telecopy
communication) and mailed, sent by overnight courier, telecopied or otherwise
delivered to it:

                (a)     if to any Guarantor, addressed to it in care of the
        Borrower at the Borrower's address specified in Section 10.02 of the
        Credit Agreement;

                (b)     if to any Agent or any Lender Party, at its address
        specified in Section 10.02 of the Credit Agreement;

                (c)     if to any Hedge Bank, at its address specified in the
        respective Hedge Agreement;

                (d)     if to any Operating Lender at its address specified in
        the respective Operating Indebtedness Agreement;

<PAGE>

                                       10

                (e)     or, as to any party, at such other address or to such
        other person as shall be designated by such party in a written notice to
        each other party.

                All such notices and other communications shall, when mailed be
effective three days after being deposited in the mail, when sent by overnight
courier, be effective one day after being sent by overnight courier, and when
telecopied, be effective when received, respectively; and when delivered by
hand, be effective upon delivery. Delivery by telecopier of an executed
counterpart of a signature page to any amendment or waiver of any provision of
this Guaranty or of any Guaranty Supplement to be executed and delivered
hereunder shall be effective as delivery of an original executed counterpart
thereof.

                Section 10. No Waiver; Remedies. No failure on the part of any
Lender Party or Hedge Bank or Operating Lender to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

                Section 11. Right of Set-off. In respect of the Guaranteed
Obligations relating to the Credit Agreement, upon (a) the occurrence and during
the continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 8.01 of the Credit Agreement to
authorize the Agent to declare the Advances due and payable pursuant to the
provisions of said Section 8.01 (or the automatic acceleration of such Advances
pursuant to the provisions of said Section 8.01), and in respect of the
Guaranteed Obligations relating to a Hedge Agreement, upon the occurrence of an
event which permits the respective Hedge Bank to exercise its remedies under
such an agreement, and in respect to the Guaranteed Obligations relating to an
Operating Indebtedness Agreement, upon the occurrence of an event which permits
the respective Operating Lender to exercise its remedies under such an
agreement, the Agent and each Lender Party, each Hedge Bank and each Operating
Lender, as the case may be, and each of their respective Affiliates are hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by the Agent, such Lender Party, such Hedge Bank, such Operating
Lender or such Affiliate to or for the credit or the account of any Guarantor
against any and all of the respective Guaranteed Obligations of such Guarantor,
irrespective of whether the Agent or such Lender Party or such Hedge Bank or
such Operating Lender shall have made any demand under this Guaranty or any
other Loan Document or any Hedge Agreement or any Operating Indebtedness
Agreement and although such Guaranteed Obligations may be unmatured. The Agent,
each Hedge Bank, each Lender Party and each Operating Lender agree promptly to
notify such Guarantor after any such set-off and application; provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of the Agent, each Lender Party, each Hedge
Bank and each Operating Lender, as the case may be, and their respective
Affiliates under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) that the Agent, such
Lender Party, such Hedge Bank, such Operating Lender and their respective
Affiliates may have.

                Section 12. Indemnification. (a) Without limitation on any other
Obligations of any Guarantor or remedies of the Lender Parties or Hedge Banks or
Operating Lenders under

<PAGE>

                                       11

this Guaranty, each Guarantor shall, to the fullest extent permitted by law,
indemnify, and hold harmless each Lender Party, Hedge Bank and Operating Lender
and each of their Affiliates and their respective officers, directors,
employees, agents and advisors (each, an "Indemnified Party") from and against,
and shall pay on demand, any and all claims (other than lost profits), damages,
liabilities and expenses (including, without limitation, reasonable and
documented fees and disbursements of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party in connection with or as a
result of any failure of any Guaranteed Obligations to be the legal, valid and
binding commitments of any Guarantor enforceable against such Guarantor in
accordance with their terms.

                (b)     Each Guarantor hereby agrees not to assert any claim
        against any Indemnified Party on any theory of liability, for special,
        indirect, consequential or punitive damages arising out of or otherwise
        relating to the actual or proposed use of the proceeds of the Advances
        or the Letters of Credit, the Credit Agreement, the Hedge Agreements,
        the Operating Indebtedness Agreements or any of the transactions
        contemplated thereby.

                (c)     Without prejudice to the survival of any of the other
        agreements of any Guarantor under this Guaranty, the agreements and
        commitments of each Guarantor contained in Section 1(a) hereof (with
        respect to enforcement expenses), the last sentence of Section 2 hereof,
        Section 5 hereof and this Section 12 shall survive the payment in full
        of the Guaranteed Obligations and all of the other amounts payable under
        this Guaranty.

                Section 13. Subordination. Each Guarantor hereby subordinates
any and all debts, liabilities and other Obligations for borrowed money owed to
such Guarantor by each other Loan Party or arising from subrogation rights with
respect to guaranties issued by such Guarantor in respect of Obligations to
third-parties in respect of which another Loan Party is the primary obligor (the
"Subordinated Obligations") to the Guaranteed Obligations to the extent and in
the manner hereinafter set forth in this Section 13:

                (a)     Prohibited Payments, Etc. Except during the continuance
        of an Event of Default while the Credit Agreement is in effect, and
        thereafter an event (if any) which would permit a Hedge Bank or
        Operating Lender to exercise its remedies under a Hedge Agreement or
        Operating Indebtedness Agreement, respectively, each Guarantor may
        receive regularly scheduled payments from any other Loan Party on
        account of the Subordinated Obligations. After the occurrence and during
        the continuance of any Event of Default (including the commencement and
        continuation of any proceeding under any Bankruptcy Law relating to any
        other Loan Party) or such event, however, unless the Agent, on behalf of
        the Lender Parties, each Hedge Bank and each Operating Lender otherwise
        agree, no Guarantor shall demand, accept or take any action to collect
        any payment on account of the Subordinated Obligations.

                (b)     Prior Payment of Guaranteed Obligations. In any
        proceeding under any Bankruptcy Law relating to any other Loan Party,
        each Guarantor agrees that the Lender Parties, Hedge Banks and Operating
        Lenders shall be entitled to receive payment in full in cash of all
        Guaranteed Obligations (including all interest and expenses accruing
        after the commencement of a proceeding under any Bankruptcy Law, whether
        or not

<PAGE>

                                       12

        constituting an allowed claim in such proceeding ("Post Petition
        Interest")) before such Guarantor receives payment of any Subordinated
        Obligations.

                (c)     Turn-Over. After the occurrence and during the
        continuance of any Event of Default or event referred to in subclause
        (a) above, each Guarantor shall, if the Agent, on behalf of the Lender
        Parties, each Hedge Bank and each Operating Lender so request, collect,
        enforce and receive payments on account of the Subordinated Obligations
        as trustee for such Persons and deliver such payments to the Agent, such
        Hedge Bank or such Operating Lender, as the case may be, on account of
        the Guaranteed Obligations (including all Post Petition Interest),
        together with any necessary endorsements or other instruments of
        transfer, but without reducing or affecting in any manner the liability
        of such Guarantor under the other provisions of this Guaranty.

                (d)     Agent Authorization. After the occurrence and during the
        continuance of any Event of Default referred to in Section 8.01(e) of
        the Credit Agreement, the Agent, on behalf of the Lender Parties, each
        Hedge Bank and each Operating Lender, are authorized and empowered (but
        without any obligation to so do), each in its discretion, (i) in the
        name of each Guarantor, to collect and enforce, and to submit claims in
        respect of, Subordinated Obligations and to apply any amounts received
        thereon to the respective Guaranteed Obligations (including any and all
        Post Petition Interest), and (ii) to require each Guarantor (A) to
        collect and enforce, and to submit claims in respect of, Subordinated
        Obligations and (B) to pay any amounts received on such commitments to
        the Agent, such Hedge Bank or such Operating Lender respectively for
        application to the Guaranteed Obligations (including any and all Post
        Petition Interest).

                Section 14. Continuing Guaranty; Assignments under the Credit
Agreement. This Guaranty is a continuing guaranty and shall (a) with respect to
the Lender Parties, remain in full force and effect until the latest of (i) the
payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Guaranty, (ii) the Termination Date and (iii) the latest date
of expiration or termination of all Letters of Credit, (b) with respect to any
Hedge Bank until the termination of its respective Hedge Agreement, (c) with
respect to any Operating Lender until the termination of its respective
Operating Indebtedness Agreement, (d) be binding upon the Guarantor, its
successors and assigns and (e) inure to the benefit of and be enforceable by the
Lender Parties, the Hedge Banks and their successors, transferees and assigns.
Without limiting the generality of clause (e) of the immediately preceding
sentence, any Lender Party may assign or otherwise transfer all or any portion
of its rights and commitments under the Credit Agreement (including, without
limitation, all or any portion of its Obligations, the Advances owing to it and
the Note or Notes held by it) to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to such
Lender Party herein or otherwise, in each case as and to the extent provided in
Section 10.07 of the Credit Agreement. No Guarantor shall have the right to
assign its rights hereunder or any interest herein (x) with respect to the
Guaranteed Obligations owed to the Lender Parties, without the prior written
consent of the Lender Parties, (y) with respect to the Guaranteed Obligations
owed to a Hedge Bank, without the prior written consent of such Hedge Bank, and
(z) with respect to the Guaranteed Obligations owed to an Operating Lender under
an Operating Indebtedness Agreement, without prior written consent of such
Operating Lender.

<PAGE>

                                       13

                Section 15. Execution in Counterparts. This Guaranty and each
amendment, waiver and consent with respect hereto may be executed in any number
of counterparts and by different parties thereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Guaranty by telecopier shall be
effective as delivery of an original executed counterpart of this Guaranty.

                Section 16. Governing Law; Jurisdiction; Waiver of Jury Trial,
Etc. (a) This Guaranty shall be governed by, and construed in accordance with,
the laws of the State of New York.

                (b)     Each of the Guarantors and Lender Parties, and each
        Hedge Bank and Operating Lender seeking to enforce this Guaranty, hereby
        irrevocably submits to the non-exclusive jurisdiction of any New York
        State or Federal court sitting in the County of New York, The City of
        New York, in any action or proceeding arising out of or relating to this
        Agreement, and each of the Guarantors and Lender Parties, and each Hedge
        Bank and Operating Lender seeking to enforce this Guaranty, hereby
        irrevocably agrees that all claims in respect of such action or
        proceeding may be heard and determined in such New York State court or
        such Federal court. Each of the Guarantors and Lender Parties, and each
        Hedge Bank and Operating Lender seeking to enforce this Guaranty, hereby
        irrevocably agrees, to the fullest extent each may effectively do so,
        that each will not assert any defense that such courts do not have
        subject matter or personal jurisdiction of such action or proceeding or
        over any party hereto. Each of the Guarantors and Lender Parties, and
        each Hedge Bank and Operating Lender seeking to enforce this Guaranty,
        hereby irrevocably consents to the service of copies of the summons and
        complaint and any other process which may be served in any such action
        or proceeding by certified mail, return receipt requested, or by
        delivering of a copy of such process, in the case of each Guarantor, in
        care of the Borrower at its address specified in Section 10.02 of the
        Credit Agreement, in the case of each Lender Party, at its address
        specified in Section 10.02 of the Credit Agreement, with respect to each
        Hedge Bank seeking to enforce this Guaranty as specified in its
        respective Hedge Agreement, with respect to each Operating Lender
        seeking to enforce this Guaranty as specified in the respective
        Operating Indebtedness Agreement or by any other method permitted by
        law. Each of the Guarantors and Lender Parties, each Hedge Bank and each
        Operating Lender seeking to enforce this Guaranty hereby agrees that a
        final judgment in any such action or proceeding shall be conclusive and
        may be enforced in other jurisdictions by suit on the judgment or by any
        other manner provided by law.

                (c)     Nothing in this Section 16 shall affect the right of any
        of the Guarantors, the Lender Parties, the Hedge Banks or the Operating
        Lenders to serve legal process in any other manner permitted by law or
        affect the right of any of the parties to bring any action or proceeding
        against any of the parties or their property in the courts of other
        jurisdictions.

                (d)     EACH GUARANTOR AND EACH LENDER PARTY BY ITS ACCEPTANCE
        OF THIS GUARANTY, AND EACH HEDGE BANK AND OPERATING LENDER SEEKING TO
        ENFORCE THIS GUARANTY, HEREBY

<PAGE>

                                       14

        IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHT TO
        TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
        UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
        AGREEMENT, THE CREDIT AGREEMENT, THE HEDGE AGREEMENTS, THE OPERATING
        INDEBTEDNESS AGREEMENTS OR THE ACTIONS OF THE AGENT, ANY LENDER PARTY,
        ANY HEDGE BANK OR ANY OPERATING LENDER IN CONNECTION WITH THE
        NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.

                Section 17. Termination.

                (a)     With respect to the Lender Parties, upon the latest of
        (i) the payment in full in cash of the Guaranteed Obligations then owing
        to the Lender Parties, (ii) the Termination Date and (iii) the
        termination or expiration of all Letters of Credit, this Guaranty shall
        immediately and automatically terminate, and the Guaranteed Obligations
        of the Guarantors hereunder with respect to the Lender Parties shall
        automatically be discharged and released, in each case without any
        further action by the Lender Parties, any Hedge Bank or any other
        Person.

                (b)     With respect to each Hedge Bank, upon the latest of (i)
        the payment in full in cash of the Guaranteed Obligations then owing to
        such Hedge Bank and (ii) the termination of all Hedge Agreements with
        respect to such Hedge Bank, this Guaranty shall immediately and
        automatically terminate, and the Guaranteed Obligations of the
        Guarantors hereunder with respect to such Hedge Agreements shall
        automatically be discharged and released, in each case without any
        further action by the Lender Parties, any Hedge Bank or any other
        Person.

                (c)     With respect to each Operating Lender, upon the latest
        of (i) the payment in full in cash of the Guaranteed Obligations then
        owing to such Operating Lender and (ii) the termination of all Operating
        Indebtedness Agreements with respect to such Operating Lender, this
        Guaranty shall immediately and automatically terminate, and the
        Guaranteed Obligations of the Guarantors hereunder with respect to such
        Operating Indebtedness Agreements shall automatically be discharged and
        released, in each case without any further action by the Lender Parties,
        any Operating Lender or any other Person.

                (d)     (i) While the Credit Agreement is in effect, if (A) all
        or a majority of the stock of a Guarantor or any of its successors in
        interest under this Guaranty shall be sold or otherwise disposed of
        (including by merger or consolidation) in a sale not prohibited by the
        Credit Agreement or otherwise consented to by the Majority Lenders, (B)
        a Guarantor shall liquidate or dissolve in accordance with the terms of
        the Credit Agreement or (C) trademarks or service marks are transferred
        to a Guarantor such that it becomes or otherwise qualifies as a Special
        Purpose Subsidiary, and (ii) if the Credit Agreement is no longer in
        effect, in accordance with the requirements (if any) of the Hedge
        Agreements and any Operating Indebtedness Agreements, then, in each
        case, the obligations of such Guarantor or such successor in interest,
        as the case may be, hereunder

<PAGE>

                                       15

        shall automatically be discharged and released without any further
        action by the Lender Parties, the Hedge Banks, the Operating Lenders or
        any other Person effective as of the time of such sale, merger,
        liquidation or dissolution.

                (e)     Upon any termination of the Guaranty or any discharge
        and release of a Guarantor's obligations hereunder, in each case as
        described subsections (a), (b), (c) and (d) of this Section 17, the
        Lender Parties, the Hedge Banks and the Operating Lenders as the case
        may be, will, at the applicable Guarantor's expense, execute and deliver
        to such Guarantor such documents as such Guarantor shall reasonably
        request to evidence such termination, discharge or release.

<PAGE>

                                       16

                  IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.

                                 BANANA REPUBLIC (CALIFORNIA) LLC

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 BANANA REPUBLIC (FLORIDA) LLC

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 BANANA REPUBLIC (HOLDINGS) INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

<PAGE>

                                       17

                                 BANANA REPUBLIC (NEW YORK) LLC

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 BANANA REPUBLIC, INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 GPS (MARYLAND), INC.

                                 By:
                                    -----------------------------------

                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

<PAGE>

                                       18

                                 GPS BRAND SERVICES, INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 GPS CONSUMER DIRECT, INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 GPS CORPORATE FACILITIES, INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

<PAGE>

                                       19

                                 GPS EMPLOYEE SERVICES, INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 GPS REAL ESTATE, INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 GPSDC (NEW YORK) INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

<PAGE>

                                       20

                                 GAP (FLORIDA) LLC
                                 By The Gap, Inc., as Manager

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 GAP (GEORGIA) L.P.
                                 By The Gap, Inc., as General Partner

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 GAP (INDIANA) L.P.
                                 By The Gap, Inc., as General Partner

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

<PAGE>

                                       21

                                 GAP (KENTUCKY) L.P.
                                 By The Gap, Inc., as General Partner

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 GAP (TENNESSEE) L.P.
                                 By The Gap, Inc., as General Partner

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 GAP (WISCONSIN) L.P.
                                 By The Gap, Inc., as General Partner

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

<PAGE>

                                       22

                                 GAP HOLDINGS, INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 GAP INTERNATIONAL SOURCING
                                 (AMERICAS) LLC
                                 By The Gap, Inc., as Manager

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 GAP INTERNATIONAL SOURCING
                                 (CALIFORNIA), INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

<PAGE>

                                       23

                                 GAP INTERNATIONAL SOURCING (JV), LLC
                                 By Gap International Sourcing, Inc., as Manager

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 GAP INTERNATIONAL SOURCING (U.S.A.) INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 GAP INTERNATIONAL SOURCING, INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

<PAGE>

                                       24

                                 OLD NAVY (CALIFORNIA) LLC
                                 By Old Navy Inc., as Manager

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 OLD NAVY (EAST) L.P.
                                 By Old Navy Inc., as General Partner

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 OLD NAVY (FLORIDA) LLC
                                 By Old Navy Inc., as Manager

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                     2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

<PAGE>

                                       25

                                 OLD NAVY (HOLDINGS) INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 OLD NAVY INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

                                 THE FISHER GAP STORES, INC.

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

<PAGE>

                                       26

                                 WCB TWENTY-EIGHT LIMITED PARTNERSHIP
                                 By GPS Corporate Facilities, Inc.,
                                 as General Partner

                                 By:
                                    -----------------------------------
                                    Name:    Sabrina Simmons
                                    Title:   Senior Vice President and
                                             Treasurer

                                 Address for Notices:
                                    2 Folsom Street
                                    San Francisco, CA 94105
                                    Attn: General Counsel

<PAGE>

                                                                       EXHIBIT A
                                                      TO THE SUBSIDIARY GUARANTY

                     FORM OF SUBSIDIARY GUARANTY SUPPLEMENT

                                                           ___________ ___, ____

Citicorp USA, Inc.
399 Park Avenue
New York, NY 10043
Attention: Credit Administration

Citicorp North America, Inc.
One Sansome Street
San Francisco, CA
Attention: Carolyn Wendler
Telecopier: 415-433-0307

                Credit Agreement dated as of June 24, 2003 among
   The Gap, Inc., a Delaware corporation (the "Borrower"), the Lender Parties
         party to the Credit Agreement and Citicorp USA, Inc., as Agent

Ladies and Gentlemen:

                Reference is made to the above-captioned Credit Agreement and to
the Subsidiary Guaranty referred to therein (such Subsidiary Guaranty, as in
effect on the date hereof and as it may hereafter be amended, supplemented or
otherwise modified from time to time, together with this Guaranty Supplement,
being the "Subsidiary Guaranty"). The capitalized terms defined in the
Subsidiary Guaranty or in the Credit Agreement and not otherwise defined herein
are used herein as therein defined.

                Section 1. Guaranty; Limitation of Liability. (a) The
undersigned hereby absolutely, unconditionally and irrevocably guarantees the
punctual payment when due, whether at scheduled maturity or on any date of a
required prepayment or by acceleration, demand or otherwise, of all Obligations
of the Borrower, each Subsidiary Borrower and each LC Subsidiary now or
hereafter existing under or in respect of the Credit Agreement, all Obligations
of the Borrower and the Hedge Subsidiaries now or hereinafter existing under
each Hedge Agreement and all Obligations of the Borrower and the Subsidiaries
now or hereafter existing under each Operating Indebtedness Agreement
(including, without limitation, any extensions, modifications, substitutions,
amendments or renewals of any or all of the foregoing Obligations), whether
direct or indirect, absolute or contingent, and whether for principal, interest,
premium, fees, indemnities, contract causes of action, costs, expenses or
otherwise (such Obligations being the

<PAGE>

                                        2

"Guaranteed Obligations"), and agrees to pay any and all reasonable and
documented expenses (including, without limitation, reasonable and documented
fees and out-of-pocket expenses of counsel) incurred by the Agent, any other
Lender Party, any Hedge Bank or any Operating Lender in enforcing any rights
under this Guaranty Supplement or the Subsidiary Guaranty. Without limiting the
generality of the foregoing, the undersigned's liability shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed to
any Lender Party under or in respect of the Credit Agreement, to any Hedge Bank
under or in respect of the Hedge Agreements or to any Operating Lender under or
in respect of the Operating Indebtedness Agreements but for the fact that they
are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such other Loan Party.

                (b)     The undersigned, and by its acceptance of this Guaranty
        Supplement, the Agent and each other Lender Party, each Hedge Bank and
        each Operating Lender, hereby confirms that it is the intention of all
        such Persons that this Guaranty Supplement, the Subsidiary Guaranty and
        the Obligations of the undersigned hereunder and thereunder not
        constitute a fraudulent transfer or conveyance for purposes of
        Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform
        Fraudulent Transfer Act or any similar foreign, federal or state law to
        the extent applicable to this Guaranty Supplement, the Subsidiary
        Guaranty and the Obligations of the undersigned hereunder and
        thereunder. To effectuate the foregoing intention, the Agent, the other
        Lender Parties, the Hedge Banks, the Operating Lenders and the
        undersigned hereby irrevocably agree that the Obligations of the
        undersigned under this Guaranty Supplement and the Subsidiary Guaranty
        at any time shall be limited to the maximum amount as will result in the
        Obligations of the undersigned under this Guaranty Supplement and the
        Subsidiary Guaranty not constituting a fraudulent transfer or
        conveyance.

                (c)     The undersigned hereby unconditionally and irrevocably
        agrees that in the event any payment shall be required to be made to any
        Lender Party, Hedge Bank or Operating Lender under this Guaranty
        Supplement, the Subsidiary Guaranty, or any other guaranty, the
        undersigned will contribute, to the maximum extent permitted by
        applicable law, such amounts to each other Guarantor and each other
        guarantor so as to maximize the aggregate amount paid to the Lender
        Parties, the Hedge Banks and the Operating Lenders, respectively, under
        or in respect of the Credit Agreement, the Hedge Agreements or the
        Operating Indebtedness Agreements, as the case may be.

                Section 2. Obligations Under the Guaranty. The undersigned
hereby agrees, as of the date first above written, to be bound as a Guarantor by
all of the terms and conditions of the Subsidiary Guaranty to the same extent as
each of the other Guarantors thereunder. The undersigned further agrees, as of
the date first above written, that each reference in the Subsidiary Guaranty to
an "Additional Guarantor" or a "Guarantor" shall also mean and be a reference to
the undersigned, and each reference in any other Loan Document to a "Guarantor"
or a "Loan Party" shall also mean and be a reference to the undersigned.

                Section 3. Representations and Warranties. The undersigned
hereby makes each representation and warranty set forth in Section 6 of the
Subsidiary Guaranty to the same extent as each other Guarantor.

<PAGE>

                                        3

                Section 4. Delivery by Telecopier. Delivery of an executed
counterpart of a signature page to this Guaranty Supplement by telecopier shall
be effective as delivery of an original executed counterpart of this Guaranty
Supplement.

                Section 5. Governing Law; Jurisdiction; Waiver of Jury Trial,
Etc. (a) This Guaranty Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.

                (b)     The undersigned, and each Lender Party, Hedge Bank and
        Operating Lender seeking to enforce the Subsidiary Guaranty, hereby
        irrevocably submit to the non-exclusive jurisdiction of any New York
        State or Federal court sitting in the County of New York, The City of
        New York, in any action or proceeding arising out of or relating to this
        Agreement, and the undersigned, and each Lender Party, Hedge Bank and
        Operating Lender seeking to enforce the Subsidiary Guaranty, hereby
        irrevocably agree that all claims in respect of such action or
        proceeding may be heard and determined in such New York State court or
        such Federal court. The undersigned, and each Lender Party, Hedge Bank
        and Operating Lender seeking to enforce the Subsidiary Guaranty, hereby
        irrevocably agree, to the fullest extent each may effectively do so,
        that each will not assert any defense that such courts do not have
        subject matter or personal jurisdiction of such action or proceeding or
        over any party hereto. The undersigned, and each Lender Party, Hedge
        Bank and Operating Lender seeking to enforce the Subsidiary Guaranty,
        hereby irrevocably consent to the service of copies of the summons and
        complaint and any other process which may be served in any such action
        or proceeding by certified mail, return receipt requested, or by
        delivering of a copy of such process to the undersigned in care of the
        Borrower at its address specified in Section 10.02 of the Credit
        Agreement, with respect to each Lender Party, at its address specified
        in Section 10.02 of the Credit Agreement, with respect to each Operating
        Lender seeking to enforce this Guaranty, at its address specified in the
        respective Operating Indebtedness Agreement, with respect to each Hedge
        Bank seeking to enforce this Guaranty at its address specified in its
        respective Hedge Agreement, or by any other method permitted by law. The
        undersigned, and each Lender Party, Hedge Bank and Operating Lender
        seeking to enforce the Subsidiary Guaranty, hereby agree that a final
        judgment in any such action or proceeding shall be conclusive and may be
        enforced in other jurisdictions by suit on the judgment or by any other
        manner provided by law.

                (c)     Nothing in this Section 5 shall affect the right of any
        of the parties hereto to serve legal process in any other manner
        permitted by law or affect the right of any of the parties to bring any
        action or proceeding against any of the parties or their property in the
        courts of other jurisdictions.

                (d)     EACH GUARANTOR AND EACH LENDER PARTY BY ITS ACCEPTANCE
        OF THIS GUARANTY, AND EACH HEDGE BANK AND OPERATING LENDER SEEKING TO
        ENFORCE THIS GUARANTY, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
        PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
        OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING
        OUT OF OR RELATING TO THIS AGREEMENT, THE

<PAGE>
                                        4

        CREDIT AGREEMENT, THE HEDGE AGREEMENTS, THE OPERATING INDEBTEDNESS
        AGREEMENTS OR THE ACTIONS OF THE AGENT, ANY LENDER PARTY, ANY HEDGE BANK
        OR ANY OPERATING LENDER IN CONNECTION WITH THE NEGOTIATION,
        ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.

                                             Very truly yours,

                                             [NAME OF ADDITIONAL GUARANTOR]

                                             By:
                                                ------------------------------
                                                Name:
                                                Title:

<PAGE>

                                    EXHIBIT E

                               SECURITY AGREEMENT

                            Dated as of June __, 2003

                                      From

                         The Grantors referred to herein

                                   as Grantors

                                       to

                               Citicorp USA, Inc.

                               as Collateral Agent

<PAGE>

                          T A B L E  O F  C O N T E N T S

<TABLE>
<CAPTION>
SECTION                                                                                              PAGE
<S>          <C>                                                                                       <C>
SECTION 1.   Grant of Security.........................................................................2

SECTION 2.   Security for Obligations..................................................................3

SECTION 3.   Grantors Remain Liable....................................................................4

SECTION 4.   Delivery and Control of Security Collateral...............................................4

SECTION 5.   Maintaining the Account Collateral........................................................5

SECTION 6.   Representations and Warranties............................................................6

SECTION 7.   Further Assurances........................................................................7

SECTION 8.   As to Inventory...........................................................................8

SECTION 9.   Insurance.................................................................................9

SECTION 10.  Post-Closing Changes; Bailees.............................................................9

SECTION 11.  Voting Rights; Dividends; Etc.............................................................9

SECTION 12.  Transfers and Other Liens; Additional Shares..............................................11

SECTION 13.  Collateral Agent Appointed Attorney-in-Fact...............................................11

SECTION 14.  Collateral Agent May Perform..............................................................11

SECTION 15.  The Collateral Agent's Duties.............................................................12

SECTION 16.  Remedies 12

SECTION 17.  Indemnity and Expenses....................................................................14

SECTION 18.  Amendments; Waivers; Additional Grantors; Etc.............................................15

SECTION 19.  Notices; Etc..............................................................................15

SECTION 20.  Continuing Security Interest; Assignments under the Credit Agreement......................16

SECTION 21.  Release; Termination......................................................................16

SECTION 22.  Execution in Counterparts.................................................................17

SECTION 23.  Governing Law.............................................................................18
</TABLE>

                                        i

<PAGE>

                               SECURITY AGREEMENT

                SECURITY AGREEMENT dated as of June __, 2003 (the "Agreement")
made by The Gap Inc., a Delaware corporation (the "Borrower"), the other Persons
listed on the signature pages hereof and the Additional Grantors (as defined in
Section 18 hereof) (the Borrower, the Persons so listed and the Additional
Grantors being, collectively, the "Grantors"), to Citicorp USA, Inc., as
collateral agent (in such capacity, together with any successor collateral agent
appointed pursuant to the Intercreditor Agreement (as hereinafter defined, the
"Collateral Agent")) for the Secured Parties (as defined in the Credit Agreement
referred to below).

                PRELIMINARY STATEMENTS.

                (1)     The Borrower has entered into a Credit Agreement dated
as of June __, 2003 with the Loan Parties, the Lenders and the Agent (each as
defined therein) and other financial institutions (said agreement, as it may
hereafter be amended, amended and restated, supplemented or otherwise modified
from time to time, being the "Credit Agreement").

                (2)     The Grantors (other than the Borrower) have guaranteed
the Obligations of the Borrower and certain of its Subsidiaries under the Credit
Agreement and the Obligations of the Borrower and the Hedge Subsidiaries (as
defined in the Credit Agreement) under the Secured Hedge Agreements (as
hereinafter defined) pursuant to a Guaranty dated as of June __, 2003, by each
such Grantor (and certain other Persons party thereto as Guarantor).

                (3)     Pursuant to the Credit Agreement, the Grantors are
entering into this Agreement in order to grant to the Collateral Agent for the
ratable benefit of the Secured Parties a security interest in the Collateral (as
hereinafter defined).

                (4)     The Borrower and/or the Hedge Subsidiaries have entered
into certain Hedge Agreements including, without limitation, those set forth on
Schedule I hereto and the Borrower and the Hedge Subsidiaries may from time to
time hereafter enter into Hedge Agreements permitted under the Credit Agreement,
in each case, with any Lender party to the Credit Agreement (or an affiliate
thereof) (collectively, "Secured Hedge Agreements"), such Lenders or such
affiliate that are and hereafter become counterparty to a Secured Hedge
Agreement being the "Hedge Banks".

                (5)     One or more Operating Lenders (as defined in the Credit
Agreement) have extended or hereafter may from time to time extend Operating
Indebtedness (as defined in the Credit Agreement) to the Borrower or one or more
of its Subsidiaries pursuant to Operating Indebtedness Agreements (as defined in
the Credit Agreement).

                (6)     Each Grantor is the owner of the shares of stock or
other equity interests set forth opposite such Grantor's name on and as
otherwise described in Schedule III hereto and issued by the Persons named
therein (the "Initial Pledged Equity").

                (7)     The Secured Parties have agreed that their respective
rights to the Collateral are to be governed by an Intercreditor and Collateral
Agency Agreement dated as of the date of this Agreement (as amended, restated or
otherwise modified from time to time, the

<PAGE>

"Intercreditor Agreement"), among the Collateral Agent on behalf of the Banks
and the Hedge Banks.

                (8)     For purposes of Sections 3.12(c) and 3.15 of the Credit
Agreement, as provided in Section 5(a) hereof, the Borrower will open a letter
of credit collateral deposit account (the "L/C Collateral Account"), with the
Collateral Agent, in the name of the Collateral Agent and under the sole control
and dominion of the Collateral Agent and subject to the terms of this Agreement.

                (9)     It is a condition precedent to, among other things, the
making of Advances and the issuance of Letters of Credit under the Credit
Agreement from time to time that the Grantors shall have granted the assignment
and security interest and made the pledge and assignment contemplated by this
Agreement.

                (10)    Each Grantor will derive substantial direct and indirect
benefit from the transactions contemplated by the Loan Documents.

                (11)    Terms defined in the Credit Agreement and not otherwise
defined in this Agreement are used in this Agreement as defined in the Credit
Agreement. Further, unless otherwise defined in this Agreement or in the Credit
Agreement, terms defined in Article 8 or 9 of the UCC (as defined below) are
used in this Agreement as such terms are defined in such Article 8 or 9. "UCC"
means the Uniform Commercial Code as in effect, from time to time, in the State
of New York; provided that, if perfection or the effect of perfection or
non-perfection or the priority of any security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, "UCC" means the Uniform Commercial Code as in effect
from time to time in such other jurisdiction for purposes of the provisions
hereof relating to such perfection, effect of perfection or non-perfection or
priority.

                NOW, THEREFORE, in consideration of the premises and in order to
induce the Loan Parties to make Advances and issue Letters of Credit under the
Credit Agreement and to induce Hedge Banks to enter additional Secured Hedge
Agreements, each Grantor hereby agrees with the Collateral Agent for the ratable
benefit of the Secured Parties as follows:

                SECTION 1. Grant of Security. Each Grantor hereby grants to the
Collateral Agent, for the ratable benefit of the Secured Parties, a security
interest in, such Grantor's right, title and interest in and to the following,
in each case, as to each type of property described below, whether now owned or
hereafter acquired by such Grantor, wherever located, and whether now or
hereafter existing or arising (collectively, the "Collateral"):

                (a)     all "inventory" as defined in the UCC, which is located
        in the United States, in all of its forms, including, without
        limitation, (i) all raw materials, work in process, finished goods and
        materials used or consumed in the manufacture, production, preparation
        or shipping thereof, (ii) goods in which such Grantor has an interest in
        mass or a joint or other interest or right of any kind (including,
        without limitation, goods in which such Grantor has an interest or right
        as consignee) and (iii) goods that are returned to or repossessed or
        stopped in transit by such Grantor, and all accessions thereto and
        products thereof and documents therefor, and all software related
        thereto, including,

                                        2

<PAGE>

        without limitation, software that is imbedded in and is part of the
        inventory (any and all such property being the "Inventory");

                (b)     the following (the "Security Collateral"):

                        (i)     the Initial Pledged Equity and the certificates,
                if any, representing the Initial Pledged Equity, and all
                dividends, distributions, return of capital, cash, instruments
                and other property from time to time received, receivable or
                otherwise distributed in respect of or in exchange for any or
                all of the Initial Pledged Equity and all subscription warrants,
                rights or options issued thereon or with respect thereto; and

                        (ii)    all additional shares of stock and other equity
                interests of or in any issuer of the Initial Pledged Equity, or
                any successor entity from time to time acquired by such Grantor
                in any manner, and all shares of stock and other equity
                interests of or in any other Domestic Subsidiary (other than
                Excluded Subsidiaries but including first-tier Special Purpose
                Subsidiaries) from time to time acquired by such Grantor (such
                shares and other equity interests, together with the Initial
                Pledged Equity, being the "Pledged Equity"), and the
                certificates, if any, representing such additional shares or
                other equity interests, and all dividends, distributions, return
                of capital, cash, instruments and other property from time to
                time received, receivable or otherwise distributed in respect of
                or in exchange for any or all of such shares or other equity
                interests and all subscription warrants, rights or options
                issued thereon or with respect thereto;

                (c)     the L/C Collateral Account of such Grantor and all funds
        and other property from time to time received, receivable or otherwise
        distributed in respect of or in exchange for any or all of such funds,
        and all certificates and instruments, if any, from time to time
        representing or evidencing the L/C Collateral Account (the "Account
        Collateral").

                (d)     all books and records (including, without limitation,
        customer lists, credit files, computer programs, software, printouts and
        other computer materials and records) of such Grantor pertaining to any
        of the Collateral; and

                (e)     all proceeds of, collateral for, and supporting
        obligations relating to, any and all of the foregoing (including,
        without limitation, proceeds, collateral and supporting obligations that
        constitute property of the types described in clauses (a) through (d) of
        this Section 1 and this clause (e)).

                SECTION 2. Security for Obligations. (a) This Agreement secures,
in the case of each Grantor, the payment of all Obligations of such Grantor now
or hereafter existing under the Loan Documents, the payment of all Obligations
of the Borrower or the Hedge Subsidiaries now or hereafter existing under the
Secured Hedge Agreements and the payment of all Obligations of the Borrower or
its Subsidiaries under Operating Indebtedness Agreements, whether direct or
indirect, absolute or contingent, and whether for principal, reimbursement
obligations, interest, fees, premiums, penalties, indemnifications, contract
causes of action, costs,

                                        3

<PAGE>

expenses or otherwise (all such Obligations being the "Secured Obligations").

                (b)     Notwithstanding anything to the contrary set forth
        herein, and with respect to the Grantors on the one hand, and the Lender
        Parties, the Operating Lenders and the Hedge Banks on the other, or in
        the Intercreditor Agreement, it is understood and agreed by the parties
        hereto and by any Hedge Bank or Operating Lender seeking to enforce this
        Agreement or to otherwise obtain any benefit under this Agreement that
        (i) any such Hedge Bank or Operating Lender shall be bound by all of the
        provisions of this Agreement, (ii) the Secured Obligations hereunder in
        favor of the Collateral Agent for the benefit of the Lender Parties, the
        Secured Obligations in favor of the Collateral Agent for the benefit of
        the Operating Lenders and the Secured Obligations hereunder in favor of
        the Collateral Agent for the benefit of the Hedge Banks are separate,
        (iii) no claim shall be made hereunder by the Collateral Agent on behalf
        of any Lender Party against any of the Collateral solely as a result of
        a claim hereunder by the Collateral Agent on behalf of any Hedge Bank or
        any Operating Lender, and no claim shall be made hereunder by the
        Collateral Agent on behalf of any Hedge Bank or any Operating Lender
        against any of the Collateral solely as a result of a claim hereunder by
        the Collateral Agent on behalf of any Lender Party, any other Operating
        Lender or any other Hedge Bank, (iv) with respect to the Secured
        Obligations incurred in favor of the Collateral Agent for the benefit of
        the Hedge Banks, this Agreement shall operate in favor of only those
        Secured Obligations with respect to Lenders or Affiliates of a Lender
        which are Hedge Banks prior to the termination of this Agreement with
        respect to the Loan Parties, and then only with respect to such Secured
        Obligations incurred under Secured Hedge Agreements in effect prior to
        such termination and (v) with respect to the Secured Obligations
        incurred in favor of the Collateral Agent for the benefit of the
        Operating Lenders, this Agreement shall operate in favor of only those
        Secured Obligations with respect to Lenders or Affiliates of a Lender
        which are Operating Lenders prior to the termination of this Agreement
        with respect to the Loan Parties, and then only with respect to such
        Secured Obligations incurred under Operating Indebtedness Agreements in
        effect prior to such termination.

                SECTION 3. Grantors Remain Liable. Anything herein to the
contrary notwithstanding, (a) each Grantor shall remain liable under the
contracts and agreements included in such Grantor's Collateral to the extent set
forth therein to perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed, (b) the exercise by the
Collateral Agent of any of the rights hereunder shall not release any Grantor
from any of its duties or obligations under the contracts and agreements
included in the Collateral and (c) no Secured Party shall have any obligation or
liability under the contracts and agreements included in the Collateral by
reason of this Agreement or any other Loan Document, nor shall any Secured Party
be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.

                SECTION 4. Delivery and Control of Security Collateral. So long
as any Advance or any other Obligation of any Loan Party under any Loan Document
shall remain unpaid, any Letter of Credit shall be outstanding, any Secured
Hedge Agreement or Operating Indebtedness Agreement shall be in effect or any
Lender Party shall have any Commitment:

                                        4

<PAGE>

                (a)     All certificates or instruments representing or
        evidencing Security Collateral shall be delivered to and held by or on
        behalf of the Collateral Agent pursuant hereto and shall be in suitable
        form for transfer by delivery, or shall be accompanied by duly executed
        instruments of transfer or assignment in blank, all in form and
        substance reasonably satisfactory to the Collateral Agent. The
        Collateral Agent shall have the right at any time, if it believes such
        is reasonably necessary or proper to better preserve and protect its
        rights hereunder, and with notice to the respective Grantor, to transfer
        to or to register in the name of the Collateral Agent or any of its
        nominees any or all of the Security Collateral, subject only to the
        revocable rights specified in Section 11(a) hereof. In addition, the
        Collateral Agent shall have the right at any time to exchange
        certificates or instruments representing or evidencing Security
        Collateral for certificates or instruments of smaller or larger
        denominations.

                (b)     With respect to any Security Collateral in which any
        Grantor has any right, title or interest and that constitutes an
        uncertificated security, such Grantor, at the request from time to time
        of the Collateral Agent, will cause the issuer thereof either (i) to
        register the Collateral Agent as the registered owner of such security
        or (ii) to agree in an authenticated record with such Grantor and the
        Collateral Agent that such issuer will comply with instructions with
        respect to such security originated by the Collateral Agent without
        further consent of such Grantor, such authenticated record to be in form
        and substance reasonably satisfactory to the Collateral Agent.

                (c)     With respect to any Security Collateral in which any
        Grantor has any right, title or interest and that constitutes a security
        entitlement in which the Collateral Agent is not the entitlement holder,
        such Grantor will cause the securities intermediary with respect to such
        security entitlement either (i) to identify in its records the
        Collateral Agent as the entitlement holder of such security entitlement
        against such securities intermediary or (ii) to agree in an
        authenticated record with such Grantor and the Collateral Agent that
        such securities intermediary will comply with entitlement orders (that
        is, notifications communicated to such securities intermediary directing
        transfer or redemption of the financial asset to which such Grantor has
        a security entitlement) originated by the Collateral Agent without
        further consent of such Grantor, such authenticated record to be in form
        and substance satisfactory to the Collateral Agent.

                (d)     No Grantor will change or add any securities
        intermediary that maintains any securities account in which any of the
        Security Collateral is credited or carried, or change or add any such
        securities account, in each case without first complying with the above
        provisions of this Section 4 in order to perfect the security interest
        granted hereunder in such Security Collateral.

                SECTION 5. Maintaining the Account Collateral. So long as any
Advance or any other Obligation of any Loan Party under any Loan Document shall
remain unpaid, any Letter of Credit shall be outstanding, any Secured Hedge
Agreement or Operating Indebtedness Agreement shall be in effect or any Lender
Party shall have any Commitment:

                (a)     No later than 30 days of the date hereof, the Borrower
        shall take all necessary actions to establish the L/C Collateral Account
        and thereafter the Borrower will

                                        5

<PAGE>

        at all times maintain the L/C Collateral Account only with the
        Collateral Agent. Upon the occurrence and during the continuance of an
        Event of Default, the Collateral Agent shall have sole right to direct
        the disposition of funds with respect to the L/C Collateral Account as
        provided in Section 16 hereof. Prior to the occurrence and continuance
        of an Event of Default, funds held in the L/C Collateral Account,
        (including, without limitation, interest on Cash Equivalents credited
        thereto) will be paid or released to or for the account of, or withdrawn
        by or for the account of, the Borrower or any other Person from the L/C
        Collateral Account, in accordance with Sections 3.12(c) and 3.15 of the
        Credit Agreement, as applicable, and, further, upon the release and
        termination of the security interest hereunder as provided in Section 21
        hereof.

                (b)     The Collateral Agent may, at any time and without notice
        to, or consent from the Grantor, transfer or direct the transfer of,
        funds from the Account Collateral to satisfy the Grantor's obligations
        under the Loan Documents and the Secured Hedge Agreements if an Event of
        Default shall have occurred and be continuing.

        SECTION 6. Representations and Warranties. Each Grantor represents and
warrants as follows:

                (a)     Such Grantor's exact legal name, as defined in Section
        9-503(a) of the UCC, is correctly set forth in Schedule II hereto. Such
        Grantor is located (within the meaning of Section 9-307 of the UCC) and
        has its chief executive office in the state or jurisdiction set forth in
        Schedule II hereto. The information set forth in Schedule II hereto with
        respect to such Grantor is true and accurate in all respects. No Grantor
        has permitted a uniform commercial code financing statement to be filed
        in respect of it as debtor with respect to the Collateral under any
        other name, location, chief executive office, type of organization,
        jurisdiction of organization or organizational identification number
        than those set forth in Schedule II hereto except as disclosed in
        Schedule V hereto.

                (b)     As of the Effective Date, the Inventory of such Grantor
        which is located at a distribution center, is located at a distribution
        center specified therefor in Schedule IV hereto, and such Grantor has
        exclusive possession and control of such Inventory other than such
        Inventory stored at any leased distribution center (which leased
        distribution center is so indicated by an asterisk on Schedule IV
        hereto), as Schedule IV may be amended from time to time pursuant to
        Section 8(a) hereof. All material Inventory of the Grantors, except
        Inventory in transit, is maintained in one or more States of the United
        States of America. All Initial Pledged Equity consisting of certificated
        securities and instruments as of the Effective Date have been delivered
        to the Collateral Agent.

                (c)     Such Grantor is the legal and beneficial owner of the
        Collateral of such Grantor free and clear of any Lien, claim, option or
        right of others, except for (i) the security interest created under this
        Agreement, (ii) Liens in favor of landlords to secure payments under
        leases, in respect of that portion of the Inventory held at distribution
        centers leased from the respective landlord and (iii) Liens to secure
        obligations described in clauses (i) and (ii) of the definition of
        Permitted Lien in the Credit Agreement (provided that such Liens are not
        material). No effective financing statement or other

                                        6

<PAGE>

        instrument similar is in effect covering all or any part of such
        Collateral, except such as may have been filed in favor of the
        Collateral Agent relating to the Loan Documents or in respect of
        landlord Liens described in this Section 6(c). No Grantor has any trade
        names, except as listed on Schedule VI hereto.

                (d)     The Pledged Equity pledged by such Grantor hereunder has
        been duly authorized and validly issued and is fully paid and
        non-assessable.

                (e)     The Initial Pledged Equity pledged by such Grantor
        constitutes the percentage of the issued and outstanding shares of stock
        or equity interest of the issuers thereof indicated on Schedule III
        hereto.

                (f)     All filings and other actions (including, without
        limitation, (A) actions necessary to obtain control of Collateral as
        provided in Sections 9-104, 9-105, 9-106 and 9-107 of the UCC and (B)
        actions necessary to perfect the Collateral Agent's security interest
        with respect to Security Collateral evidenced by a certificate)
        necessary to perfect the security interest in the Collateral of such
        Grantor created under this Agreement have been duly made or taken or
        will be duly made or taken, to the extent contemplated by the Credit
        Agreement, and upon the occurrence of such filings or actions, this
        Agreement will create in favor of the Collateral Agent for the benefit
        of the Secured Parties a valid and, together with such filings and other
        actions, perfected first priority security interest in such Security
        Collateral of such Grantor (except for Liens referred to in Section
        6(c)(ii) and (iii) hereof), securing the payment of the Secured
        Obligations.

                (g)     No authorization or approval or other action by, and no
        notice to or filing with, any governmental authority or regulatory body
        or any other third party is required for (i) the grant by such Grantor
        of the security interest granted hereunder or for the execution,
        delivery or performance of this Agreement by such Grantor, (ii) the
        perfection or maintenance of the security interest created hereunder
        (including the first priority nature of such security interest), except
        for the filing of financing and continuation statements under the UCC,
        and the actions described in Section 4 hereof with respect to Security
        Collateral, which actions have been taken and are in full force and
        effect, or (iii) the exercise by the Collateral Agent of its voting or
        other rights provided for in this Agreement or the remedies in respect
        of the Collateral pursuant to this Agreement, except as may be required
        in connection with the disposition of any portion of the Security
        Collateral by laws affecting the offering and sale of securities
        generally.

                (h)     No Grantor manufactures Inventory. All Inventory is
        manufactured by third parties under purchase orders which require
        compliance with among other things all applicable wage and hour and
        child labor laws (including the Fair Labor Standards Act of 1938 to the
        extent applicable).

                SECTION 7. Further Assurances. (a) Each Grantor agrees that from
time to time, at the expense of such Grantor, such Grantor will promptly execute
and deliver, or otherwise authenticate, all further instruments and documents,
and take all further action that, in each case, may be necessary or proper, or
that the Collateral Agent may reasonably request, in order to perfect and
protect any pledge or security interest granted or purported to be granted by

                                        7

<PAGE>

such Grantor hereunder or to enable the Collateral Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral of such
Grantor. Without limiting the generality of the foregoing, each Grantor will
promptly with respect to Collateral of such Grantor: (i) execute or authenticate
and file such financing or continuation statements, or amendments thereto, and
such other instruments or notices, as may be necessary or proper, or as the
Collateral Agent may reasonably request, in order to perfect and preserve the
security interest granted or purported to be granted by such Grantor hereunder;
(ii) deliver and pledge to the Collateral Agent for benefit of the Secured
Parties certificates representing Security Collateral that constitutes
certificated securities, accompanied by undated stock or bond powers executed in
blank; and (iii) take all action reasonably necessary to ensure that the
Collateral Agent has control of Collateral consisting of investment property and
transferable records as provided in Sections 9-105, 9-106 and 9-107 of the UCC.

                (b)     Each Grantor hereby authorizes the Collateral Agent to
        file one or more financing or continuation statements, and amendments
        thereto, including, without limitation, one or more financing statements
        indicating that such financing statements cover all or any part of the
        Collateral of such Grantor, in each case without the signature of such
        Grantor, and regardless of whether any particular asset described in
        such financing statements falls within the scope of the UCC. A photocopy
        or other reproduction of this Agreement or any financing statement
        covering the Collateral or any part thereof shall be sufficient as a
        financing statement where permitted by law.

                (c)     Each Grantor will furnish to the Collateral Agent from
        time to time (i) statements and schedules further identifying and
        describing the Collateral of such Grantor and such other reports in
        connection with such Collateral as the Collateral Agent may reasonably
        request, all in reasonable detail, in order to perfect and preserve the
        security interests granted or purported to be granted hereunder; and
        such other information as may be reasonably requested by the Collateral
        Agent from time to time with respect to the Collateral (with any
        information request with respect to Inventory to be to the extent
        practicable consistent with such Grantor's existing internal management
        information reporting systems), and (ii) such information as is
        reasonably necessary so that the Collateral Agent from time to time and
        at any time can conduct or cause to be conducted a valuation of the
        Collateral (and with the out-of-pocket and documented expenses of the
        Collateral Agent in connection therewith to be paid by the Borrower
        pursuant to Section 17 hereof); provided, however, that except during
        the continuance of any Event of Default, during the term of this
        Agreement, the Collateral Agent shall have the right to conduct or cause
        to be conducted only one such valuation.

                SECTION 8. As to Inventory. (a) To the extent Inventory of a
Grantor is kept at a distribution center, such Grantor will keep such Inventory
at the distribution centers specified on Schedule IV or, at such other
distribution centers designated in a written notice by the Grantor to the
Collateral Agent. Upon the giving of such notice, Schedule IV shall be
automatically amended to add any new locations specified in the notice.

                (b)     Each Grantor will pay promptly when due all property and
        other taxes, assessments and governmental charges or levies imposed
        upon, and all claims (including, without limitation, claims for labor,
        materials and supplies) against, the Inventory of such

                                        8

<PAGE>

        Grantor, except to the extent payment thereof is not required by Article
        IV of the Credit Agreement. The purchase orders for all Inventory
        manufactured by third parties will require compliance with among other
        things all applicable wage and hour and child labor laws (including the
        Fair Labor Standards Act of 1938 to the extent applicable).

                SECTION 9. Insurance. Each Grantor will, at its own expense,
maintain insurance with respect to the Inventory of such Grantor in such
amounts, against such risks, in such form and with such insurers, as is
customary for the industry; provided, that the Grantors may self-insure such
risks in accordance with its past practices as of the date hereof and may in
addition self-insure risks in amounts as are customarily self-insured by
similarly situated Persons in the industry.

                SECTION 10. Post-Closing Changes; Bailees. (a) Each Grantor will
provide written notice to the Collateral Agent of a change in such Grantor's
name, type of organization, jurisdiction of organization, organizational
identification number or location from those set forth on Schedule II of this
Agreement within 30 days of such change, and shall take all action reasonably
required by the Collateral Agent for the purpose of perfecting or protecting the
security interest granted by this Agreement. No Grantor will become bound by a
security agreement with respect to any of the Collateral authenticated by
another Person (determined as provided in Section 9-203(d) of the UCC) without
giving the Collateral Agent 30 days' prior written notice thereof and taking all
action required by the Collateral Agent to ensure that the perfection and first
priority nature of the Collateral Agent's security interest in the Collateral
will be maintained. Each Grantor will hold and preserve its records relating to
the Collateral and will permit representatives of the Collateral Agent at any
time during normal business hours and upon reasonable prior notice to inspect
and make abstracts from such records. If the Grantor does not have an
organizational identification number and later obtains one, it will forthwith
notify the Collateral Agent of such organizational identification number.

                (b)     If any material Inventory of any Grantor is at any time
        in the possession or control of a warehouseman, bailee or agent, and if
        any such Inventory is subject to a Lien based on statute or contract in
        favor of such warehouseman, bailee or agent and the Collateral Agent so
        requests such Grantor will (i) notify such warehouseman, bailee or agent
        of the security interest created hereunder, and (ii) instruct such
        warehouseman, bailee or agent to hold all such Inventory solely for the
        Collateral Agent's account subject only to the Collateral Agent's
        instructions (which shall permit such Inventory to be removed by such
        Grantor in the ordinary course of business until the Collateral Agent
        notifies such warehouseman, bailee or agent that an Event of Default has
        occurred and is continuing).

                SECTION 11. Voting Rights; Dividends; Etc. (a) So long as no
Event of Default shall have occurred and be continuing or, if the Credit
Agreement is no longer in effect, so long as no event has occurred and is
continuing under any Secured Hedge Agreement or Operating Indebtedness Agreement
which permits the respective Hedge Bank or Operating Lender to exercise its
remedies thereunder:

                                        9

<PAGE>

                        (i)     Each Grantor shall be entitled to exercise or
                refrain from exercising any and all voting and other consensual
                rights pertaining to the Security Collateral of such Grantor or
                any part thereof for any purpose.

                        (ii)    Each Grantor shall be entitled to receive and
                retain any and all dividends, interest and other distributions
                paid in respect of the Security Collateral of such Grantor if
                and to the extent that the payment thereof is not otherwise
                prohibited by the terms of the Loan Documents; provided,
                however, that any and all dividends, interest and other
                distributions paid or payable other than in cash in respect of,
                and instruments and other property received, receivable or
                otherwise distributed in respect of, or in exchange for, any
                Security Collateral, shall be, and shall be forthwith delivered
                to the Collateral Agent to hold as Security Collateral in
                accordance with the terms of this Agreement in the same form as
                so received (with any necessary indorsement).

                        (iii)   The Collateral Agent will execute and deliver
                (or cause to be executed and delivered) to each Grantor all such
                proxies and other instruments as such Grantor may reasonably
                request for the purpose of enabling such Grantor to exercise the
                voting and other rights that it is entitled to exercise pursuant
                to paragraph (i) above and to receive the dividends or interest
                payments that it is authorized to receive and retain pursuant to
                paragraph (ii) above.

                (b)     Upon the occurrence and during the continuance of an
        Event of Default or, if the Credit Agreement is no longer in effect,
        upon the occurrence and during the continuance of an event under any
        Secured Hedge Agreement or Operating Indebtedness Agreement which
        permits the respective Hedge Bank or Operating Lender to exercise its
        remedies thereunder:

                        (i)     All rights of each Grantor (x) to exercise or
                refrain from exercising the voting and other consensual rights
                that it would otherwise be entitled to exercise pursuant to
                Section 11(a)(i) hereof shall, upon notice to such Grantor by
                the Collateral Agent, cease and (y) to receive the dividends,
                interest and other distributions that it would otherwise be
                authorized to receive and retain pursuant to Section 11(a)(ii)
                hereof shall automatically cease, and all such rights shall
                thereupon become vested in the Collateral Agent, which shall
                thereupon have the sole right to exercise or refrain from
                exercising such voting and other consensual rights and to
                receive and hold as Security Collateral such dividends, interest
                and other distributions.

                        (ii)    All dividends, interest and other distributions
                that are received by any Grantor contrary to the provisions of
                paragraph (i) of this Section 11(b) shall be received in trust
                for the benefit of the Collateral Agent, shall be segregated
                from other funds of such Grantor and shall be forthwith paid
                over to the Collateral Agent as Security Collateral in the same
                form as so received (with any necessary indorsement).

                                       10

<PAGE>

                SECTION 12. Transfers and Other Liens; Additional Shares. (a)
Each Grantor agrees that it will not (i) sell, assign or otherwise dispose of,
or grant any option with respect to, any of the Collateral, other than sales,
assignments and other dispositions of the Collateral, and options relating to
the Collateral, permitted under the terms of this Agreement or the Credit
Agreement, or (ii) create or suffer to exist any Lien upon or with respect to
any of the Collateral of such Grantor except for the pledge, assignment and
security interest created under this Agreement and those Liens referred to in
Section 6(c)(ii) and (iii) hereof.

                (b)     Each Grantor agrees that it will (i) cause each of its
        wholly-owned Domestic Subsidiaries (other than Excluded Subsidiaries but
        including first-tier Special Purpose Subsidiaries) which is the issuer
        of the Pledged Equity pledged by such Grantor not to issue any stock or
        other Equity Interests or other securities in addition to or in
        substitution for the Pledged Equity issued by such issuer, except to
        such Grantor, and (ii) pledge hereunder, promptly following its
        acquisition (directly or indirectly) thereof, any and all additional
        Pledged Equity and other equity interests in accordance with the Credit
        Agreement.

                SECTION 13. Collateral Agent Appointed Attorney-in-Fact. (a)
Each Grantor hereby irrevocably appoints the Collateral Agent such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or otherwise, from time to time, upon the occurrence
and during the continuance of an Event of Default or, if the Credit Agreement is
no longer in effect, upon the occurrence and during the continuance of an event
under a Secured Hedge Agreement or Operating Indebtedness Agreement which
permits the respective Hedge Bank or Operating Lender to exercise its remedies
thereunder, in the Collateral Agent's discretion, to take any action and to
execute any instrument that the Collateral Agent may deem reasonably necessary
or proper to accomplish the purposes of this Agreement, including, without
limitation:

                (b)     to ask for, demand, collect, sue for, recover,
        compromise, receive and give acquittance and receipts for moneys due and
        to become due under or in respect of any of the Collateral,

                (c)     to receive, indorse and collect any drafts or other
        instruments, documents and chattel paper, in connection with clause (a)
        above, and

                (d)     to file any claims or take any action or institute any
        proceedings that the Collateral Agent may deem reasonably necessary or
        proper for the collection of any of the Collateral or otherwise to
        enforce the rights of the Collateral Agent with respect to any of the
        Collateral.

                SECTION 14. Collateral Agent May Perform. If any Grantor fails
to perform any agreement contained herein after receipt of written notice
thereof from the Collateral Agent, the Collateral Agent may, but without any
obligation to do so, itself perform, or cause performance of, such agreement,
and the expenses of the Collateral Agent incurred in connection therewith shall
be payable by such Grantor under Section 17 hereof.

                                       11

<PAGE>

                SECTION 15. The Collateral Agent's Duties. (a) The powers
conferred on the Collateral Agent hereunder are solely to protect the Secured
Parties' interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the safe
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Collateral Agent shall have no duty as to
any Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not any Secured Party has or is deemed to have knowledge
of such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Collateral. The
Collateral Agent shall be deemed to have exercised reasonable care in the
custody and preservation of any Collateral in its possession if such Collateral
is accorded treatment substantially equal to that which it accords its own
property.

                (b)     The Collateral Agent may from time to time, upon prior
        written notice to the Borrower, when the Collateral Agent deems it to be
        reasonably necessary in order to preserve and protect the Collateral,
        appoint one or more subagents (each a "Subagent") for the Collateral
        Agent hereunder with respect to all or any part of the Collateral. In
        the event that the Collateral Agent so appoints any Subagent with
        respect to any Collateral, (i) the assignment and pledge of such
        Collateral and the security interest granted in such Collateral by each
        Grantor hereunder shall be deemed for purposes of this Security
        Agreement to have been made to such Subagent, in addition to the
        Collateral Agent, for the ratable benefit of the Secured Parties, as
        security for the Secured Obligations of such Grantor, (ii) such Subagent
        shall automatically be vested, in addition to the Collateral Agent, with
        all rights, powers, privileges, interests and remedies of the Collateral
        Agent hereunder with respect to such Collateral, and (iii) the term
        "Agent," when used herein in relation to any rights, powers, privileges,
        interests and remedies of the Collateral Agent with respect to such
        Collateral, shall include such Subagent; provided, however, that no such
        Subagent shall be authorized to take any action with respect to any such
        Collateral unless and except to the extent expressly authorized in
        writing by the Collateral Agent.

                SECTION 16. Remedies. If any Event of Default shall have
occurred and be continuing or, if the Credit Agreement is no longer in effect,
then if an event shall have occurred and be continuing under a Secured Hedge
Agreement or Operating Indebtedness Agreement which permits the respective Hedge
Bank or Operating Lender to exercise its remedies thereunder:

                (a)     The Collateral Agent may exercise in respect of the
        Collateral, in addition to other rights and remedies provided for herein
        or otherwise available to it, all the rights and remedies of a secured
        party upon default under the UCC (whether or not the UCC applies to the
        affected Collateral) and also may: (i) require each Grantor to, and each
        Grantor hereby agrees that it will at its expense and upon request of
        the Collateral Agent forthwith, assemble all or part of the Collateral
        as directed by the Collateral Agent and make it available to the
        Collateral Agent at a place and time to be designated by the Collateral
        Agent that is reasonably convenient to both parties; (ii) without notice
        except as specified below, sell the Collateral or any part thereof in
        one or more parcels at public or private sale, at any of the Collateral
        Agent's offices or elsewhere, for cash, on credit or for future
        delivery, and upon such other terms as the Collateral Agent may deem

                                       12

<PAGE>

        commercially reasonable; (iii) occupy any premises owned or leased by
        any of the Grantors where the Collateral or any part thereof is
        assembled or located for a reasonable period in order to effectuate its
        rights and remedies hereunder or under law, without obligation to such
        Grantor in respect of such occupation; and (iv) exercise any and all
        rights and remedies of any of the Grantors under or in connection with
        the Collateral, or otherwise in respect of the Collateral, including,
        without limitation, (A) any and all rights of such Grantor to demand or
        otherwise require payment of any amount under the Collateral, (B)
        withdraw, or cause or direct the withdrawal, of all funds with respect
        to the L/C Collateral Account and (C) exercise all other rights and
        remedies with respect to the Collateral, including, without limitation,
        those set forth in Section 9-607 of the UCC. Each Grantor agrees that,
        to the extent notice of sale shall be required by law, at least ten
        days' notice to such Grantor of the time and place of any public sale or
        the time after which any private sale is to be made shall constitute
        reasonable notification. The Collateral Agent shall not be obligated to
        make any sale of Collateral regardless of notice of sale having been
        given. The Collateral Agent may adjourn any public or private sale from
        time to time by announcement at the time and place fixed therefor, and
        such sale may, without further notice, be made at the time and place to
        which it was so adjourned.

                (b)     Any cash held by or on behalf of the Collateral Agent in
        accordance with this Agreement and all cash proceeds received by or on
        behalf of the Collateral Agent in respect of any sale of, collection
        from, or other realization upon all or any part of the Collateral may,
        in the discretion of the Collateral Agent, be held by the Collateral
        Agent as collateral for, and/or then or at any time thereafter applied
        (after payment of any amounts payable to the Collateral Agent pursuant
        to Section 17 hereof) in whole or in part by the Collateral Agent for
        the ratable benefit of the Secured Parties against, all or any part of
        the Secured Obligations, in the following manner:

                        (i)     first, amounts then on deposit in the L/C
                Collateral Account shall be applied to reimburse the respective
                Issuing Bank for any payments by such Issuing Banks under its
                respective Letters of Credit as provided in Sections 3.12(c) and
                3.15 of the Credit Agreement, with any surplus after such
                reimbursements then to be applied solely in accordance with the
                remaining order of priority set out in this Section 16(b);

                        (ii)    second, paid to the Collateral Agent for any
                amounts then owing to the Collateral Agent pursuant to Section
                10.04 of the Credit Agreement or otherwise under the Loan
                Documents;

                        (iii)   third, (A) paid to the Secured Parties, for any
                amounts then owing to them, in their capacities as such, under
                the Loan Documents, the Secured Hedge Agreements and the
                Operating Indebtedness Agreements ratably in accordance with
                such respective amounts then owing to such Secured Parties,
                provided that, for purposes of this Section 16, the amount owing
                to any Hedge Bank pursuant to any Secured Hedge Agreement to
                which it is a party (other than any amount theretofore accrued
                and unpaid) shall be deemed to be equal to the Agreement Value
                (as defined below) therefor and (B) with any surplus to be
                deposited as Collateral in the L/C Collateral Account up to an
                amount equal to

                                       13

<PAGE>

                100% of the aggregate outstanding Letter of Credit Liability,
                provided that in the event that any such Letter of Credit is
                drawn, the Collateral Agent shall pay to the Issuing Bank that
                issued such Letter of Credit the amount held in the L/C
                Collateral Account in respect of such Letter of Credit, provided
                further that, to the extent that any such Letter of Credit shall
                expire or terminate undrawn and as a result thereof the amount
                of the Collateral in the L/C Collateral Account shall exceed
                100% of the aggregate Letter of Credit Liability then
                outstanding, such excess amount of such Collateral shall be
                applied in accordance with the remaining order of priority set
                out in this Section 16(b); and

                        (iv)    fourth, any surplus of such cash or cash
                proceeds held by or on the behalf of the Collateral Agent and
                remaining after payment in full of all the Secured Obligations
                shall be paid over to the applicable Grantor or to whomsoever
                may be lawfully entitled to receive such surplus.

For purposes of this Agreement, "Agreement Value" means, for each Secured Hedge
Agreement, on any date of determination, an amount reasonably determined by the
Collateral Agent equal to: (a) in the case of a Secured Hedge Agreement
documented pursuant to the Master Agreement (Multicurrency-Cross Border)
published by the International Swap and Derivatives Association, Inc. (the
"Master Agreement"), the amount, if any, that would be payable by any Loan Party
to its counterparty in respect of such Secured Hedge Agreement, as if (i) such
Secured Hedge Agreement was being terminated early on such date of
determination, (ii) such Loan Party was the sole "Affected Party", and (iii) the
Collateral Agent was the sole party determining such payment amount (with the
Collateral Agent making such determination pursuant to the provisions of that
specific form of Master Agreement); or (b) in the case of a Secured Hedge
Agreement traded on an exchange, the mark-to-market value of such Secured Hedge
Agreement, which will be unrealized gain or loss on such Secured Hedge Agreement
to the Loan Party to such Secured Hedge Agreement reasonably determined by the
Collateral Agent based on the settlement price of such Secured Hedge Agreement
on such date of determination, or (c) in all other cases, the mark-to-market
value of such Secured Hedge Agreement, which will be the unrealized gain or loss
on such Secured Hedge Agreement to the Loan Party to such Secured Hedge
Agreement reasonably determined by the Collateral Agent as the amount, if any,
by which (i) the present value of the future cash flows to be paid by such Loan
Party exceeds (ii) the present value of the future cash flows to be received by
such Loan Party pursuant to such Secured Hedge Agreement; capitalized terms used
and not otherwise defined in this definition shall have the respective meaning
set forth in the above described Master Agreement.

                (c)     All payments received by any Grantor in respect of the
        Collateral shall be received in trust for the benefit of the Collateral
        Agent, shall be segregated from other funds of such Grantor and shall be
        forthwith paid over to the Collateral Agent in the same form as so
        received (with any necessary indorsement).

                SECTION 17. Indemnity and Expenses. (a) Each Grantor agrees to
indemnify and hold harmless each Secured Party and each of their Affiliates and
their respective officers, directors, employees, agents and advisors (each, an
"Indemnified Party") from and against, and shall pay on demand, any and all
claims, damages, losses (other than lost profits), liabilities and expenses
(including, without limitation, reasonable and documented fees and out-of-pocket

                                       14

<PAGE>

expenses of counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or
resulting from any enforcement, investigation, litigation or proceeding related
to this Agreement, except to the extent such claim, damage, liability or expense
is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct.

                (b)     Each Grantor will upon demand pay to the Collateral
        Agent the amount of any and all reasonable and documented expenses,
        including, without limitation, the reasonable and documented fees and
        out-of-pocket expenses of its counsel and of any experts and agents,
        that the Collateral Agent may incur in connection with (i) the custody,
        preservation, use or operation of, or the sale of, collection from or
        other realization upon, any of the Collateral of such Grantor, (ii) the
        exercise or enforcement of any of the rights of the Collateral Agent or
        the other Secured Parties hereunder or (iii) the failure by such Grantor
        to perform or observe any of the provisions hereof.

                SECTION 18. Amendments; Waivers; Additional Grantors; Etc. (a)
No amendment, modification or waiver of any provision of this Agreement, and no
consent to any departure by any Grantor herefrom, shall in any event be
effective unless the same shall be in writing and signed by the Collateral
Agent, and, in the case of any such amendment or modification by the Grantors,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given, provided, that this Agreement may
be modified to the extent provided therein by the execution of a Security
Agreement Supplement by an Additional Guarantor in accordance with Section 18(b)
hereof. No failure on the part of the Collateral Agent or any other Secured
Party to exercise, and no delay in exercising any right hereunder, shall operate
as a waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right.

                (b)     Upon the execution and delivery, or authentication, by
        any Person of a security agreement supplement in substantially the form
        of Exhibit A hereto (each a "Security Agreement Supplement"), (i) such
        Person shall be referred to as an "Additional Grantor" and shall be and
        become a Grantor hereunder, and each reference in this Agreement and the
        other Loan Documents to "Grantor" shall also mean and be a reference to
        such Additional Grantor, and each reference in this Agreement and the
        other Loan Documents to "Collateral" shall also mean and be a reference
        to the Collateral of such Additional Grantor, and (ii) the supplemental
        schedules I-IX attached to each Security Agreement Supplement shall be
        incorporated into and become a part of and supplement Schedules I-IX,
        respectively, hereto, and the Collateral Agent may attach such
        supplemental schedules to such Schedules; and each reference to such
        Schedules shall mean and be a reference to such Schedules as
        supplemented pursuant to each Security Agreement Supplement.

                SECTION 19. Notices; Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier or electronic
mail) and mailed, sent by overnight courier, telecopied, emailed, or delivered,
in the case of the Borrower or the Collateral Agent, addressed to it at its
address specified in the Credit Agreement and, in the case of each Grantor other
than the Borrower, addressed to it at its address set forth opposite such
Grantor's

                                       15

<PAGE>

name on the signature pages hereto or on the signature page to the
Security Agreement Supplement pursuant to which it became a party hereto; or, as
to any party, at such other address or to such other person as shall be
designated by such party in a written notice to the other parties. All such
notices and other communications shall, when mailed, be effective three days
after being deposited in the mails, when sent by overnight courier, be effective
one day after being sent by overnight courier, and when telecopied or sent by
electronic mail, be effective when received (and, with respect to notices and
communications sent by electronic mail, upon confirmation by the recipient of
the receipt of such notice or communication), respectively; and when delivered
by hand, be effective upon delivery; except that notices and other
communications to the Collateral Agent shall not be effective until received by
the Collateral Agent. Delivery by telecopier of an executed counterpart of any
amendment or waiver of any provision of this Agreement or of any Security
Agreement Supplement or Schedule hereto shall be effective as delivery of an
original executed counterpart thereof.

                SECTION 20. Continuing Security Interest; Assignments under the
Credit Agreement. This Agreement shall create a continuing security interest in
the Collateral and shall (a) remain in full force and effect until the latest of
(i) the payment in full in cash of the Secured Obligations, (ii) the Termination
Date and (iii) the termination or expiration of all Letters of Credit and all
Secured Hedge Agreements and all Operating Indebtedness Agreements, (b) be
binding upon each Grantor, its successors and assigns and (c) inure, together
with the rights and remedies of the Collateral Agent hereunder, to the benefit
of the Secured Parties and their respective successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), but subject to
Section 10.07 of the Credit Agreement, any Lender Party may assign or otherwise
transfer all or any portion of its rights and obligations under the Credit
Agreement (including, without limitation, all or any portion of its Commitments,
the Advances owing to it and the Note or Notes, if any, held by it) to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender Party herein or otherwise.

                SECTION 21. Release; Termination. (a) While the Credit Agreement
is in effect, upon any sale, lease, transfer or other disposition of any item of
Collateral of any Grantor in accordance with the terms of the Loan Documents and
thereafter in accordance with the requirements (if any) of the Secured Hedge
Agreements and the Operating Indebtedness Agreements, the security interest
granted hereby in such Collateral shall immediately and automatically terminate
and all rights to such Collateral shall revert to the applicable Grantors
without any further action by the Collateral Agent, any Lender Party, any Hedge
Bank, any Operating Lender or any other Person effective as of the time of such
sale, lease, transfer or other disposition.

                (b)     Except as provided in Section 17 hereof, (which
        Obligations shall survive termination), with respect to the Lender
        Parties, upon the latest of (i) the payment in full in cash of the
        Secured Obligations then owing to the Lender Parties, (ii) the
        Termination Date and (iii) the termination or expiration of all Letters
        of Credit, the pledge and security interest granted hereby with respect
        to the Secured Obligations with respect to the Lender Parties shall
        terminate and all rights to the Collateral in favor of the Lender
        Parties shall revert to the applicable Grantor without any further
        action by the Collateral Agent, any Lender Party, any Hedge Bank, any
        Operating Lender or any other Person.

                                       16

<PAGE>

                (c)     Except as provided in Section 17 hereof (which
        Obligations shall survive termination), with respect to each Hedge Bank,
        upon the latest of (i) the payment in full in cash of the Secured
        Obligations then owing to such Hedge Bank and (ii) the termination of
        the Secured Hedge Agreement with respect to such Hedge Bank, the pledge
        and security interest granted hereby with respect the Secured
        Obligations with respect to such Hedge Bank shall terminate and all
        rights to the Collateral in favor of such Hedge Bank shall revert to the
        applicable Grantor without any further action by the Collateral Agent,
        any Lender Party, any Hedge Bank, any Operating Lender or any other
        Person.

                (d)     Except as provided in Section 17 hereof (which
        Obligations shall survive termination), with respect to each Operating
        Lender, upon the latest of (i) the payment in full in cash of the
        Secured Obligations then owing to such Operating Lender and (ii) the
        termination of the Operating Indebtedness Agreement with respect to such
        Operating Lender, the pledge and security interest granted hereby with
        respect the Secured Obligations with respect to such Operating Lender
        shall terminate and all rights to the Collateral in favor of such
        Operating Lender shall revert to the applicable Grantor without any
        further action by the Collateral Agent, any Lender Party, any Hedge
        Bank, any Operating Lender or any other Person.

                (e)     (i) While the Credit Agreement is in effect, if (A) all
        or a majority of the stock of a Grantor or any of its successors in
        interest under this Agreement shall be sold or otherwise disposed of
        (including by merger or consolidation) in a sale not prohibited by the
        Credit Agreement or otherwise consented to by the Collateral Agent on
        behalf of the Secured Parties, (B) a Grantor shall liquidate or dissolve
        in a transaction not prohibited by the terms of the Credit Agreement or
        otherwise consented to by the Collateral Agent on behalf of the Secured
        Parties or (C) trademarks or service marks are transferred to a Grantor
        such that it becomes or otherwise qualifies as a Special Purpose
        Subsidiary, and (ii) if the Credit Agreement is no longer in effect, in
        accordance with the requirements (if any) of the Secured Hedge
        Agreements and the Operating Indebtedness Agreements, then, in each
        case, the obligations of such Grantor or such successor in interest, as
        the case may be, hereunder shall automatically be discharged and
        released without any further action by the Collateral Agent, any Lender
        Party, any Hedge Bank, any Operating Lender or any other Person
        effective as of the time of such sale, merger, liquidation or
        dissolution.

                (f)     Upon any termination of the security interest with
        respect to any of the Collateral hereunder or any discharge and release
        of a Grantor's obligations hereunder, in each case as described in
        subsections (a) through (e) of this Section 21, the Collateral Agent
        will, at the applicable Grantor's expense, execute and deliver to such
        Grantor such documents as such Grantor shall reasonably request to
        evidence such termination, discharge or release.

                SECTION 22. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement. Delivery of an

                                       17

<PAGE>

executed counterpart of a signature page to this Agreement by telecopier shall
be effective as delivery of an original executed counterpart of this Agreement.

                SECTION 23. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New
York.

                                       18

<PAGE>

                IN WITNESS WHEREOF, each Grantor has caused this Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.

                                  THE GAP, INC.

                                  By:
                                     --------------------------------
                                     Name:      Sabrina Simmons
                                     Title:     Senior Vice President and
                                                 Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  BANANA REPUBLIC (CALIFORNIA) LLC

                                  By:
                                     --------------------------------
                                     Name:     Sabrina Simmons
                                     Title:    Senior Vice President and
                                                Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  BANANA REPUBLIC (FLORIDA) LLC

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                       19

<PAGE>

                                  BANANA REPUBLIC (HOLDINGS) INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  BANANA REPUBLIC (NEW YORK) LLC

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  BANANA REPUBLIC, INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                       20

<PAGE>

                                  GPS (MARYLAND), INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  GPS BRAND SERVICES, INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  GPS CONSUMER DIRECT, INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                       21

<PAGE>

                                  GPS CORPORATE FACILITIES, INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  GPS EMPLOYEE SERVICES, INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  GPS REAL ESTATE, INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                       22

<PAGE>

                                  GPSDC (NEW YORK) INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  GAP (FLORIDA) LLC
                                  By The Gap, Inc., as Manager

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  GAP (GEORGIA) L.P.
                                  By The Gap, Inc., as General Partner

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                       23

<PAGE>

                                  GAP (INDIANA) L.P.
                                  By The Gap, Inc., as General Partner

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  GAP (KENTUCKY) L.P.
                                  By The Gap, Inc., as General Partner

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  GAP (TENNESSEE) L.P.
                                  By The Gap, Inc., as General Partner

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                       24

<PAGE>

                                  GAP (WISCONSIN) L.P.
                                  By The Gap, Inc., as General Partner

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  GAP HOLDINGS, INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  GAP INTERNATIONAL SOURCING
                                  (AMERICAS) LLC
                                  By The Gap, Inc., as Manager

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                       25

<PAGE>

                                  GAP INTERNATIONAL SOURCING
                                  (CALIFORNIA), INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                     GAP INTERNATIONAL SOURCING (JV), LLC
                                     By Gap International Sourcing, Inc.,
                                     as Manager

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  GAP INTERNATIONAL SOURCING (U.S.A.)
                                  INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                              Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                       26

<PAGE>

                                  GAP INTERNATIONAL SOURCING, INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                              Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  OLD NAVY (CALIFORNIA) LLC
                                  By Old Navy Inc., as Manager

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  OLD NAVY (EAST) L.P.
                                  By Old Navy Inc., as General Partner

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                       27

<PAGE>

                                  OLD NAVY (FLORIDA) LLC
                                  By Old Navy Inc., as Manager

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  OLD NAVY (HOLDINGS) INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  OLD NAVY INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                       28

<PAGE>

                                  THE FISHER GAP STORES, INC.

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                  WCB TWENTY-EIGHT LIMITED
                                  PARTNERSHIP

                                  By GPS Corporate Facilities, Inc.,
                                  as General Partner

                                  By:
                                     --------------------------------
                                     Name:    Sabrina Simmons
                                     Title:   Senior Vice President and
                                               Treasurer

                                     Address for Notices:
                                     2 Folsom Street
                                     San Francisco, CA 94105
                                     Attn: General Counsel

                                       29

<PAGE>

Schedules

Schedule I       -     Secured Hedge Agreements
Schedule II      -     Location, Chief Executive Office, Type Of Organization,
                       Jurisdiction Of Organization And Organizational
                       Identification Number
Schedule III     -     Initial Pledged Equity
Schedule IV      -     Distribution Centers
Schedule V       -     Filings with Respect to Other Names, Locations, Etc.
Schedule VI      -     Trade names

Exhibit

Exhibit A        -     Form of Security Agreement Supplement

<PAGE>

                                                                EXHIBIT A TO THE
                                                              SECURITY AGREEMENT

                      FORM OF SECURITY AGREEMENT SUPPLEMENT

                                         [Date of Security Agreement Supplement]

Citicorp U.S.A., Inc.
as the Collateral Agent for the
Secured Parties referred to in the
Credit Agreement referred to below

399 Park Avenue
New York, NY 10043
Attn: Credit Administration
Telecopier: 302-894-6120

With a copy to:

Citicorp North America, Inc.
One Sansome Street
San Francisco, CA
Attn: Carolyn Wendler
Telecopier: 415-433-0307

                                  The Gap, Inc.

Ladies and Gentlemen:

        Reference is made to (i) the Credit Agreement dated as of June 24, 2003
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among The Gap, Inc., a Delaware corporation,
as the Borrower, the Loan Parties party thereto, Citicorp USA, Inc., as
Collateral Agent (together with any successor collateral agent appointed
pursuant to Article IX of the Credit Agreement, the "Collateral Agent"), and
(ii) the Security Agreement dated June 24, 2003 (as amended, amended and
restated, supplemented or otherwise modified from time to time, the "Security
Agreement") made by the Grantors from time to time party thereto in favor of the
Collateral Agent for the Secured Parties. Terms defined in the Credit Agreement
or the Security Agreement and not otherwise defined herein are used herein as
defined in the Credit Agreement or the Security Agreement.

        SECTION 1. Grant of Security. The undersigned hereby grants to the
Collateral Agent, for the ratable benefit of the Secured Parties, a security
interest in, all of its right, title and interest in and to all of the
Collateral of the undersigned, whether now owned or hereafter

                                  Exh. A Page 1

<PAGE>

acquired by the undersigned, wherever located and whether now or hereafter
existing or arising, including, without limitation, the property and assets of
the undersigned set forth on the attached supplemental schedules to the
Schedules to the Security Agreement.

        SECTION 2. Security for Obligations. The grant of a security interest
in, the Collateral by the undersigned under this Security Agreement Supplement
and the Security Agreement secures the payment of all Obligations of the
undersigned now or hereafter existing under the Loan Documents and the payment
of all Obligations of the Borrower or the Hedge Subsidiaries now or hereafter
existing under the Secured Hedge Agreements and the payment of any Obligations
of the Borrower or its Subsidiaries under Operating Indebtedness Agreements,
whether direct or indirect, absolute or contingent, and whether for principal,
reimbursement obligations, interest, premiums, penalties, fees,
indemnifications, contract causes of action, costs, expenses or otherwise.

        SECTION 3. Supplements to Security Agreement Schedules. The undersigned
has attached hereto supplemental Schedules I through V to Schedules I through V,
respectively, to the Security Agreement, and the undersigned hereby certifies,
as of the date first above written, that such supplemental schedules have been
prepared by the undersigned in substantially the form of the equivalent
Schedules to the Security Agreement and are complete and correct.

        SECTION 4. Representations and Warranties. The undersigned hereby makes
each representation and warranty set forth in Section 6 of the Security
Agreement (as supplemented by the attached supplemental schedules) to the same
extent as each other Grantor.

        SECTION 5. Obligations Under the Security Agreement. The undersigned
hereby agrees, as of the date first above written, to be bound as a Grantor by
all of the terms and provisions of the Security Agreement to the same extent as
each of the other Grantors. The undersigned further agrees, as of the date first
above written, that each reference in the Security Agreement to an "Additional
Grantor" or a "Grantor" shall also mean and be a reference to the undersigned.

        SECTION 6. Governing Law. This Security Agreement Supplement shall be
governed by, and construed in accordance with, the laws of the State of New
York.

                                           Very truly yours,

                                           [NAME OF ADDITIONAL GRANTOR]

                                           By
                                              ------------------------------
                                              Title:

                                                 Address for notices:

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

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

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

                                  Exh. A Page 2

<PAGE>

                                                                     Exhibit F-1

                                                  June [ ], 2003

Citicorp USA, Inc.,
as Agent

The Lenders and Issuing Banks
(as defined below) listed
on Schedule I hereto

                Re:  The Gap, Inc./Credit Agreement

Ladies and Gentlemen:

                I am Senior Vice President and General Counsel to The Gap, Inc.,
a Delaware corporation (the "Company"), the domestic subsidiaries of the Company
listed on Schedule II hereto (the "Delaware Subsidiaries"), the domestic
subsidiaries of the Company listed on Schedule III hereto (the "California
Subsidiaries"; and together with the Delaware Subsidiaries, the "Subsidiaries";
and together with the Company and the Delaware Subsidiaries, the "Loan
Parties"), in connection with the preparation, execution and delivery of the
Credit Agreement, dated as of June __, 2003 (the "Credit Agreement"), among the
Company and the Subsidiary Borrowers, the LC Subsidiaries, the Lenders and the
Issuing Banks (as such terms are defined in the Credit Agreement), Citigroup
Global Markets Inc. ("CGMI") and Banc of America Securities LLC ("BAS") as Joint
Book Managers, BAS, HSBC Bank USA and J.P. Morgan Securities Inc. ("JPM") as
Co-Syndication Agents, CGMI, BAS and JPM as Joint Lead Arrangers, and Citicorp
USA, Inc. as agent for the Lenders and the Issuing Banks (in such capacity, the
"Agent"), and certain other agreements, instruments and documents related to the
Credit Agreement. This opinion is being delivered pursuant to Section
5.01(b)(viii) of the Credit Agreement.

                In my examination I have assumed the genuineness of all
signatures including endorsements, the legal capacity of natural persons, the
authenticity of all documents submitted to me as originals, the conformity to
original documents of all documents submitted to me as facsimile, electronic,
certified or photostatic copies, and the authenticity of the originals of such
copies. As to any facts material to this opinion which I did not independently
establish or verify, I have relied upon statements and representations of the
Loan Parties and their officers and other representatives and of public
officials, including the facts and conclusions set forth therein.

<PAGE>

                In rendering the opinions set forth herein, I have examined and
relied on originals or copies of the following:

                (a) the Credit Agreement;

                (b) the Promissory Notes executed by the Loan Parties;

                (c) the Subsidiary Guaranty, dated as of June __, 2003 (the
"Subsidiary Guaranty"), made by the Subsidiaries party thereto in favor of the
Lender Parties;

                (d) the Security Agreement, dated as of June __, 2003 (the
"Security Agreement"), from the Loan Parties party thereto (the "Grantors") in
favor of the Agent as Collateral Agent (in such capacity, the "Collateral
Agent");

                (e) certified copies of the respective Constitutive Documents
(as defined in the Credit Agreement) of each Loan Party;

                (f) certified copies of certain resolutions of the respective
boards of directors, the managers or the partners, as the case may be, of each
Loan Party adopted on May 29, 2003, in the case of the Company, on June 11,
2003, in the case of GPS Brand Services, Inc. and on June 4, 2003, in the case
of each of the other Subsidiaries;

                (g) certificates, dated on or about the date hereof, from the
Secretary of State of the State of California and the Secretary of State of the
State of Delaware as to the good standing of each of the Loan Parties in their
respective jurisdictions of organization; and

                (h) such other documents as I have deemed necessary or
appropriate as a basis for the opinions set forth below.

                I am a member of the bar of the State of California and am
expressing no opinion as to the law of any other jurisdiction other than (i) the
laws of the State of California, (ii) the General Corporation Law of the State
of Delaware, (iii) the Limited Liability Company Act of the State of Delaware,
and (iv) the Delaware Revised Uniform Limited Partnership Act (collectively, the
"Applicable Law").

                Capitalized terms used herein and not otherwise defined herein
shall have the same meanings herein as ascribed thereto in the Credit Agreement.
The Credit Agreement, the Promissory Notes, the Security Agreement and the
Subsidiary

                                        2

<PAGE>

Guaranty shall hereinafter be referred to collectively as the "Transaction
Agreements." "Governmental Approval" means any consent, approval, license,
authorization or validation of, or filing, recording or registration with, any
governmental authority pursuant to Applicable Law. "Applicable Contracts" means
those material agreements, indentures or instruments (x) filed with the
Securities and Exchange Commission as exhibits attached to or incorporated by
reference in the Company's Form 10-K for the fiscal year ended February 1, 2003,
and Form 10-Q for the quarterly periods ending May 3, 2003, and which, after due
inquiry, are specifically applicable to any of the Loan Parties in connection
with the Transaction Agreements and the transactions contemplated thereunder or
(y) which, to my knowledge, are specifically applicable to any of the Loan
Parties in connection with the Transaction Agreements and the transactions
contemplated thereunder. The Lenders and the Issuing Banks are collectively
referred to herein as the "Lender Parties".

                Based upon the foregoing and subject to the limitations,
qualifications, exceptions and assumptions set forth herein, I am of the opinion
that:

                1. Each of the California Subsidiaries is authorized to exercise
all its powers, rights and privileges and is in good legal standing under the
laws of the State of California, and each of the Company and the Delaware
Subsidiaries is validly existing and in good standing under the Applicable Law
of the State of Delaware.

                2. Each Loan Party has the power and authority to execute,
deliver and perform all of its obligations under each of the Transaction
Agreements to which it is a party, and the execution and delivery of each of the
Transaction Agreements by each Loan Party which is a party thereto and the
consummation by each Loan Party of the transactions contemplated thereby have
been duly authorized by all requisite action on the part of each Loan Party.
Each of the Transaction Agreements has been duly executed and delivered by each
Loan Party which is a party thereto.

                3. The execution and delivery by each Loan Party of each of the
Transaction Agreements to which it is a party and the performance by each Loan
Party of its obligations under each of the Transaction Agreements, each in
accordance with its terms, does not (i) conflict with the Constitutive Documents
of each of the Loan Parties, (ii) constitute a violation of, or a default under,
any Applicable Contracts or (iii) cause the creation of any security interest or
lien (other than the liens granted under, or created by, the Loan Documents)
upon any of the property of the Loan Parties pursuant to any Applicable
Contracts to which it is a party. I call to your attention that certain of the
Applicable Contracts are governed by laws other

                                        3

<PAGE>

than those as to which I express my opinion. I express no opinion as to the
effect of such other laws on the opinions herein stated.

                4. Neither the execution, delivery nor performance by any Loan
Party of the Transaction Agreements to which it is a party will contravene any
provision of any Applicable Law.

                5. No Governmental Approval, which has not been obtained or
taken and is not in full force and effect, is required to authorize, or is
required in connection with, the execution, delivery or performance of any of
the Transaction Agreements by any Loan Party.

                6. There is no action, suit or proceeding pending or, to my
knowledge, overtly threatened against any Loan Party in or before any court,
Governmental Authority or arbitrator, which has a reasonable probability (taking
into account the exhaustion of all appeals and the assertion of all defenses) of
having a Material Adverse Effect or which purports to affect the legality,
validity or enforceability of any Loan Document.

                                        4

<PAGE>

                This opinion is being furnished only to you in connection with
the Transaction Agreements and is solely for your benefit and is not to be used,
circulated, quoted or otherwise referred to for any other purpose or relied upon
by any other person or entity (other than your successors or assigns as Lender
Parties) for any purpose without our prior written consent.

                                                  Very truly yours,

                                                  Lauri M. Shanahan
                                                  Senior Vice President and
                                                      General Counsel

                                        5

<PAGE>

                                   Schedule I

                                   ADDRESSEES

Citicorp USA, Inc.
Bank of America, N.A.
HSBC Bank USA
JPMorgan Chase Bank
GE Capital Corporation
The Bank of Nova Scotia
U.S. Bank National Association
Fleet Bank
ABN Amro Bank N.V.
Wells Fargo Bank N.A.
KeyBank National Association
Fifth Third Bank
First National Bank of Omaha
Citibank, N.A.

                                       S-1

<PAGE>

                                   Schedule II

                              DELAWARE SUBSIDIARIES

Banana Republic (California) LLC

Banana Republic, Inc.

Banana Republic (New York) LLC

GPSDC (New York) Inc.

Old Navy Inc.

Old Navy (California) LLC

WCB Twenty-Eight Limited Partnership

                                       S-2

<PAGE>

                                  Schedule III

                             CALIFORNIA SUBSIDIARIES

Banana Republic (Florida) LLC           Gap International Sourcing (U.S.A.) Inc.

Banana Republic (Holdings) Inc.         Gap International Sourcing, Inc.

Gap (Wisconsin) L.P.                    Gap International Sourcing (JV) LLC

Gap (Florida) LLC                       GPS Brand Services, Inc.

Gap (Georgia) L.P.                      GPS Corporate Facilities, Inc.

Gap (Indiana) L.P.                      GPS Consumer Direct, Inc.

Gap (Kentucky) L.P.                     GPS Real Estate, Inc.

Gap (Tennessee) L.P.                    Old Navy (East) L.P.

Gap Holdings, Inc.                      Old Navy (Florida) LLC

Gap International Sourcing
 (California) Inc.                      Old Navy (Holdings) Inc.

Gap International Sourcing (Americas)
 LLC                                    The Fisher Gap Stores, Inc.

GPS Employee Services, Inc.

                                       S-3

<PAGE>

                                   Exhibit F-2

                                                        June [ ], 2003

Citicorp USA, Inc.,
as Collateral Agent

The Lenders and Issuing Banks
(as defined below) listed
on Schedule I hereto

                       Re: The Gap, Inc./Credit Agreement

Ladies and Gentlemen:

          We have acted as special counsel to The Gap, Inc., a Delaware
corporation (the "Company"), and the domestic subsidiaries of the Company listed
on Schedule II hereto (the "Subsidiaries"; together with the Company, the
"Grantors") in connection with the preparation, execution and delivery of the
Security Agreement, dated as of June [ ], 2003 (the "Security Agreement"), from
the Grantors referred to therein to Citicorp USA, Inc. ("CUSA") as Collateral
Agent (the "Collateral Agent"). This opinion is being delivered pursuant to
Section 5.01(b)(ix) of the Credit Agreement, dated as of June [ ], 2003 (the
"Credit Agreement"), among the Company and the LC Subsidiaries, the Subsidiary
Borrowers, the Lenders and the Issuing Banks (as such terms are defined in the
Credit Agreement), Citigroup Global Markets Inc. ("CGMI") and Banc of America
Securities LLC ("BAS") as Joint Book Managers, BAS, HSBC Bank USA and J.P.
Morgan Securities Inc. ("JPM") as Co-Syndication Agents, CGMI, BAS and JPM as
Joint Lead Arrangers, and CUSA as Agent for the Lenders and the Issuing Banks.

          In our examination we have assumed the genuineness of all signatures
including endorsements, the legal capacity of natural persons, the authenticity
of all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as facsimile, electronic, certified
or photostatic copies, and the authenticity of the originals of such copies. As
to any facts material to this opinion which we did not independently establish
or verify, we have relied upon

<PAGE>

statements and representations of the Grantors and its officers and other
representatives and of public officials, including the facts and conclusions set
forth therein.

          In rendering the opinions set forth herein, we have examined and
relied on originals or copies of the following:

     1.   the Security Agreement;

     2.   unfiled copies of financing statements one for each Grantor in Part A
          of Schedule II hereto (the "Delaware Grantors") and identifying such
          Grantor as debtor and "Citicorp USA, Inc., Collateral Agent" as
          secured party, which we understand will be filed in the office of the
          Secretary of State of Delaware (such filing office, the "Delaware
          Filing Office" and such financing statements, the "Delaware Financing
          Statements");

     3.   unfiled copies of financing statements one for each Grantor in Part B
          of Schedule II hereto (the "California Grantors") and identifying such
          Grantor as debtor and "Citicorp USA, Inc., Collateral Agent as secured
          party, which we understand will be filed in the office of the
          Secretary of State of California (such filing office, the "California
          Filing Office" and such financing statements, the "California
          Financing Statements", together with the Delaware Financing
          Statements, the "Financing Statements");

     4.   certified copies of the certificates of incorporation or certificate
          of formation of each Delaware Grantor, as applicable, from the
          Secretary of State of the State of Delaware as to each Delaware
          Grantor's existence in such state (the "Delaware Secretary of State
          Certificates");

     5.   certified copies of the certificates of incorporation or certificate
          of formation of each California Grantor, as applicable, from the
          Secretary of State of the State of California as to each California
          Grantor's existence in such state (the "California Secretary of State
          Certificates"); and

     6.   such other documents as we have deemed necessary or appropriate as a
          basis for the opinions set forth below.

          Capitalized terms used herein and not otherwise defined herein shall
have the same meanings herein as set forth in the Security Agreement. As used
herein:

                                        2

<PAGE>

          1.   "New York UCC" means the Uniform Commercial Code as in effect on
               the date hereof in the State of New York (without regard to laws
               referenced in Section 9-201 thereof).

          2.   "California UCC" means the Uniform Commercial Code as in effect
               on the date hereof in the State of California (without regard to
               laws referenced in Section 9201 thereof).

          3.   "Delaware UCC" means the Uniform Commercial Code as in effect on
               the date hereof in the State of Delaware (without regard to laws
               referenced in Section 9-201 thereof).

          4.   "UCC" means (a) the New York UCC, (b) the California UCC, and (c)
               the Delaware UCC (in each case as such term is defined below), as
               applicable.

          5.   "Possessory Certificates" means that portion of the Initial
               Pledged Equity which constitute "certificated securities" as
               defined in Section 8-102 of the UCC, as identified on Schedule
               III hereto and delivered on the date hereof.

          6.   "UCC Collateral" means the Inventory and Initial Pledged Equity
               (as such terms are defined in the Security Agreement) to the
               extent the UCC governs a security interest in such collateral.

          We express no opinion with respect to any laws other than (1) the UCC,
(2) for purposes of opinion paragraph 5, the Delaware General Corporation Law,
the Limited Liability Company Act of the State of Delaware and the Delaware
Revised Uniform Limited Partnership Act and (3) for purposes of opinion
paragraph 9, the California General Corporation Law, the California Limited
Liability Company Act and the California Uniform Limited Partnership Act.

          We have this date delivered to you our opinion with respect to the
enforceability of the Security Agreement and certain other transaction
agreements. We call to your attention that the opinions set forth herein with
respect to the security interest of the Collateral Agent for the benefit of the
Secured Parties are subject to the qualifications contained in such other
opinion.

          Based upon the foregoing and subject to the limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that:

                                        3

<PAGE>

(1)  Under the New York UCC, the provisions of the Security Agreement are
     effective to create a valid security interest in each Grantor's rights in
     the UCC Collateral in favor of the Collateral Agent for the benefit of the
     Secured Parties to secure the Secured Obligations (as defined in the
     Security Agreement).

(2)  To the extent the Delaware UCC is applicable to the authorization of the
     Delaware Financing Statements, pursuant to the provisions of the Security
     Agreement the Delaware Grantors have authorized the filing of the Delaware
     Financing Statements for purposes of Section 9-509 of the Delaware UCC.

(3)  To the extent the Delaware UCC is applicable, the Delaware Financing
     Statements include not only all of the types of information required by
     Section 9-502(a) of the Delaware UCC, but also the types of information
     without which the Delaware Filing Office may refuse to accept the Delaware
     Financing Statements pursuant to Section 9-516 of the Delaware UCC.

(4)  To the extent the Delaware UCC is applicable, the security interest of the
     Collateral Agent for the benefit of the Secured Parties will be perfected
     in each Delaware Grantor's rights in all UCC Collateral upon the later of
     the attachment of the security interest and the filing of the Delaware
     Financing Statement naming such Delaware Grantor as debtor in the Delaware
     Filing Office; provided, however, we express no opinion with respect to (i)
     money, (ii) deposit accounts, (iii) letter of credit rights, (iv) goods
     covered by a certificate of title statute, (v) as-extracted collateral,
     e.g., timber to be cut, or (vi) any property subject to a statute,
     regulation or treaty of the United States whose requirements for a security
     interest's obtaining priority over the rights of a lien creditor with
     respect to the property preempt Section 9-310(a) of the Delaware UCC.

(5)  You have asked whether each of the Delaware Grantors is a "registered
     organization" as such term is defined in Section 9-102(a)(70) of the
     Delaware UCC. Pursuant to Section 9-102(a)(70) of the Delaware UCC, a
     "registered organization" must be (i) organized solely under the laws of a
     single State (or the United States) and (ii) the State (or the United
     States) must maintain a public record showing the organization to have been
     organized. Pursuant to Section 103(c)(6) of the Delaware General
     Corporation Law, Section 18-201(a) of the Limited Liability Company Act of
     the State of Delaware and Section 17-201(a) of the Delaware Revised Uniform
     Limited Partnership Act, the Secretary of State of the State of Delaware is
     required to maintain a public record showing each of the Delaware Grantors
     to have been organized. Based on our review of the Delaware Secretary of
     State Certificates and to the extent the Delaware UCC is applicable, each
     of the Delaware Grantors is a

                                        4

<PAGE>

     "registered organization" under Section 9-102(a)(70) of the Delaware UCC
     and, where applicable, the Delaware General Corporation Law, the Limited
     Liability Company Act of the State of Delaware and the Delaware Revised
     Uniform Limited Partnership Act. We have assumed that none of the Delaware
     Grantors has filed a certificate of incorporation or any similar document
     under the laws of any jurisdiction other than the State of Delaware and
     that the internal affairs of the Delaware Grantors are not otherwise
     subject to the laws of any other jurisdiction. We call to your attention
     that to the extent that the internal affairs of the Delaware Grantors are
     subject to regulation under the laws of another state, the State of
     Delaware may recognize such authority. See, e.g., McDermott Inc. v. Lewis,
     531 A.2d 206 (Del. 1987). Further, we have assumed that none of the
     Delaware Grantors has and will not file (A) any certificates of transfer,
     continuance or domestication, or any similar certificates in the State of
     Delaware pursuant to Sections 390(a) and 388(b)(1) of the Delaware General
     Corporation Law, Section 18-213 of the Limited Liability Company Act of the
     State of Delaware, or Section 17-216 of the Delaware Revised Uniform
     Limited Partnership Act or (B) any similar certificates in any jurisdiction
     other than the State of Delaware.

(6)  To the extent the California UCC is applicable to the authorization of the
     California Financing Statements, pursuant to the provisions of the Security
     Agreement the California Grantors have authorized the filing of the
     California Financing Statements for purposes of Section 9509 of the
     California UCC.

(7)  To the extent the California UCC is applicable, the California Financing
     Statements include not only all of the types of information required by
     Section 9502(a) of the California UCC, but also the types of information
     without which the California Filing Office may refuse to accept the
     California Financing Statements pursuant to Section 9516 of the California
     UCC.

(8)  To the extent the California UCC is applicable, the security interest of
     the Collateral Agent for the benefit of the Secured Parties will be
     perfected in each California Grantor's rights in all UCC Collateral upon
     the later of the attachment of the security interest and the filing of the
     California Financing Statement naming such California Grantor as debtor in
     the California Filing Office; provided, however, we express no opinion with
     respect to (i) money, (ii) deposit accounts, (iii) letter of credit rights,
     (iv) goods covered by a certificate of title statute, (v) as-extracted
     collateral, e.g., timber to be cut, or (vi) any property subject to a
     statute, regulation or treaty of the United States whose requirements for a
     security interest's obtaining priority over the rights of a lien creditor
     with respect to the property preempt Section 9310(a) of the California UCC.

                                        5

<PAGE>

(9)  You have asked whether each of the California Grantors is a "registered
     organization" as such term is defined in Section 9102(a)(70) of the
     California UCC. Pursuant to Section 9102(a)(70) of the California UCC, a
     "registered organization" must be (i) organized solely under the laws of a
     single State (or the United States) and (ii) the State (or the United
     States) must maintain a public record showing the organization to have been
     organized. Pursuant to Sections 110(a) and 209 of the California General
     Corporation Law, Sections 17050 and 17052 of the California Limited
     Liability Company Act, Sections 15621 and 15628 of the California Uniform
     Limited Partnership Act and Sections 12160 and 12168 of the California
     Government Code, the Secretary of State of the State of California is
     required to maintain a public record showing each of the California
     Grantors to have been organized. Based on our review of the California
     Secretary of State Certificates and to the extent the California UCC is
     applicable, each of the California Grantors is a "registered organization"
     under Section 9102(a)(70) of the California UCC and, where applicable, the
     California General Corporation Law, the California Limited Liability
     Company Act and the California Uniform Limited Partnership Act.

(10) Assuming that neither the Collateral Agent nor any Secured Party has notice
     of any adverse claims with respect to the Possessory Certificates then,
     upon the later of the attachment of the security interest and the delivery
     of such Possessory Certificates to the Collateral Agent in the State of
     California indorsed, by an effective indorsement, either in blank or to the
     Collateral Agent, the Collateral Agent will acquire such Possessory
     Certificates (and the shares represented thereby) free of any adverse
     claims under Section 8303 of the California UCC. As used herein, "notice of
     adverse claim" has the meaning set forth in Section 8105 of the California
     UCC and includes, without limitation, any adverse claim that the Collateral
     Agent or any Secured Party would discover upon any investigation which such
     person has a duty, imposed by statute or regulation, to investigate.

          Our opinions are subject to the following qualifications:

     (1)  We have assumed that each Grantor owns, or with respect to
          after-acquired property will own, the UCC Collateral, and we express
          no opinion as to the nature or extent of each Grantor's rights in any
          of the UCC Collateral and we note that with respect to any
          after-acquired property, the security interest will not attach until
          each Grantor acquires ownership thereof.

                                        6

<PAGE>

     (2)  Our opinion with respect to proceeds is subject to the limitations set
          forth in Section 9-315 of the UCC and, in addition, we call to your
          attention that in the case of certain types of proceeds, other parties
          such as holders in due course, protected purchasers of securities,
          persons who obtain control over securities entitlements and buyers in
          the ordinary course of business may acquire a superior interest or may
          take their interest free of the security interest of a secured party.

     (3)  We express no opinion with respect to any goods which are accessions
          to, or commingled or processed with, other goods to the extent that
          the security interest is limited by Section 9-335 or 9-336 of the UCC.

     (4)  We express no opinion with respect to the choice of law governing
          perfection, the effect of perfection and non-perfection or priority of
          the security interest of the Collateral Agent in the UCC Collateral.

     (5)  We call to your attention that the right of the Collateral Agent to
          become a partner or member in UCC Collateral constituting a
          partnership or limited liability company may be limited by applicable
          law and the terms of the partnership agreement or limited liability
          company agreement pursuant to which the partnership or limited
          liability company was formed, as amended from time to time, and that
          the only remedy may be the right to receive distributions to which the
          respective Grantor is otherwise entitled pursuant to the partnership
          agreement or limited liability company agreement.

     (6)  We have assumed that each Grantor has all necessary authorization
          under its organizational documents and applicable law (other than the
          UCC) for the filing of the Financing Statements.

     (7)  We call to your attention that in the case of goods subject to a
          negotiable document of title, a security interest perfected in the
          negotiable document has priority over any security interest perfected
          in such goods by another method.

     (8)  We express no opinion with respect to the security interest of the
          Collateral Agent for the benefit of the Secured Parties except to the
          extent that the Collateral Agent has been duly appointed as agent for
          such persons as of the date hereof.

                                        7

<PAGE>

          This opinion is being furnished only to you in connection with the
Security Agreement and is solely for your benefit and is not to be used,
circulated, quoted or otherwise referred to for any other purpose or relied upon
by any other person or entity (other than your successors or assigns as Lender
Parties (as defined in the Credit Agreement)) for any purpose without our prior
written consent.

                                              Very truly yours,

                                        8

<PAGE>

                                   SCHEDULE I

                                   Addressees

Citicorp USA, Inc.
Bank of America, N.A.
HSBC Bank USA
JPMorgan Chase Bank
GE Capital Corporation
The Bank of Nova Scotia
U.S. Bank National Association
Fleet Bank
ABN Amro Bank N.V.
Wells Fargo Bank N.A.
KeyBank National Association
Fifth Third Bank
First National Bank of Omaha
Citibank, N.A.

<PAGE>

                                   SCHEDULE II

                         Part A: California Subsidiaries

Banana Republic (California) LLC
Banana Republic, Inc.
Banana Republic (New York) LLC
GPSDC (New York) Inc.
Old Navy Inc.
Old Navy (California) LLC
WCB Twenty-Eight Limited Partnership

                          Part B: Delaware Subsidiaries

Banana Republic (Florida) LLC              Gap International Sourcing (U.S.A.)
                                           Inc.

Banana Republic (Holdings) Inc.            Gap International Sourcing, Inc.

Gap (Wisconsin) L.P.                       Gap International Sourcing (JV) LLC

Gap (Florida) LLC                          GPS Brand Services, Inc.

Gap (Georgia) L.P.                         GPS Corporate Facilities, Inc.

Gap (Indiana) L.P.                         GPS Consumer Direct, Inc.

Gap (Kentucky) L.P.                        GPS Real Estate, Inc.

Gap (Tennessee) L.P.                       Old Navy (East) L.P.

Gap Holdings, Inc.                         Old Navy (Florida) LLC

Gap International Sourcing (California)    Old Navy (Holdings) Inc.
Inc.

Gap International Sourcing (Americas)      The Fisher Gap Stores, Inc.
LLC

GPS Employee Services, Inc.

<PAGE>

                                  SCHEDULE III

                             Possessory Certificates

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                                                      NO. OF          CERTIFICATE
                                                                      ------          -----------
         GRANTOR                          ISSUER                      SHARES               NO.
         -------                          ------                      ------               --
---------------------------------------------------------------------------------------------------------
<S>                       <C>                                     <C>                <C>
The Gap, Inc.             Banana Republic (Apparel) Inc.               100                  1
---------------------------------------------------------------------------------------------------------
Banana Republic, Inc.     Banana Republic (Holdings) Inc.              100                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             Banana Republic (ITM) Inc.                   100                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             Banana Republic, Inc.                        100                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             GPS (Maryland), Inc.                         100                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             GPS Brand Services, Inc.                   1,000                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             GPS Consumer Direct, Inc.                    100                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             GPS Corporate Facilities, Inc.               100                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             GPS Employee Services, Inc.                  100                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             GPS Real Estate, Inc.                        100                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             GPSDC (New York) Inc.                        100                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             Gap (Apparel) Inc.                         1,000                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             Gap (ITM) Inc.                               100                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             Gap Holdings, Inc.                           700                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             Gap International Sourcing                   100                  1
                          (California), Inc.
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             Gap International Sourcing (U.S.A.)          100                  1
                          Inc.
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             Gap International Sourcing, Inc.             100                  1
---------------------------------------------------------------------------------------------------------
Old Navy Inc.             Old Navy (Holdings) Inc.                     100                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             Old Navy (ITM) Inc.                          100                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             Old Navy Inc.                                100                  1
---------------------------------------------------------------------------------------------------------
The Gap, Inc.             The Fisher Gap Stores, Inc.                1,000                  1
---------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                                                     Exhibit F-3

                                                      June [__], 2003

Citicorp USA, Inc.,
as Agent

The Lenders and Issuing Banks
(as defined below) listed
on Schedule I hereto

                Re: The Gap, Inc./Credit Agreement

Ladies and Gentlemen:

                We have acted as special counsel to The Gap, Inc., a Delaware
corporation (the "Company"), and the domestic subsidiaries of the Company listed
on Schedule II hereto (the "Subsidiaries"; together with the Company, the "Loan
Parties") in connection with the preparation, execution and delivery of the
Credit Agreement, dated as of June __, 2003 (the "Credit Agreement"), among the
Company and the LC Subsidiaries, the Subsidiary Borrowers, the Lenders and the
Issuing Banks (as such terms are defined in the Credit Agreement), Citigroup
Global Markets Inc. ("CGMI") and Banc of America Securities LLC ("BAS") as Joint
Book Managers, BAS, HSBC Bank USA and J.P. Morgan Securities Inc. ("JPM") as
Co-Syndication Agents, CGMI, BAS and JPM as Joint Lead Arrangers, and Citicorp
USA, Inc. as agent for the Lenders and the Issuing Banks (in such capacity, the
"Agent"), and certain other agreements, instruments and documents related to the
Credit Agreement. This opinion is being delivered pursuant to Section
5.01(b)(ix) of the Credit Agreement.

                In our examination we have assumed the genuineness of all
signatures including endorsements, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as facsimile, electronic,
certified or photostatic copies, and the authenticity of the originals of such
copies. As to any facts material to this opinion which we did not independently
establish or verify, we have relied upon statements and representations of the
Loan Parties and their officers and other representatives and of public
officials, including the facts and conclusions set forth therein.

                In rendering the opinions set forth herein, we have examined and
relied on originals or copies of the following:

<PAGE>

                (a) the Credit Agreement;

                (b) the Promissory Notes executed by the Loan Parties;

                (c) the Subsidiary Guaranty, dated as of June __, 2003 (the
"Subsidiary Guaranty"), made by the Subsidiaries party thereto in favor of the
Lender Parties;

                (d) the Security Agreement, dated as of June __, 2003 (the
"Security Agreement"), from the Loan Parties party thereto (the "Grantors") in
favor of the Agent as Collateral Agent (in such capacity, the "Collateral
Agent");

                (e) the certificate of Sabrina Simmons, the Senior Vice
President and Treasurer, and Lauri M. Shanahan, the Senior Vice President and
General Counsel, respectively, of each of the Loan Parties, dated the date
hereof, a copy of which is attached as Exhibit A hereto; and

                (f) such other documents as we have deemed necessary or
appropriate as a basis for the opinions set forth below.

                We express no opinion as to the laws of any jurisdiction other
than (i) the Applicable Laws of the State of New York and (ii) the Applicable
Laws of the United States of America (including, without limitation, Regulations
U and X of the Federal Reserve Board).

                Capitalized terms used herein and not otherwise defined herein
shall have the same meanings herein as ascribed thereto in the Credit Agreement.
The Credit Agreement, the Promissory Notes, the Security Agreement, and the
Subsidiary Guaranty shall hereinafter be referred to collectively as the
"Transaction Agreements." "Applicable Laws" shall mean those laws, rules and
regulations which, in our experience, are normally applicable to transactions of
the type contemplated by the Transaction Agreements, without our having made any
special investigation as to the applicability of any specific law, rule or
regulation, and which are not the subject of a specific opinion herein referring
expressly to a particular law or laws. "Governmental Approval" means any
consent, approval, license, authorization or validation of, or filing, recording
or registration with, any governmental authority pursuant to the Applicable Laws
of the State of New York or of the United States of America. The Lenders and the
Issuing Banks are collectively referred to herein as the "Lender Parties".
References to the "UCC" shall mean the Uniform Commercial Code as in effect on
the date hereof in the State of New York.

                Based upon the foregoing and subject to the limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that:

<PAGE>

                1. Each of the Transaction Agreements constitutes the valid and
binding obligation of each Loan Party which is a party thereto, enforceable
against each such Loan Party in accordance with its terms, under the Applicable
Laws of the State of New York.

                2. Neither the execution, delivery or performance by any Loan
Party of the Transaction Agreements to which it is a party, nor the compliance
by any Loan Parties with the terms and provisions thereof will contravene any
provision of any Applicable Law of the State of New York or any Applicable Law
of the United States of America.

                3. No Governmental Approval, which has not been obtained or
taken and is not in full force and effect, is required to authorize, or is
required in connection with, the execution or delivery of any of the Transaction
Agreements by any Loan Party or the enforceability of any of the Transaction
Agreements against any Loan Party.

                4. The Loan Parties are not and, solely after giving effect to
the transactions contemplated by the Transaction Agreements to which they are a
party, will not be subject to registration and regulation as an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended.

                5. Neither the execution, delivery or performance by any Loan
Party of the Transaction Agreements to which it is a party nor the compliance by
such Loan Party with the terms and provisions thereof will violate any provision
of the Public Utility Holding Company Act of 1935, as amended.

                Our opinions are subject to the following assumptions and
qualifications:

                (a) enforcement of the Transaction Agreements may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in equity or at law);

                (b) we have assumed that each of the Transaction Agreements
constitutes the valid and binding obligation of each party thereto (other than
the Loan Parties to the extent expressly set forth herein) enforceable against
such other party (other than the Loan Parties to the extent expressly set forth
herein) in accordance with its terms;

                (c) we express no opinion as to the effect on the opinions
expressed herein of (i) the compliance or non-compliance of the Agent or any
party (other than

<PAGE>

the Loan Parties to the extent expressly set forth herein) to the Transaction
Agreements with any state, federal or other laws or regulations applicable to
them or (ii) the legal or regulatory status or the nature of the business of the
Agent;

                (d) we express no opinion as to the enforceability of any rights
to contribution or indemnification provided for in the Transaction Agreements
which are violative of the public policy underlying any law, rule or regulation
(including any federal or state securities law, rule or regulation);

                (e) we express no opinion as to the applicability or effect of
any fraudulent transfer or similar law on the Transaction Agreements or any
transactions contemplated thereby;

                (f) we express no opinion as to the applicability or effect of
any preference or similar law on the Transaction Agreements or any transaction
contemplated thereby;

                (g) we express no opinion on the enforceability of any provision
in a Transaction Agreement purporting to prohibit, restrict or condition the
assignment of rights under such Transaction Agreement to the extent such
restriction on assignability is governed by the Uniform Commercial Code;

                (h) we express no opinion as to the enforceability of any
section of any Transaction Agreement to the extent it purports to waive any
objection a person may have that a suit, action or proceeding has been brought
in an inconvenient forum;

                (i) our opinion with respect to the enforceability of the choice
of New York law and choice of New York forum provisions of the Transaction
Agreements is rendered in reliance upon the Act of July 19, 1984, ch. 421, 1984
McKinney's Sess. Laws of N.Y. 1406 (codified at N.Y. Gen. Oblig. Law Sections
5-1401, 5-1402 (McKinney 2001) and N.Y. CPLR 327(b) (McKinney 2001)) and is
subject to the qualifications that such enforceability may be limited by public
policy considerations of any jurisdiction, other than the courts of the State of
New York, in which enforcement of such provisions, or of a judgment upon an
agreement containing such provisions, is sought;

                (j) in the case of the Subsidiary Guaranty certain of the
provisions, including waivers, with respect to the Subsidiary Guaranty are or
may be unenforceable in whole or in part, but the inclusion of such provisions
does not affect the validity of the Subsidiary Guaranty, taken as a whole;

                (k) certain of the remedial provisions with respect to the
security contained in the Security Agreement may be unenforceable in whole or in
part, but

<PAGE>

the inclusion of such provisions does not affect the validity of the Security
Agreement, taken as a whole, and the Security Agreement, taken as a whole,
together with applicable law, contains adequate provisions for the practical
realization of the benefits of the security;

                (l) we express no opinion with respect to Section 15 of the
Security Agreement to the extent it establishes a standard of care for
collateral in the possession or control of the Collateral Agent to the extent
such standard of care is unenforceable under Sections 1-102 and 9-207 of the
Uniform Commercial Code;

                (m) we express no opinion with respect to Article 3 of the
Credit Agreement to the extent it excuses the issuer of a letter of credit from
liability to the extent such provision is unenforceable pursuant to Section
5-103 of the Uniform Commercial Code;

                (n) we express no opinion with respect to any provision of the
Credit Agreement to the extent it authorizes or permits any purchaser of a
participation interest to set-off or apply any deposit, property or indebtedness
with respect to any participation interest;

                (o) we express no opinion with respect to the enforceability of
Section 10.15 of the Credit Agreement to the extent such provision purports to
select a governing law in conflict with mandatory choice of law rules set forth
in Section 5-116 of the Uniform Commercial Code; and

                (p) we express no opinion with respect to the validity,
perfection or priority of any security interest.

                In rendering the foregoing opinions, we have assumed, with your
consent, that:

                (a) each Loan Party is validly existing and in good standing as
a corporation, a limited liability company or a limited partnership, as the case
may be, under the laws of its respective jurisdiction of organization;

                (b) each Loan Party has the power and authority to execute,
deliver and perform all of its respective obligations under each of the
Transaction Agreements to which it is a party and the execution and delivery of
each of the Transaction Agreements by each Loan Party which is a party thereto
and the consummation by each Loan Party of the transactions contemplated thereby
have been duly authorized by all requisite action on the part of each Loan
Party. Each of the Transaction Agreements has been duly authorized, executed and
delivered by each Loan Party which is a party thereto;

<PAGE>

                (c) the execution, delivery and performance of any obligations
of each respective Loan Party under the Transaction Agreements to which it is a
party does not and will not conflict with, contravene, violate or constitute a
default under (i) (x) the Certificate of Incorporation, Articles of
Incorporation, Certificate of Formation, Limited Liability Company Articles of
Organization or Certificate of Limited Partnership or (y) the By-laws, Operating
Agreement or Limited Partnership Agreement, as applicable, or their equivalent
under the laws of the respective jurisdiction of organization, of each Loan
Party, (ii) any lease, indenture, instrument or other agreement to which any
Loan Party or its property is subject, (iii) any rule, law or regulation to
which any Loan Party is subject (other than Applicable Laws of the State of New
York and Applicable Laws of the United States of America as to which we express
our opinion in paragraph 2 herein) or (iv) any judicial or administrative order
or decree of any governmental authority;

                (d) no authorization, consent or other approval of, notice to or
filing with any court, governmental authority or regulatory body (other than
Governmental Approvals as to which we express our opinion in paragraph 3 herein)
is required to authorize or is required in connection with the execution,
delivery or performance by any Loan Party of any of the Transaction Agreements
to which it is a party or the transactions contemplated thereby;

                (e) we call to your attention that (i) effective enforcement of
a claim denominated in a foreign currency may be limited by requirements that
the claim (or a judgment in respect of such claim) be converted into United
States dollars at a rate of exchange prevailing on a specified date and (ii) we
express no opinion as to whether a federal or state court would award a judgment
in a currency other than United States dollars; and

                (f) our opinion is subject to possible judicial action giving
effect to governmental actions or foreign laws affecting creditors' rights.

                We understand that you are separately receiving opinions with
respect to the foregoing assumptions from Lauri M. Shanahan, the Senior Vice
President and General Counsel of each of the Loan Parties, and from Piper
Rudnick LLP, counsel to GPS (Maryland), Inc., and we are advised that such
opinions contain qualifications. Our opinions herein stated are based on the
assumptions specified above and we express no opinion as to the effect on the
opinions herein stated of the qualifications contained in such other opinions.

<PAGE>

                This opinion is being furnished only to you in connection with
the Transaction Agreements and is solely for your benefit and is not to be used,
circulated, quoted or otherwise referred to for any other purpose or relied upon
by any other person or entity (other than your successors or assigns as Lender
Parties) for any purpose without our prior written consent.

                                                     Very truly yours,

<PAGE>

                                                                      Schedule I
                                                               to SASM&F Opinion

                                   ADDRESSEES

Citicorp USA, Inc.
Bank of America, N.A.
HSBC Bank USA
JPMorgan Chase Bank
GE Capital Corporation
The Bank of Nova Scotia
U.S. Bank National Association
Fleet Bank
ABN Amro Bank N.V.
Wells Fargo Bank N.A.
KeyBank National Association
Fifth Third Bank
First National Bank of Omaha
Citibank, N.A.

                                       S-1

<PAGE>

                                                                     Schedule II
                                                               to SASM&F Opinion

                                  SUBSIDIARIES

<TABLE>
<S>                                                 <C>
Banana Republic (California) LLC                    Gap International Sourcing (U.S.A.) Inc.

Banana Republic, Inc.                               Gap International Sourcing, Inc.

Banana Republic (Florida) LLC                       Gap International Sourcing (JV) LLC

Banana Republic (Holdings) Inc.                     GPS Brand Services, Inc.

Banana Republic (New York) LLC                      GPS Corporate Facilities, Inc.

Gap (Wisconsin) L.P.                                GPS Consumer Direct, Inc.

Gap (Florida) LLC                                   GPS Real Estate, Inc.

Gap (Georgia) L.P.                                  GPSDC (New York) Inc.

Gap (Indiana) L.P.                                  Old Navy (California) LLC

Gap (Kentucky) L.P.                                 Old Navy (East) L.P.

Gap (Tennessee) L.P.                                Old Navy (Florida) LLC

Gap Holdings, Inc.                                  Old Navy (Holdings) Inc.

Gap International Sourcing (California)             Old Navy Inc.
Inc.

Gap International Sourcing (Americas)               The Fisher Gap Stores, Inc.
LLC

GPS (Maryland), Inc.                                WCB Twenty-Eight Limited Partnership

GPS Employee Services, Inc.
</TABLE>

                                       S-2

<PAGE>

                             Exhibit A to Opinion of
                    Skadden, Arps, Slate, Meagher & Flom LLP

                              Officers' Certificate

                The undersigned are, respectively, the duly elected, qualified
and acting Senior Vice President and General Counsel, and the Senior Vice
President and Treasurer, of The Gap, Inc., a Delaware corporation ("The Gap")
and the domestic subsidiaries of The Gap listed on Schedule II (the
"Subsidiaries" together with The Gap, the "Loan Parties") to the attached the
Opinion (as defined below). Each of us understands that pursuant to Section
5.01(b)(ix) of the Credit Agreement, dated as of June 24, 2003 (the "Credit
Agreement"), among The Gap and the Subsidiary Borrowers, the LC Subsidiaries,
the Lenders and the Issuing Banks (as such terms are defined in the Credit
Agreement), Citigroup Global Markets Inc. ("CGMI") and Banc of America
Securities LLC ("BAS") as Joint Book Managers, BAS, HSBC Bank USA and J.P.
Morgan Securities Inc. ("JPM") as Co-Syndication Agents, CGMI, BAS and JPM as
Joint Lead Arrangers, and Citicorp USA, Inc. as agent for the Lenders and the
Issuing Banks (in such capacity, the "Agent"), and certain other agreements,
instruments and documents related to the Credit Agreement, Skadden, Arps, Slate,
Meagher & Flom LLP ("SASM&F"), is rendering an opinion (the "Opinion") to the
Agent and the Lenders. Capitalized terms used herein but not otherwise defined
herein shall have the meanings assigned to such terms as set forth in the
Opinion. Each of us further understands that SASM&F is relying on this officer's
certificate and the statements made herein in rendering such Opinion.

                With regard to the foregoing, on behalf of the Loan Parties, we
hereby certify (each of us only as to the paragraphs below which are identified
on our respective signature pages) that:

                1.      Each of us is familiar with the business of the Loan
Parties, and due inquiry has been made of all persons deemed necessary or
appropriate to verify or confirm the statements contained herein.

                2.      SASM&F may rely on the respective representations and
warranties that each of the Loan Parties has made in the Credit Agreement, each
of the other Loan Documents and each of the certificates delivered pursuant
thereto. I have made a careful review of each of such representations and
warranties and hereby confirm, to the best of my knowledge and belief, that such
representations and warranties are true, correct and complete on and as of the
date of this certificate.

                                       A-3

<PAGE>

                3.      Set forth on Schedule I hereto are all the Governmental
Approvals which, to the best of my knowledge and belief, are specifically
applicable to each of the Loan Parties in connection with the Transaction
Agreements and the transactions contemplated thereunder.

                4.      Less than twenty-five percent (25%) of the assets of the
Loan Parties on a consolidated basis and on an unconsolidated basis consist of
Margin Stock.

                5.      Each of the Loan Parties is primarily engaged directly,
or indirectly through Majority-Owned Subsidiaries, in the specialty retailer
business primarily selling causal apparel and personal care products or
businesses related thereto; and the Loan Parties (i) are not and do not hold
themselves out as being engaged primarily, nor do they propose to engage
primarily, in the business of investing, reinvesting or trading in Securities,
(ii) have not and are not engaged in, and do not propose to engage in, the
business of issuing Face-Amount Certificates of the Installment Type and has no
such certificate outstanding and (iii) do not own or propose to acquire
Investment Securities having a Value exceeding forty percent (40%) of the Value
of the total assets of the Loan Parties (exclusive of Government Securities and
cash items) on an unconsolidated basis.

                6.      The Loan Parties do not own or operate facilities used
for the generation, transmission, or distribution of electric energy for sale
("Electric Utility Facilities").

                7.      The Loan Parties do not own or operate facilities used
for the distribution of natural or manufactured gas for heat, light, or power
("Gas Utility Facilities").

                8.      None of the Loan Parties, directly or indirectly, or
through one or more intermediary Companies, own, control, or hold with power to
vote (a) ten percent (10%) or more of the outstanding Voting Securities of any
Company that owns or operates any Electric Utility Facilities or Gas Utility
Facilities, or (b) any other interest, directly or indirectly, or through one or
more intermediary entities, in (i) any Company that owns or operates any
Electric Utility Facilities or Gas Utility Facilities, or (ii) any of the
foregoing types of entities that have received notice of the sort described in
paragraph 9 below.

                                       A-4

<PAGE>

                9.      None of the Loan Parties have received notice that the
Securities and Exchange Commission has determined, or may determine, that any of
the Loan Parties exercises a controlling influence over the management or
direction of the policies of a gas utility company or an electric utility
company as to make it subject to the obligations, duties and liabilities imposed
on holding companies by the Public Utility Holding Company Act of 1935, as
amended ("PUHCA").

                10.     To the best of my knowledge, no Company that has
registered with the Securities and Exchange Commission as a public utility
holding company under PUHCA owns, directly or indirectly, through one or more
intermediary entities, ten percent (10%) or more of the outstanding Voting
Securities (as defined below) of the Loan Parties.

                11.     As used in paragraph 4 of this certificate, the
following term shall have the following meaning:

                "Margin Stock" means: (i) any equity security registered or
having unlisted trading privileges on a national securities exchange; (ii) any
OTC security designated as qualified for trading in the National Market System
under a designation plan approved by the Securities and Exchange Commission;
(iii) any debt security convertible into a margin stock or carrying a warrant or
right to subscribe to or purchase a margin stock; (iv) any warrant or right to
subscribe to or purchase a margin stock; or (v) any security issued by an
investment company registered under Section 8 of the Investment Company Act of
1940.

                12.     As used in paragraphs 5 and 12 of this certificate, the
following terms shall have the following meanings:

                "Exempt Fund" means a company that is excluded from treatment as
an investment company solely by section 3(c)(1) or 3(c)(7) of the Investment
Company Act of 1940 (applicable to certain privately offered investment funds).

                "Face-Amount Certificate of the Installment Type" means any
certificate, investment contract, or other Security that represents an
obligation on the part of its issuer to pay a stated or determinable sum or sums
at a fixed or determinable date or dates more than 24 months after the date of
issuance, in consideration of the payment of periodic installments of a stated
or determinable amount.

                                       A-5

<PAGE>

                "Government Securities" means all Securities issued or
guaranteed as to principal or interest by the United States, or by a person
controlled or supervised by and acting as an instrumentality of the government
of the United States pursuant to authority granted by the Congress of the United
States; or any certificate of deposit for any of the foregoing.

                "Investment Securities" includes all Securities except (A)
Government Securities, (B) Securities issued by companies the only shareholders
in which are employees and former employees of a company and its subsidiaries,
members of the families of such persons and the company and its subsidiaries and
(C) Securities issued by Majority-Owned Subsidiaries of the Company which are
not engaged and do not propose to be engaged in activities within the scope of
clause (i), (ii) or (iii) of paragraph 5 of this Certificate or which are
exempted or excepted from treatment as an investment company by statute, rule or
governmental order (other than Exempt Funds).

                "Majority-Owned Subsidiary" of a person means a company fifty
percent (50%) or more of the outstanding Voting Securities of which are owned by
such person, or by a company which, within the meaning of this paragraph, is a
Majority-Owned Subsidiary of such person.

                "Security" means any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of interest or participation in
any profit-sharing agreement, collateral-trust certificate, preorganization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas, or other mineral rights, any put, call,
straddle, option, or privilege on any security (including a certificate of
deposit) or on any group or index of securities (including any interest therein
or based on the value thereof), or any put, call, straddle, option, or privilege
entered into on a national securities exchange relating to foreign currency, or,
in general, any interest or instrument commonly known as a "security," or any
certificate of interest or participation in, temporary or interim certificate
for, receipt for, guarantee of, or warrant or right to subscribe to or purchase,
any of the foregoing.

                "Value" means (i) with respect to Securities owned at the end of
the last preceding fiscal quarter for which market quotations are readily
available, the market value at the end of such quarter; (ii) with respect to
other Securities and assets owned at the end of the last preceding fiscal
quarter, fair value at the end of such quarter, as determined in good faith by
or under the direction of the board of directors; and (iii) with respect to
securities and other assets acquired after the end of the last preceding fiscal
quarter, the cost thereof.

                                       A-6

<PAGE>

                "Voting Security" means any security presently entitling the
owner or holder thereof to vote for the election of directors of a company (or
its equivalent, e.g., general partner or manager of a limited liability
company).

                13.     As used in paragraphs 8, 10 and 13 of this certificate,
the following terms shall have the following meanings:

                "Company" means a corporation, limited liability company,
partnership, association, joint-stock company, joint venture, trust, or any
receiver, trustee, or other liquidating agent of any of the foregoing in its
capacity as such.

                "Security" or "Securities" means any note, draft, stock,
treasury stock, bond, debenture, limited liability company interest, certificate
of interest or participation in any profit-sharing agreement or in any oil, gas,
other mineral royalty or lease, any collateral-trust certificate,
preorganization certificate or subscription, transferable share, investment
contract, voting-trust certificate, certificate of deposit for a security,
receiver's or trustee's certificate, or, in general, any instrument commonly
known as a "security"; or any certificate of interest or participation in,
temporary or interim certificate for, receipt for, guaranty of, assumption of
liability on, or warrant or right to subscribe to or purchase, any of the
foregoing.

                "Voting Security" or "Voting Securities" means any Security
presently entitling the owner or holder thereof to vote in the direction or
management of the affairs of a Company, or any Security issued under or pursuant
to any trust, agreement, or arrangement whereby a trustee or trustees or agent
or agents for the owner or holder of such Security are presently entitled to
vote in the direction or management of the affairs of a Company; and a specified
per centum of the outstanding Voting Securities of a Company means such amount
of the outstanding Voting Securities of such Company as entitles the holder or
holders thereof to cast said specified per centum of the aggregate votes which
the holders of all the outstanding Voting Securities of such Company are
entitled to cast in the direction or management of the affairs of such Company.

                            [Signature Page Follows]

                                       A-7

<PAGE>

                IN WITNESS THEREOF, the undersigned have executed this
certificate this ____ day of June, 2003.

<TABLE>
<S>                                                      <C>
THE GAP, INC.                                            GAP INTERNATIONAL SOURCING, INC.

BANANA REPUBLIC (CALIFORNIA) LLC, by Banana Republic,    GAP INTERNATIONAL SOURCING (JV) LLC, by Gap
Inc., its managing member                                International Sourcing, Inc.,
                                                         its managing member

BANANA REPUBLIC (FLORIDA) LLC, by Banana Republic,       GAP INTERNATIONAL SOURCING
Inc., its managing member                                (CALIFORNIA) INC.

BANANA REPUBLIC (HOLDINGS) INC.                          GPS CORPORATE FACILITIES, INC.

BANANA REPUBLIC (NEW YORK) LLC, by Banana Republic,      GPS CONSUMER DIRECT, INC.
Inc., its managing member

BANANA REPUBLIC, INC.                                    GPS REAL ESTATE, INC.

GAP (FLORIDA) LLC,                                       GPSDC (NEW YORK) INC.
by The Gap, Inc., its managing member

GAP (GEORGIA) L.P.,                                      GPS BRAND SERVICES, INC.
by The Gap, Inc., its general partner

GAP (INDIANA) L.P.,                                      OLD NAVY (EAST) L.P.,
by The Gap, Inc., its general partner                    by Old Navy, Inc., its general partner

GAP (KENTUCKY) L.P.,                                     OLD NAVY (FLORIDA) LLC,
by The Gap, Inc., its general partner                    by Old Navy, Inc., its managing member

GAP (TENNESSEE) L.P.,                                    OLD NAVY (HOLDINGS) INC.
by The Gap, Inc., its general partner

GAP (WISCONSIN) L.P.,                                    OLD NAVY INC.
by The Gap, Inc., its general partner

GAP HOLDINGS, INC.                                       OLD NAVY (CALIFORNIA) LLC,
                                                         by Old Navy, Inc., its member

GAP INTERNATIONAL SOURCING (AMERICAS) LLC, by The Gap,   WCB TWENTY-EIGHT LIMITED
Inc., its member                                         PARTNERSHIP, by GPS Corporate Facilities,
                                                         Inc., its general partner
</TABLE>

                                       A-8

<PAGE>

<TABLE>
<S>                                                      <C>
GAP INTERNATIONAL SOURCING (U.S.A.) INC.                 THE FISHER GAP STORES, INC.
GPS (MARYLAND), INC.
GPS EMPLOYEE SERVICES, INC.
</TABLE>

With respect to only paragraphs 1, 3, 6, 7, 8, 9, 10 and 13 above:

By:
   ----------------------------------------------------------------
   Lauri M. Shanahan
   Senior Vice President and General Counsel

With respect to only paragraphs 1, 2, 4, 5, 11 and 12 above:

By:
   ------------------------------------------------------------------
   Sabrina Simmons
   Senior Vice President and Treasurer

                                       A-9

<PAGE>

                                                                   Schedule I to
                                                                       Exhibit A

                             GOVERNMENTAL APPROVALS

                                      None.

                                      A-10

<PAGE>

                                    Exhibit G

                OPINION OF SPECIAL NEW YORK COUNSEL TO THE AGENT

                                  June 24, 2003

To the Lenders and Issuing
  Banks party to the Credit
  Agreement referred to below
  and to Citicorp USA, Inc.,
  as Agent

Ladies and Gentlemen:

                We have acted as special New York counsel to Citicorp USA, Inc.,
individually and as Agent, in connection with the preparation, execution and
delivery of the Credit Agreement dated as of June 24, 2003 (the "Credit
Agreement"), among The Gap, Inc., a Delaware corporation (the "Borrower"),
certain subsidiaries of the Borrower, certain other financial institutions and
each of you. Unless otherwise defined herein, terms defined in the Credit
Agreement are used herein as therein defined.

                In such capacity, we have examined a counterpart of the Credit
Agreement, the notes delivered this date thereunder, the Subsidiary Guaranty and
the Security Agreement.

                In our examination of the Credit Agreement and such other
documents, we have assumed, without independent investigation (a) the due
execution and delivery of the Loan Documents by all parties thereto, (b) the
genuineness of all signatures, (c) the authenticity of the originals of the
documents submitted to us and (d) the conformity to originals of any documents
submitted to us as copies.

                In addition, we have assumed, without independent investigation,
that (i) each Loan Party, each of the Lenders, and the Agent is a corporation or
other entity duly organized and validly existing under the laws of the
jurisdiction of its organization, (ii) each Loan Party, each of the Lenders and
the Agent has full power and authority (corporate and otherwise) to execute,
deliver and perform the Loan Documents to which it is a party, (iii) the
execution, delivery and performance by each Loan Party, each of the Lenders and
the Agent of the Loan Documents have been duly authorized by all necessary
action (corporate or otherwise) and do not (A) contravene the certificate of
incorporation, bylaws or other constituent documents of the Loan Parties, any of
the Lenders or the Agent, (B) violate any law, rule, regulation or order
applicable to the Loan Parties, any of the Lenders or the Agent or (C) conflict
with or result in the breach of any document or instrument binding on the Loan
Parties, any of the Lenders or the Agent and, (iv) no authorization, approval,
consent or other action by, and no notice to or filing with, any governmental
authority or regulatory body or any other third party is required for the due
execution, delivery or performance by the Loan Parties, any of the Lenders or
the Agent of the Loan Documents or, if any such authorization, approval,
consent, action, notice or filing is required thereof, it has been duly obtained
or made and is in full force and effect.

                                  Exh. G Page 1

<PAGE>

                Based upon the foregoing examination and assumptions and upon
such other investigation as we have deemed necessary and subject to the
qualifications set forth below, we are of the opinion that the Loan Documents
are the legal, valid and binding obligation of each Loan Party thereto,
enforceable against each such Loan Party in accordance with its respective
terms.

                Our opinion above is subject to the following qualifications:

                        (i)     Our opinion above is subject to the effect of
                any applicable bankruptcy, insolvency (including, without
                limitation, all laws relating to fraudulent transfers),
                reorganization, moratorium or similar law affecting creditors'
                rights generally.

                        (ii)    Our opinion above is also subject to the effect
                of general principles of equity, including (without limitation)
                concepts of materiality, reasonableness, good faith and fair
                dealing (regardless of whether considered in a proceeding in
                equity or at law).

                        (iii)   We express no opinion as to the enforceability
                of the indemnification provisions set forth in the Loan
                Documents to the extent enforcement thereof is contrary to
                public policy regarding the exculpation of criminal violations,
                intentional harm and acts of gross negligence or recklessness.
                We express no opinion as to the creation, perfection or priority
                of any security interests.

                        (iv)    Our opinion above is limited to the law of the
                State of New York and the federal law of the United States of
                America and we do not express any opinion herein concerning any
                other law. Without limiting the generality of the foregoing, we
                express no opinion as to the effect of the law of a jurisdiction
                other than the State of New York wherein any of the Lenders may
                be located or wherein enforcement of the Credit Agreement may be
                sought that limits the rates of interest legally chargeable or
                collectible.

                A copy of this opinion letter may be delivered by any of you to
any Person that becomes a Lender in accordance with the provisions of the Credit
Agreement. Any such Lender may rely on the opinion expressed above as if this
opinion letter were addressed and delivered to such Lender on the date hereof.

                                  Exh. G Page 2

<PAGE>

                This opinion letter speaks only as of the date hereof. We
expressly disclaim any responsibility to advise you or any other Lender who is
permitted to rely on the opinion expressed herein as specified in the preceding
paragraph of any development or circumstance of any kind including any change of
law or fact that may occur after the date of this opinion letter even though
such development, circumstance or change may affect the legal analysis, a legal
conclusion or any other matter set forth in or relating to this opinion letter.
Accordingly, any Lender relying on this opinion letter at any time should seek
advice of its counsel as to the proper application of this opinion letter at
such time.

                                                    Very truly yours,

SES/RAP/SPH

                                  Exh. G Page 3

<PAGE>

                                    EXHIBIT H

                          FORM OF ASSUMPTION AGREEMENT

                                                     Dated:  _____________, 200_

The Gap, Inc.
900 Cherry Avenue
San Bruno, California 94066

Attention:  Treasurer

Citicorp USA, Inc.,
  as Agent for the Lender Parties
  to the Credit Agreement referred to below
[399 Park Avenue
New York, New York 10043]

Attention: Credit Administration

Ladies and Gentlemen:

        Reference is made to the Credit Agreement, dated as of June __, 2003 (as
amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement," the terms defined therein being used herein as therein
defined), among The Gap, Inc., a Delaware corporation (the "Borrower"), certain
Subsidiaries of the Borrower, certain Lenders party thereto, certain Issuing
Banks, certain Joint Book Managers parties thereto, Co-Syndication Agents
parties thereto, the Documentation Agent, Citigroup Global Markets Inc., Banc of
America Securities LLC and JP Morgan Securities, Inc. as Joint Lead Arrangers,
and Citicorp USA, Inc., as agent for such Lenders and the Issuing Banks.

        The undersigned (the "Assuming Lender") proposes to become an Assuming
Lender pursuant to Section 2.04(c) of the Credit Agreement and, in that
connection, hereby agrees that it shall become a Lender for purposes of the
Credit Agreement on the applicable Commitment Increase Effective Date and that
its Commitment shall as of such date be $__________.

        The undersigned (a) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 6.01(e) thereof, the most recent financial statements referred to in
Section 7.04 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assumption Agreement; (b) agrees that it will, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement; (c)
appoints and authorizes the Agent and the Issuing Banks to take such action as
agent on its behalf and to exercise such powers under the Credit Agreement as
are delegated to the Agent and the Issuing Banks by the terms thereof, together
with such powers as

                                  Exh. H Page 1

<PAGE>

are reasonably incidental thereto; (d) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as Lender; (e) confirms that it is
an Eligible Assignee; (f) specifies as its Applicable Lending Offices (and
address for notices) the offices set forth beneath its name on the signature
pages hereof; and (g) attaches the forms prescribed by the Internal Revenue
Service of the United States required under Section 4.02 of the Credit
Agreement.

        The effective date for this Assumption Agreement shall be the applicable
Commitment Increase Effective Date. Upon delivery of this Assumption Agreement
to the Borrower and the Agent, and satisfaction of all conditions imposed under
Section 2.04(c) as of [date specified above], the undersigned shall be a party
to the Credit Agreement and have the rights and obligations of a Lender
thereunder. As of [date specified above], the Agent shall make all payments
under the Credit Agreement in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and facility
fees) to the Assuming Lender.

        This Assumption Agreement may be executed in counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart by
telecopier shall be effective as delivery of a manually executed counterpart of
this Assumption Agreement.

                                  Exh. H Page 2

<PAGE>

        This Assumption Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.

                                           Very truly yours,

                                           [NAME OF ASSUMING LENDER]

                                           By:
                                              ----------------------------------
                                              Name:
                                              Title:

                                           Domestic Lending Office
                                           (and address for notices):

                                           [Address]

                                           Eurodollar Lending Office

                                           [Address]

Acknowledged and Agreed to:

THE GAP, INC.

By:
   -------------------------------------
   Name:
   Title:

CITICORP USA, INC.

By:
   -------------------------------------
   Name:
   Title:

                                  Exh. H page 3

<PAGE>

                                    EXHIBIT I

                        [FORM OF COMPLIANCE CERTIFICATE]

                             COMPLIANCE CERTIFICATE

THE UNDERSIGNED HEREBY CERTIFIES THAT:

        (1)     I am the duly elected _____________________________ of The Gap,
Inc., a Delaware corporation (the "Company");

        (2)     I have reviewed the terms of that certain Credit Agreement dated
as of June ___, 2003, as amended, supplemented or otherwise modified to the date
hereof (said Credit Agreement, as so amended, supplemented or otherwise
modified, being the "Credit Agreement", the terms defined therein and not
otherwise defined in this Certificate (including Attachment No. 1 annexed hereto
and made a part hereof) being used in this Certificate as therein defined), by
and among the Company, the financial institutions party thereto, and Citicorp
USA, Inc., as Agent, and the terms of the other Loan Documents, and I have made,
or have caused to be made under my supervision, a review in reasonable detail of
the transactions and condition of Company and its Subsidiaries during the
accounting period covered by the attached financial statements; and

        (3)     The examination described in paragraph (2) above did not
disclose, and I have no knowledge of, the existence of any condition or event
which constitutes an Event of Default or Default during or at the end of the
accounting period covered by the attached financial statements or as of the date
of this Certificate, except as set forth below.

        Set forth [below] [in a separate attachment to this Certificate] are all
exceptions to paragraph (3) above listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Company has taken, is taking or proposes to take with respect to each such
condition or event:

                                  Exh. I Page 1

<PAGE>

        The foregoing certifications, together with the computations set forth
in Attachment No. 1 annexed hereto and made a part hereof and the financial
statements delivered with this Certificate in support hereof, are made and
delivered this _____ day of _______________, 200_ pursuant to Section
7.04[(i)][(iii)] of the Credit Agreement.

                                               THE GAP, INC.

                                               By
                                                 ------------------------------
                                                 Name:
                                                 Title:

                                  Exh. I Page 2

<PAGE>

                                ATTACHMENT NO. 1
                            TO COMPLIANCE CERTIFICATE

        This Attachment No. 1 is attached to and made a part of a Compliance
Certificate dated as of ______________, 200_ and pertains to the period from
_____________, 200_ to ____________, 200_. Subsection references herein relate
to subsections of the Credit Agreement.

A.      LEVERAGE RATIO
        (for the four-Fiscal Quarter period ending ____________, 200_)

        1.      Consolidated Funded Debt                        $__________

        2.      Eight times Lease Expense                       $__________

        3.      Consolidated Net Income                         $__________

        4.      Consolidated Interest Expense                   $__________

        5.      Provisions for Taxes based on Income            $__________

        6.      Total Depreciation Expense                      $__________

        7.      Total Amortization Expense                      $__________

        8.      Consolidated EBITDA (3+4+5+6+7)                 $__________

        9.      Lease Expense                                   $__________

        10.     Leverage Ratio (1+2) : (8+9)                    _____ : 1.00

        11.     Maximum ratio allowed under Subsection 7.03(a)  5.00 : 1.00

B.       FIXED CHARGE COVERAGE RATIO
         (for the four-Fiscal Quarter period ending _____________, 200_)

        1.      Consolidated Net Income                         $__________

        2.      Consolidated Interest Expense                   $__________

        3.      Provisions for Taxes based on Income            $__________

        4.      Total Depreciation Expense                      $__________

        5.      Total Amortization Expense                      $__________

        6.      Consolidated EBITDA (1+2+3+4+5)                 $__________

        7.      Lease Expense                                   $__________

        8.      Consolidated Interest Expense                   $__________

               Attachment No. 1 to Compliance Certificate - Page 1

<PAGE>

        9.      Fixed Charge Coverage Ratio (6 + 7) : (7+8))    _____ : 1.00

        10.     Minimum ratio required under Section 7.03(b)    _____ : 1.00

C.      CAPITAL EXPENDITURES OF THE BORROWER AND ITS SUBSIDIARIES

        1.      Capital Expenditures for Fiscal Year-to-date    $__________

        2.      Maximum amount of Capital Expenditures for
                Borrower and its Subsidiaries permitted
                under Section 7.03(c) for Fiscal Year           $625,000,000

               Attachment No. 1 to Compliance Certificate - Page 2

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