Document:

PURCHASE AGREEMENT

         THIS PURCHASE  AGREEMENT (this  "Agreement") is made as of the 31st day
of August, 2000, by and between TECHSYS, INC., a New Jersey corporation with its
principal  executive offices located at 44 Aspen Drive,  Livingston,  New Jersey
07039 (the  "Purchaser")  and  TECHNOLOGY  KEIRETSU,  LLC a New  Jersey  limited
liability  company,  with its principal  executive offices located at 35 Airport
Road, Suite 340, Morristown, New Jersey 07950 (the "Seller").  Capitalized terms
used in this  Agreement  but not  defined  upon their first usage are defined in
Section 9.1, unless otherwise noted.

         The parties hereto, intending to be legally bound, agree as follows:

                                    ARTICLE 1

                      PURCHASE AND SALE OF MEMBERSHIP UNITS

         1.1 Purchase.  Subject to the terms and conditions  hereof,  the Seller
shall sell to the Purchaser,  and the Purchaser  shall purchase from the Seller,
(the "Sale") 214,286  membership  units of the Seller,  which  membership  units
currently  constitute  approximately a 3% ownership  interest in the Seller (the
"Total  Units").  The closing of 142,857  units of the Total Units (the "Initial
Units") shall occur on the First Closing Date (as defined  herein).  The closing
of 71,429 units of the Total Units (the  "Subsequent  Units") shall occur on the
Second Closing Date (as defined herein).

         1.2 Form of Payment.  The  purchase  price for the Total Units shall be
$500,000 and 66,666 shares (the "Shares") of the  Purchaser's  common stock,  no
par value per share (the "Common  Stock").  On the First Closing  Date,  (a) the
Purchaser  shall  deliver to the Seller  $250,000  in cash or other  immediately
available  U.S.  funds and  certificates  representing  the Shares,  and (b) the
Seller shall  deliver to the  Purchaser  certificates  representing  the Initial
Units.  On  the  Second  Closing  Date,  conditioned  on the  completion  of the
Financing,  (i) the Purchaser  shall  deliver to the Seller  $250,000 in cash or
other immediately  available U.S. funds and (ii) the Seller shall deliver to the
Purchaser certificates representing the Subsequent Units.

         1.3      Closing Dates.

                  (a) First  Closing  Date.  The first  closing of the Sale will
take  place no later than  September  11,  2000,  or such other time and date as
shall be mutually  agreed upon by the  Purchaser  and the Seller.  Such time and
date is herein called the "First Closing Date."

                  (b) Second  Closing Date.  The second closing of the Sale will
take place no later than the fifth  business day  following  the date the Seller
completes the Financing, or such other time and date as shall be mutually agreed
upon by the  Purchaser  and the  Seller,  unless the Seller  cancels  the Second
Closing  pursuant to Article 7. Such time and date is herein  called the "Second
Closing Date."

                  (c)  Closing.  The First  Closing  and the Second  Closing are
herein each called, individually, a "Closing" and, collectively, the "Closings."
Each Closing shall occur at the offices of Pitney, Hardin, Kipp & Szuch LLP, 200
Campus Drive,  Florham  Park,  New Jersey,  or at such other  location as may be
agreed upon by the parties.

                                    ARTICLE 2

                 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

         The Purchaser represents and warrants that:

         2.1 Organization and Qualification. The Purchaser is a corporation duly
organized,  validly existing and in good standing under the laws of the State of
New Jersey.  The Purchaser has all  requisite  corporate  power and authority to
carry on its business as described in the Purchaser Reports (as defined herein).
The Purchaser is duly  qualified as a foreign  corporation to do business and is
in good standing in every  jurisdiction where the failure to so qualify or be in
good standing would materially adversely affect its business.

         2.2  Capitalization.  The  authorized  capital  stock of the  Purchaser
consists of 20,000,000  shares of Common Stock and 5,000,000 shares of preferred
stock. As of August 29, 2000, there were:

                  (a)      3,836,878 shares of Common Stock outstanding,

                  (b)      9,966,100   shares  of  Common  Stock   reserved  for
                           issuance pursuant to outstanding  securities that are
                           convertible into or exchangeable for shares of Common
                           Stock, and

                  (c)      3,500,000 shares reserved for issuance under the 2000
                           Incentive Compensation Plan.

Except for interests pursuant to which shares have been reserved for issuance as
set forth in the  preceding  sentence,  there are no  outstanding  or authorized
options,  warrants,  purchase rights,  subscription  rights,  conversion rights,
exchange  rights or other  contracts  or  commitments  that  could  require  the
Purchaser to issue,  sell or otherwise  cause to become  outstanding  any of its
capital stock or equity  interests or other  instruments  convertible  into such
interests.

         2.3   Authorization;   Binding  Effect;  No  Breach.   The  Purchaser's
execution,  delivery and performance of each Transaction Document to which it is
a party has been duly authorized by it. Each  Transaction  Document to which the
Purchaser is a party constitutes a valid and binding obligation of the Purchaser
which is enforceable  against the Purchaser in accordance with its terms, except
to the extent that such validity or enforceability may be subject to or affected
by  any  bankruptcy,  insolvency,  reorganization,  moratorium,  liquidation  or
similar laws relating to, or affecting  generally the enforcement of, creditors'
rights or remedies of creditors  generally,  or by other equitable principles of
general application. The execution, delivery and performance by the Purchaser of
the  Transaction  Documents  to  which  it is a party  do not and  will  not (a)
conflict with or result in a breach of the terms,  conditions or provisions  of,
(b)  constitute a default  under,  (c) result in a violation of, (d) require any
authorization, consent, approval, exemption or other action by or declaration or
notice to any Government  Entity pursuant to, or (e) create any Lien under,  the
charter  or bylaws  of the  Purchaser  or any  agreement,  instrument,  or other
document,  or any Legal  Requirement,  to which the  Purchaser is, or any of its
assets are, subject.

         2.4 Validity of the Shares.  The Shares are duly  authorized,  reserved
for  issuance  and will,  when issued in  accordance  with the terms  hereof and
thereof, be validly issued, fully paid and non-assessable, free and clear of all
Liens and any pre-emptive rights of the shareholders of the Purchaser.

         2.5  Governmental  Filings.  Except  for the  filing  of an  Additional
Listing  Application with The Nasdaq Stock Market,  Inc. and a Notice of Sale of
Securities Pursuant to Regulation D on Form D with the SEC, no notices,  reports
or other  filings are  required to be made by the  Purchaser  with,  nor are any
consents,  registrations,  approvals,  permits or authorizations  required to be
obtained by the Purchaser  from,  any Government  Entity in connection  with the
execution and delivery of this  Agreement by the Purchaser and the  consummation
of the transactions  contemplated by the Transaction Documents.  Attached hereto
as Exhibit  A-1 is a  certificate  by the  Seller  certifying  that,  within the
meaning of the  Hart-Scott-Rodino  Antitrust  Improvement  Act of 1976 (the "HSR
Act"), the Seller is not a person with total assets or net sales of $100 million
or more,  and attached  hereto as Exhibit A-2 is a certificate  by the Purchaser
certifying  that,  within the  meaning of the HSR Act,  the  Purchaser  is not a
person with total assets of $10 million or more.

         2.6 Purchaser Reports;  Financial  Statements.  The Purchaser has filed
with the SEC each report,  proxy statement or information  statement required to
be filed by it since January 1, 2000 through the date hereof,  including (a) the
Purchaser's  Annual Report on Form 10-KSB for the year ended  December 31, 1999,
as amended,  (b) the Purchaser's  Quarterly Report on Form 10-Q for the calendar
quarter ended March 31, 2000, and (c) the Purchaser's  Quarterly  Report on Form
10-Q for the calendar quarter ended June 30, 2000 (collectively,  the "Purchaser
Reports"),  copies of which have been made  available  to the  Purchaser.  As of
their  respective  dates,  the  Purchaser  Reports  did not  contain  any untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances  in which they were made, not misleading.  As of their  respective
dates, the consolidated  financial  statements included in the Purchaser Reports
complied as to form in all material  respects  with then  applicable  accounting
requirements  and the published  rules and  regulations  of the SEC with respect
thereto.  Each of the consolidated balance sheets included in or incorporated by
reference into the Purchaser Reports (including the related notes and schedules)
fairly presents in all material respects the consolidated  financial position of
the Purchaser and its  subsidiaries as of its date and each of the  consolidated
statements of income and of changes in cash flows included in or incorporated by
reference into the Purchaser Reports (including any related notes and schedules)
fairly  presents in all material  respects the results of operations and changes
in cash flows,  as the case may be, of the  Purchaser  for the periods set forth
therein (subject, in the case of unaudited  statements,  to the absence of notes
and normal  year-end audit  adjustments),  in each case in accordance with GAAP,
except as may be noted therein.

         2.7 Nasdaq  Listing.  The Common Stock is listed on the Nasdaq SmallCap
and the Purchaser has not received any notice from The Nasdaq Stock Market, Inc.
advising the  Purchaser of the  initiation  of any  delisting  proceedings  with
respect to the Common Stock.

         2.8 Absence of Certain  Changes.  Except as disclosed in the  Purchaser
Reports filed prior to the date hereof,  since January 1, 2000 the Purchaser has
conducted its business only in, and has not engaged in any material  transaction
other than in, the  ordinary  and usual course of its business and there has not
been any material adverse change in the financial condition, business, prospects
or results of  operations  of the  Purchaser  and its  Subsidiaries,  taken as a
whole, since January 1, 2000.

         2.9  Absence  of  Undisclosed   Liabilities.   The  Purchaser  and  its
Subsidiaries,  taken as a whole,  do not have any  material  liability  (whether
accrued, absolute, contingent,  unliquidated or otherwise, whether or not known,
whether due or to become due, and regardless of when  asserted)  other than: (a)
the liabilities  included on the latest balance sheet contained in the Purchaser
Reports (the "Latest Balance Sheet"),  (b) current liabilities which have arisen
in the ordinary  course of business and  consistent  with the  Purchaser's  past
practice  after  the  date of the  Latest  Balance  Sheet  (none  of  which is a
liability  resulting  from  breach  of  contract,   breach  of  warranty,  tort,
infringement,  violation  of law,  claim or  lawsuit),  all of which  have  been
disclosed to the Purchaser,  and (c) other liabilities and obligations expressly
disclosed in this Agreement or in any Transaction Document.

         2.10  Litigation.  There  are  no  civil,  criminal  or  administrative
actions, suits, claims, hearings,  investigations,  arbitrations, or proceedings
pending or, to the knowledge of the Purchaser,  threatened against the Purchaser
preventing, or which, if determined adversely to the Purchaser would prevent the
Purchaser from  consummating  the  transactions  contemplated by the Transaction
Documents or would have a material  adverse  effect on the financial  condition,
business,   prospects  or  results  of   operations  of  the  Purchaser  or  its
Subsidiaries, taken as a whole.

         2.11 Brokerage.  There is no claim for brokerage commissions,  finders'
fees or similar compensation in connection with the transactions contemplated by
the Transaction Documents which is binding upon the Purchaser.

         2.12  Disclosure.  Neither this Article 2 nor any  certificate or other
item delivered to the Purchaser by or on behalf of the Purchaser with respect to
the transactions  contemplated by the Transaction  Documents contains any untrue
statement of a material fact or omits a material fact which is necessary to make
any statement  contained  herein or therein,  in light of the  circumstances  in
which they were made, not misleading.

                                    ARTICLE 3

                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

         The Seller represents and warrants that:

         3.1 Organization and  Qualification.  The Seller is a limited liability
company duly organized,  validly existing and in good standing under the laws of
the State of New Jersey.  The Seller has all  requisite  power and  authority to
carry on its business as presently conducted. The Seller is duly qualified to do
business and is in good standing in every other  jurisdiction  where the failure
to so qualify  or be in good  standing  would  materially  adversely  affect its
business.

         3.2  Capitalization.  The Seller has authorized  10,000,000  membership
units,  of  which  7,140,616  are  outstanding.  There  are  no  outstanding  or
authorized purchase rights,  subscription  rights,  conversion rights,  exchange
rights or other contracts or commitments that could require the Seller to issue,
sell or otherwise  cause to become  outstanding  any of its membership  units or
equity interests or other instruments convertible into such interests.

         3.3 Authorization;  Binding Effect; No Breach. The Seller's  execution,
delivery and performance of each Transaction Document to which it is a party has
been duly authorized by it. Bruce  Flitcroft is the chief  executive  manager of
the Seller (the "Chief Executive Manager") and the Seller hereby represents that
the Chief Executive Manager is duly authorized to execute and deliver, on behalf
of the Seller,  each Transaction  Document to which the Seller is a party.  Each
Transaction  Document  to which the  Seller is a party  constitutes  a valid and
binding  obligation  of the Seller  which is  enforceable  against the Seller in
accordance  with  its  terms,  except  to  the  extent  that  such  validity  or
enforceability  may be subject to or  affected  by any  bankruptcy,  insolvency,
reorganization,   moratorium,  liquidation  or  similar  laws  relating  to,  or
affecting  generally  the  enforcement  of,  creditors'  rights or  remedies  of
creditors  generally,  or by other equitable  principles of general application.
The  execution,  delivery  and  performance  by the  Seller  of the  Transaction
Documents to which it is a party do not and will not (a) conflict with or result
in a breach of the terms,  conditions or provisions of, (b) constitute a default
under, (c) result in a violation of, or (d) require any authorization,  consent,
approval,  exemption  or  other  action  by or  declaration  or  notice  to  any
Government  Entity  pursuant  to,  the  charter  or bylaws of the  Seller or any
agreement, instrument, or other document, or any Legal Requirement, to which the
Seller or any of its assets is subject.

         3.4  Validity  of the  Membership  Units.  The  Initial  Units  and the
Subsequent  Units are duly  authorized,  reserved for  issuance  and will,  when
issued in  accordance  with the terms hereof and thereof,  be validly  issued in
accordance  with the terms of the Seller's  Operating  Agreement  (the "Seller's
Operating  Agreement"),  free and clear of all Liens.  The Initial Units and the
Subsequent  Units  represent  the  rights,  title and  interest  in the  Seller,
including the right to a percentage  share of distributions of net cash flow and
net  proceeds  from  the  Seller  as well as the  right  to  participate  in the
management  and  affairs  of  the  Seller  pursuant  to the  Seller's  Operating
Agreement.

         3.5 Investment Purpose. The Seller is capable of evaluating the risk of
its  investment  in the  Shares  and is able to bear the  economic  risk of such
investment,  including a complete loss thereof, that it is purchasing the Shares
for its own  account and that the Shares are being  purchased  by the Seller for
investment  and not with a view to any resale or  distribution  thereof.  If the
Seller  should in the future  decide to dispose of the Shares (which it does not
now contemplate),  it is understood that the Seller may do so only in compliance
with the Securities Act and any applicable state blue sky or securities laws.

         3.6 Information. The Seller (a) has received and carefully reviewed the
Purchaser Reports,  and (b) has had the opportunity to ask questions and receive
answers from the Purchaser  concerning  the Purchaser  Reports and the terms and
conditions of the offering of the Shares to obtain any documents relating to the
Purchaser  which  are  publicly  available  and any  additional  information  or
documents relating to the Purchaser which the Purchaser possesses or can acquire
without unreasonable effort or expense.

         3.7 Seller Organizational  Documents;  Financial  Statements.  Attached
hereto as Exhibits B and C,  respectively,  are true and complete  copies of the
Seller's  Certificate of Formation and the Seller's Operating  Agreement,  as in
full force and effect as of the date  hereof.  The  Seller has  provided  to the
Purchaser  the  combined  balance  sheets  of  Alliant  Technologies,  Inc.  and
Affiliates as of December 31, 1999 and 1998 and the related combined  statements
of income and  equity  and cash  flows for the years  then  ended  (the  "Seller
Financial  Statements").  As of their  respective  dates,  the Seller  Financial
Statements  did not contain any untrue  statement of a material  fact or omit to
state a material  fact  required to be stated  therein or  necessary to make the
statements made therein,  in light of the circumstances in which they were made,
not misleading.  The combined  balance sheets included into the Seller Financial
Statements  (including  the related noted and  schedules)  fairly present in all
material respects the combined financial position of Alliant Technologies,  Inc.
and Affiliates as of its date. Each of the combined  statements of income and of
changes in cash flow included in the Seller Financial Statements  (including any
related notes and schedules) fairly present in all material respects the results
of  operations  and  changes  in cash  flows,  as the  case may be,  of  Alliant
Technologies,  Inc. and Affiliates  for the periods set forth  therein,  in each
case in accordance with GAAP, except as may be noted therein.

         3.8  Absence  of Certain  Changes.  Except as  disclosed  in the Seller
Financial  Statements,  since  January  1, 2000 the  Seller  has  conducted  its
business only in, and has not engaged in any material transaction other than in,
the  ordinary  and  usual  course  of its  business  and  there has not been any
material  adverse  change in the  financial  condition,  business,  prospects or
results of operations of the Seller since January 1, 2000.

         3.9 Absence of  Undisclosed  Liabilities.  The Seller does not have any
material  liability  (whether  accrued,  absolute,  contingent,  unliquidated or
otherwise, whether or not known, whether due or to become due, and regardless of
when asserted)  other than: (a) the  liabilities  included on the latest balance
sheet contained in the Seller Financial Statements (the "Latest Balance Sheet"),
(b) current liabilities which have arisen in the ordinary course of business and
consistent  with the Seller's past practice after the date of the Latest Balance
Sheet (none of which is a liability resulting from breach of contract, breach of
warranty, tort, infringement,  violation of law, claim or lawsuit), all of which
have been disclosed to the Seller,  and (c) other  liabilities  and  obligations
expressly disclosed in this Agreement or in any Transaction Document.

         3.10  Litigation.  There  are  no  civil,  criminal  or  administrative
actions, suits, claims, hearings,  investigations,  arbitrations, or proceedings
pending  or, to the  knowledge  of the  Seller,  threatened  against  the Seller
preventing,  or which,  if determined  adversely to the Seller would prevent the
Seller  from  consummating  the  transactions  contemplated  by the  Transaction
Documents or would have a material  adverse  effect on the financial  condition,
business, prospects or results of operations of the Seller.

         3.11 Brokerage.  There is no claim for brokerage commissions,  finders'
fees or similar compensation in connection with the transactions contemplated by
the Transaction Documents which is binding upon the Seller.

         3.12  Disclosure.  Neither this Article 3 nor any  certificate or other
item  delivered  to the Seller by or on behalf of the Seller with respect to the
transactions  contemplated  by the  Transaction  Documents  contains  any untrue
statement of a material fact or omits a material fact which is necessary to make
any statement  contained  herein or therein,  in light of the  circumstances  in
which they were made, not misleading.

                                    ARTICLE 4

                                    COVENANTS

         4.1      Confidentiality.

                  (a) Confidential  Information  exchanged  between the parties.
The  Purchaser  and the Seller have made,  or expect to make  available  to each
other  Confidential  Information (as defined herein) concerning their respective
businesses,  financial condition,  operations, assets, properties,  liabilities,
and prospects in connection with transactions  contemplated by this Agreement or
pursuant hereto. The term "Confidential  Information" shall mean all information
concerning  the  Furnishing  Party  or any of its  Subsidiaries  or  Affiliates,
whether  in  verbal,  visual,  written,  electronic  or other form which is made
available  by  the  Furnishing   Party  to  the  Receiving   Party  or  any  its
Representatives (as defined herein) and which the Furnishing Party identifies to
the Receiving Party, whether verbally or in writing, as being confidential.  The
term "Confidential Information" shall not apply to (i) any information which (A)
the  Receiving  Party can  establish by  convincing  evidence was already in its
rightful  possession  prior to the  disclosure  thereof to it by the  Furnishing
Party;  (B) was then  generally  known to the public other than as a result of a
disclosure by the Receiving Party or its Representative; (C) became known to the
public  through no fault of the  Receiving  Party;  or (D) was  disclosed to the
Receiving Party by a third-party who, to the Receiving  Party's  knowledge,  was
not bound by an obligation of  confidentiality;  or (ii)  information  disclosed
pursuant to a legal,  regulatory requirement or in accordance with an order of a
court of competent  jurisdiction,  provided that in the event of any  disclosure
required by this clause (ii),  the Receiving  Party will give  reasonable  prior
written notice of such disclosure to the Furnishing  Party, and disclosure under
this clause (ii) does not constitute the public  knowledge under clause (i). The
term   "Representative"   shall   mean  the   Receiving   Party's   agents   and
representatives,  including, without limitation, officers, directors, employees,
attorneys,  accountants and financial advisors. The Receiving Party acknowledges
that it has informed and hereafter shall inform its Representatives of the terms
of this Section 4.1. Any breach of this Section 4.1 by a  Representative  of the
Receiving Party shall be deemed to be a breach thereof by the Receiving Party.

                  (b) Use of Confidential Information.  Confidential Information
shall be (i) kept confidential,  (ii) used solely by the Receiving Party and its
Representatives,  (iii) used solely for the purposes specified by the Furnishing
Party at the time the Furnishing Party furnishes the Confidential Information to
the Receiving  Party,  and (iv) treated as the sole  property of the  Furnishing
Party.

                  (c) Equitable  Relief.  In addition to all other remedies that
may be  available to the  Furnishing  Party in  connection  with a breach by the
Receiving Party of its or its  Representative's  obligations  under this Section
4.1,  the  Furnishing  Party  shall be  entitled  to  specific  performance  and
injunctive  and other  equitable  relief with  respect to this  Section 4.1. The
Receiving  Party waives,  and agrees to use all reasonable  efforts to cause its
Representatives to waive, any requirement to secure or post a bond in connection
with any such relief.

         4.6 Securities  Laws. The Purchaser  shall timely file a Notice of Sale
of Securities Pursuant to Regulation D on Form D with respect to the Shares with
the SEC as  required  under  Regulation  D and to provide a copy  thereof to the
Seller promptly after such filing.

         4.7 Legends.  The Purchaser may endorse on all certificates  evidencing
the Shares a legend restricting their transfer that shall read as follows:  "The
securities  represented by this  certificate  have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") or the securities laws
of any state of the United States.  The securities  represented hereby have been
acquired for investment and may not be sold, transferred,  pledged,  assigned or
otherwise disposed of in the absence of an effective  registration statement for
the securities under the Securities Act or an opinion, if requested,  of counsel
satisfactory  to the  Purchaser  that  registration  is not  required  under the
Securities Act."

                                    ARTICLE 5

                                   CONDITIONS

         5.1  Conditions to  Obligations  of the Purchaser to Effect the Sale at
the First Closing and the Second  Closing.  The  obligations of the Purchaser to
effect the Sale at each Closing shall be subject to the fulfillment or waiver at
or prior to each Closing of the following conditions:

                  (a) Each  representation and warranty by the Seller (including
those  relating to equity holders of the Seller) set forth in Article 3 shall be
true and correct in all material respects as of the Closing.

                  (b) The Seller shall have  performed in all material  respects
each covenant or other obligation required to be performed by it pursuant to the
Transaction Documents prior to the each Closing.

                  (c) The consummation of the  transactions  contemplated by the
Transaction  Documents  shall  not be  prohibited  by any Legal  Requirement  or
subject  the Seller or any of its assets to any  penalty  or  liability  arising
under any Legal Requirement or imposed by any Government Entity.

                  (d)  No  action,  suit  or  proceeding  shall  be  pending  or
threatened  before any  Government  Entity the result of which could  prevent or
prohibit  the  consummation  of any  transaction  pursuant  to  the  Transaction
Documents,   cause  any  such   transaction  to  be  rescinded   following  such
consummation  or adversely  affect the Seller's  performance of its  obligations
pursuant  to  the  Transaction  Documents,  and  no  judgment,   order,  decree,
stipulation, injunction or charge having any such effect shall exist.

                  (e) All filings, notices, licenses, consents,  authorizations,
accreditation,  waivers,  approvals  and the like of, to or with any  Government
Entity  or any other  Person  that are  required  for the  Seller to effect  the
portion  of the  Sale  scheduled  for  such  Closing  or any  other  transaction
contemplated by the Transaction  Documents shall have been duly made or obtained
and the Seller shall have delivered copies thereof to the Purchaser.

                  (f)  The  Seller  shall  have  delivered  to the  Purchaser  a
certificate,  dated as of the Closing,  signed by the Chief Executive Manager of
the Seller stating that the conditions set forth in Sections  5.1(a) through (e)
have been satisfied.

                  (g) The Seller shall have delivered to the Purchaser a copy of
the  resolutions  duly  adopted  by  the  Directors   Committee  of  the  Seller
authorizing the Seller's execution,  delivery and performance of the Transaction
Documents to which the Seller is a party,  the Sale, and all other  transactions
contemplated  by the  Transaction  Documents,  as in effect as of each  Closing,
certified by the Chief Executive Manager of the Seller.

                  (h)  The  Seller  shall  have  delivered  to the  Purchaser  a
certificate (dated not more than five business days prior to the Closing) of the
Secretary  of State of the State of New  Jersey as to the good  standing  of the
Purchaser in New Jersey.

         5.2 Additional Conditions to Obligations of the Purchaser to Effect the
Sale at the First Closing.  The  obligations of the Purchaser to effect the Sale
at the First Closing shall be subject to the  fulfillment  or waiver at or prior
to the First Closing of the additional following conditions:

                  (a)  The  Seller  shall  have  delivered  to the  Purchaser  a
certificate evidencing the Initial Units.

         5.3 Additional Conditions to Obligations of the Purchaser to Effect the
Sale at the Second Closing.  The obligations of the Purchaser to effect the Sale
at shall be  subject  to the  fulfillment  or waiver  at or prior to the  Second
Closing of the following additional conditions:

                  (a) The Purchaser shall have completed the Financing.

                  (b)  The  Seller  shall  have  delivered  to the  Purchaser  a
certificate evidencing the Subsequent Units.

         5.4  Conditions to  Obligations of the Seller to Effect the Sale at the
First and  Second  Closings.  The  obligations  of the Seller to effect the Sale
shall be subject to the  fulfillment  or waiver at or prior to the First Closing
and the Second Closing of the following conditions:

                  (a) Each  representation  and  warranty of the  Purchaser  set
forth in Article 2 shall be true and correct in all material  respects as of the
each Closing.

                  (b)  The  Purchaser  shall  have  performed  in  all  material
respects  each  covenant  or other  obligation  required to be  performed  by it
pursuant to the Transaction Documents prior to each Closing.

                  (c) The consummation of the  transactions  contemplated by the
Transaction  Documents  shall  not be  prohibited  by any Legal  Requirement  or
subject  the  Purchaser  to any  penalty or  liability  arising  under any Legal
Requirement or imposed by any Government Entity.

                  (d)  No  action,  suit  or  proceeding  shall  be  pending  or
threatened  before any  Government  Entity the result of which could  prevent or
prohibit  the  consummation  of any  transaction  pursuant  to  the  Transaction
Documents,   cause  any  such   transaction  to  be  rescinded   following  such
consummation or adversely affect the Purchaser's  performance of its obligations
pursuant  to  the  Transaction  Documents,  and  no  judgment,   order,  decree,
stipulation, injunction or charge having any such effect shall exist.

                  (e) All filings, notices, licenses, consents,  authorizations,
accreditation,  waivers,  approvals  and the like of, to or with any  Government
Entity or any other  Person that are  required  for the  Purchaser to effect the
portion  of the  Sale  scheduled  for  such  Closing  or any  other  transaction
contemplated by the Transaction  Documents shall have been duly made or obtained
and the Purchaser shall have delivered copies thereof to the Seller.

                  (f)  The  Purchaser  shall  have  delivered  to the  Seller  a
certificate dated the Closing,  signed by the President of the Purchaser stating
that the  conditions  set  forth  in  Section  5.4 (a)  through  (e)  have  been
satisfied.

                  (g) The Purchaser shall have delivered to the Seller a copy of
the resolutions duly adopted by the Purchaser's  board of directors  authorizing
the Purchaser's execution, delivery and performance of the Transaction Documents
to which  the  Purchaser  is a  party,  the  Sale,  and all  other  transactions
contemplated  by the  Transaction  Documents,  as in effect  as of the  Closing,
certified by an officer of the Purchaser.

                  (h)  The  Purchaser  shall  have  delivered  to the  Seller  a
certificate (dated not more than five business days prior to the Closing) of the
Treasurer of the State of New Jersey as to the good standing of the Purchaser in
New Jersey.

         5.5  Additional  Conditions to  Obligations of the Seller to Effect the
Sale at the First Closing.  The  obligations of the Seller to effect the Sale at
the First Closing shall be subject to the  fulfillment  or waiver at or prior to
the First Closing of the following additional conditions:

                  (a) The Purchaser  shall have delivered to the Seller $250,000
in cash or other immediately available U.S. funds.

                  (b)  The  Purchaser  shall  have  delivered  to the  Seller  a
certificate representing the Shares.

                  (c) The Shares shall have been listed, or approved for listing
subject to issuance, on the Nasdaq SmallCap (or such other market or exchange on
which the Common Stock is then listed).

         5.6  Additional  Conditions to  Obligations of the Seller to Effect the
Sale at the Second Closings. The obligations of the Seller to effect the Sale at
the Second Closing shall be subject to the  fulfillment or waiver at or prior to
the Second Closing of the following conditions:

                  (a) The Purchaser shall have completed the Financing.

                  (b) The Purchaser  shall have delivered to the Seller $250,000
in cash or other immediately available U.S. funds.

                                    ARTICLE 6

                          SURVIVAL AND INDEMNIFICATION

         6.1      Survival of Representations, Warranties and Covenants.

                  (a)  Survival  Term.  All   representations,   warranties  and
covenants  contained  herein  or made in  writing  by any  party  in  connection
herewith  shall  survive the  execution  and delivery of this  Agreement and the
consummation  of  the  transactions   contemplated  hereby  (regardless  of  any
investigation  made by any party or on its  behalf)  and will  continue  in full
force and effect for:

                           (i)  perpetuity,  in the case of the  representations
and warranties in Sections 2.3, 2.4, 3.2 and 3.3; and;

                           (ii) for a period of two years  following the Closing
Date for all other representations and warranties set forth in Articles 2 and 3,
and for the covenant in Section 4.1.

                  (b) Special Rule for Fraud.  Notwithstanding  anything in this
Section  6.1 to the  contrary,  in the  event  of a  breach  by any  party  of a
representation  or warranty which breach is intentional,  or constitutes  fraud,
the representation or warranty that has been breached will survive the execution
and  delivery  of  this  Agreement  and  the  consummation  of the  transactions
contemplated hereby (regardless of any investigation made by any party or on its
behalf) and will  continue in full force and effect for six years  following the
Closing Date or the discovery of such fraud, whichever is later.

                  (c)  No  Waiver.   Neither  a  party's  participation  in  the
consummation  of any transaction  pursuant to any  Transaction  Document nor any
waiver of any condition to such  participation  (including  any condition that a
representation  or  warranty  of any  other  party  be true  and  correct)  will
constitute  a  waiver  by such  participating  party  of any  representation  or
warranty  of  any  party  or   otherwise   affect  the   survival  of  any  such
representation or warranty.

         6.2      Indemnification Obligations of the Purchaser.

                  (a)  Specific   Indemnifiable   Losses.   The  Purchaser  will
indemnify  the Seller and its  Affiliates,  shareholders,  officers,  directors,
employees,   agents,   representatives  and  permitted  successors  and  assigns
(collectively,  the "Seller  Indemnitees") in respect of, and save and hold each
Seller Indemnitee harmless against and pay on behalf of or reimburse each Seller
Indemnitee  as and  when  incurred,  any Loss  which  any  Purchaser  Indemnitee
suffers,  sustains  or becomes  subject to as a result of, in  connection  with,
relating or incidental to or by virtue of, without duplication:

                           (i)  subject to the  survival  provisions  of Section
6.1, any  misrepresentation  or breach of any  representation or warranty (other
than  intentional   misrepresentations   or  breaches  of  representations   and
warranties arising out of fraud) by the Purchaser set forth in this Agreement or
any certificate or other  instrument or document  furnished to the Seller by the
Purchaser pursuant to any Transaction Document;

                           (ii) any intentional  misrepresentation  or breach of
any  representation  or warranty arising out of fraud by the Purchaser set forth
in this Agreement or any certificate or other  instrument or document  furnished
to the Seller by the Purchaser pursuant to any Transaction Document; or

                           (iii) any nonfulfillment or breach of any covenant or
agreement of the Purchaser set forth in any Transaction Document.

                  (b) Limitation of Liability.  In no event, except with respect
to any claim  described  in Sections  6.2(a)(ii)  and 6.1(b) of this  Agreement,
shall any  indemnification  be made under Section 6.2 until the aggregate amount
of Losses with  respect to an  indemnity  obligation  of the  Purchaser  exceeds
$10,000,  then  indemnification  for such  obligation  shall be made to the full
extent of Losses in excess of $10,000.  In no event,  except with respect to any
claim described in Sections  6.2(a)(ii) and 6.1(b) of this Agreement,  shall the
indemnify  obligation  of the  Purchaser  under this  Agreement  exceed,  in the
aggregate, $750,000.

         6.3      Indemnification Obligations of the Seller.

                  (a) Specific  Indemnifiable  Losses. The Seller will indemnify
the Purchaser  and its  Affiliates,  members,  officers,  directors,  employees,
agents, representatives and permitted successors and assigns (collectively,  the
"Purchaser  Indemnitees")  in  respect  of,  and save and  hold  each  Purchaser
Indemnitee  harmless  against and pay on behalf of or reimburse  each  Purchaser
Indemnitee  as and  when  incurred,  any Loss  which  any  Purchaser  Indemnitee
suffers,  sustains  or becomes  subject to as a result of, in  connection  with,
relating to or by virtue of, without duplication:

                           (i)  subject to the  survival  provisions  of Section
6.1, any  misrepresentation  or breach of any  representation or warranty (other
than  intentional   misrepresentations   or  breaches  of  representations   and
warranties  arising out of fraud) by the Seller set forth in this  Agreement  or
any  certificate or other  instrument or document  furnished to the Purchaser by
the Seller pursuant to any Transaction Document;

                           (ii) any intentional  misrepresentation  or breach of
any  representation  or warranty arising out of fraud by the Seller set forth in
this  Agreement  or any  certificate  furnished  to the  Purchaser by the Seller
pursuant to any Transaction Document; or

                           (iii) any nonfulfillment or breach of any covenant or
agreement of the Seller set forth in any Transaction Document.

                  (b) Limitation of Liability.  In no event, except with respect
to any claim  described  in Sections  6.3(a)(ii)  and 6.1(b) of this  Agreement,
shall any  indemnification  be made under Section 6.2 until the aggregate amount
of Losses with respect to an indemnity obligation of the Seller exceeds $10,000,
then  indemnification  for such  obligation  shall be made to the full extent of
Losses (including the initial $10,000).  In no event, except with respect to any
claim described in Sections  6.3(a)(ii) and 6.1(b) of this Agreement,  shall the
indemnity  obligation  of  the  Seller  under  this  Agreement  exceed,  in  the
aggregate, $750,000.

         6.4      Indemnification Procedures.

                  (a)  Notice  of  Claim.   Any   Person   making  a  claim  for
indemnification  pursuant to Section 6.2 or Section 6.3 (an "Indemnified Party")
must  give the party  from whom  indemnification  is  sought  (an  "Indemnifying
Party")  written  notice  of such  claim  (an  "Indemnification  Claim  Notice")
promptly after the Indemnified  Party receives any written notice of any action,
lawsuit,  proceeding,  investigation or other claim (a "Proceeding")  against or
involving the Indemnified  Party by a Government  Entity or other third-party or
otherwise discovers the liability, obligation or facts giving rise to such claim
for indemnification;  provided, that the failure to notify or delay in notifying
an Indemnifying Party will not relieve the Indemnifying Party of its obligations
pursuant to Section 6.2 or Section 6.3, as applicable, except to the extent that
such failure actually harms the Indemnifying  Party.  Such notice must contain a
description  of the claim and the  nature and amount of such Loss (to the extent
that the nature and amount of such Loss is known at such time).

                  (b)  Control  of  Defense;  Conditions.  With  respect  to the
defense of any Proceeding  against or involving an Indemnified  Party in which a
Government  Entity or other third-party in question seeks only the recovery of a
sum of money for which  indemnification  is  provided  in Section 6.2 or Section
6.3, at its option an  Indemnifying  Party may  appoint as lead  counsel of such
defense any legal counsel selected by the  Indemnifying  Party;  provided,  that
before the Indemnifying Party assumes control of such defense it must first:

                           (i)  enter  into an  agreement  with the  Indemnified
Party (in form and substance  satisfactory to the Indemnified Party) pursuant to
which the Indemnifying Party agrees to be fully responsible (with no reservation
of any  rights  other  than the  right to be  subrogated  to the  rights  of the
Indemnified   Party)   for  all  Losses   relating   to  such   Proceeding   and
unconditionally  guarantees  the payment and  performance  of any  liability  or
obligation  which may arise with respect to such  Proceeding or the facts giving
rise to such claim for indemnification; and

                           (ii) furnish the Indemnified Party with evidence that
the Indemnifying Party, in the Indemnified Party's reasonable  judgment,  is and
will be able to satisfy any such liability.

                  (c)  Control  of  Defense;  Related  Matters.  Notwithstanding
Section 6.4(b):

                           (i)  the  Indemnified   Party  will  be  entitled  to
participate in the defense of such claim and to employ counsel of its choice for
such purpose at its own expense; provided, that the Indemnifying Party will bear
the reasonable fees and expenses of such separate  counsel incurred prior to the
date upon  which the  Indemnifying  Party  effectively  assumes  control of such
defense;

                           (ii) the  Indemnifying  Party will not be entitled to
assume control of the defense of such claim,  and will pay the  reasonable  fees
and expenses of legal counsel retained by the Indemnified Party, if

                                     (A)  the   Indemnified   Party   reasonably
believes that an adverse  determination  of such Proceeding  could be materially
detrimental to or injure the Indemnified  Party's  reputation or future business
prospects, or

                                     (B) a court of competent jurisdiction rules
that the  Indemnifying  Party has failed or is failing  to  prosecute  or defend
vigorously such claim; and

                           (iii) the  Indemnifying  Party must  obtain the prior
written consent of the Indemnified  Party (which the Indemnified  Party will not
unreasonably  withhold)  prior to entering into any  settlement of such claim or
Proceeding or ceasing to defend such claim or Proceeding.

                                    ARTICLE 7

                            TERMINATION/CANCELLATION

         7.1      Events of Termination/Cancellation.

                  (a)  Prior  to  the  First  Closing.  This  Agreement  may  be
terminated at any time prior to the First Closing:

                           (i) By mutual  consent of the Purchaser and the Chief
Executive Manager of the Seller;

                           (ii) By the Seller or the  Purchaser  in the event of
(i) a breach by the other  party of any  representation  or  warranty  contained
herein,  which  breach  has not been  cured  within 30 days  after the giving of
written  notice  to the  breaching  party  of  such  breach  and  which  breach,
individually  or in the aggregate when combined with other such breaches,  would
cause the  conditions  set forth in Section 5.2 or Section  5.3, as the case may
be, not to be met by the date of the First Closing or (ii) a material  breach by
the other party of any of the covenants or agreements  contained  herein,  which
breach has not been cured  within 30 days after the giving of written  notice to
the breaching party of such breach.

                  (b)  After  December  31,  2000.  The  Second  Closing  may be
canceled by the Seller  after  December  31, 2000 in the event that on or before
December  31, 2000 the  Purchaser  does not register the resale of the Shares on
Form S-3 under the Securities Act of 1933, as amended.

         7.2 Effect of Termination/Cancellation. In the event of the termination
of this Agreement  pursuant to Section 7.1(a),  this  Agreement,  except for the
provisions  of Section 4.1,  shall  become void and have no effect,  without any
liability on the part of any party or its directors,  officers or  shareholders.
In the event of the  cancellation  of the  Second  Closing  pursuant  to Section
7.1(b),  (i) the Seller shall redeem 71,428 units of the Initial Units, and (ii)
the Purchaser shall redeem the Shares.

                                    ARTICLE 8

                                  MISCELLANEOUS

         8.1  Waivers,  Amendments  to  be in  Writing.  No  waiver,  amendment,
modification or supplement of this Agreement will be binding upon a party unless
such waiver,  amendment,  modification or supplement is set forth in writing and
is executed by such party.

         8.2 Successors and Assigns.  Except as otherwise  expressly provided in
this  Agreement,  all covenants and agreements set forth in this Agreement by or
on behalf of the  Purchaser and the Seller will bind and inure to the benefit of
the respective  successors and assigns of the Purchaser and the Seller,  whether
so  expressed  or not.  This  Agreement  and  any of the  rights,  interests  or
obligations hereunder may not be assigned by the Purchaser or the Seller.

         8.3 Governing  Law. This Agreement will be governed by and construed in
accordance  with the domestic  laws of the State of New Jersey,  without  giving
effect to any  choice of law or  conflict  rule of any  jurisdiction  that would
cause the laws of any other  jurisdiction  to be applied.  In furtherance of the
foregoing,  the  internal  law of the  State  of New  Jersey  will  control  the
interpretation  and construction of this Agreement,  even if under any choice of
law or conflict of law analysis,  the substantive law of some other jurisdiction
would ordinarily apply.

         8.4 Jurisdiction. Each of the parties hereby (a) irrevocably submits to
the  exclusive  jurisdiction  of the state  courts  of, and the  federal  courts
located in, the State of New Jersey in any action or  proceeding  arising out of
or relating  to, this  Agreement,  (b) waives,  and agrees to assert,  by way of
motion, as a defense, or otherwise, in any such suit, action or proceeding,  any
claim that it is not subject  personally to the  jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution under
the law of another jurisdiction,  that the suit, action or proceeding is brought
in an inconvenient  forum,  that the venue of the suit,  action or proceeding is
improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court, and agrees not to seek any review by any court of any other
jurisdiction which may be called upon to grant an enforcement of the judgment of
any such court.

         8.5      Notices.

                  (a)  All   demands,   notices,   communications   and  reports
("notices") provided for in this Agreement will be in writing and will be either
personally  delivered,  mailed by registered or certified  mail (return  receipt
requested) or sent by reputable  overnight  courier  service  (delivery  charges
prepaid) to any party at the address specified below, or at such address, to the
attention of such other Person, and with such other copy, as the recipient party
has  specified  by prior  written  notice to the sending  party  pursuant to the
provisions of this Section 8.5.

            If to the Seller:

            Technology Keiretsu, LLC
            35 Airport Road, Suite 340
            Morristown, New Jersey  07950
            Attention:  Bruce Flitcroft
            Facsimile Number:  (973) 267-5237

            with a copy, which will not constitute notice to the Seller, to:
            ----------------------------------------------------------------

            Nuzzi, Mason & Cabana, LLC
            104 Elcock Avenue
            Boonton, New Jersey  07005
            Attention: Brian Mason

            If to the Purchaser:

            TechSys, Inc.
            44 Aspen Drive
            Livingston, New Jersey  07039
            Attention:  President

            with a copy, which will not constitute notice to the Purchaser, to:
            -------------------------------------------------------------------

            Pitney, Hardin, Kipp & Szuch LLP
            200 Campus Drive
            P.O. Box 1945
            Morristown, New Jersey  07962-1945
            Attention:  Joseph Lunin
            Facsimile Number:  (973) 966-1550

                  (b) Any such  notice  will be deemed to have been  given  when
delivered  personally,  on the third business day after deposit postage pre-paid
in the  U.S.  mail,  or on the  business  day  after  deposit  with a  reputable
overnight courier service delivery charges pre-paid, as the case may be.

         8.6  Severability of Provisions.  If any provision of this Agreement is
held to be invalid for any reason whatsoever, then such provision will be deemed
severable  from the remaining  provisions  of this  Agreement and will in no way
affect the validity or enforceability of any other provision of this Agreement.

         8.7  Counterparts.  The parties may execute this  Agreement in separate
counterparts (no one of which need contain the signatures of all parties),  each
of which will be an original and all of which  together will  constitute one and
the same instrument.

         8.8  No  Third-Party  Beneficiaries.   Except  as  otherwise  expressly
provided in this  Agreement,  no Person which is not a party will have any right
or obligation pursuant to this Agreement.

         8.9 Headings.  The headings used in this  Agreement are for the purpose
of  reference  only and will not affect the  meaning  or  interpretation  of any
provision of this Agreement.

         8.10  Merger and  Integration.  Except as  otherwise  provided  in this
Agreement,  this  Agreement sets forth the entire  understanding  of the parties
relating to the subject matter  hereof,  and all prior  understandings,  whether
written or oral, are superseded by this Agreement.

         8.11 Transaction Expenses. The Purchaser and the Seller, whether or not
the Sale is consummated,  shall bear their own legal and other fees and expenses
with respect to the Sale.

         8.12 Further Assurances.  From and after the Closing, the Purchaser and
the Seller will,  and will cause their  respective  Affiliates  to,  execute all
documents  and take any other  action  which they are  reasonably  requested  to
execute or take to  further  effectuate  the  transactions  contemplated  by the
Transaction Documents.

         8.13  Announcements.  The Seller and the Purchaser shall have the right
to review  any press  release  or other  public  statement  with  respect to the
transactions  contemplated  by this  Agreement  for a reasonable  period of time
before  issuance  thereof;  provided,  however,  that  the  Purchaser  shall  be
entitled, without the prior approval of the Seller, to make any press release or
other  public  statement  with  respect to such  transactions  as is required by
applicable  law and  regulations  (although the Seller shall be consulted by the
Purchaser in connection  with any such press  release or other public  statement
prior to its release and shall be provided  with a copy  thereof and be given an
opportunity to comment thereon).

         8.14  Cooperation  on  SEC  Filings.   The  Purchaser  and  the  Seller
acknowledge  that the  Purchaser may now or in the future be required to include
information  concerning the Seller in SEC reports or other  filings.  The Seller
shall provide the Purchaser  with any  information,  certificates,  documents or
other materials about the Seller that are reasonably necessary to be included in
such SEC reports or other filings.

                                    ARTICLE 9

                                   DEFINITIONS

         9.1 Definitions.  For purposes hereof,  the following terms,  when used
herein with initial  capital  letters,  shall have the  respective  meanings set
forth herein:

                  "Affiliate" of any Person means any other Person  controlling,
controlled by or under common control with such first Person.

                  "Agreement" means this Purchase Agreement (including Exhibits)
as it may be amended from time to time in accordance with its terms.

                  "Exchange Act" means the  Securities  Exchange Act of 1934, as
amended.

                  "Financing" means a sale by the Purchaser of its securities in
which the gross proceeds to the Purchaser equal or exceed $10,000,000.

                  "Furnishing  Party"  means  the party  providing  Confidential
Information.

                  "GAAP"  means,  at  a  given  time,  United  States  generally
accepted accounting principles, consistently applied.

                  "Government  Entity" means the United States of America or any
other nation, any state or other political  subdivision  thereof,  or any entity
exercising  executive,  legislative,   judicial,  regulatory  or  administrative
functions of government.

                  "Legal  Requirement"  means any requirement  arising under any
action,  law,  treaty,  rule or  regulation,  determination  or  direction of an
arbitrator or Government Entity.

                  "Lien"  means  any  mortgage,   pledge,   security   interest,
encumbrance,  easement,  restriction on use, restriction on transfer, charge, or
other lien.

                  "Loss" means,  with respect to any Person,  any  diminution in
value, consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage,  deficiency,  Tax, penalty, fine or other loss or expense,
whether or not arising  out of a  third-party  claim,  including  all  interest,
penalties,  reasonable  attorneys'  fees and  expenses  and all amounts  paid or
incurred in connection with any action,  demand,  proceeding,  investigation  or
claim by any third-party  (including any Government Entity) against or affecting
such Person or which,  if determined  adversely to such Person,  would give rise
to,   evidence  the  existence  of,  or  relate  to,  any  other  Loss  and  the
investigation,  defense or  settlement  of any of the  foregoing,  together with
interest  thereon from the date on which such Person provides the written notice
of the related  claim as described in Section 6.4 through and including the date
on which the total amount of the claim, including such interest, is recovered or
recouped pursuant to Article 6.

                  "Person" means an individual, a partnership, a corporation, an
association,  a limited  liability  company,  a joint stock company,  a trust, a
joint venture,  an unincorporated  organization and a governmental entity or any
department, agency or political subdivision thereof.

                  "Receiving   Party"  means  a  party  receiving   Confidential
Information.

                  "SEC"  means  the  United  States   Securities   and  Exchange
Commission.

                  "Securities Act" means the Securities Act of 1933, as amended.

                  "Subsidiary" of any Person means any corporation, partnership,
association or other business entity which such Person,  directly or indirectly,
controls or in which such Person has a majority ownership interest. For purposes
of this definition,  a Person is deemed to have a majority ownership interest in
a partnership,  association or other business entity if such Person is allocated
a majority of the gains or losses of such entity or is or controls  the managing
director or general partner of such entity.

                  "Transaction  Documents"  means this Agreement,  and all other
agreements, instruments,  certificates and other documents to be entered into or
delivered by any party hereto in connection with the Sale.

         9.2      Other Definitional Provisions.

                  (a)   "Hereof,"   etc.  The  terms   "hereof,"   "herein"  and
"hereunder"  and terms of similar  import are  references to this Agreement as a
whole  (including  Exhibits)  and  not  to  any  particular  provision  of  this
Agreement.  Section  and  clause  references  contained  in this  Agreement  are
references  to  Sections  and  clauses  in  this  Agreement,   unless  otherwise
specified.

                  (b) "Including." The term "including" means including, without
limitation.

                  (c) Successor  Laws.  Any reference to any  particular  law or
regulation  will be  interpreted to include any revision of or successor to that
section regardless of how it is numbered or classified.

<PAGE>

                  IN WITNESS  WHEREOF,  the parties have executed this Agreement
as of the date first written above.

                                TECHNOLOGY KEIRETSU, LLC

                                         BRUCE FLITCROFT
                                By:      ___________________________
                                         Bruce Flitcroft
                                         Chief Executive Manager

                                TECHSYS, INC.

                                         STEVEN L. TRENK
                                By:      ___________________________
                                         Steven L. Trenk
                                         President<PAGE>

                                                                    EXHIBIT 10.1

                               U.S. $150,000,000

                     AMENDED AND RESTATED CREDIT AGREEMENT

                           Dated as of June 27, 2000

                                     among

                                 THE GAP, INC.,

                                  as Borrower,
                                  -----------

               THE BANKS AND FINANCIAL INSTITUTIONS NAMED HEREIN

                                   as Banks,
                                   --------

                                      and

                               CITICORP USA, INC.

                                    as Agent
                                    --------

                             for the Banks and the
                  other Lenders from time to time party hereto
<PAGE>

     AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 27, 2000 (this
"Agreement"), among The Gap, Inc., a Delaware corporation (the "Borrower"), the
 ---------                                                      --------
banks and financial institutions (the "Banks") listed on the signature pages
                                       -----
hereof and Citicorp USA, Inc. ("CUSA"), as agent (the "Agent") for the Lenders
                                ----                   -----
(as hereinafter defined) 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 July 1,
1997 (as amended by the First Letter Amendment dated as of June 30, 1998, the
"Original Agreement")

(2)  The Borrower, the Banks, the Lenders and the Agent desire to amend and
restate the Original Agreement as set forth below.

NOW THEREFORE, the Borrower, the Banks, the Lenders from time to time party
hereto 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):

          "A Advance" means an advance by an A Lender to the Borrower as part of
           ---------
     an A Borrowing and refers to a Base Rate Advance or a Eurodollar Rate
     Advance, each of which shall be a "Type" of A Advance.

          "A Borrowing" means a borrowing consisting of simultaneous A Advances
           -----------
     of the same Type made by each of the A Lenders pursuant to Section 2.01.

          "A Commitment" means, as to each A Lender, the amount set forth
           ------------
     opposite such A Lender's name on Schedule I hereof under the caption' A
                                                                           -
     Commitment' or, if such A Lender has entered into one or more Assignment
     ----------
     and Acceptances, the amount set forth for such A Lender with respect
     thereto in the Register maintained by the Agent pursuant to Section 9.07
     hereof, in each case as such amount may be reduced pursuant to Section
     2.05.

          "A Lender" means any Lender having an A Commitment or to which A
           --------
     Advances are owed.

          "Advance" means an A Advance or a B Advance, and "Advances" means the
           -------
     A Advances and the B Advances.

          "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.

          "Anniversary Date" means June 30 in each calendar year occurring
           ----------------
     during the term of this Agreement.

          "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 and, in the case of a B Advance, the
<PAGE>

     office of such Lender notified by such Lender to the Agent as its
     Applicable Lending Office with respect to such B Advance.

          "Assignment and Acceptance" means an assignment and acceptance entered
           -------------------------
     into by a Lender and an Eligible Assignee, and accepted by the Agent, in
     substantially the form of Exhibit B hereto.

          "B Advance" means an advance by an A Lender to the Borrower as part of
           ---------
     a B Borrowing resulting from the auction bidding procedure described in
     Section 2.03.

          "B Borrowing" means a borrowing consisting of simultaneous B Advances
           -----------
     from each of the A Lenders whose offer to make one or more B Advances as
     part of such borrowing has been accepted by the Borrower under the auction
     bidding procedure described in Section 2.03.

          "B Reduction" has the meaning specified in Section 2.01.
           -----------

          "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, N.A.
          ("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 A Advance which bears interest as
           -----------------
     provided in Section 2.07(a).

          "Borrowing" means an A Borrowing or a B Borrowing.
           ---------

          "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
     if the applicable Business Day relates to any Eurodollar Rate Advances, a
     day on which dealings are carried on in the London interbank market.

          "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
<PAGE>

     accounting principles, be required to be accounted for as a capital lease
     on the balance sheet of such Person.

          "CERCLA" means the Comprehensive Environmental Response, Compensation,
           ------
     and Liability Act of 1980, as amended (42 U.S.C. (S) 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), 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 IV hereto or any group of Persons in which one or
     more of the Persons listed on Schedule IV are members.

          "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 5.01(e).

          "Convert", "Conversion" and "Converted" each refers to a conversion of
           -------    ----------       ---------
     A Advances of one Type into A Advances of another Type pursuant to Section
     2.09 or 2.10.

          "CP Rating" means, as of any date, the higher of the ratings that have
           ---------
     been most recently announced by either S&P or Moody's, as the case may be,
     for any class of non-credit enhanced commercial paper debt issued by the
     Borrower.  For purposes of the foregoing, (a) if only one of S&P and
     Moody's shall have in effect a CP Rating, the Eurodollar Rate Margin and
     the Facility Fee Percentage may be determined by reference to the available
     rating; (b) 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 (c) if S&P
     or Moody's shall change the basis on which ratings are established, each
     reference to the CP 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.

          "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
<PAGE>

     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 of such Person, (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.

          "Debt Rating" means, as of any date, the higher of the ratings that
           -----------
     have been most recently announced by either S&P or Moody's, as the case may
     be, for any class of long-term senior unsecured non-credit enhanced debt
     issued by the Borrower.  For purposes of the foregoing, (a) if only one of
     S&P and Moody's shall have in effect a Debt Rating, the Eurodollar Rate
     Margin and the Facility Fee Percentage may be determined by reference to
     the available rating; (b) 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 (c) if S&P or Moody's shall change the basis on which ratings are
     established, each reference to the 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.

          "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 II hereto or in the Assignment and Acceptance pursuant
     to which it became a Lender, or such other office of such Lender as such
     Lender may from time to time specify to the Borrower and the Agent.

          "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.

          "Eligible Assignee" means (i) a commercial bank organized under the
           -----------------
     laws of the United States, or any State thereof, and having Total Assets in
     excess of $10,000,000,000; (ii) a
<PAGE>

     commercial bank organized under the laws of any other country which is a
     member of the OECD or has concluded special lending arrangements with the
     International Monetary Fund associated with its General Arrangements to
     Borrow, or a political subdivision of any such country, and having Total
     Assets in excess of $10,000,000,000; provided, that, such bank is acting
                                          --------  ----
     through a branch or agency located in the United States; (iii) the central
     bank of any country which is a member of the OECD; (iv) any Bank or Lender
     or Affiliate of a Bank or Lender; (v) a finance company, insurance company
     or other financial institution or fund (whether a corporation, partnership
     or other entity) which is engaged in making, purchasing or otherwise
     investing in commercial loans in the ordinary course of its business, and
     having Total Assets in excess of $10,000,000,000; and (vi) any other Person
     mutually acceptable to the Borrower and the Agent.

          "Environmental Laws" means any and all laws, statutes, ordinances,
           ------------------
     rules, regulations, judgments, orders, decrees, permits, licenses, or other
     governmental restrictions or requirements relating to the environment or
     any Hazardous Substance.

          "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.

          "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 II hereto or in the Assignment and Acceptance pursuant
     to which it became a Lender (or, if 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 A Borrowing, an interest rate per
     annum equal to 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 A Borrowing and for a period equal to
     such Interest Period.  The Eurodollar Rate for the Interest Period for each
     Eurodollar Rate Advance comprising part of the same A 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 2.09.

          "Eurodollar Rate Advance" means an A Advance which bears interest as
           -----------------------
     provided in Section 2.07(b).
<PAGE>

          "Eurodollar Rate Margin" means, as of any date, a percentage per annum
           ----------------------
     determined by reference to the highest of the Debt Rating or the CP Rating,
     as the case may be, in effect on such date as set forth below:

                  --------------------------------------------------------
                   Debt Rating or CP               Eurodollar Rate Margin
                        Rating                       for Eurodollar Rate
                    S&P/Moody's                         Advances
                  --------------------------------------------------------
                  Level 1
                  -------

                  Debt Rating:
                  -----------
                  A+ or above or A1 or above                .13%
                  --------------------------------------------------------
                  Level 2
                  -------

                  Debt Rating:
                  -----------
                  below A+ but at least
                  A- or below A1 but at
                  least A3

                  or

                  CP Rating:
                  ---------
                  A1 or P1                                 .155%
                  --------------------------------------------------------
                  Level 3
                  -------

                  Debt Rating:
                  -----------
                  below A- but at least
                  BBB- or below A3
                  but at least Baa3

                  or

                  CP Rating:
                  ---------
                  below A1 or below
                  P1                                        .21%
                  --------------------------------------------------------
                  Level 4
                  -------

                  Debt Rating:
                  -----------
                  none for S&P or
                  Moody's or

                  below BBB- or
                  below Baa3

                  and

                  CP Rating:
                  ---------
                  None from S&P or
                  Moody's                                   .31%
                  --------------------------------------------------------

<PAGE>

          "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 7.01.
           -----------------

          "Facility Fee Percentage" means, as of any date, a percentage per
           -----------------------
     annum determined by reference to the highest of the Debt Rating or the CP
     Rating, as the case may be, as set forth below:

                    --------------------------------------------------
                    Debt Rating or CP
                          Rating                      Facility Fee
                       S&P/Moody's
                    --------------------------------------------------
                    Level 1
                    -------

                    Debt Rating:
                    -----------
                    A+ or above or A1 or above            .06%
                    --------------------------------------------------
                    Level 2
                    -------

                    Debt Rating:
                    -----------
                    below A+ but at least
                    A- or below A1 but
                    at least A3

                    or

                    CP Rating:
                    ---------
                    A1 or P1                              .07%
                    --------------------------------------------------
                    Level 3
                    -------

                    Debt Rating:
                    -----------
                    below A- but at least
                    BBB- or below A3
                    but at least Baa3

                    or

                    CP Rating:
                    ---------
                    below A1 or below
                    P1                                    .115%
                    --------------------------------------------------

<PAGE>

                    ----------------------------------------
                    Level 4
                    -------

                    Debt Rating:
                    -----------
                    none for S&P or
                    Moody's or

                    below BBB- or
                    below Baa3

                    and

                    CP Rating:
                    ---------
                    None from S&P or
                    Moody's                         .19%
                    ----------------------------------------

          "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 5.01(e).

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

          "Hazardous Substance" means (i) any hazardous substance or toxic
           -------------------
     substance as such terms are presently defined or used in (S) 101(14) of
     CERCLA (42 U.S.C. (S) 9601(14)), in 33 U.S.C. (S) 1251 et.seq. (Clean Water
                                                            -- ---
     Act), or 15 U.S.C. (S) 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.

          "Interest Expense" of any Person for any period means the aggregate
           ----------------
     amount of interest or fees (other than agency fees payable to the Agent, as
     such) 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,
     determined in accordance with generally accepted accounting principles.

          "Interest Period" means, for each Eurodollar Rate Advance comprising
           ---------------
     part of the same A Borrowing, the period commencing on the date of such
     Type of A Advance or the date of the Conversion of any A Advance into such
     Type of an A 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
<PAGE>

     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 or 6 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:
                                      --------  -------

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

               (ii)   Interest Periods commencing on the same date for A
          Advances comprising part of the same A 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 A 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, as requested by the Borrower, if, and only if, the Agent
          determines a Eurodollar Rate for the tenor of such Interest Period and
          the Majority Lenders do not notify the Agent pursuant to Section
          2.09(b) that the Eurodollar Rate for such Interest Period will not
          adequately reflect the cost to such Majority 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 A Borrowing, or, if no
          alternative Interest Period is selected, 6 months.

          "Lenders" means the Banks listed on the signature pages hereof and
           -------
     each Eligible Assignee that shall become a party hereto pursuant to Section
     9.07.

          "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.

          "Majority Lenders" means, at any time, A Lenders owed at least 66 2/3%
           ----------------
     of the then aggregate unpaid principal amount of the A Advances held by A
     Lenders, or, if no such principal amount is then outstanding, A Lenders
     having at least 66 2/3% of the A Commitments.

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

          "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.

          "Non-Retail Assets" means property (tangible and intangible) that is
           -----------------
     not used, sold or consumed in a Retail Business.

          "Non-Retail Business" means, with respect to any Person, that such
           -------------------
     Person is not engaged in the Retail Business.

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

          "Notice of B Borrowing" has the meaning specified in Section 2.03(a).
           ---------------------

          "Obligations" means all obligations of the Borrower now or hereafter
           -----------
     existing under this Agreement, whether for principal, interest, fees,
     expenses, indemnification or otherwise.

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

          "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 nondelinquent obligations under worker's compensation or
          unemployment laws or similar legislation or to secure the performance
          of leases or contracts entered into in the ordinary course of business
          or of public or nondelinquent statutory obligations, bids, or appeal
          bonds;

               (iv)   Liens upon or in, and limited to, any property acquired or
          held by the Borrower or any of its Subsidiaries to secure the purchase
          price of such property or to secure indebtedness incurred solely for
          the purpose of financing or refinancing the acquisition of any such
          property to be subject to such Liens, or Liens existing on any such
          property at the time of acquisition;
<PAGE>

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

               (vi)    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;

               (vii)   Liens of the Borrower and its Subsidiaries not described
          in the foregoing clauses (i) through (vi), existing of the date hereof
          and listed on Schedule III hereof;

               (viii)  Liens not described in subclauses (i) through (vii) above
          that relate to liabilities not in excess of $20,000,000 in the
          aggregate; and

               (ix)    extensions, renewals or replacements of Liens described
          in subclauses (i v), (v), (vii) and (viii) 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.

          "Person" means an individual, partnership, 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. (S) 6901 et seq.), and any regulations promulgated
                                 -- ---
     thereunder.

          "Reference Banks" means Citibank, N.A., The Hongkong and Shanghai
           ---------------
     Banking Corporation Limited 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 or chief financial officer
     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 9.07(c).
           --------

          "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.

          "Revolver Termination Date" means, subject to Section 2.14 hereof,
           -------------------------
     June 27, 2005 or the earlier date of termination in whole of the A
     Commitments pursuant to Section 2.05 or 7.01.
<PAGE>

         "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) 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) (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.

          "364-Day Credit Agreement" means the Second Amended and Restated
           ------------------------
     Credit Agreement dated as of the date hereof among the Borrower, the LC
     Subsidiaries (as defined therein), the financial institutions party thereto
     as lenders, Citibank, N.A., as Issuing Bank (as defined therein), and CUSA,
     as agent for the Issuing Bank and such lenders, as the same may be amended,
     supplemented or otherwise modified from time to time.

          "Total Assets" of any Person means all property, whether real,
           ------------
     personal, tangible, intangible or otherwise, which, in accordance with
     generally accepted accounting principles, should be included in determining
     total assets as shown on the assets portion of a balance sheet of such
     Person.

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

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 5.01(e).

                                  ARTICLE II
                       AMOUNTS AND TERMS OF THE ADVANCES

SECTION 2.01  The A Advances.  Each A Lender severally agrees, on the terms and
              --------------
conditions hereinafter set forth, to make A Advances to the Borrower from time
to time on any Business Day during the period from the date hereof until the
Revolver Termination Date in an aggregate amount not to exceed at any time
outstanding such A Lender's A Commitment, provided, that, the aggregate amount
                                          --------  ----
of the A Commitments of the A Lenders shall be deemed used from time to time to
the extent of the aggregate amount of the B Advances then outstanding and such
deemed use of the aggregate amount of the A Commitments shall be applied to the
A Lenders ratably according to their respective A Commitments (such deemed use
of the aggregate amount of the A Commitments being a "B Reduction").  Each A
Borrowing shall be in an aggregate amount not less than (i) $15,000,000, in the
case of an A Borrowing consisting of Eurodollar Rate Advances and (ii)
$1,000,000, in the case of an 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 A Advances of the same Type made on the same day by the A Lenders
ratably according to their respective A Commitments.  Within the limits of each
A Lender's A Commitment, the Borrower may from time to time borrow, prepay
pursuant to Section 2.11(b) and reborrow under this Section 2.01.

SECTION 2.02  Making the A Advances. (a) Each A 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 A Borrowing, if such proposed A
Borrowing consists of Eurodollar Rate Advances and (ii) 10:00 A.M. (New
<PAGE>

York City time) on the day of such proposed A Borrowing, if such proposed A
Borrowing consists of Base Rate Advances, by the Borrower to the Agent, which
shall give to each A Lender prompt notice thereof by telecopier, telex or cable.
Each such notice of an A Borrowing (a "Notice of A Borrowing") shall be by
telecopier, telex, cable or telephone (and if by telephone, confirmed
immediately in writing), in substantially the form of Exhibit A-1 hereto,
specifying therein the requested (i) date of such A Borrowing, (ii) Type of A
Advances comprising such A Borrowing, (iii) aggregate amount of such A Borrowing
and (iv) in the case of an A Borrowing comprised of Eurodollar Rate Advances,
initial Interest Period for each such A Advance. Each A Lender shall, before
12:00 noon (New York City time) on the date of such A Borrowing, make available
for the account of its Applicable Lending Office to the Agent at its address
referred to in Section 9.02, in same day funds, such A Lender's ratable portion
of such A Borrowing. After the Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article IV, the Agent will
make such funds available to the Borrower at the Agent's aforesaid address.

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

(c)   Each Notice of A Borrowing shall be irrevocable and binding on the
Borrower. In the case of any A Borrowing which the related Notice of A Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall
indemnify each A Lender against any loss, cost or expense incurred by such A
Lender as a result of any failure to fulfill on or before the date specified in
such Notice of A Borrowing for such A Borrowing the applicable conditions set
forth in Article IV, 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 A Lender to fund the A
Advance to be made by such A Lender as part of such A Borrowing when such A
Advance, as a result of such failure, is not made on such date.

(d)   Unless the Agent shall have received notice from an A Lender prior to the
date of any A Borrowing that such A Lender will not make available to the Agent
such A Lender's ratable portion of such A Borrowing, the Agent may assume that
such A Lender has made such portion available to the Agent on the date of such A
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 on such
date a corresponding amount. If and to the extent that such A Lender shall not
have so made such ratable portion available to the Agent, such A Lender and the
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 until the date such amount is
repaid to the Agent at (i) in the case of the Borrower, the interest rate
applicable at the time to A Advances comprising such A Borrowing and (ii) in the
case of such A Lender, the Federal Funds Rate. If such A Lender shall repay to
the Agent such corresponding amount, such amount so repaid shall constitute such
A Lender's A Advance as part of such A Borrowing for purposes of this Agreement.

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

SECTION 2.03  The B Advances. (a) Each A Lender severally agrees that the
              --------------
Borrower may make B Borrowings under this Section 2.03 from time to time on any
Business Day during the period from the date hereof until the date occurring 7
days prior to the Revolver Termination Date in the manner set forth below;
provided, that, following the making of each B Borrowing, the aggregate amount
--------  ----
of the Advances then outstanding shall not exceed the aggregate amount of the A
Commitments of the A Lenders (computed without regard to any B Reduction).

          (i)   The Borrower may request a B Borrowing under this Section 2.03
     by delivering to the Agent (or to each A Lender if the Borrower is
     conducting the auction for B Advances pursuant to subsection (g) of this
     Section 2.03), by telecopier, telex or cable, confirmed
<PAGE>

     immediately in writing, a notice of a B Borrowing (a "Notice of B
     Borrowing"), in substantially the form of Exhibit A-2 hereto, specifying
     the date and aggregate amount of the proposed B Borrowing, the maturity
     date for repayment of each B Advance to be made as part of such B Borrowing
     (which maturity date may not be earlier than the date occurring 7 days
     after the date of such B Borrowing or later than the Revolver Termination
     Date), the interest payment date or dates relating thereto, and any other
     terms to be applicable to such B Borrowing, not later than 3:00 P.M. (New
     York City time) (A) at least one Business Day prior to the date of the
     proposed B Borrowing, if the Borrower shall specify in the Notice of B
     Borrowing that the rates of interest to be offered by the A Lenders shall
     be fixed rates per annum and (B) at least four Business Days prior to the
     date of the proposed B Borrowing, if the Borrower shall instead specify in
     the Notice of B Borrowing the basis to be used by the A Lenders in
     determining the rates of interest to be offered by them. If the Agent is
     conducting the auction for B Advances, it shall in turn promptly notify
     each A Lender of each request for a B Borrowing received by it from the
     Borrower by sending such A Lender a copy of the related Notice of B
     Borrowing.

          (ii)   Each A Lender may, if, in its sole discretion, it elects to do
     so, irrevocably offer to make one or more B Advances to the Borrower as
     part of such proposed B Borrowing at a rate or rates of interest specified
     by such Lender in its sole discretion, by notifying the Agent (which shall
     give prompt notice thereof to the Borrower) or the Borrower (if it is
     conducting the auction for B Advances pursuant to subsection (g) of this
     Section 2.03), before 10:30 A.M. (New York City time) (A) on the date of
     such proposed B Borrowing, in the case of a Notice of B Borrowing delivered
     pursuant to clause (A) of paragraph (i) above and (B) three Business Days
     before the date of such proposed B Borrowing, in the case of a Notice of B
     Borrowing delivered pursuant to clause (B) of paragraph (i) above, of the
     minimum amount and maximum amount of each B Advance which such A Lender
     would be willing to make as part of such proposed B Borrowing (which
     amounts may, subject to the proviso to the first sentence of this Section
     2.03(a), exceed such A Lender's A Commitment), the rate or rates of
     interest therefor and such A Lender's Applicable Lending Office with
     respect to such B Advance; provided, that, if the Agent in its capacity as
                                --------  ----
     an A Lender shall, in its sole discretion, elect to make any such offer and
     the Agent is conducting the auction for B Advances, it shall notify the
     Borrower of such offer before 10:00 A.M. (New York City time) on the date
     on which notice of such election is to be given to the Agent by the other A
     Lenders.  If any A Lender shall elect not to make such an offer, such A
     Lender shall so notify the Agent, or the Borrower (if it is conducting the
     auction for the B Advances pursuant to subsection (g) of this Section
     2.03), before 10:30 A.M. (New York City time) on the date on which notice
     of such election is to be given to the Agent or the Borrower (if it is
     conducting the auction for the B Advances pursuant to subsection (g) of
     this Section 2.03) by the other A Lenders, and such A Lender shall not be
     obligated to, and shall not, make any B Advance as part of such B
     Borrowing; provided, that, the failure by any A Lender to give such notice
                --------  ----
     shall not cause such A Lender to be obligated to make any B Advance as part
     of such proposed B Borrowing.

          (iii)  The Borrower shall, in turn, (A) before 12:00 noon (New York
     City time) on the date of such proposed B Borrowing, in the case of a
     Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i)
     above and (B) before 1:00 P.M. (New York City time) three Business Days
     before the date of such proposed B Borrowing, in the case of a Notice of B
     Borrowing delivered pursuant to clause (B) of paragraph (i) above, either:
<PAGE>

               (x)  cancel such B Borrowing by giving the Agent (or each A
          Lender if the Borrower is conducting the auction for the B Advances
          pursuant to subsection (g) of this Section 2.03) notice to that
          effect; or

               (y)  accept one or more of the offers made by any A Lender or A
          Lenders pursuant to paragraph (ii) above, in its sole discretion, by
          giving notice to the Agent (or each such A Lender, if the Borrower is
          conducting the auction for B Advances pursuant to subsection (g) of
          this Section 2.03) of the amount of each B Advance (which amount shall
          be equal to or greater than the minimum amount, and equal to or less
          than the maximum amount, notified to the Borrower by the Agent on
          behalf of such A Lender (or by each A Lender, if the Borrower is
          conducting the auction for B Advances pursuant to subsection (g) of
          this Section 2.03) for such B Advance pursuant to paragraph (ii)
          above) to be made by each A Lender as part of such B Borrowing, and
          reject any remaining offers made by A Lenders pursuant to paragraph
          (ii) above by giving the Agent (or each A Lender, if the Borrower is
          conducting the auction for B Advances pursuant to subsection (g) of
          this Section 2.03) notice to that effect.

          (iv) If the Borrower notifies the Agent that such B Borrowing is
     cancelled pursuant to paragraph (iii)(x) above, the Agent shall give prompt
     notice thereof to the A Lenders, and such B Borrowing shall not be made.

          (v)  If the Borrower accepts one or more of the offers made by any A
     Lender or A Lenders pursuant to paragraph (iii)(y) above, the Agent, if it
     is conducting the auction for the B Advances, or the Borrower, if it is
     conducting the auction for the B Advances pursuant to subsection (g) of
     this Section 2.03, shall promptly notify (A) each A Lender that has made an
     offer as described in paragraph (ii) above, of the date and aggregate
     amount of such B Borrowing, of the lowest and highest interest rates
     offered to the Borrower by the A Lenders in connection with such B
     Borrowing and whether or not any offer or offers made by such A Lender
     pursuant to paragraph (ii) above have been accepted by the Borrower and (B)
     each A Lender that is to make a B Advance as part of such B Borrowing, of
     the amount of each B Advance to be made by such A Lender as part of such B
     Borrowing.  If the Borrower is conducting the auction for the B Advances
     pursuant to subsection (g) of this Section 2.03, it shall concurrently with
     the notices given by it to the A Lenders pursuant to the previous sentence,
     provide a copy of all such notices to the Agent.  The Agent shall in turn
     notify each A Lender that is to make a B Advance as part of such B
     Borrowing, upon receipt, that the Agent has received forms of documents
     appearing to fulfill the applicable conditions set forth in Article V.
     Each A Lender that is to make a B Advance as part of such B Borrowing
     shall, before 2:00 P.M. (New York City time) on the date of such B
     Borrowing specified in the notice received from the Agent (or from the
     Borrower if it is conducting the auction for B Advances pursuant to
     subsection (g) of this Section 2.03) pursuant to clause (A) above or any
     later time when such A Lender shall have received notice from the Agent
     pursuant to the preceding sentence, make available (i) if the Agent is
     conducting the auction for B Advances, to the Agent for the account of its
     Applicable Lending Office at its address referred to in Section 9.02 such A
     Lender's portion of such B Borrowing, in same day funds or (ii) if the
     Borrower is conducting the auction for B Advances pursuant subsection (g)
     of this Section 2.03, to the Borrower at the account designated by it, such
     A Lender's portion of such B Borrowing, in same day funds.  Upon
     fulfillment of the applicable conditions set forth in Article IV, and after
     receipt by the Agent of such funds (if the Agent conducted the auction
     relating to such B Borrowing), the Agent will make such funds available to
     the Borrower at the Agent's aforesaid address.  Promptly after each B
     Borrowing the Agent will
<PAGE>

     notify each A Lender of the amount of the B Borrowing, the consequent B
     Reduction and the dates upon which such B Reduction commenced and will
     terminate.

(b)  Each B Borrowing shall be in an aggregate amount not less than $5,000,000
or an integral multiple of $1,000,000 in excess thereof and, following the
making of each B Borrowing, the Borrower shall be in compliance with the
limitation set forth in the proviso to the first sentence of subsection (a)
above. The Borrower may not accept offers for B Advances in excess of the
aggregate amount specified in its Notice of B Borrowing given with respect to
each proposed B Borrowing.

(c)  Within the limits and on the conditions set forth in this Section 2.03, the
Borrower may from time to time borrow under this Section 2.03, repay or prepay
pursuant to subsection (d) below, and reborrow under this Section 2.03. The
Borrower may not make more than one B Borrowing on any Business Day.

(d)  If the Agent conducted the applicable auction relating to the B Advance to
be repaid, the Borrower shall repay to the Agent for the account of each A
Lender which has made a B Advance on the maturity date of each B Advance (such
maturity date being that specified by the A Lender for repayment of such B
Advance in the related offer delivered pursuant to subsection (a)(ii) above),
the then unpaid principal amount of such B Advance. If the Borrower conducted
the applicable auction relating to the B Advance to be repaid, the Borrower
shall repay directly to each A Lender that made a B Advance on the maturity date
of each B Advance (such maturity date being that specified by the A Lender for
repayment of such B Advance in the related offer delivered pursuant to
subsection (a)(ii) above), the then unpaid principal amount of such B Advance at
the account designated by such A Lender to the Borrower. The Borrower shall have
no right to prepay any principal amount of any B Advance unless, and then only
on the terms, specified for such B Advance in the offer delivered pursuant to
subsection (a)(ii) above.

(e)  The Borrower shall pay interest on the unpaid principal amount of each B
Advance from the date of such B Advance to the date the principal amount of such
B Advance is repaid in full, at the rate of interest for such B Advance
specified by the A Lender making such B Advance in its offer with respect
thereto delivered pursuant to subsection (a)(ii) above, payable on the interest
payment date or dates specified by the Borrower in its Notice of B Borrowing
with respect thereto delivered pursuant to subsection (a)(i) above. Such
interest shall be paid directly to the A Lender that made the B Advance at the
account designated by it to the Borrower, if the Borrower conducted the
applicable auction relating to the B Advance on which interest is to be paid,
and to the Agent for the account the Applicable Lending Office of each A Lender
that made a B Advance, if the Agent conducted the auction relating to the B
Advance on which interest is to be paid.

(f)  The indebtedness of the Borrower to an A Lender resulting from each B
Advance made to the Borrower as part of a B Borrowing shall be evidenced by such
A Lender's loan account referred to in Section 3.04; provided, however, that
upon the request of such A Lender, the Borrower shall execute and deliver to
such A Lender a promissory note, in substantially the form of Exhibit E hereto,
in the face amount of the B Advance made by such A Lender as part of a B
Borrowing.

(g)  If the Borrower so elects, it may conduct, from time to time, auctions for
B Advances in accordance with the foregoing provisions.

SECTION 2.04   Fees.
               ----
(a)  Facility Fee.  The Borrower agrees to pay to the Agent for the account of
     ------------
each A Lender a facility fee, accruing at the rate per annum equal to the
Facility Fee Percentage in effect from and after the date hereof, on the amount
of such A Lender's A Commitment (computed without giving effect to any B
Reduction or any other usage of the A Commitment of such A Lender), payable
quarterly in arrears on the last day of each January, April, July and October
and on the Revolver Termination Date.

(b)  Utilization Fee.  The Borrower agrees to pay to the Agent for the account
     ---------------
of each A Lender a utilization fee, accruing, during all periods from and after
the date hereof when the aggregate amount of outstanding A Advances made by such
A Lender exceeds 50% of such A Lender's A Commitment (without regard to any
usage thereof), at the rate of 0.05% per annum on the aggregate amount of such A
Advances outstanding
<PAGE>

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 Revolver 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 and the Agent.

SECTION 2.05   Reduction of the A Commitments.  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 A Commitments of the A Lenders, provided, the aggregate amount of the
                                           --------
A Commitments of the A Lenders shall not be reduced to an amount which is less
than the aggregate principal amount of the B Advances then outstanding and
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.

SECTION 2.06  Repayment of A Advances.  The Borrower shall repay in full the
              -----------------------
principal amount of each A Advance owing to each A Lender, together with accrued
interest and fees thereon, on the Revolver Termination Date.

SECTION 2.07  Interest on A Advances.  The Borrower shall pay interest on the
              ----------------------
unpaid principal amount of each A Advance made by each A Lender from the date of
such A Advance until such principal amount shall be paid in full, at the
following rates per annum:

              (a)   Base Rate Advances.  If such A Advance is a Base Rate
                    ------------------
     Advance, a rate per annum equal at all times to the Base Rate 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 Base Rate in effect from time
     to time.

              (b)   Eurodollar Rate Advances.  If such A Advance is a Eurodollar
                    ------------------------
     Rate Advance, a rate per annum equal at all times during the Interest
     Period for such A Advance to the sum of the Eurodollar Rate for such
     Interest Period plus the Eurodollar Rate Margin, 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 (x) after the expiration
     of the Interest Period related to such principal amount, 2% per annum above
     the Base Rate in effect from time to time and (y) prior to the expiration
     of the Interest Period related to such principal amount, 2% per annum above
     the rate per annum required to be paid on such A Advance immediately prior
     to the date on which such principal amount became due.

SECTION 2.08  Additional Interest on Eurodollar Rate Advances.  The Borrower
              -----------------------------------------------
shall pay to each A Lender, so long as such A 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 A Lender, from the date of such A 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 A 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 A Lender for such Interest Period, payable on
each date on which interest is payable on such A Advance.  Such additional
interest shall be determined by such A Lender and notified to the Borrower
through the Agent.
<PAGE>

SECTION 2.09  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 any 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 A Lenders of the applicable interest rate
determined by the Agent for purposes of Section 2.07(a) or (b), and the
applicable rate, if any, furnished by each Reference Bank for the purpose of
determining the applicable interest rate under Section 2.07(b).

(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 A
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 A Lenders to make, or to Convert
     A Advances into, Eurodollar Rate Advances shall be suspended until the
     Agent shall notify the Borrower and the A 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, the Agent will forthwith so
notify the Borrower and the A 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 A Advances
comprising any A Borrowing shall be reduced, by payment or prepayment or
otherwise, to less than $1,000,000 multiplied by the number of A Lenders, such A
Advances shall, if they are A Advances of a Type other than Base Rate Advances,
automatically Convert into Base Rate Advances, and on and after such date the
right of the Borrower to Convert such A Advances into A Advances of a Type other
than Base Rate Advances shall terminate; provided, however, that if and so long
                                         --------  -------
as each such A Advance shall be of the same Type and have the same Interest
Period as A Advances comprising another A Borrowing or other A Borrowings, and
the aggregate unpaid principal amount of all such A Advances shall equal or
exceed $1,000,000 multiplied by the number of A Lenders, the Borrower shall have
the right to continue all such A Advances as, or to Convert all such A Advances
into, A Advances of such Type having such Interest Period.

(e)  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
     A Lenders that the interest rate cannot be determined for such Eurodollar
     Rate Advances,

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

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

SECTION 2.10  Voluntary Conversion of A 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 2.09 and 2.13, Convert all
A
<PAGE>

Advances of one Type comprising the same A Borrowing into A Advances of another
Type; provided, however, that any Conversion of any Eurodollar Rate Advances
      --------  -------
into A 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 A Advances to be Converted, and (iii) if such
Conversion is into Eurodollar Rate Advances, the duration of the Interest Period
for each such A Advance.

SECTION 2.11  No Prepayments of A Advances.  (a) The Borrower shall have no
              ----------------------------
right to prepay any principal amount of any A Advances other than as provided in
subsection (b) below or Section 2.14.

(b)  The Borrower may, upon at least (i) two Business Day's, in the case of
Eurodollar Rate Advances and (ii) same Business Day's, in the case of Base Rate
Advances, notice to the Agent (to be received by the Agent prior to 12:00 noon
(New 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 A Advances comprising part of the same A
Borrowing in whole or ratably in part, together with accrued interest to the
date of such prepayment on the principal amount prepaid; provided, however, that
                                                         --------  -------
(x) each partial prepayment shall be in an aggregate principal amount not less
than $15,000,000 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 A Lenders in respect thereof pursuant to Section 9.04(b).

SECTION 2.12  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 to any A 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 A Lender (with a copy of such demand to the
Agent), pay to the Agent for the account of such A Lender additional amounts
sufficient to compensate such A Lender for such increased cost; provided, that,
                                                                --------  ----
the Borrower shall have no obligation to reimburse any A 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 A Lender, shall be conclusive and binding for all purposes, absent
manifest error.

(b)  If, at any time after the date of this Agreement, any A 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 A Lender or any corporation controlling such A Lender and
that the amount of such capital is increased by or based upon the existence of
such A Lender's commitment to lend hereunder and other commitments of this type,
then, upon demand by such A Lender (with a copy of such demand to the Agent),
the Borrower shall immediately pay to the Agent for the account of such A
Lender, from time to time as specified by such A Lender, additional amounts
sufficient to compensate such A Lender or such corporation in the light of such
circumstances, to the extent that such A Lender reasonably determines such
increase in capital to be allocable to the existence of such A Lender's
commitment to lend 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 A Lender undertaken by such A 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 A 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 2.12(a) or 2.12(b) or any other
provision of this Agreement, each A Lender agrees that if there is any
increase in any cost to or reduction in any amount receivable by
<PAGE>

such A Lender with respect to which the Borrower would be obligated to
compensate such A Lender pursuant to Sections 2.12(a) or 2.12(b), such A 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 A Lender; provided, however, that no A Lender shall
                                    --------  -------
be obligated to select an alternative Applicable Lending Office if such A Lender
determines that (i) as a result of such selection such A 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 A 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 2.12 shall survive the payment in full (after the Revolver Termination
Date) of all Obligations.

SECTION 2.13  Illegality.  (a) Notwithstanding any other provision of this
              ----------
Agreement, if any A 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 A 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 A
Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances shall
be suspended until the Agent shall notify the Borrower and the A 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 A 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 A Lenders then outstanding into A Advances of another Type in
accordance with Section 2.10.

(b)  Without affecting its rights under Section 2.13(a) or under any other
                                        ---------------
provision of this Agreement, each A Lender agrees that if it becomes unlawful or
impossible for such A Lender to make, maintain or fund its Eurodollar Rate
Advances as contemplated by this Agreement, such A Lender shall use reasonable
efforts to select an alternative Applicable Lending Office from which such A
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 A Lender shall be obligated to select an alternative
--------  -------
Applicable Lending Office if such A Lender determines that (i) as a result of
such selection such A Lender would be in violation of any applicable law,
regulation, or treaty, or would incur additional costs or expenses or (ii) such
selection would be inadvisable for regulatory reasons or inconsistent with the
interests of such A Lender.

SECTION 2.14  Extension of Revolver Termination Date.  At least 45 but not more
              --------------------------------------
than 60 days prior to the next Anniversary Date, the Borrower, by written notice
to the Agent, may request that the Revolver Termination Date be extended one
calendar year from its then current scheduled expiration. The Agent shall
promptly notify each A Lender of such request, and each A Lender shall in turn,
within 30 days prior to such next Anniversary Date, notify the Borrower and the
Agent in writing regarding whether such A Lender will consent to such extension.
If, and only if, the Majority Lenders consent in writing to such extension prior
to the tenth Business Day preceding such next Anniversary Date, the Revolver
Termination Date shall be so extended for one calendar year and references
herein to the "Revolver Termination Date" shall refer to such "Revolver
Termination Date" as so extended. If any A Lender does not consent to any
requested extension or any A Lender shall fail to deliver such notice to the
Borrower and the Agent as provided above, in which event such A Lender shall be
deemed not to have consented, (each such A Lender being a "Declining A Lender"),
such Declining A Lenders' A Commitments shall terminate on the scheduled
Revolver Termination Date then in effect for such Declining A Lender, and on
such scheduled Revolver Termination Date the Borrower shall repay in full the
principal amount of A Advances owing to such Declining A Lender, together with
accrued interest thereon to the date of payment of such principal amount, all
fees payable to such Declining A Lender and all other amounts payable to such
Declining A Lender under this Agreement (including, but not limited to any
increased costs or other additional amounts owing under Section 2.12, any
indemnification for Taxes or Other Taxes under Section 3.02, or any amounts
which may
<PAGE>

be required to be paid by the Borrower pursuant to Section 9.04(b)). It is
understood that no A Lender shall have any obligation whatsoever to agree to any
request made by the Borrower for an extension of the Revolver Termination Date.

                                  ARTICLE III
                       PAYMENTS, TAXES, EXTENSIONS, ETC.

SECTION 3.01  Payments and Computations.  (a) The Borrower shall make each
              -------------------------
payment hereunder with respect to Article II, the A Advances, the A Lenders, the
B Advances 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 (unless otherwise specified in Section
2.03 with respect to B Advances) at its address referred to in Section 9.02 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 commitment
fees ratably (other than amounts payable pursuant to Section 2.03, 2.08, 2.12,
2.14 or 3.02) to the A Lenders for the account of their respective Applicable
Lending Offices, and like funds relating to the payment of any other amount
payable to such A Lender to be distributed to the appropriate A Lender or A
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 9.07(d), 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 A
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 hereby authorizes the Agent and each A Lender if and to the
extent payment owed to the Agent or such A Lender is not paid when due hereunder
to charge from time to time against any or all of the Borrower's accounts with
the Agent or such A Lender any amount so due.

(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,
fixed rates of interest on B Advances 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 2.08 shall be made by an 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 excluding the last day) occurring in the period for which such interest or
commitment fees are payable. Each determination by the Agent (or, in the case of
Section 2.08, by an 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 commitment 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 A Lender or A Lenders hereunder that the
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 A Lender
or A Lenders on such due date an amount equal to the amount then due such A
Lender or A Lenders. If and to the extent that the Borrower shall not have so
made such payment in full to the Agent, each such A Lender shall repay to the
Agent forthwith on demand such amount distributed to such A Lender together with
interest thereon, for each day from the date such amount is distributed to such
A Lender until the date such A Lender repays such amount to the Agent, at the
Federal Funds Rate.

SECTION 3.02  Taxes.  (a) Any and all payments by the 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
<PAGE>

withholdings, and all liabilities with respect thereto, excluding, in the case
                                                        ---------
of each A Lender and the Agent, taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction under the laws of which such A Lender or the
Agent (as the case may be) is organized or any political subdivision thereof
and, in the case of each A Lender, taxes imposed on its income, and franchise
taxes imposed on it, by the jurisdiction of such A Lender'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 shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to any A Lender
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 3.02) such A Lender 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 shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.

(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, or otherwise with respect to, this Agreement
(hereinafter referred to as "Other Taxes").

(c)  The Borrower will reimburse each A Lender and the Agent for the full amount
of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 3.02) paid by
such A Lender or the Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
This reimbursement shall be made within 30 days from the date such A Lender or
the Agent (as the case may be) makes written demand therefor. The Agent and each
A Lender, as the case may be, shall give prompt (within 10 Business Days) notice
to the Borrower of the payment by the Agent or such A Lender, as the case may
be, of such Taxes or Other Taxes, and of the assertion by any governmental or
taxing authority that such Taxes or Other Taxes are due and payable, but the
failure to give such notice shall not affect the Borrower's obligations
hereunder to reimburse the Agent and each A Lender for such Taxes or Other
Taxes, except that the Borrower shall not 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. The Borrower shall not 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 A Lender, as the case may be.

(d)  Each A Lender 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 Bank and on the date of the Assignment and Acceptance
pursuant to which it becomes an A Lender in the case of each other A Lender, and
from time to time thereafter if requested in writing by the Borrower (but only
so long as such A Lender remains lawfully able to do so), shall provide the
Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
A Lender 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 or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States. If the form provided by an A Lender at the time such A Lender first
becomes a party to this Agreement indicates a United States interest withholding
tax rate in excess of zero, withholding tax at such rate shall be considered
excluded from "Taxes" as defined in Section 3.02(a).

(e)  For any period with respect to which an A Lender has failed to provide the
Borrower with the appropriate form described in Section 3.02(d) (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 sentence of subsection (d) above), such A Lender shall
not be entitled to
<PAGE>

indemnification under Section 3.02(a) with respect to Taxes imposed by the
United States; provided, however, that should an A Lender become subject to
               --------  -------
Taxes because of its failure to deliver a form required hereunder, the Borrower
shall take such steps as the A Lender shall reasonably request to assist the A
Lender to recover such Taxes.

(f)  Notwithstanding any contrary provisions of this Agreement, in the event
that an A Lender that originally provided such form as may be required under
Section 3.02(d) thereafter ceases to qualify for complete exemption from United
States withholding tax, such A Lender may assign its interest under this
Agreement to any assignee and such assignee shall be entitled to the same
benefits under this Section 3.02 as the assignor provided, that, the rate of
                                                 --------  ----
United States withholding tax applicable to such assignee shall not exceed the
rate then applicable to the assignor.

(g)  Without affecting its rights under this Section 3.02 or any provision of
this Agreement, each A Lender 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 A Lender or its Applicable Lending Office with respect to which the
Borrower would be obligated pursuant to this Section 3.02 to increase any
amounts payable to such A Lender or to pay any such Taxes or Other Taxes, such A
Lender 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 A Lender shall be obligated to select an alternative
--------  -------
Applicable Lending Office if such A Lender determines that (i) as a result of
such selection such A Lender would be in violation of an applicable law,
regulation, or treaty, or would incur additional costs or expenses or (ii) such
selection would be inadvisable for regulatory reasons or inconsistent with the
interests of such A Lender.

(h)  Each A Lender agrees with the Borrower that it will take all reasonable
actions by all usual means (i) to secure and maintain 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 A Lender'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 in
accordance with this Section 3.02 and (ii) otherwise to cooperate with the
Borrower to minimize the amount payable by the Borrower pursuant to this Section
3.02; provided, however, that no A Lender shall be obliged to disclose to the
      --------  -------
Borrower any information regarding its tax affairs or tax computations nor to
reorder its tax affairs or tax planning pursuant hereto.

(i)  Without prejudice to the survival of any other agreement of the Borrower
hereunder, the agreements and obligations of the Borrower contained in this
Section 3.02 shall survive the payment in full of the Obligations.

SECTION 3.03  Sharing of Payments, Etc.  If any A Lender shall obtain any
              ------------------------
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the A Advances made by it (other than
pursuant to Section 2.08, 2.12, 2.14 or 3.02) in excess of its ratable share of
payments on account of the A Advances obtained by all the A Lenders, such Lender
shall forthwith purchase from the other Lenders such participations in the A
Advances made by them as shall be necessary to cause such purchasing A Lender 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 A Lender, such purchase from each A Lender shall be rescinded and
such A Lender shall repay to the purchasing A Lender the purchase price to the
extent of such recovery together with an amount equal to such A Lender's ratable
share (according to the proportion of (i) the amount of such A Lender's required
repayment to (ii) the total amount so recovered from the purchasing A Lender) of
any interest or other amount paid or payable by the purchasing A Lender in
respect of the total amount so recovered.  The Borrower agrees that any A Lender
so purchasing a participation from another A Lender pursuant to this Section
3.03 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 A Lender were the direct creditor of the Borrower in the amount
of such participation.
<PAGE>

SECTION 3.04  Evidence of Debt.  (a) Each A Lender shall maintain in accordance
              ----------------
with its usual practice an account or accounts evidencing the indebtedness of
the Borrower to such A Lender resulting from each Advance owing to such A Lender
from time to time, including the amounts of principal and interest payable and
paid to such A Lender from time to time hereunder.

(b)  The Register maintained by the Agent pursuant to Section 9.07(c) shall
include a control account, and a subsidiary account for each A Lender, 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
A Lender hereunder, and (iv) the amount of any sum received by the Agent from
the Borrower hereunder and each A Lender's share thereof.

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

                                  ARTICLE IV
                             CONDITIONS OF LENDING

SECTION 4.01  Condition Precedent to Effectiveness of this Agreement.  This
              ------------------------------------------------------
Agreement shall be effective as of June 27, 2000 if on or before June 29, 2000
the Agent shall have received the following, in form and substance satisfactory
to the Agent and in sufficient copies for each Lender:

              (a)   Certified copies of all documents of the Borrower evidencing
     necessary corporate action and governmental approvals, if any, with respect
     to this Agreement.

              (b)   A certificate of the Secretary or an Assistant Secretary of
     the Borrower certifying the names and true signatures of the officers of
     the Borrower authorized to sign this Agreement and the other documents to
     be delivered hereunder.

              (c)   A favorable opinion of Borrower's General Counsel or
     Associate General Counsel, substantially in the form of Exhibit C hereto,
     and as to such other matters as any Lender through the Agent may reasonably
     request.

              (d)   A favorable opinion of Shearman & Sterling, counsel for the
     Agent, substantially in the form of Exhibit D hereto.

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

SECTION 4.02  Conditions Precedent to Each A Borrowing.  The obligation of each
              ----------------------------------------
A Lender to make an A Advance on the occasion of each A Borrowing (including the
initial A Borrowing) shall be subject to the further conditions precedent that
on the date of such A Borrowing the following statements shall be true (and each
of the giving of the applicable Notice of A Borrowing and the acceptance by the
Borrower of the proceeds of such A Borrowing shall constitute a representation
and warranty by the Borrower that on the date of such A Borrowing such
statements are true):

              (a)   The representations and warranties contained in Section 5.01
     (other than Section 5.01(e)) are correct on and as of the date of such A
     Borrowing, before and after giving effect to such A Borrowing, and to the
     application of the proceeds therefrom, as though made on and as of such
     date, and

                    (b)  (i) No event has occurred and is continuing, or would
     result from such A Borrowing or from the application of the proceeds
     therefrom, which constitutes an Event of
<PAGE>

     Default or Default and (ii) no event has occurred and is continuing which
     constitutes an "Event of Default" or a "Default" under the 364-Day Credit
     Agreement.

SECTION 4.03  Conditions Precedent to Each B Borrowing.  The obligation of each
              ----------------------------------------
A Lender which is to make a B Advance on the occasion of a B Borrowing
(including the initial B Borrowing) to make such B Advance as part of such B
Borrowing is subject to the conditions precedent that (i) the Agent shall have
received the written confirmatory Notice of B Borrowing with respect thereto or
the notices from the Borrower contemplated by the second sentence of Section
2.03(a)(v) and (ii) on the date of such B Borrowing the following statements
shall be true (and each of the giving of the applicable Notice of B Borrowing
and the acceptance by the Borrower of the proceeds of such B Borrowing shall
constitute a representation and warranty by the Borrower that on the date of
such B Borrowing such statements are true):

              (a)   The representations and warranties contained in Section 5.01
     (other than Section 5.01(e)) are correct on and as of the date of such B
     Borrowing, before and after giving effect to such B Borrowing and to the
     application of the proceeds therefrom, as though made on and as of such
     date,

              (b)   (i) No event has occurred and is continuing, or would result
     from such B Borrowing or from the application of the proceeds therefrom,
     which constitutes an Event of Default or Default and (ii) no event has
     occurred and is continuing which constitutes an "Event of Default" or a
     "Default" under the 364-Day Credit Agreement, and

              (c)   No event has occurred and no circumstance exists as a result
     of which the information concerning the Borrower that has been provided to
     the Agent and each A Lender by the Borrower in connection herewith would,
     taken as a whole, include an untrue statement of a material fact or omit to
     state any material fact or any fact necessary to make the statements
     contained therein, in the light of the circumstances under which they were
     made, not misleading.

                                   ARTICLE V
                        REPRESENTATIONS AND WARRANTIES

SECTION 5.01  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. The Borrower and
     each of its Subsidiaries possess all corporate powers 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 the Borrower of
     this Agreement are within the Borrower's corporate powers, have been duly
     authorized by all necessary corporate action, and do not contravene (i) the
     Borrower's charter or by-laws or (ii) law or any contractual restriction
     binding on or affecting the Borrower or its properties.

              (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 the Borrower of
     this Agreement.

              (d)   This Agreement is the legal, valid and binding obligation of
     the Borrower enforceable against the Borrower in accordance with its terms,
     except as limited by bankruptcy,
<PAGE>

     insolvency or other laws of general application relating to or effecting
     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 at January 29, 2000, 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, copies of which have been furnished to each Lender, 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, and since
     January 29, 2000, there has been no material adverse change in the
     condition (financial or otherwise), operations, properties or prospects of
     the Borrower and its Subsidiaries taken as a whole.

              (f)   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, 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 this
     Agreement.

              (g)   Following the application of the proceeds of each Advance,
     not more than 25 percent of the value of the assets (either of the Borrower
     only or of the Borrower and its Subsidiaries on a Consolidated basis) which
     are subject to any restriction on Liens set forth in this Agreement or in
     any agreement or instrument between the Borrower and any Lender or any
     Affiliate of any Lender relating to Debt and within the scope of Section
     8.01(d) will consist of Margin Stock.

              (h)   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.

              (i)   Set forth on Schedule VI 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 any ERISA Affiliate is a party or
     subject to, or has any obligation to make payments, to, any Multiemployer
     Plan.

                                  ARTICLE VI
                           COVENANTS OF THE BORROWER

SECTION 6.01  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 Liens), 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.
<PAGE>

              (b)   Preservation of Corporate Existence, Etc.  Preserve and
                    ----------------------------------------
     maintain, and cause each of its Subsidiaries to preserve and maintain, its
     corporate existence, 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 hereunder or the ability of the Borrower to
     perform its obligations hereunder.

              (c)   Visitation Rights.  Permit the Agent and any Lender or any
                    -----------------
     agents or representatives thereof from time to time during normal business
     hours to examine and make copies of and abstracts from the records and
     books of account of, and upon reasonable prior notice to visit the
     properties of, the Borrower and its Subsidiaries during reasonable business
     hours, without hindrance or delay, 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 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.
<PAGE>

              (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 $1,000,000;

                    (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 $1,000,000) 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 $1,000,000 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)  Guaranty.  Within ten Business Days after the request of the
                    --------
     Majority Lenders made through the Agent, cause its Subsidiaries designated
     in such request to enter into and deliver a guaranty of the Obligations,
     such guaranty to be in form and substance satisfactory to the Majority
     Lenders.

SECTION 6.02  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, other than Permitted
     Liens and Liens upon or with respect to Margin Stock.

              (b)   Debt.  Create or suffer to exist, or permit any of its
                    ----
     Subsidiaries to create or suffer to exist, any Debt if, immediately after
     giving effect to the incurrence of such Debt and the receipt and
     application of any proceeds thereof, the Borrower and its Subsidiaries, on
     a Consolidated basis, would be in violation of the financial covenant
     specified in Section 6.03 hereof.

              (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 that any Subsidiary of the Borrower may merge
     or consolidate with or into, or dispose of assets to, any other Subsidiary
     of the Borrower and except that any Subsidiary of the Borrower may merge
     into or dispose of assets to the Borrower and, subject to Section
     6.02(d)(iii), the Borrower may merge or consolidate with or into, and any
     Subsidiary of the Borrower may merge or consolidate with or into, any other
     Person, provided in each case that, immediately after giving effect to such
             --------
     proposed transaction, no Event of Default or Default shall exist, and in
     the case of any merger or consolidation to which the Borrower is a party,
     the Person into which the Borrower shall be merged or formed by any such
     consolidation shall be a
<PAGE>

     corporation organized and existing under the laws of the United States of
     America or any State thereof and shall assume the Borrower's obligations
     hereunder in an agreement or instrument in form and substance reasonably
     satisfactory to the Agent.

              (d)   Asset Acquisition, Investments, Mergers.
                    ---------------------------------------

                    (i)   Asset Acquisitions.  Purchase, or permit any of its
                          ------------------
              Subsidiaries to purchase, all or substantially all the assets of
              any Person (an "Asset Acquisition") unless (A) if such Asset
                                                  ------
              Acquisition involves the purchase of Retail Assets, the purchase
              price of the Retail Assets to be purchased in such Asset
              Acquisition is less than 50% of the book value of the Borrower's
              Consolidated Total Assets immediately prior to such Asset
              Acquisition or (B) if such Asset Acquisition involves the purchase
              of Non-Retail Assets, the purchase price of the Non-Retail Assets
              to be purchased in such Asset Acquisition is less than 25% of the
              book value of the Borrower's Consolidated Total Assets immediately
              prior to such Asset Acquisition and (C) immediately prior to and
              after giving effect to such Asset Acquisition no Event of Default
              or Default shall exist.

                    (ii)  Investments.  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) if
                                                                   ------
              such Investment is in a Person predominantly engaged in the Retail
              Business, the purchase price and dollar amount of capital
              contributions made with respect to such Investment is less than
              50% of the Borrower's Consolidated Total Assets immediately prior
              to such Investment or (B) if such Investment is in a Person
              engaged predominantly in the Non-Retail Business, the purchase
              price and dollar amount of capital contributions made with respect
              to such Investment is less than 25% of the Borrower's Consolidated
              Total Assets immediately prior to such Investment and (C) 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. The foregoing limitation shall not
              restrict the Borrower's and its Subsidiaries' ability to make
              investments in the instruments described in Schedule V hereto, as
              such Schedule may be amended from time to time by the Borrower.
              The Borrower shall provide the Agent and each Lender a copy of
              each change or amendment made to Schedule V promptly after each
              such change or amendment thereof.

                    (iii) Mergers.  Consummate, or permit the consummation of,
                          -------
              any merger or consolidation (regardless of whether it is otherwise
              permitted by Section 6.02(c)) if immediately after giving effect
              to such merger or consolidation the book value of Consolidated
              Non-Retail Assets of the surviving corporation is greater than 25%
              of the book value of Borrower's Consolidated Total Assets, or the
              book value of the Consolidated Retail Assets of the surviving
              corporation is greater than 50% of the Borrower's Consolidated
              Total Assets, in each case immediately prior to such merger or
              consolidation provided, that, Subsidiaries of the Borrower may
                            --------  ----
              merge into or with the Borrower or any other Subsidiary of the
              Borrower without regard to the restrictions of this Section
              6.02(d)(iii).

              (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.
<PAGE>

SECTION 6.03  Financial Covenant.  The Borrower will not, without the written
              ------------------
consent of the Majority Lenders, permit the ratio of Debt on the last day of any
Fiscal Quarter of the Borrower to EBITDA for the period of four consecutive
Fiscal Quarters of the Borrower ending on such day to be greater than 3.00 to
1.00.

SECTION 6.04  Reporting Requirements.  The Borrower will furnish to the Lenders:
              ----------------------

              (i)    as soon as available and in any event within 60 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 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
     6.03 (which certificate shall contain the computations used by such chief
     financial officer in determining such compliance or non-compliance);

              (ii)   as soon as available and in any event within 120 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 in a manner acceptable to the Majority Lenders
     by Deloitte & Touche or other independent public accountants reasonably
     acceptable to the Majority Lenders;

              (iii)  within 120 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
     6.03 (which certificate shall contain the computations used by such chief
     financial officer in determining such compliance or non-compliance);

              (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 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;
<PAGE>

               (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; and

               (viii) such other information respecting the condition or
     operations, financial or otherwise, of the Borrower or any of its
     Subsidiaries as any Lender through the Agent may from time to time
     reasonably request.

                                  ARTICLE VII
                               EVENTS OF DEFAULT

SECTION 7.01   Events of Default.  If any of the following events ("Events of
               -----------------
Default") shall occur and be continuing:

               (a)    The Borrower shall fail to pay any principal of any
     Advance when the same becomes due and payable; or shall fail to pay any
     interest on any Advance, fees or any other amounts hereunder within two
     days after the same become due and payable by it; or

               (b)    Any representation or warranty made by the Borrower herein
     (whether made on behalf of itself or otherwise) or by the Borrower (or any
     of its officers) in connection with this Agreement shall prove to have been
     incorrect in any material respect when made; or

               (c)    The Borrower shall fail to perform or observe (i) the
     covenant contained in Section 6.03; or (ii) any term, covenant or agreement
     contained in Section 6.02(c) or (d) for a period of five days after written
     notice thereof shall have been given to the Borrower by the Agent or any
     Lender; or (iii) any other term, covenant or agreement contained in this
     Agreement 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 the
     Borrower by the Agent or any Lender; or

               (d)    The Borrower or any of its Subsidiaries 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 the Borrower or such Subsidiary (as the case may be),
     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 any other event shall
     occur or condition shall exist under any agreement or instrument relating
     to any such Debt 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 (other than any such Debt owed to a Lender or an
     Affiliate of a Lender if such event or condition shall relate solely to a
     restriction on the pledge or other disposition of Margin Stock owned by the
     Borrower or any of its Subsidiaries); 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, in each case prior to the stated maturity thereof; or

               (e)    The Borrower or any of its Subsidiaries 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
<PAGE>

     general assignment for the benefit of creditors; or any proceeding shall be
     instituted by or against the Borrower or any of its Subsidiaries 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 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 the Borrower or any of its Subsidiaries shall take any corporate action
     to authorize any of the actions set forth above in this subsection (e); or

               (f)  Any judgment or order for the payment of money in excess of
     $50,000,000 shall be rendered against the Borrower or any of its
     Subsidiaries 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 ten 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; or

               (g)  a Change of Control shall have occurred;

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 A Lender to make Advances to be terminated, whereupon the
same shall forthwith terminate, and/or (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; provided, however, that in the event of an actual or deemed
                 --------  -------
entry of an order for relief with respect to the Borrower or any of its
Subsidiaries under the Federal Bankruptcy Code, the obligation of each A Lender
to make A 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 shall
automatically be terminated.

                                 ARTICLE VIII
                                   THE AGENT

SECTION 8.01   Authorization and Action.  Each Lender 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 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 unless the distribution
of such notice is otherwise provided for herein.
<PAGE>

SECTION 8.02  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 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 9.07; (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,
telegram, cable or telex) believed by it to be genuine and signed or sent by the
proper party or parties.

SECTION 8.03  CUSA and Affiliates.  With respect to CUSA's A Commitment and the
              -------------------
Advances made by it, CUSA 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; and the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include CUSA in its individual capacity. CUSA and each of its
Affiliates (and, as applicable, any of its officers and directors) may 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 and without any duty to
account therefor to the Lenders.

SECTION 8.04  Lender Credit Decision.  Each Lender acknowledges that it has,
              ----------------------
independently and without reliance upon the Agent or any other Lender and based
on the financial statements referred to in Section 5.01 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 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 8.05  Indemnification.  The Lenders agree to indemnify the Agent
              ---------------
(to the extent not reimbursed by the Borrower), ratably, according to their
respective principal amounts of A Advances then outstanding or if no A Advances
are outstanding, ratably according to the respective amounts of their A
Commitments), 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 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,
<PAGE>

penalties, actions, judgments, suits, costs expenses or disbursements, this
Section 8.05 applies whether any such investigation, litigation or proceeding is
brought by the Agent, any Lender or a third party.

SECTION 8.06  Successor Agent.  The Agent may resign at any time by giving ten
              ---------------
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 $50,000,000.  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 VIII shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.

                                  ARTICLE IX
                                 MISCELLANEOUS

SECTION 9.01  Amendments, Etc.
              ---------------

(a)  Majority Lenders. 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 shall,
                  --------  -------
unless in writing and signed by all the A Lenders, do any of the following: (i)
waive any of the conditions specified in Section 4.01 or 4.02 as they relate to
A Borrowings and A Advances, (ii) increase the A Commitments of the A Lenders or
subject the A Lenders to any additional obligations, (iii) reduce the principal
of, or interest on, the A Advances or any fees or other amounts payable
hereunder to the A Lenders, (iv) postpone any date fixed for any payment of
principal of, or interest on, the A Advances or any fees or other amounts
payable hereunder to the A Lenders (other than as permitted under Section 2.14),
(v) change the percentage of the A Commitments or of the aggregate unpaid
principal amount of the A Advances, or the number of A Lenders, which shall be
required for the A Lenders or any of them to take any action hereunder or (vi)
amend this subsection (a) of this Section 9.01.

(b)  Agent. No amendment, waiver or consent given or effected pursuant to this
     -----
Section 9.01 shall, unless in writing and signed by the Agent in addition to the
A Lenders required above to take such action, affect the rights, obligations or
duties of the Agent under this Agreement.

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

SECTION 9.02  Notices, Etc.  All notices and other communications provided for
              ------------
hereunder shall be in writing (including telecopier, telegraphic, telex or cable
communication) and mailed, sent by overnight courier, telecopied, telegraphed,
telexed, cabled or delivered, if to the Borrower, at its address at 900 Cherry
Avenue, San Bruno, CA 94066 Attention: Treasurer; if to any Lender, at its
Domestic Lending Office specified opposite its name on Schedule II hereto; if to
any other Lender, at its Domestic Lending Office specified in the Assignment and
Acceptance pursuant to which it became a Lender; if to the Agent, at its address
at 399 Park Avenue, New York, New York 10043, Attention: Credit Administration;
with a copy, in the case of notices to the Agent, to Citicorp North America,
Inc., One Sansome Street, San Francisco,
<PAGE>

California, Attention: Carolyn Wendler, 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, when telecopied or delivered to the telegraph company, be effective
when received or delivered to the cable company, respectively; and when
delivered by hand, be effective upon delivery except that notices and
communications to the Agent pursuant to Article II or VIII shall not be
effective until received by the Agent.

SECTION 9.03  No Waiver; Remedies.  No failure on the part of any Lender 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 9.04  Costs and Expenses.  (a) The Borrower agrees to pay on demand all
              ------------------
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 fees and out-of-pocket expenses of counsel for the Agent with respect
thereto and with respect to advising the Agent as to their respective rights and
responsibilities under this Agreement with respect thereto. The Borrower further
agrees to pay on demand all costs and expenses of the Agent and each Lender
(including, without limitation, reasonable counsel fees and expenses), incurred
in connection with the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Agreement and the other documents to be
delivered hereunder, including, without limitation, reasonable counsel fees and
expenses in connection with the enforcement of their respective rights
hereunder.

(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 A
Advance, as a result of a payment or Conversion pursuant to Section 2.09(d),
2.11, 2.13 or 2.14 or acceleration of the maturity of the Advances pursuant to
Section 7.01 or for any other reason, the Borrower shall, upon demand by any A
Lender (with a copy of such demand to the Agent), pay to the Agent for the
account of such A Lender any amounts required to compensate such A Lender for
any additional losses, costs or expenses which it may reasonably incur as a
result of such payment or Conversion, 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 A
Lender to fund or maintain such A Advance.

(c)  The Borrower agrees to indemnify and hold harmless each of the Agent, each
Lender and each of their Affiliates and their respective officers, directors,
employees, agents and advisors (each, an "Indemnified Party") from and against
any and all claims, damages, liabilities and expenses (including, without
limitation, 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 by the Borrower, 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 9.04 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
2.08, 2.12(a), 2.13 or 9.04(b) of this Agreement each Lender shall be deemed to
have funded its Eurodollar Rate Advances with proceeds of Dollar deposits in the
London interbank market.
<PAGE>

SECTION 9.05  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 7.01 to authorize the Agent to
declare the Advances due and payable pursuant to the provisions of Section 7.01,
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 the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under this
Agreement to such Lender, whether or not such Lender shall have made any demand
under this Agreement and although such obligations may be unmatured.  Each
Lender agrees promptly to notify the Borrower 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
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 9.06  Binding Effect.  This Agreement shall become effective when it
              --------------
shall have been executed by the Borrower and the Agent and when the Agent shall
have been notified by each Bank that such Bank has executed it and thereafter
shall be binding upon and inure to the benefit of the Borrower, the Agent and
each Lender and their respective successors and assigns, except that the
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 9.07  Assignments and Participations.  (a)  Each Lender may, and if
              ------------------------------
demanded by the Borrower (following a demand by such Lender pursuant to Section
2.08, 2.12 or 3.02, after such Lender has declined to vote in favor of extension
of the Revolver Termination Date pursuant to Section 2.14, or after any Lender
has assigned all or any portion of its rights and obligations under this
Agreement to any Affiliate without the consent of the Borrower, upon at least 20
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
A Commitment and the A Advances owing to it); provided, however, that (i) each
                                              --------  -------
such respective assignment shall be of a percentage of all rights and
obligations under this Agreement (other than any B Advances) in respect of the
assigning A Lender's A Commitment and A Advances that is constant and not
varying over time, (ii) the respective amounts of the rights and obligations
under the A Commitment and A Advances of the assigning A Lender, being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall in no event be less than
5% of all such rights and obligations or less than $5,000,000 (or an integral
multiple of $500,000 in excess thereof), (iii) each such assignment shall be to
an Eligible Assignee consented to by the Borrower (which shall not unreasonably
withhold its consent); provided, that, the Borrower's consent need not be
                       --------  ----
obtained if such assignment is made 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 9.07(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 9.07(a) unless and until such Lender shall
have received one 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, and (vi) the parties
to each such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register,
<PAGE>

an Assignment and Acceptance, together with a processing and recordation fee of
$2,000; 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 a 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 or the performance or observance by the Borrower 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 5.01 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, 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 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; 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 a Lender.

(c)  The Agent shall maintain at its address referred to in Section 9.02 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 A Commitment
of, and principal amount of the Advances owing to, each Lender 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 a 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 B 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.

(e)  Each Lender may assign or participate to one or more banks or other
entities any B Advance held by it without regard to any of the restrictions
placed on assignments elsewhere in this Section 9.07 or this Agreement;
provided, that, any participation shall be made in accordance with subsection
--------  ----
(f) hereof and provided, further, that any assignee of a B Advance that is not
               --------  -------
then a Lender hereunder shall not be entitled to demand any payments under
Section 2.08, 2.12 or 3.02 hereof and shall have no voting rights or other
<PAGE>

rights of a Lender hereunder other than the right to demand and receive interest
and principal payments at the times when due with respect to the B Advance owned
by it.

(f)  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 A Commitment to the
Borrower hereunder) 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 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 a 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 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 or other amounts or such
fees, or (iii) extend the Revolver Termination Date.

(g)  Upon written request of the Borrower to an A Lender, such A Lender shall,
to the extent consistent with the policies of such A Lender, inform the Borrower
of the Dollar amount of any Full Term Participation (as hereinafter defined)
that such A Lender has entered into; provided, however, that no A Lender shall
                                     --------  -------
be obligated to disclose such information if the disclosure thereof would
constitute a violation of law or regulation or violate any confidentiality
agreement to which such A Lender is subject. For the purposes of this subsection
(g), "Full Term Participation" means a participation by an A Lender to another
Person whereby such other Person has purchased (pursuant to a participation
agreement) all or a portion of such A Lender's A Commitment from the effective
date of such participation agreement to the Revolver Termination Date.

(h)  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 prompt 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.

SECTION 9.08  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 9.09  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 9.10  Confidentiality.  Each Lender and the Agent agrees that it will
              ---------------
not disclose to any third party any written information marked "Confidential"
                                                                ------------
provided to it by the Borrower; provided, that, the foregoing will not (i)
                                --------  ----
restrict the ability of the Agent, the Lenders and any loan participants from
freely exchanging such information among themselves (and their respective
employees, attorneys, agents and advisors), (ii) restrict the ability to
disclose such 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 such information to such
<PAGE>

Eligible Assignee or participant or (iii) prohibit the disclosure of such
information to the extent such information (a) becomes publicly available, (b)
becomes available through a Person not a Subsidiary, (c) is required to be
disclosed pursuant to court order, subpoena, other legal process, regulatory
request or otherwise by law or (d) is disclosed in litigation with the Borrower
or any of its Subsidiaries.

SECTION 9.11  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 9.12  Entire Agreement.  This Agreement sets forth the entire agreement
              ----------------
of the parties with respect to its subject matter and, except for the letter
agreement referred to in Sections 2.04(c), supersedes all previous
understandings, written or oral, in respect thereof.

SECTION 9.13  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 9.14  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
certified mail, return receipt requested, or by delivering of a copy of such
process to such party at its address specified in Section 9.02 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 9.14 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 9.15  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
              -------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SECTION 9.16  WAIVER OF JURY TRIAL.  EACH OF THE BORROWER, THE AGENT AND THE
              --------------------
LENDERS 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
OR THE ADVANCES, OR THE ACTIONS OF THE AGENT OR ANY LENDER IN CONNECTION WITH
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
<PAGE>

                                      S-1

          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/ Heidi Kunz
                                      -------------------------------------
                                            Heidi Kunz
                                            Executive Vice President
                                            and Chief Financial Officer

                                  THE AGENT:
                                  ---------

                                  CITICORP USA, INC.

                                  By  /s/ Carolyn Wendler
                                      -------------------------------------
                                            Carolyn Wendler
                                            Managing Director
<PAGE>

                                      S-2

                                  THE BANKS:
                                  ---------

                                  CITICORP USA, INC.

                                  By  /s/ Carolyn Wendler
                                      -------------------------------------
                                            Carolyn Wendler
                                            Managing Director

                                  BANK OF AMERICA, N.A.

                                  By  /s/ Kimberly A. Whitney
                                      -------------------------------------
                                            Kimberly A. Whitney
                                            Managing Director

                                  THE HONG KONG AND SHANGHAI
                                  BANK CORPORATION LIMITED

                                  By  /s/ John Rynne
                                      -------------------------------------
                                            John Rynne
                                            Vice President

                                  MORGAN GUARANTY TRUST
                                  COMPANY OF NEW YORK

                                  By  /s/ Robert Bottamedi
                                      -------------------------------------
                                            Robert Bottamedi
                                            Vice President
<PAGE>

                                      S-3

                                  THE SUMITOMO BANK LIMITED

                                  By  /s/ Azar Shakeri
                                      -------------------------------------
                                            Azar Shakeri
                                            Vice President and Manager

                                  DEUTSCHE BANK AG NEW YORK
                                  BRANCH AND/OR CAYMAN ISLANDS
                                  BRANCH

                                  By  /s/ Alexander Karow
                                      -------------------------------------
                                            Alexander Karow
                                            Vice President

                                  By  /s/ Sheryl L. Paynter
                                      -------------------------------------
                                            Sheryl L. Paynter
                                            Vice President

                                  SOCITETE GENERALE

                                  By  /s/ Carol Radice
                                      -------------------------------------
                                            Carol Radice
                                            Vice President

                                  THE FUJI BANK, LIMITED

                                  By  /s/ Masahito Fukuda
                                      -------------------------------------
                                            Masahito Fukuda
                                            Senior Vice President
<PAGE>

                                      S-4

                                  ABN AMRO BANK N.V.

                                  By  /s/ John A. Miller
                                      -------------------------------------
                                            John A. Miller
                                            Senior Vice President

                                  THE BANK OF NEW YORK

                                  By  /s/ Charlotte Sohn Fuiks
                                      -------------------------------------
                                            Charlotte Sohn Fuiks
                                            Vice President

                                  BANK ONE, NA f/k/a THE FIRST
                                  NATIONAL BANK OF CHICAGO

                                  By  /s/ Eva Drinis
                                      -------------------------------------
                                            Eva Drinis
                                            Assistant Vice President

                                  U.S. BANK NATIONAL ASSOCIATION

                                  By  /s/ Janet Jordan
                                      -------------------------------------
                                            Janet Jordan
                                            Vice President

                                  FLEET NATIONAL BANK

                                  By  /s/ Susan L. Pardus-Galland
                                      -------------------------------------
                                            Susan L. Pardus-Galland
                                            Director

                                  WELLS FARGO BANK, NATIONAL
                                  ASSOCIATION

<PAGE>

                                      S-5

                                  By  /s/ Lee Jensen
                                      -------------------------------------
                                            Lee Jensen
                                            Vice President

                                  By  /s/ June P. Hanson
                                      -------------------------------------
                                            June P. Hanson
                                            Assistant Vice President
<PAGE>

                                      S-1

                                  SCHEDULE I

                                 COMMITTMENTS

-------------------------------------------------------------------------
Lender                                                A Commitment ($)
------                                                ----------------
-------------------------------------------------------------------------
Citicorp USA, Inc.                                    $ 19,777,777.78
-------------------------------------------------------------------------
Bank of America, N.A.                                 $ 15,555,555.56
-------------------------------------------------------------------------
The Hong Kong and Shanghai Bank                       $ 15,555,555.56
Corporation Limited
-------------------------------------------------------------------------
Morgan Guaranty Trust Company of New York             $ 10,000,000.00
-------------------------------------------------------------------------
The Sumitomo Bank Limited                             $  8,000,000.00
-------------------------------------------------------------------------
Deutsche Bank AG New York Branch and/or               $  8,333,333.33
Cayman Islands Branch
-------------------------------------------------------------------------
Societe Generale                                      $  7,222,222.22
-------------------------------------------------------------------------
The Fuji Bank, Limited                                $  7,222,222.22
-------------------------------------------------------------------------
ABN AMRO Bank N.V.                                    $ 15,555,555.56
-------------------------------------------------------------------------
The Bank of New York                                  $  7,222,222.22
-------------------------------------------------------------------------
Bank One, NA f/k/a The First National                 $  8,333,333.33
Bank of Chicago
-------------------------------------------------------------------------
U.S. Bank National Association                        $  7,222,222.22
-------------------------------------------------------------------------
Fleet National Bank                                   $ 10,000,000.00
-------------------------------------------------------------------------
Wells Fargo Bank, National Association                $ 10,000,000.00
-------------------------------------------------------------------------

-------------------------------------------------------------------------
TOTAL                                                 $150,000,000.00
-------------------------------------------------------------------------
<PAGE>

                               Sch. II Page - 1

                                  SCHEDULE II

<TABLE>
<CAPTION>

        Name of Bank             Domestic Lending Office              Eurodollar Lending Office

-------------------------------------------------------------------------------------------------------
<S>                              <C>                                  <C>
Citicorp USA, Inc.               One Sansome Street, 28/th/ Floor     One Sansome Street, 28/th/ Floor
                                 San Francisco, CA 94104              San Francisco, CA 94104
                                 Attn: Carolyn Wendler                Attn: Carolyn Wendler
                                 Tel: 415-627-6363                    Tel: 415-627-6363
                                 Fax: 415-433-0307                    Fax: 415-433-0307
-------------------------------------------------------------------------------------------------------

Bank of America, N.A.            1850 Gateway Blvd. Concord,          1850 Gateway Blvd. Concord,
                                 CA 94520                             CA 94520
                                 Attn.: B. Manduk                     Attn.: B. Manduk
                                 Tel: 925-675-7537                    Tel: 925-675-7537
                                 Fax: 925-969-2855                    Fax: 925-969-2855
-------------------------------------------------------------------------------------------------------

HSBC Bank USA                    140 Broadway, 4th Floor              10 - Lower Thames St.
                                 New York, NY 10005                   3rd Floor
                                 Attn: Anatasia                       London EC3R 6HH
                                       Micklethwaite                  United Kingdom
                                 Tel.: 212-658-1403                   Telex: 885945 HSBC LDG
                                 Fax: 212-658-2804                    Fax: 011-44-171-260-0930
-------------------------------------------------------------------------------------------------------

Morgan Guaranty Trust            Morgan Guaranty Trust                Morgan Guaranty Trust
Company of New York              Company of New York                  Company of New York
                                 60 Wall Street                       c/o J.P. Morgan Services
                                 New York, NY 10260                   Euro-Loan Servicing Unit
                                 Attn: Robert Bottamedi               500 Stanton Christiana Rd.
                                 Tel: 212-648-5014                    Newark, DE 19713
                                 Fax: 212-648-1349                    Attn: Jeannie Matson
                                                                      Tel: 302-634-1938
                                                                      Fax: 302-634-1852
-------------------------------------------------------------------------------------------------------

Deutsche Bank AG, New York       31 West 52nd St.                     31 West 52nd St.
Branch and/or Cayman Islands     New York, NY 10019                   New York, NY 10019
Branch                           Attn: Carmen Melendez                Attn: Carmen Melendez
                                 Tel: 212-469-4008                    Tel: 212-469-4008
                                 Fax: 212-469-4138                    Fax: 212-469-4138

-------------------------------------------------------------------------------------------------------

The Sumitomo Bank, Limited,      555 California Street                555 California Street
San Francisco Branch             Suite 3350                           Suite 3350
</TABLE>
<PAGE>

                               Sch. II Page - 2

<TABLE>
<CAPTION>
        Name of Bank             Domestic Lending Office              Eurodollar Lending Office

-------------------------------------------------------------------------------------------------------
<S>                              <C>                                  <C>
                                 San Francisco, CA 94104              San Francisco, CA 94104
                                 Attn: San Topham                     Attn: San Topham
                                 Tel: 415-616-3026                    Tel: 415-616-3026
                                 Fax: 415-398-3580                    Fax: 415-398-3580

-------------------------------------------------------------------------------------------------------

ABN AMRO Bank, N.V.              208 South LaSalle, Ste. 1500         208 South LaSalle, Ste. 1500
                                 Chicago, IL 60604-1003               Chicago, IL 60604-1003
                                 Attn: John Miller                    Attn: John Miller
                                 Tel: 312-992-5110                    Tel: 312-992-5110
                                 Fax: 312-992-5111                    Fax: 312-992-5111
-------------------------------------------------------------------------------------------------------

Societe Generale                 2029 Century Park East               2029 Century Park East
                                 Suite 2900                           Suite 2900
                                 Los Angeles, CA 90067                Los Angeles, CA 90067
                                 Attn: Tuliuh Wu                      Attn: Tuliuh Wu
                                 Tel: 310-788-7117                    Tel: 310-788-7117
                                 Fax: 310-203-0539                    Fax: 310-203-0539
-------------------------------------------------------------------------------------------------------

The Fuji Bank, Limited           333 South Hope Street,               333 South Hope Street,
                                 39/th/ Floor                         39/th/ Floor
                                 Los Angeles, CA 90071                Los Angeles, CA 90071
                                 Attn: Tami Kita                      Attn: Tami Kita
                                 Tel: 213-253-4163                    Tel: 213-253-4163
                                 Fax: 213-253-4178                    Fax: 213-253-4178
-------------------------------------------------------------------------------------------------------

The Bank of New York             One Wall Street, 8/th/ Floor         One Wall Street, 8/th/ Floor
                                 New York, NY 10286                   New York, NY 10286
                                 Attn: Madlyn Myrick                  Attn: Madlyn Myrick
                                 Tel: 212-635-1366                    Tel: 212-635-1366
                                 Fax: 212-635-1481                    Fax: 212-635-1481
-------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

                               Sch. II Page - 3

<TABLE>
---------------------------------------------------------------------------------------------------------
<S>                                  <C>                                  <C>
U.S. Bank National Association       555 S.W. Oak Street, PL-4            555 S.W. Oak Street, PL-4
                                     Portland, OR 97204                   Portland, OR 97204
                                     Attn: Jan Knox                       Attn: Jan Knox
                                     Tel: 503-275-6561                    Tel: 503-275-6561
                                     Fax: 503-275-4600                    Fax: 503-275-4600
---------------------------------------------------------------------------------------------------------

Wells Fargo Bank, National           420 Montgomery Street                420 Montgomery Street
Association                          9/th/ Floor                          9/th/ Floor
                                     San Francisco, CA 94104              San Francisco, CA 94104
                                     Attn: Judy Chan                      Attn: Judy Chan
                                     Tel: 415-477-5433                    Tel: 415-477-5433
                                     Fax: 415-979-0675                    Fax: 415-979-0675

=========================================================================================================

Fleet National Bank                  One Federal Street                   One Federal Street
                                     Boston, MA 02110                     Boston, MA 02110
                                     Attn: Dwayne Nelson                  Attn: Dwayne Nelson
                                     Tel: 617-346-4223                    Tel: 617-346-4223
                                     Fax: 617-346-0595                    Fax: 617-346-0595
=========================================================================================================

Bank One, NA f/k/a The First         1 Bank One Plaza                     1 Bank One Plaza
National Bank of Chicago             Chicago, IL 60670                    Chicago, IL 60670
                                     Attn: Medy Hernandez                 Attn: Medy Hernandez
                                     Tel: 312-732-8297                    Tel: 312-732-8297
                                     Fax: 312-732-4840                    Fax: 312-732-4840

=========================================================================================================
</TABLE>
<PAGE>

                                 Schedule III

                                EXISTING LIENS

                                     None
<PAGE>

                                  Schedule IV

                               CHANGE OF CONTROL

1.   Donald G. Fisher

2.   Doris Fisher

3.   Millard S. Drexler

4.   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.

5.   The executive officers of The Gap, Inc. as of June 27, 2000.
<PAGE>

                                  Schedule V

                             PERMITTED INVESTMENTS

1.   Obligations issued or guaranteed by the United States Government.

2.   Commercial paper of issuers having a rating of P-1 by Moodys or A-1 by S&P
    or a rating of not less than P-2 by Moodys and A-2 by S&P.

3.   Banker's acceptances, certificates of deposit and eurodollar time deposits
    (including bank money market funds) from commercial banks with commercial
    paper ratings (or equivalent long-term debt ratings) as specified in 2
    above.

4.   Tax-exempt securities rated Aaa by Moodys or AAA by S&P or Aa by Moodys or
    AA by S&P or A by Moodys or A by S&P.

5.   Secured repurchase agreements involving any of the instruments referred to
    in 1-4 above and having the ratings specified in 1-4 above, as applicable,
    with an institution or institutions whose commercial paper (or long term
    debt rating) satisfies the criteria specified in 2 above.

6.   Money market preferred stock (not issued by a thrift, saving and loans
    institution or analogous institution) rated Aaa by Moodys or AAA by S&P.

7.   Loan participations purchased from major money center banks provided the
    borrower associated with such participation has a long-term debt rating of
    P-1 by Moodys or A-1 by S&P or P-2 by Moodys and A-2 by S&P.

     Moodys = Moody's Investors Service, Inc.
     S&P = Standard & Poor's Corporation
<PAGE>

                                  Schedule VI

                                    PLANS:

Gap VEBA Trust (Self-insured medical and dental claims)

GapShare Plan

Employee Benefit Premium Payment Plan - (Pre-tax employee contributions under
medical, dental plans)

Life Insurance and Accidental Death and Dismemberment Plan

Health Insurance Plan (HMOs and Employee Assistance Plan)

Short Term Disability Plan

Long Term Disability Plan

Tuition Reimbursement Program

Vision Care Plan
<PAGE>

                                  EXHIBIT A-1

                             NOTICE OF A BORROWING

Citicorp USA, Inc., as Agent
 for the Lenders parties
 to the Credit Agreement
 referred to below

____________
                                    [Date]

Attention:
Ladies and Gentlemen:

The undersigned, The Gap, Inc., refers to the Amended and Restated Credit
Agreement, dated as of ___________ __, 2000 (such Credit Agreement, as it may be
amended, restated or otherwise modified, being the "Credit Agreement", the terms
defined therein being used herein as therein defined), among the undersigned,
certain Lenders parties thereto, and Citicorp USA, Inc. as Agent for said
Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of
the Credit Agreement that the undersigned hereby requests an A Borrowing under
the Credit Agreement, and in that connection sets forth below the information
relating to such A Borrowing (the "Proposed A Borrowing") as required by Section
2.02(a) of the Credit Agreement:

          (i)   The Business Day of the Proposed A Borrowing is _______, 200_.

          (ii)  The Type of A Advances comprising the Proposed A Borrowing is
    [Base Rate Advances] [Eurodollar Rate Advances].

         (iii)  The aggregate amount of the Proposed A Borrowing is $_________.

         (iv)   The Interest Period for each A Advance made as part of the
    Proposed A Borrowing is [____ days] [____ 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 A Borrowing:

          (A)   the representations and warranties contained in Section 5.01 are
    correct, before and after giving effect to the Proposed A Borrowing and to
    the application of the proceeds therefrom, as though made on and as of such
    date; and

__________________
*    Specify alternative if 9 or 12 month Eurodollar Rate Interest Period is
requested, but not available.
<PAGE>

          (B)  no event has occurred and is continuing, or would result from
    such Proposed A Borrowing or from the application of the proceeds therefrom,
    which constitutes an Event of Default or Default.

                                  Very truly yours,

                                  THE GAP, INC.

                                  By______________________________
                                    Name:
                                    Title:
<PAGE>

                                  EXHIBIT A-2

                             NOTICE OF B BORROWING

Citicorp USA, Inc.*, as Agent
 for the Lenders parties
 to the Credit Agreement
 referred to below

____________
                       [Date]

Attention:
Ladies and Gentlemen:

The undersigned, The Gap, Inc., refers to the Amended and Restated Credit
Agreement, dated as of _______ __, 2000 (such Credit Agreement, as it may be
amended, restated or otherwise modified, being the "Credit Agreement", the terms
defined therein being used herein as therein defined), among the undersigned,
certain Lenders parties thereto, and Citicorp USA, Inc. as Agent for said
Lenders, and hereby gives you notice pursuant to Section 2.03 of the Credit
Agreement that the undersigned hereby requests a B Borrowing under the Credit
Agreement, and in that connection sets forth the terms on which such B Borrowing
(the "Proposed B Borrowing") is requested to be made:

(A)  Date of B Borrowing   _________________
(B)  Amount of B Borrowing _________________
(C)  Maturity Date _________________
(D)  Interest Rate Basis _________________
(E)  Interest Payment Date(s) _________________
(F)
(G)
(H)

The undersigned hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the Proposed B Borrowing:

          (a)  the representations and warranties contained in Section 5.01 are
     correct, before and after giving effect to the Proposed B Borrowing 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 the
     Proposed B Borrowing or from the application of the proceeds therefrom,
     which constitutes an Event of Default or Default;

          (c)  no event has occurred and no circumstance exists as a result of
     which the information concerning the undersigned that has been provided to
     the Agent and each Lender by the undersigned in connection with the Credit
     Agreement would, taken as a whole, include

___________________
*  Address to each Lender if the Borrower is conducting the auction.
<PAGE>

     an untrue statement of a material fact or omit to state any material fact
     or any fact necessary to make the statements contained therein, in the
     light of the circumstances under which they were made, not misleading; and

          (d)  the aggregate amount of the Proposed B Borrowing and all other
     Borrowings to be made on the same day under the Credit Agreement is within
     the aggregate amount of the unused A Commitments of the A Lenders.

The undersigned hereby confirms that the Proposed B Borrowing is to be made
available to it in accordance with Section 2.03(a)(v) of the Credit Agreement.

                              Very truly yours,

                              THE GAP, INC.

                              By ________________________
                              Name:
                              Title:
<PAGE>

                                   EXHIBIT B

                           ASSIGNMENT AND ACCEPTANCE

                               Dated _______, _

Reference is made to the Amended and Restated Credit Agreement dated as of
_______ __, 2000(such Credit Agreement, as it may be amended, restated or
otherwise modified, being the "Credit Agreement") among The Gap, Inc., a
Delaware corporation (the "Borrower"), the Lenders (as defined in the Credit
Agreement), and Citicorp USA, Inc. as Agent for the Lenders (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 (other than in respect of B Advances) which represent the
respective percentage interests specified on Schedule 1 of all outstanding
rights and obligations under the Credit Agreement (other than in respect of B
Advances) in respect of the Assignor's A Commitment and the A Advances owing to
the Assignor. After giving effect to such sale and assignment, the Assignee's A
Commitment and the amount of the A Advances owing to the Assignee will be as set
forth in Section 2 of Schedule 1.

2.   The Assignor (i) 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; (ii) 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 (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of their respective obligations
under the Credit Agreement or any other instrument or document furnished
pursuant thereto.

3.   The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 5.01 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; (ii) agrees that it will, independently and without
reliance upon the Agent, 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
Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and
authorizes the Agent to take such action on its behalf and to exercise such
powers under the Credit Agreement as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto; (v)
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 a Lender; [and] (vi) 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 [(vii) 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
<PAGE>

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,
(i) 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 a
Lender thereunder and (ii) 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 all payments under the Credit Agreement in
respect of the interests assigned hereby (including, without limitation, all
payments of principal, interest and commitment 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.
<PAGE>

                                  Schedule 1
                                      to
                           Assignment and Acceptance
                                Dated _____, __

Section 1.

Percentage Interest in A Commitment and A Advances:  ______

Section 2.

Assignee's A Commitment:                    $_____
Aggregate outstanding principal amount
of A Advances owing to Assignee:            $_____

Section 3.

Effective Date*:                            ______, ___

                                                   [NAME OF ASSIGNOR]

                                                   By: _____________________

                                                   Title:

                                                   [NAME OF ASSIGNEE]

                                                   By: _____________________
                                                   Title:

                                                   Domestic Lending Office (and
                                                   address for notices):
                                                            [Address]

                                                   Eurodollar Lending Office:
                                                            [Address]

_____________
*  This date should be no earlier than the dare of acceptance by the Agent.
<PAGE>

Accepted this __ day
of __________________, ____

 CITICORP USA, INC., as Agent

By: ___________________________
    Title:
<PAGE>

                                   EXHIBIT E
                        FORM OF AUCTION BORROWING NOTE

U.S. $___________ Dated: ____________, ___

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 (as defined in the
Credit Agreement referred to below), on _________, ___, the principal amount of
_______________________ Dollars ($ ________).

The Borrower promises to pay interest on the unpaid principal amount hereof from
the date hereof until such principal amount is paid in full, at the interest
rate and payable on the interest payment date or dates provided below:

     Interest Rate:  _____% per annum (calculated on the basis of a year of
     _____ days for the actual number of days elapsed).

     [Insert variable calculation if applicable]

     Interest Payment Date or Dates: _________________________________________

Both principal and interest are payable in lawful money of the United States of
America to ___________________________ for the account of the Lender at the
office of ____________________________, at __________________________________,
in same day funds, free and clear of and without any deduction, with respect to
the payee named above, subject to Section 3.02 of the Credit Agreement referred
to below, for any and all present and future taxes, deductions, charges or
withholdings, and all liabilities with respect thereto.

This Promissory Note is one of the promissory notes referred to in Section
2.03(f) of the Amended and Restated Credit Agreement, dated as of _____ __,
2000, among the Borrower, the Lender and certain other banks parties thereto,
and Citicorp USA, Inc., as Agent for the Lender and such other banks (such
Credit Agreement, as it may be amended, restated or otherwise modified, being
the "Credit Agreement").  The Credit Agreement, among other things, contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events.

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, without reference to principles of
conflicts of laws.

                                   THE GAP, INC.

                                   By: _______________________________
                                       Name:
                                       Title:

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