Document:

<PAGE>

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

                                                                   EXHIBIT 10.33

                     AMENDED AND RESTATED CREDIT AGREEMENT

                                     Among

                                BROOKSTONE, INC.
                            BROOKSTONE COMPANY, INC.
                            BROOKSTONE STORES, INC.
                          BROOKSTONE PURCHASING, INC.
                          GARDENERS EDEN BY MAIL, INC.
                          GARDENERS EDEN COMPANY, INC.
                        GARDENERS EDEN PURCHASING, INC.

                            THE LENDERS PARTY HERETO

                                      and

                              FLEET NATIONAL BANK
                            as Agent for the Lenders

                                      and

                         CITIZENS BANK OF MASSACHUSETTS
                             as Documentation Agent
                                for the Lenders

                                      With

                             FLEET SECURITIES, INC.
                                  as Arranger

                         Dated as of February 21, 2002

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

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Section       Title                                                                                   Page
<S>                                                                                                   <C>
    SECTION I DEFINITIONS ..........................................................................     2

          1.1.    Definitions ......................................................................     2
          1.2.    Accounting Terms. ................................................................    14

    SECTION II DESCRIPTION OF CREDIT ...............................................................    14

          2.1.    The Loans ........................................................................    14
          2.2.    Notice and Manner of Borrowing or Conversion of Loans. ...........................    15
          2.3.    Commitment Fee. ..................................................................    16
          2.4.    Reduction of Commitment Amount. ..................................................    17
          2.5.    The Notes. .......................................................................    17
          2.6.    Duration of Interest Periods. ....................................................    17
          2.6.    Interest Rates and Payment of Interest. ..........................................    17
          2.8.    Changed Circumstances. ...........................................................    18
          2.9.    Capital Requirements. ............................................................    19
          2.10.   Payments and Prepayments of the Loans. ...........................................    20
          2.11.   Method of Payment. ...............................................................    20
          2.12.   Default Interest. ................................................................    21
          2.13.   Payments Not at End of Interest Period. ..........................................    21
          2.14.   Computation of Interest and Fees. ................................................    21
          2.15.   Sharing of Payments. .............................................................    22
          2.16.   Letter of Credit Facility. .......................................................    22
          2.17.   Swing Line Commitment. ...........................................................    26
          2.18.   Procedure for Swing Line Borrowing; Interest on Swing Line Loans. ................    27
          2.19.   Refunded Swing Line Loans; Swing Line Loan Participations. .......................    27
          2.20.   Use of Proceeds. .................................................................    29
          2.21.   Guaranty of Parent. ..............................................................    29
          2.22.   Replacement of Lenders. ..........................................................    30
          2.23.   Extension of Revolving Credit Termination Date. ..................................    30

    SECTION III CONDITIONS OF LOANS AND LETTERS OF CREDIT ..........................................    31

          3.1.    Conditions Precedent to Initial Loan. ............................................    31
          3.2.    Conditions Precedent to All Loans and Letters of Credit. .........................    33

    SECTION IV REPRESENTATIONS AND WARRANTIES ......................................................    34

          4.1.    Organization and Qualification. ..................................................    34
          4.2.    Corporate Authority. .............................................................    34
          4.3.    Valid Obligations. ...............................................................    34
          4.4.    Consents or Approvals. ...........................................................    35
</TABLE>

                                      -i-

<PAGE>

<TABLE>
<S>                                                                                                     <C>
          4.5.    Title to Properties; Absence of Encumbrances. ....................................    35
          4.6.    Financial Statements. ............................................................    35
          4.7.    Defaults. ........................................................................    35
          4.8.    Taxes. ...........................................................................    35
          4.9.    Litigation. ......................................................................    36
          4.10.   Use of Proceeds. .................................................................    36
          4.11.   Subsidiaries. ....................................................................    36
          4.12.   Investment Company Act. ..........................................................    36
          4.13.   Compliance with ERISA. ...........................................................    36
          4.14.   Environmental Matters. ...........................................................    36
          4.15.   Collateral. ......................................................................    38

    SECTION V AFFIRMATIVE COVENANTS ................................................................    38

          5.1.    Financial Statements and other Reporting Requirements ............................    38
          5.2.    Conduct of Business. .............................................................    40
          5.3.    Maintenance and Insurance. .......................................................    40
          5.4.    Taxes. ...........................................................................    40
          5.5.    Inspection. ......................................................................    41
          5.6.    Maintenance of Books and Records. ................................................    41
          5.7.    Consolidated Net Worth. ..........................................................    41
          5.8.    Cash Flow Leverage. ..............................................................    41
          5.9.    Fixed Charge Coverage. ...........................................................    41
          5.10.   Further Assurances. ..............................................................    42

    SECTION VI NEGATIVE COVENANTS ..................................................................    42

          6.1.    Indebtedness. ....................................................................    42
          6.2.    Contingent Liabilities. ..........................................................    43
          6.3.    Sale and Leaseback. ..............................................................    43
          6.4.    Encumbrances. ....................................................................    43
          6.5.    Merger; Acquisitions; Consolidation; Sale or Lease of Assets. ....................    45
          6.6.    Additional Stock Issuance. .......................................................    45
          6.7.    Equity Distributions. ............................................................    46
          6.8.    Investments. .....................................................................    46
          6.9.    ERISA. ...........................................................................    46
          6.10.   Capital Expenditures. ............................................................    46
          6.11.   Transactions with Affiliates. ....................................................    47

    SECTION VII DEFAULTS ...........................................................................    47

          7.1.    Events of Default. ...............................................................    47
          7.2.    Remedies. ........................................................................    49
          7.3.    License of Intangibles ...........................................................    50
          7.4.    Distribution of Proceeds. ........................................................    50

    SECTION VIII CONSENTS; AMENDMENTS; WAIVERS; REMEDIES ...........................................    50
</TABLE>

                                      -ii-

<PAGE>

<TABLE>
<S>                                                                                  <C>
          8.1.    Actions by Lenders. .............................................  50
          8.2.    Actions by Parent or Borrowers. .................................  51

    SECTION IX SUCCESSORS AND ASSIGNS .............................................  52

          9.1.    General. ........................................................  52
          9.2.    Assignments. ....................................................  52
          9.3.    Participations. .................................................  53

    SECTION X  THE AGENT ..........................................................  54

          10.1.   Authorization and Action. .......................................  54
          10.2.   Agent's Reliance, Etc. ..........................................  55
          10.3.   Fleet as Lender. ................................................  55
          10.4.   Lender Credit Decision. .........................................  55
          10.5.   Indemnification of Agents. ......................................  55
          10.6.   Successor Agent. ................................................  56
          10.7.   Other Agents. ...................................................  56
          10.8.   Amendment of Section X. .........................................  56

    SECTION XI MISCELLANEOUS ......................................................  57

          11.1.   Notices. ........................................................  57
          11.2.   Expenses. .......................................................  58
          11.3.   Set-Off. ........................................................  58
          11.4.   Term of Agreement. ..............................................  58
          11.5.   No Waivers. .....................................................  58
          11.6.   Governing Law. ..................................................  58
          11.7.   Counterparts. ...................................................  59
          11.8.   Partial Invalidity. .............................................  59
          11.9.   Captions. .......................................................  59
          11.10.  WAIVER OF JURY TRIAL. ...........................................  59
          11.11.  Entire Agreement. ...............................................  59
          11.12.  Indemnification. ................................................  59
          11.13.  Collateral Release Conditions. ..................................  60
</TABLE>

                                     -iii-

<PAGE>

                             EXHIBITS AND SCHEDULES

EXHIBIT A-1          Form of Promissory Note

EXHIBIT A-2          Form of Swing Line Note

EXHIBIT B            Form of Notice of Borrowing or Conversion

EXHIBIT C            Indebtedness; Encumbrances

EXHIBIT D            Litigation

EXHIBIT E            Subsidiaries

EXHIBIT F            Form of Report of Chief Financial Officer

EXHIBIT G            Form of Borrowing Base Report

EXHIBIT H            Form of Opinion of Counsel

EXHIBIT I            Form of Amended and Restated Unlimited Guaranty

EXHIBIT J            Form of Assignment and Acceptance Agreement

SCHEDULE 1.1         Commitment Percentages

SCHEDULE 1.2         Pricing Schedule

SCHEDULE 2.16.9      Outstanding Letters of Credit

SCHEDULE 4.13        Certain ERISA Matters

SCHEDULE 6.8         List of Investments in Subsidiaries

                                      -iv-

<PAGE>

                      AMENDED AND RESTATED CREDIT AGREEMENT

         THIS AMENDED AND RESTATED CREDIT AGREEMENT is made as of February 21,
2002, by and among BROOKSTONE, INC., a Delaware corporation (the "Parent"),
BROOKSTONE COMPANY, INC., a New Hampshire corporation (the "Company"),
BROOKSTONE STORES, INC., a New Hampshire corporation ("Stores"), BROOKSTONE
PURCHASING, INC., a New Hampshire corporation ("Purchasing"), GARDENERS EDEN
COMPANY, INC., a New Hampshire corporation ("GE"), GARDENERS EDEN PURCHASING,
INC., a New Hampshire corporation ("GE Purchasing"), GARDENERS EDEN BY MAIL,
INC., a New Hampshire corporation ("GE Mail;" the Parent, the Company,
Purchasing, GE, GE Mail, GE Purchasing and Stores are referred to herein
collectively as the "Companies;" and the Company, Purchasing, GE, GE Mail, GE
Purchasing and Stores are referred to herein individually as a "Borrower" and
collectively as the "Borrowers"), each having its chief executive office at 17
Riverside Street, Nashua NH 03062, the lenders from time to time parties hereto,
FLEET NATIONAL BANK (f/k/a BankBoston, N.A.) ("Fleet" or the "Agent"), a
national banking association having its head office at 100 Federal Street,
Boston, MA 02110, as agent for the lenders from time to time parties hereto, and
CITIZENS BANK OF MASSACHUSETTS (the "Documentation Agent"), a Massachusetts
banking corporation with its principal place of business at 28 State Street,
Boston, Massachusetts 02109, as Documentation Agent for the Lenders from time to
time parties hereto.

                                    Recitals

         The Parent, the Company, GE, GE Mail and Stores have established credit
facilities for working capital and other corporate needs, and certain of the
Lenders currently provide credit facilities to the Company, GE, GE Mail and
Stores on the terms and conditions set forth in that certain Amended and
Restated Credit Agreement dated as of May 11, 1999 (the "1999 Credit
Agreement").

         The Agent, the Lenders and the Companies desire to modify the 1999
Credit Agreement in certain respects.

         NOW, THEREFORE, for good and valuable consideration, (a) the Company,
GE, GE Mail, Stores, the Agent and the Lenders hereby amend and restate the 1999
Credit Agreement in its entirety and (b) the parties hereto hereby agree, as
follows:

                                       -1-

<PAGE>

                                    SECTION I

                                   DEFINITIONS

1.1.     Definitions.
         -----------

         All capitalized terms used in this Agreement or in the Notes or in any
certificate, report or other document made or delivered pursuant to this
Agreement (unless otherwise defined therein) shall have the meanings assigned to
them below:

         1999 Credit Agreement.  See Preamble.

         Adjusted LIBOR Rate. For any Interest Period, a rate per annum (rounded
upward, if necessary, to the nearest 1/32 of one percent) as determined on the
basis of the offered rates for deposits in U.S. dollars, for a period of time
comparable to such Interest Period which appears on the Telerate page 3750 as of
11:00 a.m. (London time) on the day that is two Business Days preceding the
first day of such Interest Period; provided, however, if the rate described
                                   --------  -------
above does not appear on the Telerate System on any applicable interest
determination date, then the Adjusted LIBOR Rate shall be the rate (rounded
upwards as described above, if necessary) for deposits in U.S. dollars for a
period substantially equal to the Interest Period on the Reuters Page "LIBO" (or
such other page as may replace the LIBO Page on that service for the purpose of
displaying such rates), as of 11:00 a.m. (London time), on the day that is two
Business Days prior to the beginning of such Interest Period, provided, further,
                                                              --------  -------
that if both the Telerate and Reuters systems are unavailable, then the rate for
that date will be determined on the basis of the offered rates for deposits in
U.S. dollars for a period of time comparable to such Interest Period which are
offered by four major banks in the London interbank market at approximately
11:00 a.m. (London time), on the day that is two Business Days preceding the
first day of such Interest Period as selected by Agent. The principal London
office of each of the four major London banks will be requested to provide a
quotation of its U.S. dollar deposit offered rate. If at least two such
quotations are provided, the rate for that date will be the arithmetic mean of
the quotations. If fewer than two quotations are provided as requested, the rate
for that date will be determined on the basis of the rates quoted for loans in
U.S. dollars to leading European banks for a period of time comparable to such
Interest Period offered by major banks in New York City at approximately 11:00
a.m. (New York City time), on the day that is two Business Days preceding the
first day of such Interest Period. In the event that the Agent is unable to
obtain any such quotation as provided above, it will be deemed that the Adjusted
LIBOR Rate cannot be determined. In the event that the Board of Governors of the
Federal Reserve System shall impose a Reserve Percentage with respect to LIBOR
deposits of the Agent, then for any period during which such Reserve Percentage
shall apply, the Adjusted LIBOR Rate shall be equal to the amount determined
above divided by an amount equal to 1 minus the Reserve Percentage.

         Affected Lender.  See Section 2.22.

                                       -2-

<PAGE>

         Affected Loans.  See Section 2.8(a).

         Affiliate. Shall mean (a) any director or officer of any Borrower or
the Parent and (b) any Person that controls, is controlled by or is under common
control with the Borrower. For purposes of this definition, "control" of a
Person shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.

         Agent.  See Preamble.

         Agreement. This Agreement, as the same may be supplemented or amended
from time to time.

         Applicable Base Rate Margin. As of any day, the applicable Base Rate
Margin described on the Pricing Schedule then in effect.

         Applicable LIBOR Margin. As of any day, the applicable LIBOR Margin
described on the Pricing Schedule then in effect.

         Arranger. Fleet Securities, Inc.

         Assignment and Acceptance Agreement.  See Section 9.2(a).

         Base Rate. The greater of (a) the rate of interest announced from time
to time by the Agent at its head office as its Base Rate, and (b) the Federal
Funds Effective Rate plus 1/2 of 1% per annum (rounded upwards, if necessary, to
the next l/8 of l%).

         Base Rate Loan. Any Loan or Swing Line Loan bearing interest determined
with reference to the Base Rate.

         Borrower or Borrowers.  See Preamble.

         Borrowing Base. At any date during the periods described below for any
year, the applicable advance percentage of Eligible Inventory and stated amount
of outstanding documentary Letters of Credit issued in connection with the
purchase of goods which would otherwise constitute Eligible Inventory:

                                       -3-

<PAGE>

PERIOD                                      ADVANCE PERCENTAGE

December 1 through May 31                           50%
June 1 through July 31                              65%
August 1 through November 30                        75%

         Brookstone Subsidiaries. Brookstone By Mail, Inc., Brookstone Holdings,
Inc., Brookstone Retail Puerto-Rico, Inc., Brookstone Properties, Inc., and any
other Subsidiary which may hereafter become a party to the Subsidiary Guaranty
and the Security Documents pursuant to Section 5.10(b).

         Business Day. (a) For all purposes other than as covered by clause (b)
below, any day other than a Saturday, Sunday or legal holiday on which banks in
Boston, Massachusetts or New York, New York are open for the conduct of a
substantial part of their commercial banking business; and (b) with respect to
all notices and determinations in connection with, and payments of principal and
interest on, LIBOR Loans, any day that is a Business Day described in clause (a)
and that is also a day for trading by and between banks in U.S. Dollar deposits
in the Interbank LIBOR market.

         Capital Expenditures. Amounts paid or Indebtedness incurred by the
Parent or any of its Subsidiaries in connection with the purchase or lease of
capital assets that would be required to be capitalized, all as shown on the
consolidated statement of cash flow of the Parent and its Subsidiaries in
accordance with generally accepted accounting principles.

         Change of Control. Either (i) any Person or "group" (within the meaning
of Section 13(d) or 14(d) of the Exchange Act) and its affiliates shall have
acquired beneficial ownership of capital stock having 35% or more of the
ordinary voting power in the election of directors of the Parent and which
Person, group or affiliate shall have had no beneficial ownership of any such
capital stock on or before the date of this Agreement, or (ii) any Person or
group and its affiliates shall have acquired beneficial ownership of capital
stock having 40% or more of the ordinary voting power in the election of
directors of the Parent and which Person, group or affiliate had some beneficial
ownership of such stock on or before the date of this Agreement.

         Code. The Internal Revenue Code of 1986 and the rules and regulations
thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.

         Collateral. Any and all personal property of the Parent, the Borrowers
and the Brookstone Subsidiaries, whether tangible or intangible, but excluding
                                                                 --- ---------
real property, machinery and equipment encumbered on the date of this Agreement,
and general intangibles.

                                       -4-

<PAGE>

         Collateral Release Conditions.  See Section 11.13.

         Commitment Amount. $80,000,000 or any lesser amount, including zero,
resulting from a termination or reduction of such amount in accordance with
Section 2.4 or Section 7.2.

         Commitment Percentage. As to each lender, its percentage interest in
the Commitment Amount as set forth on Schedule 1.1  hereto.
                                      ------------

         Companies.  See Preamble.

         Company.  See Preamble.

         Consolidated EBITDA. At any date as of which the amount thereof shall
be determined and for the period specified, the sum of (a) Consolidated Net
Income (minus extraordinary or one-time gains and plus extraordinary or one-time
non-cash losses (to the extent such losses have not been and will not become
cash losses in a later fiscal period)) for such period, plus (b) consolidated
depreciation and amortization expenses for such period, plus (c) Consolidated
Interest Expense, plus (d) income tax expense for such period.

         Consolidated Interest Expense. For any period for which the amount
thereof shall be determined, consolidated net interest expense (including
imputed interest on capital lease obligations) and amortized debt discount.

         Consolidated Net Income. At any date as of which the amount thereof
shall be determined and for the period specified, the net income (or deficit) of
the Parent and its Subsidiaries, after taxes, determined in accordance with
generally accepted accounting principles consistently applied.

         Consolidated Net Worth. At any date as of which the amount thereof
shall be determined, (a) the consolidated total assets of the Parent and its
Subsidiaries minus (b) Consolidated Total Liabilities.

         Consolidated Rent Expense. At any date as of which the amount thereof
shall be determined and for the period specified, the aggregate amount of
minimum rent and percentage rent paid by the Borrowers and their Subsidiaries
under real property lease agreements with third parties during such period
through the date of determination.

         Consolidated Tangible Net Worth. At any date as of which the amount
thereof shall be determined, Consolidated Net Worth minus the sum of any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, patents, trade and service marks and names, copyrights and
research and development expenses except prepaid expenses, (c) all reserves not
already deducted from assets, (d) any write-up in the book value of assets
resulting from any revaluation thereof

                                       -5-

<PAGE>

subsequent to the date of the financial statements referred to in Section 4.6
and (e) the value of any minority interests in Subsidiaries.

         Consolidated Total Liabilities. At any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
generally accepted accounting principles, be classified as liabilities on the
consolidated balance sheet of the Parent and its Subsidiaries, including in any
event all Loans.

         Consolidated Total Funded Debt. As at any date of determination, on a
consolidated basis for the Parent and its Subsidiaries, and without duplication,
the sum of (i) the aggregate amount of Indebtedness for borrowed money
outstanding on such date (including, without limitation, the Loans outstanding
on such date), plus (ii) all principal obligations arising under capital leases
               ----
in effect on such date required to be capitalized in accordance with generally
accepted accounting principles, plus (iii) all Guarantees of Indebtedness for
                                ----
borrowed money or capital leases of the Parent and its Subsidiaries outstanding
on such date.

         Controlled Group. All trades or businesses (whether or not
incorporated) under common control that, together with the Company, are treated
as a single employer under Section 414(b) or 414 (c) of the Code or Section 4001
of ERISA.

         Credit Participants.  See Section 9.3.

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

         Defaulting Lender. A Lender which has defaulted in its obligation to
make Loans to the Borrowers hereunder for so long as it remains in default.

         Documentation Agent.  See Preamble.

         Eligible Inventory. The Borrowers', the Brookstone Subsidiaries' and
PR's inventory of goods wherever located, in each case held for sale in the
ordinary course of business, valued at the lower of cost or market and less any
reserves (including any reserves for slow-moving, obsolete and clearance items)
as determined in accordance with generally accepted accounting principles;
provided that no such inventory shall be deemed eligible if:
--------

         (a)      it is under consignment to or from any Person;

         (b)      it is not owned by a Borrower, a Brookstone Subsidiary or PR,
                  as applicable, free and clear of all liens;

         (c)      it is not in good and merchantable condition, useable and
                  saleable in the ordinary course of business or if it is
                  obsolete;

                                       -6-

<PAGE>

         (d)      it arises from the sale to an account debtor on a
                  bill-and-hold, guaranteed sale, sale or return, sale or
                  approval basis;

         (e)      it is not subject to the Agent's perfected, first-priority
                  security interest;

         (f)      it is held outside of the United States, unless backed by a
                  letter of credit in form and substance, and issued by a bank,
                  satisfactory to the Agent;

and provided, further, that the aggregate amount of such inventory that
    --------  -------
constitutes Eligible Inventory of PR shall at no time exceed $100,000.

         Encumbrances.  See Section 6.4.

         Environmental Laws. Any and all applicable foreign, federal, state and
local environmental, health or safety statutes, laws, regulations, rules,
ordinances, policies and rules or common law (whether now existing or hereafter
enacted, promulgated or decided), of all governmental agencies, bureaus or
departments which may now or hereafter have jurisdiction over the Parent or any
of its Subsidiaries and all applicable judicial and administrative and
regulatory decrees, judgments and orders, including common law rulings and
determinations, relating to injury to, or the protection of, real or personal
property or human health or the environment, including, without limitation, all
requirements pertaining to reporting, licensing, permitting, investigation,
remediation and removal of emissions, discharges, releases or threatened
releases of Hazardous Materials, chemical substances, pollutants or contaminants
whether solid, liquid or gaseous in nature, into the environment or relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of such Hazardous Materials, chemical substances,
pollutants or contaminants.

         Equifax Agreement.  See Section 6.4(j).

         ERISA. The Employee Retirement Income Security Act of 1974 and the
rules and regulations thereunder, collectively, as the same may from time to
time be supplemented or amended and remain in effect.

         Event of Default.  Any event described in Section 7.1.

         Extension Date.  See Section 2.23(a).

         Federal Funds Effective Rate. For any day, a fluctuating interest rate
per annum equal 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 that 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 the
Agent.

                                       -7-

<PAGE>

         Fee Letter.  The letter agreement dated as of August 1, 2001, among
Fleet, the Arranger and the Borrowers.

         Fixed Charge Coverage. At any date as of which the amount thereof shall
be determined and for the period specified, the quotient obtained by dividing
the total of (a) Consolidated EBITDA plus (b) Consolidated Rent Expense for such
period minus (c) consolidated Capital Expenditures for such period, by the total
of (d) Consolidated Interest Expense and Consolidated Rent Expense for such
period.

         For purposes of the foregoing calculation, there shall not be deducted
as Capital Expenditures expenditures up to an aggregate amount of $17,000,000 to
the extent such amount is used for the construction of a new distribution
facility, provided that unless funded through third party financing (which may
          --------
include a capital lease, but which shall not include any Loans hereunder) the
aggregate amount of Capital Expenditures excluded hereunder shall not exceed the
Capital Expenditure limitations specified in Section 6.10 in any one fiscal
year.

         Fleet.  See Preamble.

         GE.  See Preamble.

         GE Mail.  See Preamble.

         GE Purchasing.  See Preamble.

         Generally accepted accounting principles. Generally accepted accounting
principles as defined by controlling pronouncements of the Financial Accounting
Standards Board, as from time to time supplemented and amended.

         Guaranteed Obligations.  See Section 2.21.

         Guarantees. As applied to the Parent and its Subsidiaries, all
guarantees, endorsements or other contingent or surety obligations with respect
to obligations of others whether or not reflected on the consolidated balance
sheet of the Parent and its Subsidiaries, including any obligation to furnish
funds, directly or indirectly (whether by virtue of partnership arrangements, by
agreement to keep-well or otherwise), through the purchase of goods, supplies or
services, or by way of stock purchase, capital contribution, advance or loan, or
to enter into a contract for any of the foregoing, for the purpose of payment of
obligations of any other Person.

         Hazardous Material. Any substance (a) the presence of which requires or
may hereafter require notification, investigation or remediation under any
Environmental Law; (b) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "controlled industrial waste"
or "pollutant" or "contaminant" under any present or future Environmental Law or
amendments thereto including,

                                       -8-

<PAGE>

without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.) and any applicable local statutes
and the regulations promulgated thereunder; (c) which is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or
otherwise hazardous and is or becomes regulated by any governmental authority,
agency, department, commission, board, agency or instrumentality of any foreign
country, the United States, any state of the United States, or any political
subdivision thereof to the extent any of the foregoing has or had jurisdiction
over the Company; or (d) without limitation, which contains gasoline, diesel
fuel or other petroleum products, asbestos or polychlorinated biphenyls
("PCB's").

         Indebtedness. As applied to the Parent and its Subsidiaries, (a) all
obligations for borrowed money or other extensions of credit whether or not
secured or unsecured, absolute or contingent, including, without limitation,
unmatured reimbursement obligations with respect to letters of credit or
guarantees issued for the account of or on behalf of the Parent and its
Subsidiaries and all obligations representing the deferred purchase price of
property, other than accounts payable arising in the ordinary course of
business, (b) all obligations evidenced by bonds, notes, debentures or other
similar instruments, (c) all obligations secured by any mortgage, pledge,
security interest or other lien on property owned or acquired by the Parent or
any of its Subsidiaries whether or not the obligations secured thereby shall
have been assumed, (d) that portion of all obligations arising under capital
leases that is required to be capitalized on the consolidated balance sheet of
the Parent and its Subsidiaries, (e) all Guarantees, and (f) all obligations
that are immediately due and payable out of the proceeds of or production from
property now or hereafter owned or acquired by the Parent or any of its
Subsidiaries. Indebtedness shall not include any hedge contract entered into by
the Parent or any of its Subsidiaries for purposes of protecting against changes
in the cost of paper and not for speculation.

         Indemnitees.  See Section 11.12.

         Interest Period. With respect to each LIBOR Loan, the period commencing
on the date of the making or continuation of or conversion to such LIBOR Loan
and ending one, two, three or six months thereafter, as the Company may elect in
the applicable Notice of Borrowing or Conversion; provided that:
                                                  --------

         (a)      any Interest Period (other than an Interest Period determined
                  pursuant to clause (c) below) that would otherwise end on a
                  day that is not a Business Day shall be extended to the next
                  succeeding Business Day unless, in the case of LIBOR Loans,
                  such Business Day falls in the next calendar month, in which
                  case such Interest Period shall end on the immediately
                  preceding Business Day;

         (b)      any Interest Period applicable to a LIBOR Loan that begins on
                  the last Business Day of a calendar month (or on a day for
                  which there is no numerically corresponding day in the
                  calendar month at the end of such

                                       -9-

<PAGE>

                  Interest Period) shall, subject to clause (c) below, end on
                  the last Business Day of a calendar month;

         (c)      any Interest Period during the Revolving Credit Period that
                  would otherwise end after the Revolving Credit Termination
                  Date shall end on the Revolving Credit Termination Date; and

         (d)      notwithstanding clause (c) above, no Interest Period
                  applicable to a LIBOR Loan shall have a duration of less than
                  one month; and if any Interest Period applicable to such Loans
                  would be for a shorter period, such Interest Period shall not
                  be available hereunder.

         Investment. As applied to the Parent and its Subsidiaries, the purchase
or acquisition of any share of capital stock, partnership interest, evidence of
indebtedness or other equity security of any other Person, any loan, advance or
extension of credit to, or contribution to the capital of, any other person or
entity, any real estate held for sale or investment, any commodities futures
contracts held other than in connection with bona fide hedging transactions, any
other investment in any other Person, and the making of any commitment or
acquisition of any option to make an Investment.

         JV Subsidiary.  See Section 6.8.

         L/C Notice.  See Section 2.16.2.

         L/C Participant.  See Section 2.16.3.

         L/C Participation.  See Section 2.16.3.

         Lender Agreements. This Agreement, the Notes, the Swing Line Note, the
Subsidiary Guaranty, the Fee Letter, the Letters of Credit (and related
documentation and agreements, including any letter of credit application), the
Security Documents, and any other present or future agreement from time to time
entered into between the Parent or any of its Subsidiaries and the Agent, the
Arranger or the Lenders, each as from time to time amended or supplemented, and
all statements, reports and certificates delivered by the Parent or any of its
Subsidiaries to the Agent, the Arranger or the Lenders in connection therewith.

         Lenders.  (a) Initially, the banks described on Schedule 1.1 hereto and
                                                         ------------
(b) any other Person who becomes a Successor Lender hereunder in accordance with
the terms of Section 9.2(a) hereof.

         Letters of Credit.  Letters of Credit of the Agent issued for the
account of the Company in accordance with the provisions of Section 2.16.

         Letter of Credit Fee.  See Section 2.16.4(b).

                                       -10-

<PAGE>

         Letter of Credit Fee Rate. For standby letters of credit, the Letter of
Credit Fee Rate shall be, as of any day, a per annum fee equal to the LIBOR Rate
Margin then in effect, as determined in accordance with (and defined in) the
Pricing Schedule, and for documentary letters of credit, the Letter of Credit
Fee Rate shall be, as of any day, a per annum fee equal to the Documentary
Letter of Credit Fee Rate then in effect, as determined in accordance with (and
defined in) the Pricing Schedule.

         Letter of Credit Participation Amount.  See Section 2.16.4(c).

         LIBOR Loan. Any Loan bearing interest at a rate determined with
reference to the Adjusted LIBOR Rate.

         Loan or Revolving Credit Advance. A loan made to the Company by the
Lenders pursuant to Section II of this Agreement, and "Loans" and "Revolving
Credit Advances" means all of such loans, collectively.

         Loan Parties.  The Parent, the Borrowers and the Brookstone
Subsidiaries.

         Majority Lenders. At any time, the Lenders having made not less than
the Required Percentage of the outstanding principal amount of the Loans
hereunder, or, if no Loans are outstanding, the Lenders having aggregate
Commitment Percentages of not less than the Required Percentage.

         Maximum Letter of Credit Amount.  $50,000,000.

         Notes. Promissory notes of the Borrowers, substantially in the form of
Exhibit A-l hereto, evidencing the joint and several obligations of the
Borrowers to each Lender to repay the Loans.

         Notice of Borrowing or Conversion.  See Section 2.2(a).

         Obligations. Any and all obligations of the Parent, the Borrowers and
the Brookstone Subsidiaries to the Agent, the Arranger or the Lenders of every
kind and description, direct or indirect, absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising, regardless
of how they arise or by what agreement or instrument, if any, and including, the
Loans, the Swing Line Loans, obligations with respect to the Letters of Credit
and obligations to perform acts and refrain from taking action as well as
obligations to pay money.

         PBGC.  The Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.

         PR.  Brookstone Retail Puerto-Rico, Inc., a Puerto-Rico corporation.

         Parent.  See Preamble.

                                       -11-

<PAGE>

         Permitted Encumbrances.  See Section 6.4.

         Permitted Liabilities. Liabilities of the Parent, the Borrowers and the
Brookstone Subsidiaries for (a) state franchise, income and unemployment tax
liabilities, employee withholding, accrued liabilities for employee salaries,
wages, and accrued vacation, personal property taxes, and sales and use taxes
incurred in the ordinary course of business, (b) without limitation of clause
(a) above, accounts payable and accrued liabilities (other than for inventory
purchases), incurred in the ordinary course of business, in an aggregate amount
not to exceed $25,000,000 at any time outstanding, (c) indebtedness of the
Company, GE, GE Purchasing and Purchasing for inventory purchased in the
ordinary course of business , (d) intercompany indebtedness and liabilities
among the Parent, the Borrowers and the Brookstone Subsidiaries incurred in the
ordinary course of business, and (e) liabilities of the Borrowers and the
Brookstone Subsidiaries under leases for real property.

         Person. An individual, corporation, partnership, joint venture,
association, estate, joint stock company, trust, organization, business, or a
government or agency or political subdivision thereof.

         Plan. At any time, an employee pension or other benefit Plan that is
subject to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by the Company or any
member of the Controlled Group for employees of the Company or any member of the
Controlled Group or (ii) if such Plan is established, maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which the Company or any member of the
Controlled Group is then making or accruing an obligation to make contributions
or has within the preceding five Plan years made contributions.

         Pricing Schedule.  The Pricing Schedule attached hereto as
Schedule 1.2.
------------

         Purchasing.  See Preamble.

         Qualified Investments. As applied to the Parent and its Subsidiaries,
investments in (a) notes, bonds or other obligations of the United States of
America or any agency thereof that as to principal and interest constitute
direct obligations of or are guaranteed by the United States of America, (b)
certificates of deposit or other deposit instruments or accounts of banks or
trust companies organized under the laws of the United States or any state
thereof that have capital and surplus of at least $100,000,000, (c) commercial
paper that is rated not less than prime-one or A-l or their equivalents by
Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively,
or their successors, (d) any repurchase agreement secured by any one or more of
the foregoing and (e) investments in shares of any so-called "Money Market fund"
provided that such fund is registered under the Investment Company Act of 1940,
has net assets of at least $100,000,000, has an investment portfolio with an
average maturity of 365 days or less and is not considered to be a "high-yield"
fund.

                                       -12-

<PAGE>

         Refunded Swing Line Loans.  See Section 2.19.

         Refunding Date.  See Section 2.19(c).

         Register.  See Section 9.2(c).

         Reimbursement Amount.  See Section 2.16.4(a).

         Reimbursement Date.  See Section 2.16.4(c).

         Replacement Lender.  See Section 2.22.

         Replacement Notice.  See Section 2.22.

         Required Percentage.  66-2/3%.

         Reserve Percentage. As applicable to any Interest Period, the rate
(expressed as a decimal) applicable to the Agent during such Interest Period
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System for determining the maximum reserve requirement
(including, without limitation, any basic, supplemental, emergency or marginal
reserve requirement) of the Agent with respect to "Eurocurrency liabilities" as
that term is defined under such regulations.

         Revolving Credit Period. The period beginning on the date of this
Agreement and extending through and including the Revolving Credit Termination
Date or such earlier date on which the commitment to make Loans is terminated or
the Commitment Amount is reduced to zero in accordance with the terms hereof.

         Revolving Credit Termination Date.  February 21, 2005.  The Revolving
Credit Termination Date may subsequently be extended in accordance with the
terms of Section 2.23.

         Security Documents. Each security agreement, stock pledge agreement and
other security agreement, instrument or document (including UCC financing
statements) that the Agent and/or the Lenders may in their reasonable discretion
require any Loan Party to execute and deliver from time to time in order to
secure any of the Obligations and to grant to the Agent, for the ratable benefit
of the Agent and the Lenders, a perfected, first priority security interest in
or other lien on the Collateral, including, without limitation, by way of
assignment, subject only to Permitted Encumbrances and such other liens and
encumbrances as may be acceptable to the Agent and the Lenders in their sole
discretion.

         Stores.  See Preamble.

         Subsidiary.  Any corporation, association, joint stock company,
business trust or other similar organization of which 50% or more of the
ordinary voting power for the

                                       -13-

<PAGE>

election of a majority of the members of the board of directors or other
governing body of such entity is held or controlled by the Parent or a
Subsidiary of the Parent; or any other such organization the management of which
is directly or indirectly controlled by the Parent or a Subsidiary of the Parent
through the exercise of voting power or otherwise; or any joint venture, whether
incorporated or not, in which the Parent has a 50% or greater ownership
interest.

         Subsidiary Guaranty. The Amended and Restated Unlimited Guaranty of
even date herewith from the Brookstone Subsidiaries to the Agent in the form of
Exhibit I hereto, by which the Brookstone Subsidiaries have jointly and
severally guaranteed to the Agent, for itself and the benefit of the Lenders,
the payment and performance of all Obligations.

         Successor Lender.  See Section 9.2(a).

         Swing Line Commitment.  $2,500,000.

         Swing Line Lender.  See Section 2.17.

         Swing Line Loans.  See Section 2.17.

         Swing Line Note. The Swing Line Note substantially in the form of
Exhibit A-2 hereto executed by the Borrowers, jointly and severally, in favor of
the Swing Line Lender to evidence the Swing Line Loans.

         Swing Line Participation Amount.  See Section 2.19(c).

         1.2. Accounting Terms. All terms of an accounting character shall have
              ----------------
the meanings assigned thereto by generally accepted accounting principles
applied on a basis consistent with the financial statements referred to in
Section 4.6 of this Agreement, modified to the extent, but only to the extent,
that such meanings are specifically modified herein.

                                   SECTION II

                              DESCRIPTION OF CREDIT

         2.1.     The Loans.
                  ---------

         (a) Subject to the terms and conditions hereof, each Lender, severally
and not jointly will make Loans to the Borrowers, jointly and severally, from
time to time until the close of business on the Revolving Credit Termination
Date, in such sums as the Company may request, provided that the aggregate
principal amount of all Loans and stated amount of all Letters of Credit at any
one time outstanding hereunder shall not, (a) as to each Lender, exceed such
Lender's Commitment Percentage of the Commitment

                                       -14-

<PAGE>

Amount, and (b) as to all Lenders, exceed the lesser of (i) the Borrowing Base
in effect at such time and (ii) the Commitment Amount. The Borrowers may borrow,
prepay pursuant to Section 2.10 and reborrow, from the date of this Agreement
until the Revolving Credit Termination Date, the full amount available hereunder
or any lesser sum that is at least $100,000 and an integral multiple of $50,000;
provided that each LIBOR Loan shall be in a minimum of $1,000,000 and multiples
of $500,000. Any Loan not repaid by the Revolving Credit Termination Date shall
be due and payable on the Revolving Credit Termination Date.

         (b) Provided that no Default shall have occurred and be continuing, the
Borrowers may convert all or any part (in a minimum amount of $500,000 and
multiples of $100,000 for LIBOR Loans) of any outstanding Loan into a Loan of
any other type provided for in this Agreement in the same aggregate principal
amount, on any Business Day (which, in the case of a conversion of a LIBOR Loan,
shall be the last day of the Interest Period applicable to such LIBOR Loan). The
Company shall give the Agent prior notice of each such conversion (which notice
shall be effective upon receipt) in accordance with Section 2.2.

         (c) The Borrowers covenant that there will be a period of thirty (30)
consecutive days during each period commencing December 15 and ending the
following April 30 during which the principal amount of the Loans outstanding
shall not exceed $10,000,000, provided that the first such period shall commence
                              --------
on the date of this Agreement and end on April 30, 2002, and provided, further,
                                                             --------  -------
that for thirty (30) consecutive days during the period commencing December 15,
2002 and ending April 30, 2003, the principal amount of the Loans outstanding
shall be reduced to zero.

         2.2.     Notice and Manner of Borrowing or Conversion of Loans.
                  ------------------------------------------------------

         (a) Whenever the Borrowers desire to obtain or continue a Loan
hereunder, or convert an outstanding Loan into a Loan of another type provided
for in this Agreement, the Company shall notify the Agent (which notice shall be
irrevocable) by telefax or telephone received no later than 10:00 a.m. Boston
time on the Business Day on which the requested Loan is to be made or continued
as or converted to a Base Rate Loan and received no later than 10:00 a.m. Boston
time on the date three Business Days before the day on which the requested Loan
is to be made or continued as or converted to a LIBOR Loan. Such notice shall
specify (i) the effective date and amount of each Loan or portion thereof to be
continued or converted, subject to the limitations set forth in Section 2.1,
(ii) the interest rate option to be applicable thereto, and (iii) the duration
of the applicable Interest Period, if any (subject to the provisions of the
definition of Interest Period and Section 2.6). Each such notification (a
"Notice of Borrowing or Conversion") shall be immediately followed by a written
confirmation thereof by the Company in substantially the form of Exhibit B
                                                                 ---------
hereto, provided that if such written confirmation differs in any material
        --------
respect from the action taken by the Agent, the records of the Agent shall
control absent manifest error. The Agent shall give the Lenders notice of each
Notice of Borrowing or Conversion in accordance with the Agent's customary
practice.

                                       -15-

<PAGE>

         (b) Subject to the terms and conditions of this Agreement, each Lender
shall make available on or before 2:00 p.m. Boston time on the date of each
proposed Loan, to the Agent at the Agent's address and in immediately available
funds, such Lender's Commitment Percentage of such Loan. After the Agent's
receipt of such funds and upon fulfillment of the applicable conditions set
forth in Section III, the Agent will credit such funds to the Company's demand
deposit account on the date of the proposed Loan.

         (c) Unless the Agent shall have received notice from a Lender prior to
the date of any Loan that such Lender will not make available to the Agent such
Lender's Commitment Percentage of such Loan, the Agent may assume that such
Lender has made such amount available to the Agent on the date of such Loan in
accordance with and as provided in this Section 2.2 and the Agent may, in
reliance upon such assumption, make available on such date a corresponding
amount to the Borrowers. If and to the extent such Lender shall not have so made
its Commitment Percentage of such Loan available to the Agent and the Agent
shall have made available such corresponding amount to the Borrowers, such
Lender agrees to pay to the Agent forthwith on demand, and the Borrowers agree,
jointly and severally, to repay to the Agent within two Business Days after
demand (but only after demand for payment has first been made to such Lender and
such Lender has failed to make such payment), an amount equal to such
corresponding amount together with interest thereon for each day from the date
the Agent shall make such amount available to the Borrowers until the date such
amount is paid or repaid to the Agent, at an interest rate equal to (i) in the
case of such Lender the Federal Funds Effective Rate and (ii) in all other
respects at the interest rate applicable at the time to such Loans. If such
Lender shall pay to the Agent such corresponding amount, such amount so paid
shall constitute such Lender's Loan for purposes of this Agreement. If the
Borrowers make a repayment required by the foregoing provisions of this Section
2.2(c) and thereafter the applicable Lender or Lenders make the payments to the
Agent required by this Section 2.2(c), the Agent shall promptly refund the
amount of such payment.

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

         2.3. Commitment Fee. The Borrowers, jointly and severally, shall pay to
              --------------
the Agent, for the accounts of the Lenders in accordance with their respective
Commitment Percentages, a commitment fee on the average daily amount by which
the Commitment Amount exceeds the aggregate principal amount of all Loans and
the stated amount of all outstanding Letters of Credit during each quarter or
portion thereof computed at the Commitment Fee Rate determined in accordance
with the Pricing Schedule. Commitment Fees shall be determined and payable
quarterly in arrears on the last day of March, June, September and December of
each year, beginning March 31, 2002 and on the Revolving Credit Termination
Date; provided, however, that the Borrowers shall not be liable to pay any such
      --------  -------
commitment fees for the account of a Defaulting Lender.

                                       -16-

<PAGE>

         2.4. Reduction of Commitment Amount. The Company may from time to time
              ------------------------------
by written notice delivered to the Agent at least seven (7) days prior to the
date of the requested reduction, reduce by a minimum amount of $5,000,000 and by
integral multiples of $1,000,000 any unborrowed portion of the Commitment
Amount. No reduction of the Commitment Amount shall be subject to reinstatement.

         2.5. The Notes.
              ---------

         (a) The Loans shall be evidenced by the Notes executed by the
Borrowers, jointly and severally, in favor of each Lender and having a final
maturity of the Revolving Credit Termination Date. The Notes shall be dated on
or before the date of the first Loan and shall have the blanks therein
appropriately completed.

         (b) The Agent shall, and is hereby irrevocably authorized by the
Borrowers to, enter in its records appropriate notations evidencing the date and
the amount of each Loan, the interest rate applicable thereto and the date and
amount of each payment of principal made by the Borrowers with respect thereto;
and in the absence of manifest error, such notations shall constitute conclusive
evidence thereof. No failure on the part of the Agent to make any notation as
provided in this subsection (b) shall in any way affect any Loan or the rights
or obligations of the Agent, the Lenders or the Borrowers with respect thereto.

         2.6. Duration of Interest Periods.
              ----------------------------

         (a) Subject to the provisions of the definition of Interest Period, the
duration of each Interest Period applicable to a Loan shall be as specified in
the applicable Notice of Borrowing or Conversion. The Borrowers shall have the
option to elect a subsequent Interest Period to be applicable to such Loan by
the Company's giving notice of such election to the Agent received no later than
10:00 a.m. Boston time on the Business Day on which the then applicable Interest
Period ends if such Loan is to be continued as or converted to a Base Rate Loan
and three Business Days before the end of the then applicable Interest Period if
such Loan is to be continued as or converted to a LIBOR Loan.

         (b) If the Agent does not receive a notice of election of duration of
an Interest Period for a LIBOR Loan pursuant to subsection (a) above within the
applicable time limits specified therein, or if, when such notice must be given,
a Default exists, the Borrowers shall be deemed to have elected to convert such
Loan in whole into a Base Rate Loan on the last day of the then current Interest
Period with respect thereto.

         (c) Notwithstanding the foregoing, the Borrowers may not select an
Interest Period that would end, but for the provisions of the definition of
Interest Period, after the Revolving Credit Termination Date.

         2.7. Interest Rates and Payment of Interest.
              --------------------------------------

                                       -17-

<PAGE>

         (a) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof at a rate per annum equal to the Base Rate plus the
Applicable Base Rate Margin. Such interest shall be payable on the last day of
each month, in arrears, commencing February 28, 2002, and when such Loans are
due (whether at maturity, by reason of acceleration or otherwise).

         (b) Each LIBOR Loan shall bear interest on the outstanding principal
amount thereof, for each Interest Period applicable thereto, at a rate per annum
equal to the Adjusted LIBOR Rate plus the Applicable LIBOR Margin. Such interest
shall be payable for such Interest Period on the last day thereof and when such
LIBOR Loan is due (whether at maturity, by reason of acceleration or otherwise)
and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof. The Borrowers shall not have more than
fifteen LIBOR Loans outstanding at any time.

         2.8.     Changed Circumstances.
                  ---------------------

         (a)  In the event that:

         (i) on any date on which the Adjusted LIBOR Rate would otherwise be
set, the Agent shall have determined in good faith (which determination shall be
final and conclusive) that adequate and fair means do not exist for ascertaining
the Adjusted LIBOR Rate, or

         (ii) at any time the Agent shall have determined in good faith (which
determination shall be final and conclusive) that:

         (A) the making or continuation of or conversion of any Loan to a LIBOR
Loan has been made impracticable or unlawful by (1) the occurrence of a
contingency that materially and adversely affects the Interbank LIBOR market or
(2) compliance by any Lender in good faith with any applicable law or
governmental regulation, guideline or order or interpretation or change thereof
by any governmental authority charged with the interpretation or administration
thereof or with any request or directive of any such governmental authority
(whether or not having the force of law); or

         (B) the Adjusted LIBOR Rate shall no longer represent the effective
cost to the Lenders for U.S. dollar deposits in the LIBOR market for deposits in
which it regularly participates;

then, and in any such event, the Agent shall forthwith so notify the Company
thereof. Until the Agent notifies the Company that the circumstances giving rise
to such notice no longer apply, the obligation of the Lenders and the Agent to
allow selection by the Borrowers of a LIBOR Loan affected by the contingencies
described in this Section 2.8(a) (herein called "Affected Loans") shall be
suspended. If at the time the Agent so notifies the Company, the Company has
previously given the Agent a Notice of Borrowing or Conversion with respect to
one or more Affected Loans but such Loans have not yet gone into effect, such
notification shall be deemed to be void and the

                                       -18-

<PAGE>

Borrowers may borrow Loans of a non-affected type by giving a substitute Notice
of Borrowing or Conversion Pursuant to Section 2.2 hereof.

         Upon such date as shall be specified in such notice from the Agent
(which shall not be earlier than the date such notice is given) the Company
shall, with respect to the outstanding Affected Loans, prepay the same, together
with interest thereon and any amounts required to be paid pursuant to Section
2.13, and may borrow a Loan of another type in accordance with Section 2.1
hereof by giving a Notice of Borrowing or Conversion pursuant to Section 2.2
hereof.

         (b) In case any law, regulation, treaty or official directive or the
interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof or the compliance with any
guideline or request of any central bank or other governmental authority
(whether or not having the force of law):

         (i) subjects any Lender to any tax not in effect on the date hereof
with respect to payments of principal or interest or any other amounts payable
hereunder by the Company or otherwise with respect to the transactions
contemplated hereby (except for taxes on the overall net income of such Lender
imposed by the United States of America or any political subdivision thereof),
or

         (ii) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, any Lender (other than such
requirements as are already included in the determination of the Adjusted LIBOR
Rate), or

         (iii) imposes upon any Lender any other condition with respect to its
performance under this Agreement, and the result of any of the foregoing is to
increase the cost to such Lender, reduce the income receivable by such Lender or
impose any expense upon such Lender with respect to any outstanding LIBOR Loans,
such Lender shall notify the Company thereof. The Borrowers, jointly and
severally, agree to pay to such Lender the amount of such increase in cost,
reduction in income or additional expense as and when such cost, reduction or
expense is incurred or determined, upon presentation by such Lender of a
statement in the amount and setting forth such Lender's calculation thereof,
which statement shall be deemed true and correct absent manifest error.

         2.9. Capital Requirements. If after the date hereof any Lender
              --------------------
determines that (a) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies, or
any change in the interpretation or application thereof by any governmental
authority charged with the administration thereof, or (b) compliance by such
Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), has the effect of reducing the return on such Lender or such
holding company's capital as a consequence of such Lender's commitment to make
Loans hereunder to a level below that which such Lender or such holding company
could have achieved but for such adoption, change or compliance (taking into
consideration

                                       -19-

<PAGE>

such Lender's or such holding company's then existing policies with respect to
capital adequacy and assuming the full utilization of such entity's capital) by
any material amount, then such Lender shall notify the Company thereof. The
Borrowers, jointly and severally, agree to pay to such Lender the amount of such
reduction in the return on capital as and when such reduction is determined,
upon presentation by such Lender of a statement in the amount and setting forth
such Lender's calculation thereof, which statement shall be deemed true and
correct absent manifest error. In determining such amount, such Lender may use
any reasonable averaging and attribution methods.

         2.10.    Payments and Prepayments of the Loans.
                  -------------------------------------

         (a) The Borrowers may make prepayments to the Agent, for the ratable
accounts of the Lenders, of outstanding LIBOR Loans in amounts not less than
$1,000,000 and in multiples of $500,000, without premium or penalty, on the last
day of any Interest Period applicable thereto, upon three (3) Business Days'
notice to the Agent. The Borrowers may make prepayments to the Agent, for the
ratable accounts of the Lenders, of Base Rate Loans at any time in amounts not
less than $100,000 and in multiples of $50,000, without premium or penalty, upon
one Business Day's notice to the Agent. Any interest accrued on the amounts so
prepaid to the date of such payment must be paid at the time of any such
payment. No prepayment of the Revolving Loans during the Revolving Credit Period
shall affect the Commitment Amount or impair the Borrowers' right to borrow as
set forth in Section 2.1.

         (b) If at any time the sum of (i) the aggregate principal amount of
outstanding Loans and (ii) the stated amount of the outstanding Letters of
Credit exceeds the lesser of (A) the Borrowing Base in effect at such time or
(B) the Commitment Amount, the Borrowers, jointly and severally, shall
immediately repay to the Agent for the ratable accounts of the Lenders a
principal amount of Loans equal to such excess.

         2.11. Method of Payment. All payments and prepayments of principal and
               -----------------
all payments of interest shall be made by the Company, on behalf of itself, GE,
GE Mail and Stores, or by any of the Borrowers, to the Agent at 100 Federal
Street, Boston, Massachusetts in immediately available funds, on or before 11:00
a.m. (Boston time) on the due date thereof, free and clear of, and without any
deduction or withholding for, any taxes or other payments. The Agent and the
Lenders may, and the Borrowers hereby authorize the Agent and the Lenders to,
debit the amount of any payment not made by such time to the demand deposit
account of any Borrower with the Agent or such Lender. The Agent will, after its
receipt thereof, distribute like funds relating to the payment of principal,
interest or any other amounts payable hereunder ratably to the Lenders in
accordance with their respective Commitment Percentages. Any payment made by the
Borrowers to the Agent under this Agreement or under the Notes in the manner
provided in this Agreement shall be deemed to be a payment to each of the
respective Lenders, unless the provisions of this Agreement expressly provide
that any such payment shall be solely for the account of the Agent or any
specific Lender.

                                       -20-

<PAGE>

         2.12. Default Interest. Upon the occurrence and during the continuance
               ----------------
of any Default, the Borrowers, jointly and severally, shall pay to the Agent for
the account of the Lenders interest on the unpaid principal balance of the Loans
and the Swing Line Loans, and, to the extent permitted by applicable law, on any
overdue interest and fees or any other amounts payable hereunder or under the
Notes and the Swing Line Notes, at a rate per annum equal to two percent (2%)
above the rate then applicable to Base Rate Loans, which interest shall be
compounded monthly and payable on demand.

         2.13. Payments Not at End of Interest Period. If the Borrowers for any
               --------------------------------------
reason make any payment of principal with respect to any LIBOR Loan on any day
other than the last day of an Interest Period applicable to such LIBOR Loan, or
fail to borrow or continue or convert to a LIBOR Loan after giving a Notice of
Borrowing or Conversion pursuant to Section 2.2, or if any LIBOR Loan is
accelerated pursuant to Section 7.2(b), the Borrowers, jointly and severally,
shall pay to the Agent, for the ratable accounts of the Lenders, an amount
computed pursuant to the following formula.

                               L = (R - T) x P x D
                                   --------------
                                       360

L          =    amount payable to the Agent for the ratable accounts of the
                Lenders
R          =    interest rate on such Loan
T          =    effective interest rate per annum at which any readily
                marketable bond or other obligation of the United States,
                selected at the Agent's sole discretion, maturing on or near
                the last day of the then applicable Interest Period of such
                Loan and in approximately the same amount as such Loan can be
                purchased by the Agent on the day of such payment of principal
                or failure to borrow or continue

P          =    the amount of principal prepaid or the amount of the requested
                Loan
D          =    the number of days remaining in the Interest Period as of the
                date of such payment or the number of days of the requested
                Interest Period

The Borrowers shall pay such amount upon presentation by the Agent of a
statement setting forth the amount and the Agent's calculation thereof pursuant
hereto.

         2.14. Computation of Interest and Fees. Interest and all fees payable
               --------------------------------
hereunder shall be computed daily on the basis of a year of 360 days and paid
for the actual number of days for which due, except for interest on Base Rate
Loans which shall be computed daily on a basis of a year of 365/366 days and
paid for the actual number of days for which due. If the due date for any
payment of principal is extended by operation of law, interest shall be payable
for such extended time. If any payment required by this Agreement becomes due on
a day that is not a Business Day such payment may be made on the next succeeding
Business Day (subject to clause (a) of the definition of Interest Period), and
such extension shall be included in computing interest in connection with such
payment.

                                       -21-

<PAGE>

         2.15.   Sharing of Payments. If any Lender shall obtain any payment
                 -------------------
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Loans made by it in excess of its ratable share
(according to the then outstanding principal amount of the Loans) of payments on
account of the Loans obtained by all the Lenders, such Lender shall purchase
from the other Lenders such participations in the Loans held by such other
Lenders as shall cause such purchasing Lender to share such payment ratably
according to the then outstanding principal amount of the Loans with each of
such other Lenders; provided, however, that if all or any portion of such
                    --------  -------
payment is thereafter recovered from such purchasing Lender, the purchase shall
be rescinded and the purchase price restored to the extent of such recovery,
with interest at an interest rate per annum equal to the Base Rate. The
Borrowers, jointly and severally, agree that any Lender so purchasing a
participation in the Loans from another Lender pursuant to this Section 2.15
may, to the fullest extent permitted by law, exercise all its rights of payment
with respect to such participation as fully as if such Lender were the direct
creditor of each Borrower in the amount of such participation.

         2.16.   Letter of Credit Facility.
                 -------------------------

         2.16.1. The Letters of Credit. Subject to the terms and conditions
                 ---------------------
hereof, including satisfaction of the conditions set forth in Section 3.2
hereof, and provided no Default has occurred and that the Agent is generally
issuing letters of credit for the account of customers in its ordinary banking
business, the Agent agrees upon the request of the Company pursuant to Section
2.16.2 hereof, to issue Letters of Credit, provided that: (a) the outstanding
stated amount of the Letters of Credit shall not exceed the Maximum Letter of
Credit Amount; (b) the sum of (i) the outstanding stated amount of all Letters
of Credit and (ii) the aggregate principal amount of all outstanding Loans shall
not exceed the lesser of (A) the Borrowing Base and (B) the Commitment Amount;
and (c) each Letter of Credit shall expire on or before the earlier of ten (10)
days prior to the Revolving Credit Termination Date or 360 days after the
issuance thereof.

         2.16.2. Issuing a Letter of Credit. The Company may request that the
                 --------------------------
Agent issue a Letter of Credit by written notice (the "L/C Notice") given to the
Agent not less than two (2) Business Days prior to the proposed date of issuance
of such Letter of Credit. The L/C Notice shall specify the proposed date of
issuance and the beneficiary and amount of such Letter of Credit, and shall be
accompanied by a letter of credit application completed to the satisfaction of,
and with such amendments and modifications as may be deemed necessary by, the
Agent.

         2.16.3. Letter Credit Participations.
                 ----------------------------

         (a) The Agent shall notify the Lenders on a monthly basis, reporting
the issuance or any amendment or extension of any Letter of Credit. Immediately
upon the issuance by the Agent of any Letter of Credit, the Agent shall be
deemed to have sold to each Lender (each such Lender, in its capacity under this
Section 2.16.3, an "L/C Participant"),

                                       -22-

<PAGE>

and each such L/C Participant shall be deemed irrevocably and unconditionally to
have purchased and received from the Agent, without recourse or warranty, an
undivided interest and participation (each an "L/C Participation") to the extent
of such L/C Participant's Commitment Percentage, in such Letter of Credit, any
substitute Letter of Credit, each draw made thereunder and the obligations of
the Borrowers under the Lender Agreements with respect thereto, and any security
therefor or any pertaining thereto.

         (b) In determining whether to pay under any Letter of Credit, the Agent
shall have no obligation relative to the L/C Participants other than to confirm
that any documents required to be delivered under such Letter of Credit have
been delivered and that they appear to comply on their face with the
requirements of such Letter of Credit. Any action taken or omitted to be taken
by the Agent under or in connection with any Letter of Credit, if taken or
omitted to be taken in the absence of gross negligence or willful misconduct,
shall not create for the Agent any resulting liability.

         2.16.4.  Reimbursement and Other Payments.
                  --------------------------------

         (a) The Borrowers, jointly and severally, hereby agree to pay to the
Agent, for the ratable accounts of the Lenders, on the date on which the Agent
shall be required to pay any draft presented under any Letter of Credit, a sum
(the "Reimbursement Amount") equal to: (i) the amount so paid under such Letter
of Credit, plus (ii) interest on any amount remaining unpaid by the Borrowers to
the Lenders under clause (i) from and including the date on which such amount
becomes payable pursuant to clause (i) until payment in full, payable on demand,
at a per annum rate of interest equal to the rate applicable to Base Rate Loans
plus any additional interest under Section 2.12. If the Borrowers shall fail to
pay to the Agent the Reimbursement Amount on the date on which the Agent shall
be required to pay any draft presented under any Letter of Credit, the Agent
shall, to the extent the Borrowers have availability to request a Loan, consider
such failure to be a request for a Loan in the amount of the Reimbursement
Amount. In the event any such Loan is made pursuant to this Section 2.16.4(a),
the Agent shall notify each Lender of such Lender's Commitment Percentage of
such Loan, and such Lender shall make available promptly to the Agent the
corresponding amount of such Loan, all in accordance with Section 2.2 hereof.
The Borrowers, jointly and severally, agree that the Agent may make any such
Loan, and each Lender agrees to deliver such Lender's Commitment Percentage of
such Loan, even if the making of such Loan causes the outstanding balance of all
Loans to exceed the limits set forth in Section 2.1 hereof, and the Borrowers
further agree that the making of such Loan by the Agent in excess of the limits
set forth in Section 2.1 hereof shall constitute an automatic Events of Default
under Section VII, entitling the Agent and the Lenders to exercise all rights
and remedies available to them under the Lender Agreements and applicable law.

         (b) The Borrowers shall, jointly and severally, quarterly in arrears on
the last day of each calendar quarter for the calendar quarter ending on such
date, pay a fee (in each case, a "Letter of Credit Fee") to the Agent in respect
of each Letter of Credit issued, extended or renewed at the request of the
Borrowers equal to the face amount of each Letter of Credit multiplied by the
Letter of Credit Fee Rate per annum. The Agent

                                       -23-

<PAGE>

shall, in turn, remit to each Lender its pro rata portion of such Letter of
Credit Fee. In addition, the Borrowers shall, jointly and severally, pay to the
Agent, for its own account, (a) on standby Letters of Credit, a fronting fee
equal to 0.125% per annum of the stated amount, payable quarterly in arrears,
and (b) on the date of issuance, or any extension or renewal of any Letter of
Credit and at such other time or times as such charges are customarily made by
the Agent, the Agent's standard issuance, processing, negotiation, amendment and
administrative fees, determined in accordance with customary fees and charges
for similar facilities.

         (c) If prior to the time a Loan would have otherwise been made pursuant
to Section 2.16.4(a) one of the events described in Section 7.1(g) or (h) shall
have occurred and be continuing, each Lender shall, on the date such Loan was to
have been made pursuant to the provisions of paragraph (a) above (the
"Reimbursement Date"), purchase an undivided participating interest in an amount
equal to (i) its Commitment Percentage times (ii) the aggregate principal amount
of the Reimbursement Amount then outstanding which was to have been repaid with
such Loan (the "Letter of Credit Participation Amount"). On the Reimbursement
Date, each Lender shall transfer to the Agent, in immediately available funds,
such Lender's Letter of Credit Participation Amount and upon receipt thereof the
Agent shall deliver to such Lender a Letter of Credit Loan Participation
Certificate dated the date of the Lender's receipt of such funds and in such
Letter of Credit Participation Amount.

         2.16.5. Obligations Absolute. The obligations of the Borrowers with
                 --------------------
respect to the Letters of Credit shall be unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation, the following circumstances:

         (a)      any lack of validity or enforceability of the Letters of
Credit or this Agreement;

         (b)      any amendment or waiver of or any consent to or actual
departure from this Agreement;

         (c) the existence of any claim, set-off, defense or other right which
the Borrowers may have at any time against any beneficiary or any transferee of
a Letter of Credit (or any persons or entities for which any such beneficiary or
any such transferee may be acting), the Agent, the Lenders or any other Person,
whether in connection with this Agreement, the transactions contemplated herein
or in any other agents or any unrelated transaction;

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

         (e) payment by the Agent under a Letter of Credit against presentation
by the beneficiary thereof of a draft or certificate which does not comply with
terms of such

                                       -24-

<PAGE>

Letter of Credit; or

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

         The obligations of the Borrower under this Section 2.16.5 shall not
limit any rights or claims of the Borrowers under Section 2.16.6 or 2.16.8
hereof.

         2.16.6. The Uniform Customs and Practice. The Uniform Customs and
                 --------------------------------
Practice for Documentary Credits (ICC Publication No. 500) shall be binding on
the Borrowers, the Lenders and the Agent. The Borrowers assume all risks of the
acts or omissions of the beneficiary of each Letter of Credit with respect to
such Letter of Credit. In furtherance of, and not in limitation of the Agent's
rights and powers under the Uniform Customs and Practice, but subject to all
other provisions of this Section 2.16.6, it is understood and agreed that the
Agent shall not have any liability for, and that the Borrowers assume all
responsibility for: (a) the genuineness of any signature; (b) the form,
correctness, validity, sufficiency, genuineness, falsification and legal effect
of any draft, certification or other document required by a Letter of Credit or
the authority of the Person signing the same; (c) the failure of any instrument
to bear any reference or adequate reference to a Letter of Credit or the failure
of any Persons to note the amount of any instrument on the reverse of a Letter
of Credit or to surrender a Letter of Credit or otherwise to comply with the
terms and conditions of a Letter of Credit; (d) the good faith or acts of any
Person other than the Agent and its agents and employees; (e) the existence,
form, sufficiency or breach of or default under any agreement or instrument of
any nature whatsoever; (f) any delay in giving or failure to give any notice,
demand or protest; and (g) any error, omission, delay in or nondelivery of any
notice or other communication, however sent. The determination as to whether the
required documents are presented prior to the expiration of a Letter of Credit
and whether such other documents are in proper and sufficient form for
compliance with a Letter of Credit shall be made by the Agent in its sole
discretion, which determination shall be conclusive and binding upon the
Borrowers. It is agreed that the Agent may honor, as complying with the terms of
the Letters of Credit and this Agreement, any documents otherwise in order and
signed or issued by the beneficiary thereof. Any action, inaction or omission on
the part of the Agent under or in connection with the Letters of Credit or any
related instruments or documents, if in good faith and in conformity with such
laws, regulations or commercial or banking customs as the Agent may reasonably
deem to be applicable, shall be binding upon the Borrowers, shall not place the
Agent or the Lenders under any liability to the Borrowers, and shall not affect,
impair or prevent the vesting of any of the Agent's or the Lenders' rights or
powers hereunder or the Borrowers' obligation to make full reimbursement.

         2.16.7. Modification, Consent, etc. If the Borrowers, either in writing
                 --------------------------
or orally, request or consent to any modification or extension of a Letter of
Credit or waive failure of any draft, certificate or other documents to comply
with the terms of a Letter of Credit, the Agent shall be entitled to rely and
shall be deemed to have relied on such request, consent or waiver with respect
to any action taken or omitted by the Agent pursuant to

                                       -25-

<PAGE>

any such request, consent or waiver, and such extension, modification or waiver
binding upon the Borrowers.

         2.16.8. Liability of the Agent and the Lenders. Neither the Agent, the
                 --------------------------------------
Lenders nor any of their officers or directors shall be liable or responsible
for: (a) the use which may be made of the Letters of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by the Agent against
presentation of documents which do not comply with the terms of a Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to a Letter of Credit; or (d) any other circumstances whatsoever in
making or failure to make payment under a Letter of Credit, except that
notwithstanding anything in this Section 2.16.8 to the contrary, the Borrowers
shall have a claim against the Agent, and the Agent shall be liable to the
Borrowers, to the extent but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Borrowers which were caused by the
Agent's failure to conform to the standards of the Uniform Customs and Practice.
In furtherance and not in limitation of the foregoing, the Agent may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.
Nothing contained in this Section 2.16.8 shall affect the Agent's
responsibilities under Section 2.16.6.

         2.16.9. Outstanding Letters of Credit. As of the date of this
                 -----------------------------
Agreement, certain letters of credit are outstanding from Fleet for the account
of the Company under the 1999 Credit Agreement, which letters of credit are
described on Schedule 2.16.9 hereto. The parties hereto acknowledge and agree
             ---------------
that upon execution of this Agreement, all letters of credit described on
Schedule 2.16.9 hereto shall automatically be deemed to be Letters of Credit
---------------
hereunder without the necessity of any further action on the part of the
Company, the Lenders or the Agent.

         2.17. Swing Line Commitment. Subject to the terms and conditions
               ---------------------
hereof, Fleet (in such capacity, the "Swing Line Lender") agrees to make
available to the Borrowers a portion of the credit otherwise available to the
Borrowers hereunder from time to time prior to the Revolving Credit Termination
Date by making swing line loans ("Swing Line Loans") to the Borrowers, jointly
and severally, in an aggregate principal amount not to exceed at any one time
outstanding the Swing Line Commitment; provided that (a) the aggregate principal
                                       --------
amount of Swing Line Loans outstanding at any time shall not exceed the Swing
Line Commitment then in effect (notwithstanding that the Swing Line Loans
outstanding at any time, when aggregated with the Swing Line Lender's other
outstanding Loans hereunder, may exceed the Swing Line Commitment then in
effect) and (b) the Borrowers shall not request, and the Swing Line Lender shall
not be obligated to make, any Swing Line Loan if, after giving effect to the
making of such Swing Line Loan, the aggregate amount of the Loans, the Swing
Line Loans and the stated amount of all Letters of Credit exceed the lesser of
the Borrowing Base in effect at such time and the Commitment Amount. Prior to
the Revolving Credit Termination Date, the Borrowers may use the Swing Line
Commitment by borrowing, repaying and

                                       -26-

<PAGE>

reborrowing, all in accordance with the terms and conditions hereof. Swing Line
Loans shall be Base Rate Loans only. The Borrowers may use the proceeds of
Revolving Credit Advances from time to time to repay any outstanding Swing Line
Loans. The Borrowers, jointly and severally, shall repay all outstanding Swing
Line Loans on the Revolving Credit Termination Date. On the Closing Date, the
Borrowers shall deliver to the Swing Line Lender a Swing Line Note to evidence
the Swing Line Loans from time to time made by the Swing Line Lender to the
Borrowers hereunder.

         2.18. Procedure for Swing Line Borrowing; Interest on Swing Line Loans.
               ----------------------------------------------------------------
Whenever the Borrowers desire that the Swing Line Lender make Swing Line Loans
under Section 2.18, the Company shall give the Swing Line Lender irrevocable
telephonic notice confirmed promptly in writing (which telephonic notice must be
received by the Swing Line Lender not later than 1:00 P.M., Boston time, on the
proposed borrowing date), specifying (a) the amount to be borrowed and, (b) the
requested borrowing date (which shall be a Business Day prior to the Revolving
Credit Termination Date); and not later than 3:00 P.M., Boston time, on the
borrowing date specified in the notice in respect of Swing Line Loans, the Swing
Line Lender shall make the proceeds of such Swing Line Loan available to the
Company, as agent for the Borrowers on such borrowing date in accordance with
the instructions of the Company. The Borrowers, jointly and severally, shall pay
interest on the unpaid balance of the Swing Line Loans from time to time
outstanding at a per annum rate equal to the Base Rate. Interest on the Swing
Line Loans shall be payable monthly in arrears on the last day of each month,
commencing February 28, 2002 and continuing until all of the Indebtedness of the
Borrowers to the Swing Line Lender hereunder shall have been paid in full.

         2.19. Refunded Swing Line Loans; Swing Line Loan Participations. (a)
               ---------------------------------------------------------
The Swing Line Lender, at any time and from time to time in its sole and
absolute discretion, but in any event at least once every fourteen days, may, on
behalf of the Borrowers (which hereby irrevocably direct the Swing Line Lender
to act on their behalf) on one Business Day's notice given by the Swing Line
Lender no later than 12:00 noon, Boston time, request each Lender to make, and
each Lender hereby agrees to make, a Revolving Credit Advance in an amount equal
to such Lender's Commitment Percentage of the aggregate amount of the Swing Line
Loans (the "Refunded Swing Line Loans") outstanding on the date of such notice,
to repay the Swing Line Lender. Unless any of the events described in Section
7.1(g) or (h) shall have occurred and be continuing (in which case the
procedures of Section 2.19(c) shall apply), each Lender shall make the amount of
such Revolving Credit Advance available to the Agent at its office in
immediately available funds, not later than 10:00 A.M., Boston time, one
Business Day after the date of such notice. The proceeds of such Revolving
Credit Advances shall be immediately applied by the Swing Line Lender to repay
the Refunded Swing Line Loans. Effective on the day such Revolving Credit
Advances are made, the portion of the Swing Line Loans so paid shall no longer
be outstanding as Swing Line Loans and shall be outstanding as Revolving Credit
Advances and owed to the Lenders in accordance with their respective Commitment
Percentages. The Borrowers irrevocably authorize the Swing Line Lender to charge
the Borrowers' accounts with the Agent (up to the amount

                                       -27-

<PAGE>

available in each such account) to immediately pay the amount of such Refunded
Swing Line Loans to the extent amounts received from the Lenders are not
sufficient to repay all such Refunded Swing Line Loans.

         (b) The making of any Swing Line Loan hereunder shall be subject to the
satisfaction of the applicable conditions precedent thereto set forth in Section
3.2. The Swing Line Lender shall notify the Company of its election not to make
Swing Line Loans hereunder as a result of the failure to satisfy such conditions
precedent, unless an Event of Default of the type specified in Section 7.1(g) or
(h) shall have occurred and be continuing.

         (c) If prior to the time a Revolving Credit Advance would have
otherwise been made pursuant to Section 2.2(a) one of the events described in
Section 7.1(g) or (h) shall have occurred and be continuing, each Lender shall,
on the date such Revolving Credit Advance was to have been made pursuant to the
notice referred to in Section 2.19(a) (the "Refunding Date"), purchase an
undivided participating interest in an amount equal to (i) its Commitment
Percentage times (ii) the aggregate principal amount of Swing Line Loans then
outstanding which were to have been repaid with such Revolving Credit Advances
(the "Swing Line Participation Amount"). On the Refunding Date, each Lender
shall transfer to the Swing Line Lender, in immediately available funds, such
Lender's Swing Line Participation Amount, and upon receipt thereof the Swing
Line Lender shall deliver to such Lender a Swing Line Loan Participation
Certificate dated the date of the Swing Line Lender's receipt of such funds in
such Swing Line Participation Amount.

         (d) Whenever, at any time after the Swing Line Lender has received from
any Lender such Lender's Swing Line Participation Amount, the Swing Line Lender
receives any payment on account of the Swing Line Loans, the Swing Line Lender
will distribute to such Lender its Swing Line Participation Amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Lender's participating interest was outstanding and
funded and, in the case of principal and interest payments, to reflect such
Lender's pro rata portion of such payment if such payment is not sufficient to
pay the principal of and interest on all Swing Line Loans then due); provided
however, that in the event that such payment received by the Swing Line Lender
is required to be returned, such Lender will return to the Swing Line Lender any
portion thereof previously distributed to it by the Swing Line Lender.

         (e) Each Lender's obligation to make the Loans referred to in Section
2.19(a) and to purchase a participating interest pursuant to Section 2.19(c)
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any setoff, counterclaim,
recoupment, defense or other right which such Lender or the Borrowers may have
against the Swing Line Lender, the Borrowers or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of a Default or an Event of
Default or the failure to satisfy any of the other conditions specified in
Section 3.2; (iii) any adverse change in the condition (financial or otherwise)
of the Borrowers; (iv) any breach of this Agreement or any other Lender
Agreement by the

                                       -28-

<PAGE>

Borrowers or any other Lender; or (v) any other circumstances, happening or
event whatsoever, whether or not similar to any of the foregoing.

         2.20. Use of Proceeds. The proceeds of all Loans and Swing Line Loans
               ---------------
shall be used by the Borrowers as follows: (a) the initial Revolving Credit Loan
shall be used to repay in full all amounts outstanding for Loans and Revolving
Credit Advances under the 1999 Credit Agreement, and (b) all future Revolving
Credit Advances and all Swing Line Loans shall be used for general working
capital and other general corporate purposes, including repurchases of stock of
the Parent permitted hereunder.

         2.21. Guaranty of Parent. The Parent hereby unconditionally guaranties
               ------------------
to the Agent and the Lenders the prompt payment and performance of (a) all
liabilities and obligations and Indebtedness, direct or indirect, matured or
unmatured, primary or secondary, certain or contingent, of the Borrowers and the
Brookstone Subsidiaries (including without limitation, costs and expenses
incurred by the Agent and the Lenders in attempting to collect or enforce any of
the foregoing), accrued in each case to the date of payment, and (b) the
performance of all other agreements, covenants and conditions of the Borrowers
and the Brookstone Subsidiaries with respect thereto set forth in this Agreement
and all other Lender Agreements. The responsibilities and obligations of the
Borrowers and the Brookstone Subsidiaries to the Agent and the Lenders described
in the preceding sentence are hereinafter referred to collectively as the
"Guaranteed Obligations." The guaranty pursuant to this Section 2.21 is an
absolute, unconditional and continuing guaranty of the full and punctual payment
and performance by the Borrowers and the Brookstone Subsidiaries of the
Guaranteed Obligations and not of collectability of the Guaranteed Obligations,
and is in no way conditioned upon any requirement that the Agent or the Lenders
first attempt to collect any of the Guaranteed Obligations from the Borrowers
and the Brookstone Subsidiaries or resort to any security or other means of
obtaining payment of any of the Guaranteed Obligations which the Agent or the
Lenders now has or may acquire after the date hereof, or upon any other
contingency whatsoever. Upon any default by the Borrowers or the Brookstone
Subsidiaries in the full and punctual payment and performance of the Guaranteed
Obligations, the liabilities and obligations of the Parent hereunder shall, at
the option of the Agent, become forthwith due and payable to the Agent, for the
ratable benefit of the Agent and the Lenders, without demand or notice of any
nature, all of which are expressly waived by the Parent. Payments by the Parent
under this Section 2.21 may be required by the Agent or the Lenders on any
number of occasions. The Parent waives presentment, demand, protest, notice of
acceptance, notice of Guaranteed Obligations incurred and all other notices of
any kind, all defenses which may be available by virtue of any valuation, stay,
moratorium law or other similar law now or hereafter in effect, any right to
require the marshaling of assets of the Borrowers and the Brookstone
Subsidiaries, and all suretyship defenses generally. Without limiting the
generality of the foregoing, the Parent agrees to the provisions of any
instrument evidencing, securing or otherwise executed in connection with any
Guaranteed Obligations and agrees that the obligations of the Parent hereunder
shall not be released or discharged, in whole or in part, or otherwise affected
by any rescissions, waivers, amendments or modifications of any of the terms or
provisions of any agreement evidencing securing or otherwise executed in
connection

                                       -29-

<PAGE>

with any Guaranteed Obligation. Until the payment and performance in full of all
Guaranteed Obligations and any and all obligations of the Borrowers and the
Brookstone Subsidiaries to any affiliate of the Agent or the Lenders, the Parent
shall not exercise any rights against the Borrowers and the Brookstone
Subsidiaries arising as a result of payment by the Parent hereunder, by way of
subrogation or otherwise. The payment of any amounts due with respect to any
indebtedness of the Borrowers and the Brookstone Subsidiaries now or hereafter
held by the Parent is hereby subordinated to the prior payment in full of the
Guaranteed Obligations.

         2.22. Replacement of Lenders. If any Lender (an "Affected Lender")
               ----------------------
defaults in its obligation to make Loans, in accordance with the terms of this
Agreement, the Borrowers may, within ninety (90) days of receipt of notice of
such default, by notice (a "Replacement Notice") in writing to the Agent and
such Affected Lender (a) request the Affected Lender to cooperate with such
Borrowers in obtaining a replacement bank satisfactory to the Agent and such
Borrowers (the "Replacement Lender"); (b) request the non-Affected Lenders to
acquire and assume all of the Affected Lender's Loans and Commitment Percentage,
as provided herein, but none of such Lenders shall be under an obligation to do
so; or (c) designate a Replacement Lender reasonably satisfactory to the Agent
(which shall be deemed to be satisfactory if a Successor Lender). If any
satisfactory Replacement Lender shall be obtained, and/or if any one or more of
the non-Affected Lenders shall agree to acquire and assume all of the Affected
Lender's Loans and Commitment Percentage, then such Affected Lender shall
assign, in accordance with Section 9.2, all of its Commitment Percentage, Loans,
Notes and other rights and obligations under this Agreement and all other Lender
Agreements to such Replacement Lender or non-Affected Lenders, as the case may
be, in exchange for payment of the principal amount so assigned and all interest
and fees accrued on the amount so assigned, plus all other Obligations then due
and payable to the Affected Lender; provided, however, that prior to any such
                                    --------  -------
assignment, such Borrower shall have paid to such Affected Lender all amounts
properly demanded and unreimbursed under this Agreement. Upon the effective date
of such assignment, such Borrower shall issue replacement Notes to such
Replacement Lender and/or non-Affected Lenders, as the case may be, and such
institution shall become a "Lender" for all purposes under this Agreement and
the other Loan Agreements.

         2.23. Extension of Revolving Credit Termination Date.
               ----------------------------------------------

               (a) At any time after the first anniversary of the date this
Agreement but prior to the Revolving Credit Termination Date, the Company, by
written notice to the Agent, may request an extension of the Revolving Credit
Termination Date by a period of one year from the date then in effect. The Agent
shall promptly send each Lender a copy of such extension request, and each
Lender shall in turn, in its sole discretion, not later than the thirty (30)
days following the date of such extension request, notify the Company and the
Agent in writing as to whether such Lender will consent to such extension. If
any Lender shall fail to notify the Agent and the Company in writing of its
consent to any such extension request on or before such 30/th/ day (such 30/th/
day hereinafter referred to as the "Extension Date"), such Lender shall be
deemed not to have

                                       -30-

<PAGE>

consented to such request. The Agent shall notify the Company on or prior to the
Extension Date of the decision of the Lenders regarding the Company's request
for an extension of the Revolving Credit Termination Date.

                  (b) If all Lenders consent in writing to such request in
accordance with subsection (a) of this Section 2.23, the Revolving Credit
Termination Date in effect at such time shall, effective as at the Extension
Date, be extended for a period of one year, provided, however, that on the
                                            --------  -------
Extension Date the applicable conditions set forth in Sections 3.1 and 3.2 shall
be satisfied. If fewer than all Lenders consent in writing to any such request
in accordance with subsection (a) of this Section 2.23, the Revolving Credit
Termination Date in effect at such time shall be extended, but only as to those
Lenders who consented to such extension, and only if the aggregate Commitment
Amount of the consenting Lenders would equal or exceed $75,000,000. To the
extent the aggregate Commitment Amount would not equal or exceed $75,000,000,
the Revolving Credit Termination Date shall not be extended. In addition, to the
extent the Revolving Credit Termination Date is not extended as to any Lender,
then (i) such Lender's Commitment Percentage of the Commitment Amount shall
remain in effect until, and automatically terminate in whole upon, the original
unextended Revolving Credit Termination Date, and (ii) upon such termination as
to such Lender, the aggregate Commitment Amount of the Lenders under this
Agreement shall be automatically reduced by an amount equal to such terminated
Commitment Percentage. It is understood and agreed that no Lender shall have any
obligation whatsoever to agree to any request made by the Company for any
requested extension of the Revolving Credit Termination Date. It is further
understood and agreed that in no event shall the Commitment Percentage of the
Lenders hereunder extend for a period longer than 365 days from the original
Revolving Credit Termination Date.

                                   SECTION III

                    CONDITIONS OF LOANS AND LETTERS OF CREDIT

         3.1.     Conditions Precedent to Initial Loan. The obligation of the
                  ------------------------------------
Lenders to make the initial Loan is subject to the condition precedent that the
Agent shall have received, in form and substance satisfactory to Agent and its
counsel, the following:

         (a)      each of the Lender Agreements, duly authorized, executed and
delivered by the respective parties thereto;

         (b) certificates of the Secretary or an Assistant Secretary of the
Parent, each Borrower, and each of the Brookstone Subsidiaries with respect to
resolutions of the Board of Directors authorizing the execution and delivery of
the Lender Agreements to which they are respectively a party and identifying the
officer(s) authorized to execute, deliver and take all other actions required
under this Agreement and the other Lender Agreements, and pending specimen
signatures of such officers;

                                       -31-

<PAGE>

         (c) certificates of incorporation of each of the Parent, each Borrower
and each of the Brookstone Subsidiaries and all amendments and supplements
thereto, filed in the office of the Secretaries of State of Delaware and New
Hampshire, respectively, and each certified by said Secretaries of State as
being a true and correct copy thereof;

         (d) the by-laws of each of the Parent, each Borrower and each of the
Brookstone Subsidiaries and all amendments and supplements thereto, certified by
the Secretary or an Assistant Secretary of the Parent, each Borrower, and each
of the Brookstone Subsidiaries, respectively as being a true and correct copy
thereof;

         (e) certificates of the Secretaries of State of the jurisdictions of
organization of each of the Parent, each Borrower and each of the Brookstone
Subsidiaries, as to legal existence and good standing of each of the Parent,
each Borrower and each of the Brookstone Subsidiaries in such states, and
certificates of Secretaries of State with respect to authority to do business
from such states as are requested by the Agent;

         (f) an opinion addressed to it from Cook, Little, Rosenblatt & Manson,
p.l.l.c., counsel to the Parent, each Borrower,and each of the Brookstone
Subsidiaries, substantially in the form of Exhibit H hereto;
                                           ---------

         (g) the Borrowers' three-year financial plan, and the Agent shall be
satisfied therewith and otherwise shall have completed its due diligence;

         (h) satisfaction that the Arranger has syndicated the Commitment Amount
in a manner mutually satisfactory to the Borrowers and the Agent;

         (i) payment to Fleet of all accrued commitment fees under the 1999
Credit Agreement;

         (j) the Security Documents and the appropriate financing statements (in
the name of the Parent, each Borrower and each of the Brookstone Subsidiaries)
and other documents in respect thereto and necessary to enable the Agent to
perfect a legal, valid and enforceable first-priority security interest
thereunder (subject to Permitted Encumbrances) shall have been duly executed by
each such Person, and filed or recorded, as applicable, in all appropriate
filing offices or other locations necessary for the perfection of such
first-priority interests (subject to Permitted Encumbrances), and all other
actions necessary for the perfection of such interests shall have been
completed. The Agent shall have received reports concerning the results of
searches of the Uniform Commercial Code filing offices for the Parent, each
Borrower and each of the Brookstone Subsidiaries in each jurisdiction requested
by the Agent where Collateral or other assets are located made no more than 30
days prior to the date of this Agreement. The Agent shall have received the
original stock certificates, together with stock powers endorsed in blank, for
(i) all of the issued and outstanding capital stock of each domestic U.S.
Subsidiary of the Parent, and (ii) 65% of the issued and outstanding capital
stock of each foreign Subsidiary of the Parent. The Lender shall have received
satisfactory evidence that liability insurance (including umbrella coverage) and
casualty insurance, including any insurance as is required by the Security

                                       -32-

<PAGE>

Documents, to be in effect in respect of all real and personal property and
fixtures, of the Parent, each Borrower and each of the Brookstone Subsidiaries
is in effect and the interest of the Agent as loss payee and additional insured
has been duly endorsed upon all instruments of insurance issued in respect of
such property and in respect of liability. All such insurance shall provide for
30 days' advance written notice to the Agent of any cancellation thereof;

        (k)  the Agent shall have received reasonably satisfactory evidence that
the Parent, the Borrowers and the Brookstone Subsidiaries are solvent, and will
be solvent after giving effect to the Loans to be made hereunder on the date of
this Agreement; and

        (l)  such other documents, and evidence of the completion of such other
matters, as counsel for the Agent may reasonably deem necessary or appropriate.

        3.2. Conditions Precedent to All Loans and Letters of Credit. The
             -------------------------------------------------------
Lenders' obligation to make each Loan, including the initial Loan, or continue
or convert Loans to Loans of another type, or issue or extend any Letter of
Credit, are further subject to the following conditions:

        (a)  timely receipt by the Agent of the Notice of Borrowing or
Conversion as provided in Section 2.2 or an L/C Notice as provided in Section
2.16.2;

        (b)  the representations and warranties contained in Section IV shall be
true and accurate in all material respects on and as of the date of such Notice
of Borrowing or Conversion or L/C Notice and on the effective date of the
making, continuation or conversion of each Loan or issuance or extension of each
Letter of Credit as though made at and as of each such date (except to the
extent that such representations and warranties expressly relate to an earlier
date);

        (c)  the sum of (i) the aggregate principal amount of outstanding Loans
and (ii) the stated amount of the outstanding Letters of Credit, after the
making, continuation or conversion of such Loan or issuance or extension of such
Letter of Credit, will not exceed the lesser of (A) the Borrowing Base in effect
as of the end of the Borrowers' previous fiscal month or (B) the Commitment
Amount,

        (d)  no Default shall have occurred and be continuing, or would result
from such Loan or Letter of Credit;

        (e)  the resolutions referred to in Section 3.1(c) shall remain in full
force and effect; and

        (f)  no change shall have occurred in any law or regulation or
interpretation thereof that, in the opinion of counsel for any Lender, would
make it illegal or against the policy of any governmental agency or authority
for any Lender to make Loans or issue Letters of Credit hereunder.

        The making of each Loan and issuance or extension of each Letter of
Credit shall

                                       -33-

<PAGE>

be deemed to be a representation and warranty by the Company on the date of the
making, continuation or conversion of such Loan or issuance or extension of such
Letter of Credit as to the satisfaction of the conditions set forth in
subsections (b) through (e) of this Section 3.2.

                                   SECTION IV

                         REPRESENTATIONS AND WARRANTIES

         In order to induce the Agent and the Lenders to enter into this
Agreement and to induce the Lenders to make Loans hereunder, the Parent and the
Borrowers jointly and severally represent and warrant to the Agent and the
Lenders that:

         4.1. Organization and Qualification. Each of the Parent and its
              ------------------------------
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, (b) has all
requisite corporate power to own its property and conduct its business as now
conducted and as presently contemplated, and (c) is duly qualified and in good
standing as a foreign corporation and is duly authorized to do business in each
jurisdiction where the nature of its properties or business requires such
qualification, except to the extent any such failure to be duly qualified or in
good standing does not have a material adverse effect on the assets, business,
condition (financial or otherwise) or prospects of the Parent and its
Subsidiaries considered as a whole.

         4.2. Corporate Authority. The execution, delivery and performance of
              -------------------
the Lender Agreements and the transactions contemplated hereby and thereby are
within the corporate power and authority of the Parent, the Borrowers and the
Brookstone Subsidiaries and have been authorized by all necessary corporate
proceedings, and do not and will not (a) require any consent or approval of the
stockholders of the Parent, the Borrowers or any of the Brookstone Subsidiaries,
(b) contravene any provision of the charter documents or by-laws of the Parent,
the Borrowers or any of the Brookstone Subsidiaries or any law, rule or
regulation applicable to the Parent, the Borrowers or any of the Brookstone
Subsidiaries, (c) contravene any provision of, or constitute an event of default
or event that, but for the requirement that time elapse or notice be given, or
both, would constitute an event of default under, any other agreement,
instrument, order or undertaking binding on the Parent, the Borrowers or any of
the Brookstone Subsidiaries, or (d) result in or require the imposition of any
Encumbrance on any of the properties, assets or rights of the Parent, the
Borrowers or any of the Brookstone Subsidiaries.

         4.3. Valid Obligations. The Lender Agreements and all of their
              -----------------
respective terms and provisions are the legal, valid and binding obligations of
the Parent and the Borrowers, with respect to this Agreement, the Borrowers,
with respect to the Notes, and the Parent, the Borrowers and the Brookstone
Subsidiaries with respect to the other Lender Agreements to which they are a
party, enforceable in accordance with their respective terms except as limited
by bankruptcy, insolvency, reorganization, moratorium or other laws affecting
the enforcement of creditors rights generally, and except as the

                                       -34-

<PAGE>

remedy of specific performance or of injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.

         4.4. Consents or Approvals. The execution, delivery and performance of
              ---------------------
the Lender Agreements and the transactions contemplated herein and therein do
not require any approval or consent of, or filing or registration with, any
governmental or other agency or authority, or any other party, except filings
under the Uniform Commercial Code in connection with the Collateral.

         4.5. Title to Properties; Absence of Encumbrances. Each of the Parent
              --------------------------------------------
and its Subsidiaries has good and marketable title to all of the properties,
assets and rights of every name and nature now used in the conduct of its
business, including, without limitation, such properties, assets and rights as
are reflected in the financial statements referred to in Section 4.6 (except
such properties, assets or rights as have been disposed of in the ordinary
course of business since the date thereof), free from all Encumbrances except
Permitted Encumbrances or those Encumbrances disclosed in Exhibit C hereto, and,
                                                          ---------
except as so disclosed, free from all defects of title that might materially
adversely affect such properties, assets or rights, taken as a whole.

         4.6. Financial Statements. The Parent has furnished to the Lenders its
              --------------------
consolidated balance sheet as of February 3, 2001 and its related consolidated
statements of income, changes in stockholders' equity and cash flow for the
fiscal year then ended, and related footnotes, audited and certified by Price
Waterhouse Coopers LLP. The Parent has also furnished to the Lenders its
unaudited consolidated balance sheet as of November 3, 2001 and its related
unaudited consolidated statements of income, changes in stockholders' equity and
cash flow for the fiscal quarter then ended, certified by the principal
financial officer of the Parent. All such financial statements were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods specified (except that the unaudited financial
statements are without footnotes) and present fairly the financial position of
the Parent and its Subsidiaries as of such dates and the results of the
operations of the Parent and its Subsidiaries for such periods (except, as to
the unaudited financial statements, subject to normal, recurring year-end
adjustments). There are no liabilities, contingent or otherwise, not disclosed
in such financial statements or in Exhibit C hereto that involve a material
                                   ---------
amount. There has been no material adverse change in the assets, business,
condition (financial or otherwise) or prospects of the Parent and its
Subsidiaries since November 3, 2001.

         4.7. Defaults.  No Default exists.
              --------

         4.8. Taxes. The Parent and each Subsidiary have filed all federal,
              -----
state and other tax returns or appropriate extensions required to be filed, and
all taxes, assessments and other governmental charges due from the Parent and
each Subsidiary have been fully paid, except for immaterial amounts which are
being contested by appropriate proceedings. The Parent and each Subsidiary have
established on their books reserves adequate for the payment of all federal,
state and other tax liabilities.

                                       -35-

<PAGE>

         4.9.  Litigation. Except as set forth on Exhibit D hereto, there is no
               ----------                         ---------
litigation, arbitration, proceeding or investigation pending, or, to the
knowledge of the Parent's or any Subsidiary's officers, threatened, against the
Parent or any Subsidiary that, if adversely determined, could result in a
material judgment not fully covered by insurance, could result in a forfeiture
of all or any substantial part of the property of the Parent or its
Subsidiaries, or could otherwise have a material adverse effect on the assets,
business, condition (financial or otherwise) or prospects of the Parent or any
Subsidiary.

         4.10. Use of Proceeds. Following the application of the proceeds of
               ---------------
each Loan, the value of all "margin stock" as such term is used in Regulations U
and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. 221 and
224, as amended, of the Parent will not exceed 25% of the value of the total
assets of the Parent that are subject to the restrictions set forth in Section
6.5 and 6.6.

         4.11. Subsidiaries. All the Subsidiaries of the Parent are listed on
               ------------
Exhibit E hereto. The Parent or a Subsidiary of the Parent is the owner, free
---------
and clear of all liens and encumbrances, of all of the issued and outstanding
stock of each Subsidiary, except with respect to Properties which has issued
stock to other shareholders as described on Exhibit E hereto. All shares of such
                                            ---------
stock have been validly issued and are fully paid and nonassessable, and no
rights to subscribe to any additional shares have been granted, and no options,
warrants or similar rights are outstanding. Brookstone Realty, Inc. conducts no
business and owns no property, assets or rights of any name or nature.

         4.12. Investment Company Act. Neither the Parent nor any of its
               ----------------------
Subsidiaries is subject to regulation under the Investment Company Act of 1940,
as amended.

         4.13. Compliance with ERISA. Except as disclosed on Schedule 4.13, the
               ---------------------                         -------------
Parent and each member of the Controlled Group have fulfilled their obligations
under the minimum funding standards of ERISA and the Code with respect to each
Plan and are in compliance in all material respects with the applicable
provisions of ERISA and the Code, and have not incurred any liability to the
PBGC or a Plan under Title IV of ERISA; and no "prohibited transaction" or
"reportable event" (as such terms are defined in ERISA) has occurred with
respect to any Plan.

         4.14. Environmental Matters.
               ---------------------

         (a)   The Parent and each of its Subsidiaries have obtained all
permits, licenses and other authorizations which are required under all
Environmental Laws, except to the extent failure to have any such permit,
license or authorization would not have a material adverse effect on the assets,
business, condition (financial or otherwise) or prospects of the Parent and its
Subsidiaries. The Parent and each of its Subsidiaries are in compliance with the
terms and conditions of all such permits, licenses and authorizations, and are
also in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Environmental Law or in any regulation, code, plan,
order, decree, judgment,

                                       -36-

<PAGE>

injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply would not have a material
adverse effect on the assets, business, condition (financial or otherwise) or
prospects of the Parent and its Subsidiaries.

         (b) No notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or, to the knowledge of
the Parent or any Subsidiary, threatened by any governmental or other entity
with respect to any alleged failure by the Parent or any of its Subsidiaries to
have any permit, license or authorization required in connection with the
conduct of its business or with respect to any Environmental Laws, including,
without limitation, Environmental Laws relating to the generation, treatment,
storage, recycling, transportation, disposal or release of any Hazardous
Materials, except to the extent that such notice, complaint, penalty or
investigation did not or could not result in the remediation of any property
owned or used by the Parent or any of its Subsidiaries costing in excess of
$100,000 per occurrence or $500,000 in the aggregate.

         (c) To the best of the knowledge of the Parent or any Subsidiary, no
material oral or written notification of a release of a Hazardous Material has
been filed by or on behalf of the Parent or any of its Subsidiaries and no
property now or previously owned, leased or used by the Parent or any of its
Subsidiaries is listed or proposed for listing on The National Priorities List
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or on any similar state list of sites requiring
investigation or clean-up.

         (d) There are no liens or encumbrances arising under or pursuant to any
Environmental Laws on any of the real property or properties owned, or to the
best knowledge of the Parent and its Subsidiaries, any real property leased or
used, by the Parent or any of its Subsidiaries and no governmental actions have
been taken or are in process which could subject any of such properties to such
liens or encumbrances or, as a result of which the Parent or any of its
Subsidiaries would be required to place any notice or restriction relating to
the presence of Hazardous Materials at any property owned by it in any deed to
such property.

         (e) Neither the Parent nor any of its Subsidiaries nor, to the best
knowledge of the Parent or any Subsidiary but without conducting any special
investigation, any previous owner, tenant, occupant or user of any property
owned, leased or issued by the Parent or any of its Subsidiaries, has (i)
engaged in or permitted any operations or activities upon or any use or
occupancy of such property, or any portion thereof, for the purpose of or in any
way involving the handling, manufacture, treatment, storage, use, generation,
release, discharge, refining, dumping or disposal (whether legal or illegal,
accidental or intentional) of any Hazardous Materials on, under, in or about
such property, except to the extent commonly used in day-to-day operations of
such property and in such case only in compliance with all Environmental Laws,
or (ii) transported any Hazardous Materials to, from or across such property
except to the extent commonly used

                                      -37-

<PAGE>

in day-to-day operations of such property and, in such case, in compliance with,
all Environmental Laws; nor to the best knowledge of the Parent, but without
conducting any special investigation, have any Hazardous Materials migrated from
other properties upon, about or beneath such property, nor, to the best
knowledge of the Parent or any Subsidiary, are any Hazardous Materials presently
constructed, deposited, stored or otherwise located on, under, in or about such
property except to the extent commonly used in day-to-day operations of such
property and, in such case, in compliance with, all Environmental Laws.

         4.15. Collateral. All of the Obligations under or in respect of the
               ----------
Lender Agreements will at all times be entitled to the benefits of and be
secured by each of the Security Documents, except to the extent provided in
Section 11.13.

                                    SECTION V

                              AFFIRMATIVE COVENANTS

         So long as the Lenders have any commitment to make Loans or issue
Letters of Credit hereunder or any Loan or other Obligation remains outstanding,
the Parent and the Borrowers covenant, jointly and severally, as follows:

         5.1.  Financial Statements and other Reporting Requirements. The Parent
               -----------------------------------------------------
shall furnish to the Agent and to each Lender:

         (a)   as soon as available to the Parent, but in any event within 90
days after the end of each of its fiscal years, a consolidated and consolidating
balance sheet as of the end of, and a related consolidated and consolidating
statement of income, changes in stockholders' equity and cash flow for, such
year, audited and certified by Price Waterhouse Coopers LLP (or other
independent certified public accountants acceptable to the Agent and the
Lenders) in the case of such consolidated statements, and certified by the chief
financial officer in the case of such consolidating statements; and,
concurrently with such financial statements, a copy of said certified public
accountants' management report and a written statement by such accountants that,
in the making of the audit necessary for their report and opinion upon such
financial statements they have obtained no knowledge of any Default set out in
Sections 5.7, 5.8, 5.9, 6.1 and 6.10 or, if in the opinion of such accountants
any such Default exists, they shall disclose in such written statement the
nature and status thereof;

         (b)   as soon as available to the Parent, but in any event within 45
days after the end of each of its fiscal quarters, commencing with the fourth
fiscal quarter of fiscal year 2001, a consolidated balance sheet as of the end
of, and a related consolidated statement of income and cash flow for, the period
then ended, certified by the principal financial officer of the Parent but
subject, however, to normal, recurring year-end adjustments that shall not in
the aggregate be material in amount;

         (c)   concurrently with the delivery of each financial statement
pursuant to

                                       -38-

<PAGE>

subsections (a) and (b) of this Section 5.1, a report in substantially the form
of Exhibit F hereto signed on behalf of the Parent by its chief financial
   ---------
officer;

         (d) within ten (10) business days after the end of each fiscal month, a
report in substantially the form of Exhibit G hereto signed on behalf of the
                                    ---------
Borrowers by their respective chief financial officers;

         (e) promptly after the receipt thereof by the Parent, copies of any
reports submitted to the Parent by independent public accountants in connection
with any interim review of accounts of the Parent made by such accountants;

         (f) promptly after the same are available, copies of all proxy
statements, financial statements and reports as the Parent shall send to its
stockholders or as the Parent may file with the Securities and Exchange
Commission or any governmental authority (excluding tax returns, except on
request) at any time having jurisdiction over the Parent or its Subsidiaries;

         (g) if and when the Parent or any Borrower gives or is required to give
notice to the PBGC of any "Reportable Event" (as defined in Section 4043 of
ERISA) with respect to any Plan that might constitute grounds for a termination
of such Plan under Title IV of ERISA, or knows that any member of the Controlled
Group or the Plan administrator of any Plan has given or is required to give
notice of any such Reportable Event, a copy of the notice of such Reportable
Event given or required to be given to the PBGC;

         (h) immediately upon becoming aware of the existence of any condition
or event that constitutes a Default, written notice thereof specifying the
nature and duration thereof and the action being or proposed to be taken with
respect thereto;

         (i) promptly upon becoming aware of any litigation or of any
investigative proceedings by a governmental agency or authority commenced or
threatened against the Parent or any of its Subsidiaries of which it has notice,
the outcome of which would or might have a materially adverse effect on the
assets, business, condition (financial or otherwise) or prospects of the Parent
and its Subsidiaries on a consolidated basis, written notice thereof and the
action being or proposed to be taken with respect thereto;

         (j) promptly upon becoming aware of any investigative proceedings by a
governmental agency or authority commenced or threatened against the Parent or
any of its Subsidiaries regarding any potential violation of Environmental Laws
or any spill, release, discharge or disposal of any Hazardous Material, written
notice thereof and the action being or proposed to be taken with respect
thereto;

         (k) within 45 days after the beginning of each fiscal year, budgets for
the Parent and its Subsidiaries for such fiscal year, on a quarter-by-quarter
basis and in such detail as the Agent may reasonably request; and

                                       -39-

<PAGE>

         (l)  from time to time, such other financial data and information about
the Parent or its Subsidiaries as the Agent or the Lenders may reasonably
request.

         5.2. Conduct of Business. Each of the Parent and its Subsidiaries
              -------------------
shall:

         (a)  duly observe and comply in all material respects with all
applicable laws and valid requirements of any governmental authorities relative
to its corporate existence, rights and franchises, to the conduct of its
business and to its property and assets (including without limitation all
Environmental Laws and ERISA), and shall maintain and keep in full force and
effect all licenses and permits necessary in any material respect to the proper
conduct of its business;

         (b)  maintain its corporate existence; and

         (c)  remain engaged substantially in its existing business -- the
Parent will continue to be a holding company, conducting no business, incurring
no Indebtedness (other than as permitted under Sections 6.1 and 6.2) and holding
no assets other than 100% of the stock of the Company; the Borrowers will not
change the nature or scope of their businesses in any material respect from that
which exists on the date hereof; and the other Subsidiaries will continue their
current operations as in effect at closing (including, in the case of Brookstone
Realty, Inc. and Brookstone Fork Distribution, conducting no business and owning
no assets).

         5.3. Maintenance and Insurance. Each of the Parent and its Subsidiaries
              -------------------------
shall maintain its properties in good repair, working order and condition as
required for the normal conduct of its business. Each of the Parent and its
Subsidiaries shall at all times maintain liability and casualty insurance with
financially sound and reputable insurers in such amounts as the officers of the
Parent in the exercise of their reasonable judgment deem to be adequate. Unless
the Agent determines that the Collateral Release Conditions have been satisfied,
the Agent shall at all times be named as loss payee and additional insured under
such liability and casualty insurance and shall be given thirty (30) days'
advance written notice of any cancellation thereof. If the Parent at any time
fails to provide such insurance, the Agent, in its sole discretion, may provide
such insurance and charge the cost (plus applicable interest) to any loan
account or to the deposit accounts of the Parent or the Borrowers with the Agent
or any Lender. On request of the Agent from time to time, the Parent shall
furnish to the Agent and the Lenders certificates or other evidence satisfactory
to the Agent and the Lenders of compliance with the foregoing insurance
provisions.

         5.4. Taxes. The Parent shall pay or cause to be paid all taxes,
              -----
assessments or governmental charges on or against it or any of its Subsidiaries
or its or their properties on or prior to the time when they become due;
provided that this covenant shall not apply to any tax, assessment or charge
--------
that is being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been established and are being
maintained in accordance with generally accepted accounting principles if no
proceedings shall have been commenced to foreclose any lien securing such tax,

                                       -40-

<PAGE>

assessment or charge.

         5.5. Inspection. The Parent shall permit the Agent and the Lenders or
              ----------
their designees, at any reasonable time, and upon reasonable notice (or if a
Default shall have occurred and is continuing, at any time and without prior
notice), to (a) visit and inspect the properties of the Parent and its
Subsidiaries, (b) examine and make copies of and take abstracts from the books
and records of the Parent and its Subsidiaries, and (c) discuss the affairs,
finances and accounts of the Parent and its Subsidiaries with their appropriate
officers, employees and accountants. In handling such information the Agent and
the Lenders shall exercise the same degree of care that they exercise with
respect to their own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to subsections 5.1(a), (b), or (c) except that disclosure of such
information may be made (i) to the subsidiaries, affiliates, employees,
officers, directors, or advisors of the Agent and the Lenders in connection with
their present or prospective business relations with the Parent, (ii) to
prospective transferees or purchasers of an interest in the Loans (so long as
any such transferee is regularly engaged in the business of making loans similar
to the Loans and agrees to be subject to the confidentiality requirements set
forth herein), (iii) as required by law, regulation, rule or order, subpoena,
judicial order or similar order and (iv) as may be required in connection with
the examination, audit or similar investigation of the Agent and the Lenders.

         5.6. Maintenance of Books and Records. Each of the Parent and its
              --------------------------------
Subsidiaries shall keep adequate books and records of account, in which true and
complete entries will be made reflecting all of its business and financial
transactions, and such entries will be made in accordance with generally
accepted accounting principles consistently applied and applicable law.

         5.7. Consolidated Net Worth. The Parent shall maintain Consolidated Net
              ----------------------
Worth as of the end of each fiscal quarter, commencing with the quarter ending
February 2, 2002, of not less than the sum of (a) $75,000,000 plus (b) 75% of
Consolidated Net Income for the period from February 4, 2001 through the end of
the most recent fiscal year (but without deduction for losses during any fiscal
quarter during such period), less (c) repurchases by the Parent of its capital
stock after February 2, 2002 up to a maximum amount of $10,000,000.

         5.8. Cash Flow Leverage. The Parent shall maintain, at the end of each
              ------------------
fiscal quarter for the period of four consecutive fiscal quarters then ending,
commencing with the four quarters ending February 2, 2002, a ratio of
Consolidated Total Funded Debt to Consolidated EBITDA of not greater than 1.50
to 1.0; provided, however, that said maximum ratio shall be increased to 2.00 to
        --------  -------
1.0 solely for the third quarter of fiscal year 2002 and to 1.75 to 1.0 solely
for the third quarter of fiscal year 2003.

         5.9. Fixed Charge Coverage. The Parent shall maintain, at the end of
              ---------------------
each fiscal quarter for the period of four consecutive fiscal quarters then
ending, commencing with the four quarters ending February 2, 2002, consolidated
Fixed Charge Coverage of

                                       -41-

<PAGE>

not less than (a) 1.05 to 1.0 for the fourth quarter of fiscal year 2001 and for
each of the first, second and third quarters of fiscal year 2002, (b) 1.35 to
1.0 for the fourth quarter of fiscal year 2002 and for each of the first, second
and third quarters of fiscal year 2003, and (c) 1.40 to 1.0 as at the end of
each fiscal quarter thereafter.

         5.10.  Further Assurances.
                ------------------

         (a) At any time and from time to time the Parent shall, and shall cause
each of its Subsidiaries to, execute and deliver such further instruments and
take such further action as may reasonably be requested by the Agent and the
Lenders to effect the purposes of this Agreement, the Notes and the other Lender
Agreements; and

         (b) In addition, upon the formation of any Subsidiary (other than a JV
Subsidiary), the Parent shall promptly notify the Agent thereof and, unless the
Agent otherwise agrees, cause such Subsidiary to become a party to the
Subsidiary Guaranty as a guarantor thereunder and to become a party to such of
the Security Documents as the Agent shall require.

                                   SECTION VI

                               NEGATIVE COVENANTS

         So long as the Lenders have any commitment to lend or issue Letters of
Credit hereunder or any Loan or other obligation remains outstanding, the Parent
and the Borrowers jointly and severally covenant as follows:

         6.1.   Indebtedness.  Neither the Parent nor any of its Subsidiaries
                ------------
shall create, incur, assume, guarantee or be or remain liable with respect to
any Indebtedness, including intercompany Indebtedness, other than the following:

         (a)    Indebtedness of the Parent or any of its Subsidiaries to the
Lenders created under this Agreement and the Notes;

         (b)    Indebtedness of the Subsidiaries existing as of the date of this
Agreement and disclosed on Exhibit C hereto;
                           ---------

         (c)    Indebtedness of the Subsidiaries secured by Permitted
Encumbrances;

         (d)    Indebtedness of the Company to the City of Mexico, Missouri
evidenced by a capitalized lease of the Company's facility in the City of
Mexico, Missouri in an aggregate amount not to exceed $2,500,000, and
Indebtedness (including a capital lease or mortgage financing) incurred in
connection with the construction or acquisition of a new distribution facility
in an aggregate amount not exceeding $17,000,000;

         (e)    other unsecured Indebtedness of the Company in an aggregate
outstanding

                                      -42-

<PAGE>

principal amount not exceeding $1,000,000;

         (f)    the Guarantees permitted pursuant to Section 6.2;

         (g)    Permitted Liabilities; and

         (h)    accounts payable and lease obligations with respect to retail
stores of Subsidiaries which are not Brookstone Subsidiaries in an aggregate
outstanding amount not exceeding (i) $50,000, in the case of Brookstone O'Hare,
LLC, and (ii) $200,000 in the case of all such other Subsidiaries, if any.

         6.2.   Contingent Liabilities. Neither the Parent nor any of its
                ----------------------
Subsidiaries shall create, incur, assume, guarantee or remain liable with
respect to any Guarantees other than the following:

         (a)    Guarantees in favor of the Lenders;

         (b)    Guarantees by the Subsidiaries existing on the date of this
Agreement and disclosed on Exhibit C hereto and in the financial statements
                           ---------
referred to in Section 4.6;

         (c)    Guarantees resulting from the endorsement of negotiable
instruments for collection in the ordinary course of business;

         (d)    Guarantees by the Subsidiaries with respect to surety, appeal,
performance and return-of-money and other similar obligations incurred in the
ordinary course of business (exclusive of obligations for the payment of
borrowed money) not exceeding in the aggregate at any time $200,000;

         (e)    Guarantees by the Subsidiaries of normal trade debt relating to
the acquisition of goods and supplies and the receipt of services; and

         (f)    Guarantees by the Parent, GE, and the Company of obligations of
Brookstone Properties, Inc. for lease obligations with respect to retail stores
used by any of the Borrowers.

         6.3.   Sale and Leaseback. Neither the Parent nor any of its
                ------------------
Subsidiaries shall enter into any arrangements, directly or indirectly, whereby
it shall sell or transfer any property owned by it in order to lease such
property or lease other property that the Parent or any such Subsidiary intends
to use for substantially the same purpose as the property being sold or
transferred, if the aggregate principal amount of all such outstanding leases
under all such arrangements would exceed $500,000.

         6.4.   Encumbrances.  Neither the Parent nor any of its Subsidiaries
                ------------
shall create, incur, assume or suffer to exist any mortgage, pledge, security
interest, lien or other charge or encumbrance, including the lien or retained
security title of a conditional vendor upon or with respect to any of its
property or assets ("Encumbrances"), or assign

                                      -43-

<PAGE>

or otherwise convey any right to receive income, including the sale or discount
of accounts receivable with or without recourse, except the following
("Permitted Encumbrances"):
  ----------------------

         (a)    Encumbrances in favor of the Lenders;

         (b)    Encumbrances against assets of the Subsidiaries existing as the
date of this Agreement and disclosed in Exhibit C hereto;
                                        ---------

         (c)    liens for taxes, fees, assessments and other governmental
charges to the extent that payment of the same may be postponed or is not
required in accordance with the provisions of Section 5.4;

         (d)    landlords' and lessors' liens in respect of rent not in default,
or in default and being contested in good faith, or liens in respect of pledges
or deposits under workmen's compensation, unemployment insurance, social
security laws, or similar legislation (other than ERISA), or in connection with
appeal and similar bonds incidental to litigation; mechanics', laborers' and
materialmen's and similar liens, if the obligations secured by such liens are
not then delinquent; liens securing the performance of bids, tenders, contracts
(other than for the payment of money); and liens in connection with statutory
obligations incidental to the conduct of its business and that do not in the
aggregate materially detract from the value of its property or materially impair
the use thereof in the operation of its business;

         (e)    judgment liens that shall not have been in existence for a
period longer than 30 days after the creation thereof or, if a stay of execution
shall have been obtained, a period longer than 30 days after the expiration of
such stay;

         (f)    rights of lessors under capital leases with Subsidiaries in an
aggregate principal amount not to exceed $4,000,000;

         (g)    security interests created by any Subsidiary in respect of any
purchase money obligations of any Subsidiary for tangible property used in its
business that at any time shall not exceed $3,200,000 in the aggregate for all
Subsidiaries, provided that any such security interests shall not extend to
              --------
property and assets of such Subsidiary not financed by such a purchase money
obligation;

         (h)    easements, rights of way, restrictions and other similar charges
or Encumbrances relating to real property and not interfering in a material way
with the ordinary conduct of its business;

         (i)    Encumbrances on its property or assets created in connection
with the refinancing of Indebtedness secured by Permitted Encumbrances on such
property, provided that the amount of Indebtedness secured by any such
          --------
Encumbrance shall not be increased as a result of such refinancing and no such
Encumbrance shall extend to property and assets of any such Subsidiary not
encumbered prior to any such refinancing;

                                      -44-

<PAGE>

         (j)    Encumbrances in the nature of a security interest in checks
created or to be created in connection with a certain Welcome Check Warranty
Agreement dated September 1, 1994 between the Company and Equifax Check
Services, Inc. (the "Equifax Agreement") or similar agreements relating to the
discounting of customer checks; and

         (k)    rights of a lessor under a capital lease with a Borrower, or a
mortgagor in respect of mortgage financing with a Borrower, in either case to
the extent such financing (i) is used for the construction of a new distribution
facility and (ii) is not in excess of $17,000,000 in the aggregate, and also to
the extent the liens created in respect thereof extend only to such distribution
facility.

         6.5.   Merger; Acquisitions; Consolidation; Sale or Lease of Assets.
                ------------------------------------------------------------
Neither the Parent nor any of its Subsidiaries shall sell, lease or otherwise
dispose of assets or properties (valued at the lower of cost or market) in any
fiscal year, other than (a) sales of inventory by the Subsidiaries in the
ordinary course of business and (b) sales, leases or other dispositions of
assets by the Subsidiaries to third parties for fair market value in the
aggregate not in excess of 5% of Consolidated Tangible Net Worth as of the end
of its most recently completed fiscal year, provided that the aggregate amount
                                            --------
of all such sales, leases or other dispositions shall not exceed $7,500,000
after the date hereof; or acquire all or substantially all of the assets of any
Person, except that the Borrowers may acquire all or substantially all of the
assets of any Person so long as (a) the aggregate consideration for such
acquisition or series of related acquisitions and Investments, does not exceed
$3,000,000, (b) no Default shall have occurred and be continuing (c) the
acquired Person is a specialty retailer or direct marketing company, and (d) the
assets acquired by the Borrowers in connection with such acquisition shall be
free from all liens, charges and encumbrances whatsoever (other than Permitted
Encumbrances), and the Agent shall have a valid, perfected, first-priority
security interest therein (unless the Agent determines that the Collateral
Release Conditions have been satisfied); or liquidate, merge or consolidate into
or with any other Person, provided that (a) any Subsidiary of the Parent other
than the Company may merge or consolidate into or with (i) the Company if no
Default has occurred and is continuing or would result from such merger and if
the Company is the surviving entity, or (ii) any other wholly-owned Subsidiary
of the Parent if no Default has occurred and is continuing or would result from
such merger, and if the surviving entity is a Subsidiary that is incorporated or
organized under the laws of the United States, any state thereof or the District
of Columbia, and (b) the Company may sell property as provided in Section 6.3,
and (c) the Company may assign all of its rights, title and interest in certain
checks pursuant to the provisions of the Equifax Agreement.

         6.6.   Additional Stock Issuance. The Parent shall not permit any of
                -------------------------
its Subsidiaries to issue any additional shares of capital stock or other equity
securities, any options therefor or any securities convertible thereto other
than to the Parent or to any of the Parent's wholly-owned Subsidiaries (only to
the extent, however, that such shares, concurrently with the issuance thereof,
become subject to a perfected, first priority pledge in favor of the Agent),
except for issuance by Properties of non-voting preferred shares to

                                      -45-

<PAGE>

employees of the Company in New Hampshire. Neither the Parent nor any of its
Subsidiaries shall sell, transfer or otherwise dispose of any of the capital
stock or other equity securities of a Subsidiary, except to the Parent or any of
its wholly-owned Subsidiaries.

         6.7.  Equity Distributions. Neither the Parent nor the Company shall
               --------------------
pay any dividends on any class of its capital stock or make any other
distribution or payment on account of or in redemption, retirement or purchase
of such capital stock; provided that this Section shall not apply to (a) the
                       --------
issuance, delivery or distribution by the Parent of shares of its common stock
pro rata to its existing shareholders, (b) the purchase or redemption by the
Parent of its capital stock with the proceeds of the issuance of additional
shares of capital stock and (c) repurchases by the Parent of up to $10,000,000
of its capital stock after the date hereof, and dividends from the Company to
the Parent in an amount equal to and used by the Parent for such repurchases,
provided that no Default has occurred or is continuing, both before and after
--------
giving effect to any such repurchases and dividends.

         6.8.  Investments. Neither the Parent nor any of its Subsidiaries shall
               -----------
make or maintain any Investments other than (a) Investments in the Borrowers and
the Brookstone Subsidiaries described on Schedule 6.8, (b) Investments in
                                         ------------
Subsidiaries formed after the date of this Agreement to the extent such
Subsidiaries become a party to the Subsidiary Guaranty and the Security
Documents pursuant to Section 5.10(b), (c) advances by the Company to the Parent
to enable the Parent to pay Delaware franchise taxes and other routine operating
expenses, (d) Qualified Investments, and (e) Investments in Subsidiaries which
are not Brookstone Subsidiaries in an aggregate amount not exceeding $2,500,000,
which Subsidiaries have each been formed with a third-party for purposes of
operating a retail store or stores at specific locations (each, a "JV
Subsidiary").

         6.9.  ERISA. Neither the Parent nor any member of the Controlled Group
               -----
shall permit any Plan maintained by it to (a) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code), (b) incur any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) whether or
not waived, or (c) terminate any Plan in a manner that could result in the
imposition of a lien or encumbrance on the assets of the Parent or any of its
Subsidiaries pursuant to Section 4068 of ERISA.

         6.10. Capital Expenditures. The Parent and its Subsidiaries shall not
               --------------------
make Capital Expenditures in an aggregate amount in any fiscal year exceeding
the sum of (a) $14,500,000 for the fiscal year ending February 2, 2002, (b)
$11,500,000 for the fiscal year ending February 1, 2003, (c) $26,000,000 for the
fiscal year ending January 31, 2004 (of which $10,000,000 is available solely
for the Borrowers' new distribution facility), (d) $25,500,000 for the fiscal
year ending January 29, 2005 (of which $7,000,000 is available solely for the
Borrowers' new distribution facility), and (e) $20,000,000 for the fiscal year
ending January 28, 2006. Notwithstanding the limitations contained in clauses
(b) and (c) of the immediately preceding sentence, it is agreed that the
Borrowers may aggregate their Capital Expenditures for their new distribution
facility

                                      -46-

<PAGE>

in either the fiscal year ending January 31, 2004 or January 29, 2005, provided
                                                                       --------
that (i) such Capital Expenditures are funded through third party financing
(which may include a capital lease, but which shall not include any Loans
hereunder), (ii) if such aggregation causes the limitation on Capital
Expenditures to be exceeded in either such fiscal year, then the amount of such
excess shall reduce the limitation on Capital Expenditures for the other fiscal
year on a dollar-for-dollar basis, and (iii) the total amount expended for the
new distribution facility shall not exceed $17,000,000 in the aggregate. Up to
$4,000,000 of the amount (if any) of Capital Expenditures not used in any fiscal
year may be used in the next succeeding fiscal year, provided that the amount
                                                     --------
(if any) of Capital Expenditures unused in the fiscal year ending February 1,
2003 shall not be permitted to be used in any other fiscal year.

         6.11. Transactions with Affiliates. The Parent and the Borrowers will
               ----------------------------
not enter into any transaction, including without limitation, the purchase, sale
or exchange of property or the rendering of any service, with each other or with
any other Affiliate, except that (a) the Parent and the Borrowers may pay
salaries, fees and bonuses to their directors, officers and employees as are
usual and customary in their business, and (b) the Parent and the Borrowers may
enter into transactions with the Brookstone Subsidiaries so long as all payments
for such transactions are made solely by offsetting intercompany accounts
receivables and payables or are Permitted Liabilities.

                                   SECTION VII

                                    DEFAULTS

         7.1.  Events of Default. There shall be an event of Default hereunder
               -----------------
if any of the following events occurs:

         (a)   the Borrowers shall fail to pay (a) any amount of principal of
any Loans, including Swingline Loans, or any Reimbursement Amount, when due, or
(b) any amount of interest thereon or any fees or expenses payable hereunder or
under the Notes or any other Lender Agreement within five days of the due date
therefor; or

         (b)   the Parent or the Borrowers shall fail to perform any term,
covenant or agreement contained in Sections 5.1(h), 5.2(b), 5.2(c), 5.3, 5.5,
5.7 through 5.9, or 6.1 through 6.12, provided, however, that if a failure to
                                      --------  -------
perform the covenants contained in Sections 5.7, 5.8, 5.9, 6.1, 6.5 and 6.10 are
solely as a result of a change in one or more accounting principles used in the
preparation of financial statements, because of a change mandated by the
Financial Accounting Standards Board, then an Event of Default relating to such
Sections shall not be an Event of Default until the 30/th/ day after the earlier
to occur of: (i) the date upon which the president or chief financial officer of
the Parent or the Borrowers makes a determination that such change shall result
in an Event of Default or (ii) the date upon which the financial statements
required to be delivered pursuant to Section 5.1(b) following such change are
due; or

         (c)   the Parent or the Borrowers shall fail to perform any covenant
contained in

                                      -47-

<PAGE>

Sections 5.1(g), 5.1(i) or 5.2(a), and such failure shall continue for 15 days;
or

         (d) the Parent or the Borrowers shall fail to perform any term,
covenant or agreement (other than in respect of subsections 7.1(a) through (c)
hereof) contained in this Agreement or in any other Lender Agreement and such
default shall continue for 30 days after notice thereof has been sent to the
Parent by the Agent; or

         (e) any representation or warranty of any of the Borrowers, the Parent
or the Brookstone Subsidiaries made in this Agreement, the Notes, any other
Lender Agreement or other documents or agreements executed in connection with
the transactions contemplated by this Agreement, or in any certificate delivered
hereunder, shall prove to have been false in any material respect upon the date
when made or deemed to have been made; or

         (f) the Parent or any of its Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any obligations in excess of
$500,000 in the aggregate for Indebtedness, or for the use of real or personal
property, or shall fail to observe or perform any term, covenant or agreement
evidencing or securing such obligations for Indebtedness, or relating to such
use of real or personal property, the result of which failure is to permit the
holder or holders of such Indebtedness to cause such Indebtedness to become due
prior to its stated maturity; or

         (g) the Parent or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar official of itself or of all or a
substantial part of its property, (ii) be generally not paying its debts as such
debts become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code (as
now or hereafter in effect), (v) take any action or commence any case or
proceeding under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts, or any other law providing for
the relief of debtors, (vi) fail to contest in a timely or appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
under the Federal Bankruptcy Code or other law, (vii) take any action under the
laws of its jurisdiction of incorporation or organization similar to any of the
foregoing, or (viii) take any corporate action for the purpose of effecting any
of the foregoing; or

         (h) a proceeding or case shall be commenced, without the application or
consent of the Parent or any of its Subsidiaries in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, dissolution,
winding-up, or composition or readjustment of its debts, (ii) the appointment of
a trustee, receiver, custodian, liquidator or the like of it or of all or any
substantial part of its assets, or (iii) similar relief in respect of it, under
any law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts or any other law providing for the relief of
debtors, and such proceeding or case shall continue undismissed, or unstayed and
in effect, for a period of 90 days; or an order for relief shall be entered in
an involuntary case under the Federal Bankruptcy Code, against the Parent or
such Subsidiary; or action under the laws

                                      -48-

<PAGE>

of the jurisdiction of incorporation or organization of the Parent or any of its
Subsidiaries similar to any of the foregoing shall be taken with respect to the
Parent or such Subsidiary and shall continue unstayed and in effect for any
period of 90 days; or

         (i)  a judgment or order for the payment of money shall be entered
against the Parent or any of its Subsidiaries by any court, or a warrant of
attachment or execution or similar process shall be issued or levied against
property of the Parent or such Subsidiary, that in the aggregate exceeds
$1,500,000 and such judgment, order, warrant or process shall continue
undischarged or unstayed for 45 days; or

         (j)  the Parent or any member of the Controlled Group shall fail to pay
when due an amount or amounts aggregating in excess of $500,000 that it shall
have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
notice of intent to terminate a Plan or Plans shall be filed under Title IV of
ERISA by the Parent, any member of the Controlled Group, any Plan administrator
or any combination of the foregoing, or the PBGC shall institute proceedings
under Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any such Plan or Plans or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans against the Parent and such proceedings
shall not have been dismissed within 30 days thereafter; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any such Plan or Plans must be terminated; or

         (k)  the occurrence of a Change of Control.

         7.2. Remedies. Upon the occurrence of an Event of Default described in
              --------
subsections 7.1(g) and (h), immediately and automatically, and upon the
occurrence of any other Event of Default, at any time thereafter while such
Event of Default is continuing, at the Majority Lenders' option and declaration:

         (a)  the Lenders' commitment to make any further Loans hereunder shall
terminate;

         (b)  the unpaid principal amount of the Loans together with accrued
interest and all other Obligations shall become immediately due and payable
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived;

         (c)  the Borrowers, jointly and severally, shall immediately provide
the Agent with cash in an amount of 105% of the stated amount of outstanding
Letters of Credit to be held by the Agent, for the ratable accounts of the
Lenders, as collateral for the Obligations; and

         (d)  the Agent may, and upon the request of the Majority Lenders, shall
exercise any and all rights the Agent and the Lenders have under this Agreement,
the Notes, the Security Documents or any other documents or agreements executed
in connection herewith, or at law or in equity, and proceed to protect and
enforce the

                                      -49-

<PAGE>

Agent's and the Lenders' rights by any action at law, in equity or other
appropriate proceeding.

         7.3. License of Intangibles. Each of the Parent, the Borrowers, and the
              ----------------------
Brookstone Subsidiaries hereby grants an unlimited royalty-free license to the
Agent and the Lenders to use any of the general intangibles of such Person,
including without limitation, all patents, trademarks, trade names, service
marks, copyrights, and applications for any of the foregoing, for the purposes
of the sale or other liquidation of the Collateral, this license to be exclusive
to the Agent or the Lenders.

         7.4. Distribution of Proceeds. Notwithstanding anything to the contrary
              ------------------------
contained herein, in the event that following the occurrence or during the
continuance of any Event of Default, the Agent or any Lender receives any monies
on account of the Obligations from the Borrowers or otherwise, such monies shall
be distributed for application as follows:

         (a)  first, to the payment of or the reimbursement of the Agent for or
in respect of all costs, expenses, disbursements and losses which shall have
been incurred or sustained by the Agent in connection with the collection of
such monies by the Agent, or in connection with the exercise, protection or
enforcement by the Agent of all or any of the rights, remedies, powers and
privileges of Agent or the Lenders under this Agreement or any other Lender
Agreement;

         (b)  second, to the payment of all interest, including interest on
overdue amounts and late charges, then due and payable with respect to the
Loans, allocated among the Lenders in proportion to their respective Commitment
Percentages;

         (c)  third, to the payment of the outstanding principal balance of the
Loans, allocated among the Lenders in proportion to their respective Commitment
Percentages;

         (d)  fourth, to any other outstanding Obligations, allocated among the
Lenders in proportion to their respective Commitment Percentages; and

         (e)  fifth, the excess, if any, shall be returned to the Borrowers or
to such other Persons as are entitled thereto.

                                  SECTION VIII

                     CONSENTS; AMENDMENTS; WAIVERS; REMEDIES

         8.1. Actions by Lenders. Except as otherwise expressly set forth in any
              ------------------
particular provision of this Agreement, any consent or approval required or
permitted by this Agreement to be given by the Lenders, including without
limitation under Section 8.2, may be given, and any term of this Agreement or of
any other instrument related hereto or mentioned herein may be amended, and the
performance or observance by the Parent or the Borrowers of any term of this
Agreement may be waived (either generally

                                      -50-

<PAGE>

or in a particular instance and either retroactively or prospectively) with, but
only with, the written consent of the Parent, the Borrowers and the Majority
Lenders, provided, however, that without the written consent of all Lenders:
         --------  -------

         (a)  no reduction in the interest rates on or any fees relating to the
Loans shall be made;

         (b)  no extension or postponement shall be made of the stated time of
payment of the principal amount of, interest on, or fees payable to the Lenders
relating to the Loans;

         (c)  no increase in the Commitment Amount, or extension of the
Revolving Credit Termination Date shall be made (except as expressly provided in
Section 2.23);

         (d)  no release of any guarantor of the Obligations shall be made and
no release of all or substantially all the Collateral shall be made (other than
in connection with a sale of Collateral permitted by this Agreement);

         (e)  no change in the definition of the term "Majority Lenders" shall
be made;

         (f)  no change in the provisions of this Section 8.1 shall be made; and

         (g)  no increase in the Commitment Percentage shall be made.

         8.2. Actions by Parent or Borrowers. No delay or omission on the
              ------------------------------
Agent's or the Lenders' part in exercising their rights and remedies against the
Parent, the Borrowers or any other interested party shall constitute a waiver
thereof. A breach by the Parent or the Borrowers of their respective obligations
under this Agreement may be waived only by a written waiver executed by the
Agent and the Lenders in accordance with Section 8.1. The Agent's and the
Lenders' waiver of the Parent's or the Borrowers' breach in one or more
instances shall not constitute or otherwise be an implicit waiver of other or
subsequent breaches. To the extent permitted by applicable law, the Parent and
the Borrowers each hereby absolutely and irrevocably waives: (a) all
presentments, demands for performance, notices of protest and notices of
dishonor in connection with any of the Indebtedness evidenced by the Notes, (b)
any requirement of diligence or promptness on the Agent's or the Lenders' part
in the enforcement of its rights under the provisions of this Agreement or any
Lender Agreement, and (c) any and all notices of every kind and description
which may be required to be given by any statute or rule of law with respect to
its liability (i) under this Agreement or in respect of the Indebtedness
evidenced by the Notes or any other Obligation or (ii) under any other Lender
Agreement. No course of dealing between the Parent, the Borrowers and the Agent
or the Lenders' shall operate as a waiver of any of the Agent's or the Lenders,
rights under this Agreement or any other Lender Agreement or with respect to any
of the Obligations. This Agreement shall be amended only by a written instrument
executed by the Agent and the Lenders in accordance with Section 8.1 making
explicit reference to this Agreement. The Agent's and the Lenders' rights and
remedies under this Agreement or any other Lender

                                      -51-

<PAGE>

Agreement and under all subsequent agreements between the Agent, the Lenders,
the Parent and the Borrowers shall be cumulative and any rights and remedies
expressly set forth herein shall be in addition to, and not in limitation of,
any other rights and remedies which may be available to the Agent and the
Lenders in law or at equity.

                                   SECTION IX

                             SUCCESSORS AND ASSIGNS

         9.1. General. This Agreement shall be binding upon and shall inure to
              -------
the benefit of the parties hereto and their respective successors (which shall
include in the case of the Agent or any Lender any entity resulting from a
merger or consolidation) and assigns, except that (a) none of the Parent or the
Borrowers may assign its rights or obligations under this Agreement, and (b)
each Lender may assign its rights in this Agreement only as set forth below in
this Section IX.

         9.2. Assignments.
              -----------

         (a)  Assignments. In compliance with applicable laws with respect to
such assignment and with the consent of the Company (provided that if there
                                                     --------
shall exist an Event of Default, the Company's consent shall not be required for
any such assignment) and the Agent (which consents in all cases shall not be
unreasonably withheld), a Lender may assign to one or more financial
institutions, including commercial finance institutions, organized or existing
under the laws of the United States of America, any state thereof or Canada and
having capital and surplus, net worth or the equivalent of not less than
$100,000,000 (each a "Successor Lender") all or a proportionate part of its
rights and obligations in connection with this Agreement, its Notes and the
related Lender Agreements and each such Successor Lender shall assume such
rights and obligations pursuant to an Assignment and Acceptance Agreement
("Assignment and Acceptance Agreement") duly executed by such Successor Lender
and such assigning Lender and acknowledged and consented to by the Company and
the Agent, substantially in the form of Exhibit J attached hereto. Any
assignment under this Section 9.2(a) shall be in a minimum amount of $2,500,000.
In connection with any assignment under this Section 9.2(a) there shall be paid
to the Agent by the assigning Lender or the Successor Lender an administrative
processing fee in the amount of $3,500.

         (b)  Assignment Procedures. In the event of an assignment in accordance
with Section 9.2(a), upon execution and delivery of such an assignment at least
five (5) Business Days prior to the proposed assignment date, and payment by
such Successor Lender to the assigning Lender an amount equal to the purchase
price agreed between such assigning Lender and such Successor Lender, such
Successor Lender shall become party to this Agreement as a signatory hereto and
shall have all the rights and obligations of a Lender under this Agreement and
the other Lender Agreements with an interest therein as set forth in such
assignment, and the assigning Lender making such assignment shall be released
from its obligations hereunder to a corresponding extent, and no further consent
or action by any party shall be required. Upon the consummation of any such

                                      -52-

<PAGE>

assignment, the assigning Lender, the Successor Lender, the Parent and the
Borrowers shall make appropriate arrangements so that, if required, new Notes
are issued to the Successor Lender and replacement Notes are issued to the
assigning Lender in principal amounts reflecting their respective revised
interests, and all old Notes which are replaced shall be returned and cancelled.

         (c)  Register. The Agent shall maintain a register (the "Register") for
the recordation of (i) the names and addresses of all Successor Lenders that
enter into Assignment and Acceptance Agreements, (ii) the interests of each
Lender in the Obligations, and (iii) the amounts of the Loans owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Parent, the Borrowers, the Agent and the
Lenders may treat each Person whose name is registered therein for all purposes
as a party to this Agreement. The Register shall be available for inspection by
the Parent, the Borrowers or any Lender at any reasonable time and from time to
time upon reasonable prior notice.

         (d)  Further Assurances. The Parent and the Borrowers shall sign such
documents and take such other actions from time to time reasonably requested by
the Agent or a Lender to enable any Successor Lender to share in the benefits
and rights created by the Lender Agreements.

         (e)  Assignments to Federal Reserve Bank. Any Lender at any time,
without the consent of any other party hereto, may assign all or any portion of
its rights under this Agreement and its Notes to a Federal Reserve Bank. No such
assignment shall release the transferor Lender from its obligations hereunder.

         9.3. Participations. Any Lender may, without the consent of the Parent
              --------------
the Borrowers or the Agent, at any time grant or offer to grant to one or more
financial institutions ("Credit Participants") participating interests in such
Lender's rights and obligations in this Agreement, its Notes and the related
Lender Agreements, and each such Credit Participant shall acquire such
participation subject to the terms set forth below.

         (a)  Amount. Each such participation shall be in a minimum amount of at
least $2,500,000; provided that a Lender may grant a participation to an
                  --------
Affiliate without any limitation on the amount thereof.

         (b)  Procedure. Each Lender granting such participation shall comply
with all applicable laws with respect to such transfer and shall remain
responsible for the performance of its obligations hereunder and under the other
Lender Agreements and shall retain the sole right and responsibility to exercise
its rights and to enforce the Obligations of the Parent and the Borrowers
hereunder and under the other Lender Agreements, including the right to consent
to any amendment, modification or waiver of any provision of any Lender
Agreement, except for those matters referred to in Section 8.1 which require the
consent of all Lenders and which may also require the consent of each Credit
Participant.

                                      -53-

<PAGE>

         (c)   Dealing with Lenders. The Parent and the Borrowers shall continue
to deal solely and directly with the Lenders in connection with their rights and
obligations under this Agreement and the other Lender Agreements.

         (d)   Rights of Credit Participants. The Parent and the Borrowers each
agree that each Credit Participant shall, to the extent provided in its
participation instrument, be entitled to the benefits of Sections 2.8, 2.9,
2.13, 7.3 and 11.3 with respect to its participating interest; provided,
                                                               --------
however, that no Credit Participant shall be entitled to receive any greater
-------
payment under such Sections than the Lender granting such participation would
have been entitled to receive with respect to the interests transferred.

         (e)   Notice. At the time of granting any participation, the Lender
granting such participation shall notify the Agent, the Borrowers and the
Parent.

                                    SECTION X

                                    THE AGENT

         10.1. Authorization and Action. Each Lender hereby appoints and
               ------------------------
authorizes the Agent to take such action on its behalf and to exercise such
powers under this Agreement and the other Lender Agreements as are delegated to
the Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement and the other Lender Agreements (including, without limitation,
enforcement or collection of the Notes), 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 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 liability or which is
contrary to this Agreement or the other Lender Agreements or applicable law.
Subject to the foregoing provisions and to the other provisions of this Section
X, the Agent shall, on behalf of the Lenders: (a) execute any documents on
behalf of the Lenders providing collateral for or guarantees of the Obligations;
(b) hold and apply any collateral for the Obligations, and the proceeds thereof,
at any time received by it, in accordance with the provisions of this Agreement
and the other Lender Agreements; (c) exercise any and all rights, powers and
remedies of the Lenders under this Agreement or any of the other Lender
Agreements, including the giving of any consent or waiver or the entering into
of any amendment, subject to the provisions of Section 8.1; (d) at the direction
of the Lenders, execute, deliver and file UCC financing statements, mortgages,
deeds of trust, lease assignments and such other agreements in respect of any
collateral for the Obligations, and possess instruments included in the
collateral on behalf of the Lenders; and (e) in the event of acceleration of the
Indebtedness of the Borrowers hereunder, act at the direction of the Lenders to
exercise the rights of the Lenders hereunder and under the other Lender
Agreements.

                                      -54-

<PAGE>

         10.2. Agent's Reliance, Etc. Neither the Agent nor any of its
               ---------------------
directors, officers, agents or employees shall be liable to the Lenders for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement or the other Lender Agreements, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Agent: (a) may treat the payee of any Note as the holder thereof
until the Agent receives written notice of the assignment or transfer thereof
signed by such payee and in form required under Section IX hereof; (b) may
consult with legal counsel, 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; (c) makes no warranty or representations to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement or the other Lender
Agreements; (d) 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 or the other Lender Agreements on the part of the Parent, the
Borrowers or any other entity or to inspect the property (including the books
and records) of the Parent, the Borrowers or any other entity; (e) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Lender Agreements or any other instrument or document furnished pursuant hereto
or thereto; and (f) shall incur no liability under or in respect of this
Agreement or the other Lender Agreements by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy or
telegram) believed by the Agent to be genuine and signed or sent by the proper
party or parties.

         10.3. Fleet as Lender. With respect to its Commitment Percentage of the
               ---------------
Loans hereunder, Fleet shall have the same rights and powers under this
Agreement and the other Lender Agreements as any other Lender and may exercise
the same as though it were not the Agent; and the term "Lender" or "Lender(s)"
shall, unless otherwise expressly indicated, include Fleet in its individual
capacity. Fleet and its Affiliates may lend money to, and generally engage in
any kind of business with, the Parent, the Borrowers, any of the Parent's or the
Borrowers' Affiliates and any entity that may do business with or own securities
of the Parent, the Borrowers or any of their Affiliates, all as if Fleet were
not the Agent and without any duty to account therefor to the Lenders.

         10.4. 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 5.1 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.

         10.5. Indemnification of Agents. Each Lender agrees to indemnify the
               -------------------------
Agent and the Documentation Agent (to the extent that the Agent or the
Documentation Agent

                                      -55-

<PAGE>

(as applicable) is not reimbursed by the Borrowers), ratably according to each
Lender's Commitment Percentage, 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 or the Documentation Agent (as
applicable) in any way relating to or arising out of this Agreement or any other
Lender Agreement or any action taken or omitted by the Agent or the
Documentation Agent (as applicable) in such capacity 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 or the Documentation
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 and each other Lender
Agreement, to the extent that the Agent is not reimbursed for such expenses by
the Borrowers.

         10.6. Successor Agent. Except as provided below, the Agent may resign
               ---------------
by giving not less than fifteen (15) days' written notice thereof to the
Lenders, the Parent and the Company. Upon any such resignation, the Lenders
shall have the right to appoint a successor Agent which shall be reasonably
acceptable to the Parent and the Company. If no successor Agent shall have been
so appointed by the Lenders (other than the resigning Agent), and shall have
accepted such appointment, within thirty (30) days after the retiring Agent's
giving notice of resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a commercial bank or
financial institution organized 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 and which shall be reasonably acceptable to the Parent and the
Company. 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 and the other Lender Agreements. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Section X shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement and the other Lender Agreements.

         10.7. Other Agents. No Lender identified on the facing page, the
               ------------
preamble or the signature pages of this Agreement as a "Documentation Agent"
shall have any right, power, liability, responsibility, or duty under this
Agreement other than those applicable to all Lenders as such. Each Lender
acknowledges that it has not relied, and will not rely, on any Lender so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.

         10.8. Amendment of Section X. The Parent and the Borrowers each hereby
               ----------------------

                                      -56-

<PAGE>

agree that the foregoing provisions of this Section X constitute an agreement
among the Agent and the Lenders (and the Agent and the Lenders acknowledge that
except for the provisions of Section 10.6, the Parent and the Borrowers are not
parties to or bound by such foregoing provisions) and that any and all of the
provisions of this Section X may be amended at any time by the Lenders without
the consent or approval of, or notice to, the Parent or the Borrowers (other
than the requirement of notice to the Parent and the Company of the resignation
of the Agent and the appointment of a successor Agent).

                                   SECTION XI

                                  MISCELLANEOUS

         11.1. Notices. Unless otherwise specified herein, all notices hereunder
               -------
to any party hereto shall be in writing and shall be deemed to have been given
when delivered by hand, when properly deposited in the mails postage prepaid,
when sent by telex, answerback received, or electronic facsimile transmission,
or when delivered to the telegraph company or overnight courier, addressed to
such party at its address indicated below:

         (a)    If to the Parent or the Borrowers, at

                Brookstone, Inc.
                17 Riverside Street
                Nashua, NH 03062
                Attention:  Mr. Philip Roizin
                            Executive Vice President and
                            Chief Financial Officer

         (b)    If to the Agent, at

                Fleet National Bank, as Agent
                Retail & Apparel Division
                100 Federal Street
                Mail Stop: MA DE 10008F
                Boston, MA 02110
                Attention:  Kathleen Dimock
                            Director

         (c) If to any Lender, at the address(es) and to the attention of the
person(s) specified below such Lender's name on the execution page of this
Agreement (or in the case of a Successor Lender, at the address(es) and to the
attention of the person(s) specified in the Assignment and Acceptance Agreement
executed by such Successor Lender); or

         (d)      at any other address specified by such party in writing.

                                       -57-

<PAGE>

         11.2. Expenses. The Parent and the Borrowers, jointly and severally,
               --------
will pay on demand all expenses of (a) the Agent and the Arranger in connection
with the preparation, waiver or amendment of this Agreement, the Notes, the
other Lender Agreements or other documents executed in connection therewith, and
(b) the Agent, the Arranger or any Lender in connection with the administration,
default or collection of the Loans or other Obligations or administration,
default, collection in connection with the Agent's, the Arranger's and the
Lenders' exercise, preservation or enforcement of any of their rights, remedies
or options thereunder, including, without limitation, reasonable fees of outside
legal counsel or the allocated costs of in-house legal counsel, reasonable
accounting, consulting, brokerage or other similar professional fees or
expenses, and any fees or expenses associated with any travel or other costs
relating to any appraisals or examinations conducted in connection with the
obligations or any collateral therefor and the amount of all such expenses
shall, until paid, bear interest at the rate applicable to principal hereunder
(including any default rate). Prior to any Default, the Agent shall notify the
Company prior to incurring any expenses for its or any Lender's in-house legal
counsel or for any accountants.

         11.3. Set-Off. Regardless of the adequacy of any collateral or other
               -------
means of obtaining repayment of the Obligations, any deposits, balances or other
sums credited by or due from the head office of the Lenders or any of their
branch offices to the Parent or any of the Borrowers may, at any time and from
time to time after the occurrence of an Event of Default hereunder, without
notice to the Parent or the Borrowers or compliance with any other condition
precedent now or hereafter imposed by statute, rule of law, or otherwise (all of
which are hereby expressly waived) be set off, appropriated, and applied by the
Lenders against any and all obligations of the Parent and the Borrowers to the
Lenders or any of their affiliates in such manner as the head office of the
Lenders or any of their branch offices in their sole discretion may determine,
and the Parent and each of the Borrowers hereby grant the Lenders a continuing
security interest in such deposits, balances or other sums for the payment and
performance of all such obligations.

         11.4. Term of Agreement. This Agreement shall continue in force and
               -----------------
effect so long as the Lenders have any commitment to make Loans or issue Letters
of Credit hereunder or any Loan, any Letter of Credit or any other Obligation
shall be outstanding.

         11.5. No Waivers. No failure or delay by the Agent or the Lenders in
               ----------
exercising any right, power or privilege hereunder or under the Notes, any other
Lender Agreement, or any other documents or agreements executed in connection
herewith shall operate as a waiver thereof; nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein and in
the Notes and other Lender Agreements provided are cumulative and not exclusive
of any rights or remedies otherwise provided by agreement or law.

         11.6. Governing Law.  This Agreement, the Notes and the other Lender
               -------------
Agreements shall be deemed to be contracts made under seal and shall be
construed in accordance with and governed by the laws of The Commonwealth of
Massachusetts

                                      -58-

<PAGE>

(without giving effect to any conflicts of laws provisions contained therein).

         11.7.  Counterparts. This Agreement may be signed in any number of
                ------------
counterparts each of which shall constitute an original and all of which, taken
together, shall constitute one and the same Agreement, notwithstanding the fact
that such counterparts have not been executed by all parties hereto.

         11.8.  Partial Invalidity.  The invalidity or unenforceability of any
                ------------------
one or more phrases, clauses or sections of this Agreement shall not affect the
validity or enforceability of the remaining provisions.

         11.9.  Captions. The captions and headings of the various sections and
                --------
subsections of this Agreement are provided for convenience only and shall not be
construed to modify the meaning of such sections or subsections.

         11.10. WAIVER OF JURY TRIAL. THE AGENT, THE LENDERS, THE PARENT AND THE
                --------------------
BORROWERS AGREE THAT NONE OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A
JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED
UPON, OR ARISING OUT OF, THIS AGREEMENT, THE NOTES, THE OTHER LENDER AGREEMENTS,
ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP
BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE AGENT, THE
LENDERS, THE PARENT AND THE BORROWERS AND THESE PROVISIONS SHALL BE SUBJECT TO
NO EXCEPTIONS. NONE OF THE AGENT, THE LENDERS, THE PARENT OR THE BORROWERS HAS
AGREED WITH OR REPRESENTED TO ANY OTHER PERSON THAT THE PROVISIONS OF THIS
PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.

         11.11. Entire Agreement. This Agreement, the Notes, the Lender
                ----------------
Agreements and the documents and agreements executed in connection herewith
constitute the final agreement of the parties hereto and supersede any prior or
contemporaneous agreement or understanding, written or oral, with respect to the
matters contained herein and therein.

         11.12. Indemnification. Each Borrower indemnifies and holds harmless
                ---------------
the Agent, the Arranger, the Documentation Agent and each of the Lenders and
their shareholders, directors, officers, employees, subsidiaries, affiliates and
agents (collectively, the "Indemnitees") against any and all third party claims,
demands, suits, actions, causes of action, damages, losses, settlement payments,
obligations, costs, expenses (including, without limitation, reasonable fees and
disbursements of a single legal counsel (and local counsel in any particular
jurisdiction) incurred in connection with any investigation, litigation or other
proceeding) and all other liabilities whatsoever which shall at any time or
times be incurred or sustained by any Indemnitee (other than as a result of the
gross negligence or willful misconduct of the Agent, the Arranger, the
Documentation Agent or

                                      -59-

<PAGE>

any of the Lenders) on account of, or in relation to, or in any way in
connection with, the use of the proceeds of the Loans and any of the
arrangements or transactions contemplated by, associated with or ancillary to
either this Agreement or any of the other Lender Agreements, whether or not all
or any of the transactions contemplated by, associated with or ancillary to this
Agreement or any such Lender Agreements are ultimately consummated. Nothing in
the foregoing is intended to prevent or restrict a Borrower or other party
hereto from asserting claims for breach of this Agreement against the Agent, the
Arranger, the Documentation Agent or any of the Lenders, any assertion of which
shall in no event affect the indemnification provided by the Borrowers
hereunder. Without prejudice to the survival of any other covenant of the
Borrowers hereunder, the covenants of this Section 11.12 shall survive the
termination of this Agreement and the payment or satisfaction of payment of
amounts owing with respect to any Lender Agreements for the five (5)-year period
following such termination, payment and satisfaction, unless prior to such fifth
anniversary the Agent, Arranger, the Documentation Agent or any Lender has
provided notice to the Borrowers of a dispute, claim or other facts which give
rise to an obligation of the Borrowers to indemnify such Person under this
Section.

         11.13. Collateral Release Conditions. If the Parent shall deliver a
                -----------------------------
compliance certificate to the Agent demonstrating the following: (i) a
consolidated Fixed Charge Coverage ratio of at least 1.40 to 1.0 for at least
four consecutive quarters, and (ii) Consolidated EBITDA for the four quarters
then ending of at least $34,500,000 (the foregoing clauses (i) and (ii) being
hereinafter collectively referred to as the "Collateral Release Conditions"),
each Security Document shall be automatically terminated, and the Collateral
contemplated thereby shall be released from all security interests, pledges and
assignments made in favor of the Agent and the Lenders, without any further
action by the Agent or any Lender, except that the Agent shall, at the
                                   ------
Borrowers' expense, file and cause to be recorded all such UCC-3 termination
statements, and shall take all such other actions as the Borrowers may
reasonably require, in order to effectuate the release of the Collateral from
all such security interests, pledges and assignments.

                                      -60-

<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Amended and Restated
Agreement to be executed by their duly authorized officers as of the day and
year first above written.

                                          BROOKSTONE, INC.

                                          By:___________________________________
                                             Name:  Philip Roizin
                                             Title: Executive Vice President and
                                                    Chief Financial Officer

                                          BROOKSTONE COMPANY, INC.

                                          By:___________________________________
                                             Name:  Philip Roizin
                                             Title: Executive Vice President and
                                                    Chief Financial Officer

                                          BROOKSTONE STORES, INC.

                                          By:___________________________________
                                             Name:  Philip Roizin
                                             Title: Executive Vice President and
                                                    Chief Financial Officer

                                          BROOKSTONE PURCHASING, INC.

                                          By:___________________________________
                                             Name:  Philip Roizin
                                             Title: Executive Vice President and
                                                    Chief Financial Officer

                                       -61-

<PAGE>

                                         GARDENERS EDEN BY MAIL, INC.

                                         By:_________________________________
                                            Name:  Philip Roizin
                                            Title: Executive Vice President and
                                                   Chief Financial Officer

                                         GARDENERS EDEN COMPANY, INC.

                                         By:_________________________________
                                            Name:  Philip Roizin
                                            Title: Executive Vice President and
                                                   Chief Financial Officer

                                         GARDENERS EDEN
                                         PURCHASING, INC.

                                         By:_________________________________
                                            Name:  Philip Roizin
                                            Title: Executive Vice President and
                                                   Chief Financial Officer

                                         FLEET NATIONAL BANK, as Agent for the
                                         Lenders

                                         By:_________________________________
                                            Name:  Kathleen Dimock
                                            Title: Director

                                         CITIZENS BANK OF MASSACHUSETTS, as
                                         Documentation Agent for the Lenders

                                         By:_________________________________
                                            Name:
                                            Title:

                                      -62-

<PAGE>

                                         FLEET NATIONAL BANK

                                         By:_________________________________
                                            Name:  Kathleen Dimock
                                            Title: Director

                                         CITIZENS BANK OF MASSACHUSETTS

                                         By:_________________________________
                                            Name:
                                            Title:

                                         BANKNORTH, N.A.

                                         By:_________________________________
                                            Name:
                                            Title:

                                         SOVEREIGN BANK

                                         By:_________________________________
                                            Name:
                                            Title:

                                         NATIONAL CITY BANK

                                         By:_________________________________
                                            Name:
                                            Title:

                                      -63-

<PAGE>

                                   EXHIBIT A-1
                                   -----------

                            BROOKSTONE COMPANY, INC.
                             BROOKSTONE STORES, INC.
                           BROOKSTONE PURCHASING, INC.
                          GARDENERS EDEN BY MAIL, INC.
                          GARDENERS EDEN COMPANY, INC.
                         GARDENERS EDEN PURCHASING, INC.
                             FORM OF PROMISSORY NOTE

                                                          February __, 2002
__________________$                                       Boston, Massachusetts

         For value received, the undersigned, jointly and severally, hereby
promise to pay to ____________________(the "Lender"), or order, at the head
office of Fleet National Bank, as Agent, at 100 Federal Street, Boston,
Massachusetts, the principal amount of _______________ Dollars ($___________) or
such lesser amount as shall equal the principal amount outstanding hereunder on
February __, 2005 (as the same may be extended pursuant to the Credit Agreement
referred to below, the "Revolving Credit Termination Date"), in lawful money of
the United States of America and in immediately available funds, and to pay
interest on the unpaid principal balance hereof from time to time outstanding,
at said office and in like money and funds, for the period commencing on the
date hereof until paid in full, at the rates per annum and on the dates provided
in the Amended and Restated Credit Agreement referred to below. All principal
remaining unpaid and any accrued but unpaid interest shall be due and payable on
the Revolving Credit Termination Date.

         This Note is issued pursuant to, and entitled to the benefits of, and
is subject to, the provisions of a certain Amended and Restated Credit Agreement
dated as of February __, 2002 by and among Brookstone, Inc., the undersigned,
the Lender, the other lenders party thereto and Fleet National Bank, as Agent
(herein, as the same may from time to time be amended or extended, referred to
as the "Credit Agreement"), but neither this reference to the Credit Agreement
nor any provision thereof shall affect or impair the absolute and unconditional
obligation of the undersigned makers of this Note to pay the principal of and
interest on this Note as herein provided.

         In case an Event of Default (as defined in the Credit Agreement) shall
occur, the aggregate unpaid principal of and accrued interest on this Note shall
become or may be declared to be due and payable in the manner and with the
effect provided in the Credit Agreement.

         The undersigned may at their option prepay all or any part of the
principal of this Note before maturity upon the terms provided in the Credit
Agreement.

         Each undersigned maker hereby waives presentment, demand, notice of
dishonor,

                                      A1-1

<PAGE>

protest and all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note.

         This instrument shall have the effect of an instrument executed under
seal and shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).

                                         BROOKSTONE COMPANY, INC.

                                         By:_________________________________
                                            Name:  Philip Roizin
                                            Title: Executive Vice President and
                                                   Chief Financial Officer

                                         BROOKSTONE STORES, INC.

                                         By:_________________________________
                                            Name:  Philip Roizin
                                            Title: Executive Vice President and
                                                   Chief Financial Officer

                                         BROOKSTONE PURCHASING, INC.

                                         By:_________________________________
                                            Name:  Philip Roizin
                                            Title: Executive Vice President and
                                                   Chief Financial Officer

                                         GARDENERS EDEN BY MAIL, INC.

                                         By:_________________________________
                                            Name:  Philip Roizin
                                            Title: Executive Vice President and
                                                   Chief Financial Officer

                                      A1-2

<PAGE>

                                         GARDENERS EDEN COMPANY, INC.

                                         By:_________________________________
                                            Name:  Philip Roizin
                                            Title: Executive Vice President and
                                                   Chief Financial Officer

                                         GARDENERS EDEN
                                         PURCHASING, INC.

                                         By:_________________________________
                                            Name:  Philip Roizin
                                            Title: Executive Vice President and
                                                   Chief Financial Officer

Witness (as to all):  _____________________

                                      A1-3

<PAGE>

                          SCHEDULE I TO PROMISSORY NOTE

<TABLE>
<CAPTION>
                      TYPE OF LOAN
                     (LIBOR OR BASE
            AMOUNT          -------  INTEREST    INTEREST     AMOUNT    NOTATION
    DATE    OF LOAN       RATE)        RATE*     PERIOD**      PAID     MADE BY
    ----    -------       -----        ----      ------        ----     -------
    <S>     <C>      <C>             <C>         <C>          <C>       <C>
</TABLE>

________________________
*   For Base Rate Loans, insert "Base Rate".

**  For LIBOR Loans.

                                      A1-1

<PAGE>

                                   EXHIBIT A-2
                                   -----------

                            BROOKSTONE COMPANY, INC.
                             BROOKSTONE STORES, INC.
                           BROOKSTONE PURCHASING, INC.
                          GARDENERS EDEN BY MAIL, INC.
                          GARDENERS EDEN COMPANY, INC.
                         GARDENERS EDEN PURCHASING, INC.

                                 PROMISSORY NOTE
                                  (Swing Line)

                                                         February __, 2002
$2,500,000                                               Boston, Massachusetts

         For value received, the undersigned, jointly and severally, hereby
promise to pay to Fleet National Bank (the "Lender"), or order, at the head
office of Fleet National Bank, as Agent, at 100 Federal Street, Boston,
Massachusetts, the principal amount of Two Million Five Hundred Thousand Dollars
($2,500,000) or such lesser amount as shall equal the principal amount
outstanding hereunder on February __, 2005 (the "Revolving Credit Termination
Date"), in lawful money of the United States of America and in immediately
available funds, and to pay interest on the unpaid principal balance hereof from
time to time outstanding, at said office and in like money and funds, for the
period commencing on the date hereof until paid in full, at the rates per annum
and on the dates provided in the Credit Agreement referred to below. All
principal remaining unpaid and any accrued but unpaid interest shall be due and
payable on the Revolving Credit Termination Date.

         This Note is issued pursuant to, and entitled to the benefits of, and
is subject to, the provisions of a certain Amended and Restated Credit Agreement
dated as of February __, 2002 by and among Brookstone, Inc., the undersigned,
the Lender, the other lenders party thereto and Fleet National Bank, as Agent
(herein, as the same may from time to time be amended or extended, referred to
as the "Credit Agreement"), but neither this reference to the Credit Agreement
nor any provision thereof shall affect or impair the absolute and unconditional
obligation of the undersigned makers of this Note to pay the principal of and
interest on this Note as herein provided.

         In case an Event of Default (as defined in the Credit Agreement) shall
occur, the aggregate unpaid principal of and accrued interest on this Note shall
become or may be declared to be due and payable in the manner and with the
effect provided in the Credit Agreement.

         The undersigned may at their option prepay all or any part of the
principal of this Note before maturity upon the terms provided in the Credit
Agreement.

                                      A2-1

<PAGE>

         Each undersigned maker hereby waives presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.

         This instrument shall have the effect of an instrument executed under
seal and shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained herein).

                                           BROOKSTONE COMPANY, INC.

                                           By:_________________________________
                                              Name:  Philip Roizin
                                              Title: Executive Vice President
                                                     and Chief Financial Officer

                                           BROOKSTONE STORES, INC.

                                           By:_________________________________
                                              Name:  Philip Roizin
                                              Title: Executive Vice President
                                                     and Chief Financial Officer

                                           BROOKSTONE PURCHASING, INC.

                                           By:_________________________________
                                              Name:  Philip Roizin
                                              Title: Executive Vice President
                                                     and Chief Financial Officer

                                           GARDENERS EDEN BY MAIL, INC.

                                           By:_________________________________
                                              Name:  Philip Roizin
                                              Title: Executive Vice President
                                                     and Chief Financial Officer

                                      A2-2

<PAGE>

                                           GARDENERS EDEN COMPANY, INC.

                                           By:_________________________________
                                              Name:  Philip Roizin
                                              Title: Executive Vice President
                                                     and Chief Financial Officer

                                           GARDENERS EDEN
                                           PURCHASING, INC.

                                           By:_________________________________
                                              Name:  Philip Roizin
                                              Title: Executive Vice President
                                                     and Chief Financial Officer

Witness (as to all):  ____________________

                                      A2-3

<PAGE>

                                    EXHIBIT B
                                    ---------

                            BROOKSTONE COMPANY, INC.
                             BROOKSTONE STORES, INC.
                           BROOKSTONE PURCHASING, INC.
                          GARDENERS EDEN BY MAIL, INC.
                          GARDENERS EDEN COMPANY, INC.
                         GARDENERS EDEN PURCHASING, INC.

                        NOTICE OF BORROWING OR CONVERSION

Fleet National Bank, as Agent
100 Federal Street
Boston, MA 02110

         Re:  Amended and Restated Credit Agreement Dated as of February __,
              2002 (the "Agreement")

Ladies and Gentlemen:

         Pursuant to Section 2.2 of the Agreement the undersigned hereby
confirms its request made on ___________, 200_ for a [Base Rate] [LIBOR] Loan in
the amount of $______________* on ___________, 199___. After the making of such
Loan, the aggregate amount of Loans and Letters of Credit outstanding will not
exceed the Borrowing Base in effect as of the end of the Company's last fiscal
month end.

         [The Interest Period applicable to said Loan will [be (one) (two)
(three) (six) months].**

         [Said Loan represents a conversion of the [Base Rate] [LIBOR] Loan in
the same amount made on _____________________.]***

                                      B-1

<PAGE>

     The representations and warranties contained or referred to in Section IV
of the Agreement are true and accurate on and as of the effective date of the
Loan as though made at and as of such date (except to the extent that such
representations and warranties expressly relate to an earlier date); and no
Default has occurred and is continuing or will result from the Loan.

                                        BROOKSTONE COMPANY, INC.
Date:

                                        By:____________________________________
                                           Name:  Philip Roizin
                                           Title: Executive Vice President and
                                                  Chief Financial Officer

                                        BROOKSTONE STORES, INC.
Date:

                                        By:____________________________________
                                           Name:  Philip Roizin
                                           Title: Executive Vice President and
                                                  Chief Financial Officer

                                        BROOKSTONE PURCHASING, INC.
Date:

                                        By:____________________________________
                                           Name:  Philip Roizin
                                           Title: Executive Vice President and
                                                  Chief Financial Officer

                                        GARDENERS EDEN BY MAIL, INC.
Date:

                                        By:____________________________________
                                           Name:  Philip Roizin
                                           Title: Executive Vice President and
                                                  Chief Financial Officer

                                       B-2

<PAGE>

                                        GARDENERS EDEN COMPANY, INC.
Date:

                                        By:_________________________________
                                           Name:  Philip Roizin
                                           Title: Executive Vice President and
                                                  Chief Financial Officer

                                        GARDENERS EDEN
                                        PURCHASING, INC.
Date:

                                        By:_________________________________
                                           Name:  Philip Roizin
                                           Title: Executive Vice President and
                                                  Chief Financial Officer

____________________

*    LIBOR Loans must be in a minimum amount of $1,000,000 and in integral
     multiplies of $500,000.

**   To be inserted in any request for a LIBOR Loan.

***  To be inserted in any request for a conversion.

                                       B-3

<PAGE>

                                    EXHIBIT C
                                    ---------

                           INDEBTEDNESS; ENCUMBRANCES

                         [to be provided by the Parent]

                                       C-1

<PAGE>

                                    EXHIBIT D
                                    ---------

                                   LITIGATION

                         [to be provided by the Parent]

                                       D-1

<PAGE>

                                    EXHIBIT E
                                    ---------

                                  SUBSIDIARIES

                         [to be provided by the Parent]

                                       E-1

<PAGE>

                                   EXHIBIT F
                                   ---------

                                BROOKSTONE, INC.

                       REPORT OF CHIEF FINANCIAL OFFICER

         BROOKSTONE, Inc. (the "Parent") HEREBY CERTIFIES that:

     This Report is furnished pursuant to Section 5.1(c) of the Amended and
Restated Credit Agreement dated as of February __, 2002 by and among the Parent,
Brookstone Company, Inc., Brookstone Stores, Inc., Brookstone Purchasing, Inc.,
Gardeners Eden By Mail, Inc., Gardeners Eden Company, Inc., Gardeners Eden
Purchasing, Inc., the lenders party thereto and Fleet National Bank as Agent
(the "Agreement"). Unless otherwise defined herein, the terms used in this
Report have the meanings given to them in the Agreement.

     As required by Section 5.1(a) of the Agreement, consolidated financial
statements of the Parent and its Subsidiaries for the [year/quarter] ended
___________, 200_ (the "Financial Statements") prepared in accordance with
generally accepted accounting principles consistently applied accompany this
Report. The Financial Statements present fairly the consolidated financial
position of the Parent and its Subsidiaries as at the date thereof and the
consolidated results of operations of the Parent and its Subsidiaries for the
period covered thereby (subject only to normal, recurring year-end audit
adjustments).

     The figures set forth in Schedule A for determining compliance by the
Parent with the financial and certain other covenants contained in the Agreement
present fairly the information set forth therein as of the date or for the
period to which this certificate relates.

     The activities of the Parent and its Subsidiaries during the period covered
by the Financial Statements have been reviewed by the Chief Financial Officer or
by employees or agents under his immediate supervision. Based on such review, to
the best knowledge and belief of the Chief Financial Officer, and as of the date
of this Report, no Default has occurred.*

     WITNESS my hand this __________ day of _____________, 200_.

                                                     BROOKSTONE, INC.

                                                     By:________________________
                                                          Name:
                                                          Title:
_____________________
*    If a Default has occurred, this paragraph is to be modified with an
     appropriate statement as to the nature thereof, the period of existence
     thereof and what action the Parent has taken, is taking, or proposes to
     take with respect thereto.

                                       F-1

<PAGE>

                                                                      SCHEDULE A
                                                                              to
                                                                       EXHIBIT F
                                                                       ---------

                         COVENANT COMPLIANCE WORKSHEET

Consolidated Net Worth (Section 5.7)
------------------------------------

REQUIRED:

(i)       Base Net Worth                                             $________

(ii)      75% of Consolidated Net Income from February 4, 2001 the   $________
          most recent year end (without deduction for any annual
          losses)

(iii)     Repurchases of capital stock by the Parent since October   $________
          __, 2001

(iv)      (i) plus (ii) less (iii)                                   $________
              ----      ----

ACTUAL:                                                              $________

Cash Flow Leverage (Section 5.8)
--------------------------------

REQUIRED:   Not greater than ____ to 1.00

ACTUAL:

    (i)   Consolidated Total Funded Debt                             $_________

    (ii)  Consolidated EBITDA                                        $_________

    (iii) Line (i) divided by line (ii)                              ____ to 1.0

                                       F-2

<PAGE>

Fixed Charge Coverage (Section 5.9)
-----------------------------------

REQUIRED:  Not less than _____ to 1.0

ACTUAL:

           Consolidated EBITDA

           Plus: Rent Expense

           Less: Capital Expenditures

     (A)   Subtotal                                                 $_________

           Rent Expense

           Plus:  Interest Expense

     (B)   Subtotal                                                 $_________

           Cash Flow Coverage:                                      _____ to 1.0
           Line (A) divided by line (B)

Capital Expenditures (Section 6.10)
-----------------------------------

           Capital Expenditures since the beginning of the
           current fiscal year (not to exceed $14,500,000
           during the 2001 Fiscal Year, $11,500,000
           during the 2002 Fiscal Year, $26,000,000
           during the 2003 Fiscal Year $25,500,000
           during the 2004 Fiscal Year, and $20,000,000             $_________
           during the 2005 Fiscal Year (except that Section
           6.10 permits, as therein provided, an
           aggregation of the distribution facility amount
           up to $17,000,000 in either fiscal year 2003 or
           2004)).

                                       F-3

<PAGE>

     WITNESS by hand this _____ day of ________, 200_.

                                                     BROOKSTONE, INC.

                                                     By:_______________________
                                                        Name:
                                                        Title:

                                       F-4

<PAGE>

                                   EXHIBIT G
                                   ---------

                            BROOKSTONE COMPANY, INC.
                             BROOKSTONE STORES, INC.
                           BROOKSTONE PURCHASING, INC.
                          GARDENERS EDEN BY MAIL, INC.
                          GARDENERS EDEN COMPANY, INC.
                         GARDENERS EDEN PURCHASING, INC.
                       BROOKSTONE RETAIL PUERTO-RICO, INC.

     BROOKSTONE COMPANY, INC. (the "Company"), BROOKSTONE STORES, INC.
("Stores"), BROOKSTONE PURCHASING, INC. ("Purchasing"), GARDENERS EDEN COMPANY,
INC. ("GE"), GARDENERS EDEN PURCHASING, INC. ("GE Purchasing"), BROOKSTONE
RETAIL PUERTO-RICO, INC. ("PR") and GARDENERS EDEN BY MAIL, INC. ("GE Mail")
hereby jointly and severally certify that:

     This Report is furnished pursuant to Section 5.1(d) of the Amended and
Restated Revolving Credit Agreement dated as of February __, 2002 by and among
Brookstone, Inc., the Company, Stores, Purchasing, PR, GE, GE Purchasing, GE
Mail, the lenders party thereto and Fleet National Bank, as Agent (the
"Agreement"). Unless otherwise defined herein, the terms used in this Report
have the meanings given to them in the Agreement.

     As of ____________, 200_, the end of the last fiscal month of the Company,
Stores, Purchasing, PR, GE, GE Purchasing, GE Mail, the Company, Stores,
Purchasing, PR, GE, GE Purchasing, and GE Mail jointly and severally certify as
follows:

     A.   Eligible Inventory was $_________ determined as follows:

          1.   Gross Inventory*                                   $__________

          2.   Less reserves and other exclusions                 $__________

          3.   Eligible Inventory (Line 1 less Line 2)            $__________

     B.   The Borrowing Base was $__________, determined as follows:

          1.   Applicable % of Eligible Inventory**               $__________

          2.   Applicable % Outstanding Documentary Letters of    $__________
               Credit**

          3.   Borrowing Base (Line 1 plus line 2)                $__________

                                       G-1

<PAGE>

     C. The amount available for Loans and Letters of Credit under the Agreement
was $_________, determined as follows:

       1.      The Lesser of $80,000,000 or the Borrowing Base    $__________

       2.      Outstanding Loans                                  $__________

       3.      Outstanding Letters of Credit                      $__________

       4.      Availability for Loans and Letters of Credit       $__________
               (Line 1 less the sum of line 2 and line 3)

     WITNESS my hand this ________ day of ________, 200_.

                                   BROOKSTONE COMPANY, INC.
                                   BROOKSTONE-STORES, INC.
                                   BROOKSTONE PURCHASING, INC.
                                   BROOKSTONE RETAIL PUERTO-RICO, INC.
                                   GARDENERS EDEN BY MAIL, INC.
                                   GARDENERS EDEN COMPANY, INC.
                                   GARDENERS EDEN PURCHASING, INC.

                                   By:___________________________
                                          Name:
                                          Title:  Chief Financial Officer

______________________________________
*up to $100,000, in the case of PR

**"Applicable %" means: 50%, from December 1 through May 31, 65% from June 1
through July 31, and 75% from August 1 through November 30.

                                       G-2

<PAGE>

                                    EXHIBIT H
                                    ---------

                           FORM OF OPINION OF COUNSEL

                                [TO BE INSERTED]

                                       H-1

<PAGE>

                                    EXHIBIT I
                                    ---------

                     AMENDED AND RESTATED UNLIMITED GUARANTY

     AMENDED AND RESTATED UNLIMITED GUARANTY dated as of February __, 2002, by
BROOKSTONE PROPERTIES, INC., BROOKSTONE HOLDINGS, INC., BROOKSTONE RETAIL
PUERTO-RICO, INC. and BROOKSTONE BY MAIL, INC. (each a "Guarantor" and
collectively the "Guarantors"), in favor of FLEET NATIONAL BANK, a national
banking association with its head office at 100 Federal Street, Boston,
Massachusetts, as Agent (the "Agent") for the Lenders parties to the Amended and
Restated Credit Agreement referred to below.

                                    Recitals

     In consideration of the Lenders' giving time, credit or banking facilities
or accommodations to Brookstone Company, Inc., Brookstone Stores, Inc.,
Brookstone Purchasing, Inc., Gardeners Eden by Mail, Inc., Gardeners Eden
Company, Inc. and Gardeners Eden Purchasing, Inc. and their successors
(collectively, the "Borrowers") under an Amended and Restated Credit Agreement
of even date herewith (the "Amended and Restated Credit Agreement") by and among
the Agent, the Borrowers, Brookstone, Inc. and the Lenders parties thereto, the
Notes and Swing Line Note issued thereunder and otherwise, the Guarantors hereby
amend and restate that certain Unlimited Guaranty dated as of May 11, 1999 by
the Guarantors and agree, jointly and severally, as follows. Capitalized terms
used herein and not otherwise defined shall have the meanings set forth in the
Amended and Restated Credit Agreement (provided, however, that the term
"Lenders" as used herein shall mean all the Lenders and the Swing Line Lender
under the Amended and Restated Credit Agreement).

     1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantors hereby absolutely
and unconditionally guarantee to the Agent and the Lenders, jointly and
severally, the full and punctual payment when due (whether at maturity, by
acceleration or otherwise), and the performance, of all liabilities, agreements
and other obligations of the Borrowers to the Agent and the Lenders, whether
direct or indirect, absolute or contingent, due or to become due, secured or
unsecured, now existing or hereafter arising or acquired (whether by way of
discount, letter of credit, lease, loan, overdraft or otherwise) (the
"Obligations"). This Guaranty is an absolute, unconditional and continuing
guaranty of the full and punctual payment and performance of the obligations and
not of their collectibility only and is in no way conditioned upon any
requirement that the Agent and the Lenders first attempt to collect any of the
Obligations from the Borrowers or resort to any security or other means of
obtaining their payment. Should the Borrowers default in the payment or
performance of any of the Obligations, the obligations of the Guarantors
hereunder shall become immediately due and payable to the Agent and the Lenders,
without demand or notice of any nature, all of which are expressly waived by the
Guarantors. Payments by the Guarantors hereunder may be required by the Agent on
any number of occasions.

                                       I-1

<PAGE>

     2. GUARANTORS' AGREEMENT TO PAY. The Guarantors further agree, jointly and
severally, as principal obligors and not as guarantors only, to pay to the Agent
and the Lenders, on demand, all costs and expenses (including court costs and
legal expenses) incurred or expended by the Agent and the Lenders in connection
with the Obligations, this Guaranty and the enforcement thereof, together with
interest on amounts recoverable under this Guaranty from the time such amounts
become due until payment, at the rate per annum equal to the rate of interest
announced by the Agent from time to time at its head office as its Base Rate,
plus 2%; provided that if such interest exceeds the maximum amount permitted to
be paid under applicable law, then such interest shall be reduced to such
maximum permitted amount.

     3. UNLIMITED GUARANTY. The liability of the Guarantors hereunder shall be
unlimited.

     4. WAIVERS BY GUARANTORS; AGENT'S FREEDOM TO ACT. The Guarantors agree that
the Obligations will be paid and performed strictly in accordance with their
respective terms regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Agent and the Lenders with respect thereto. The Guarantors waive presentment,
demand, protest, notice of acceptance, notice of Obligations incurred and all
other notices of any kind, all defenses which may be available by virtue of any
valuation, stay, moratorium law or other similar law now or hereafter in effect,
any right to require the marshaling of assets of the Borrowers, and all
suretyship defenses generally. Without limiting the generality of the foregoing,
the Guarantors agree to the provisions of any instrument evidencing, securing or
otherwise executed in connection with any Obligation and agree that the
obligations of the Guarantors hereunder shall not be released or discharged, in
whole or in part, or otherwise affected by (i) the failure of the Agent and the
Lenders to assert any claim or demand or to enforce any right or remedy against
the Borrowers; (ii) any extensions or renewals of any Obligation; (iii) any
rescissions, waivers, amendments or modifications of any of the terms or
provisions of any agreement evidencing securing or otherwise executed in
connection with any Obligation; (iv) the substitution or release of any entity
primarily or secondarily liable for any Obligation; (v) the adequacy of any
rights the Agent and the Lenders may have against any collateral or other means
of obtaining repayment of the Obligations; (vi) the impairment of any collateral
securing the Obligations, including without limitation the failure to perfect or
preserve any rights the Agent and the Lenders might have in such collateral or
the substitution, exchange, surrender, release, loss or destruction of any such
collateral; or (vii) any other act or omission which might in any manner or to
any extent vary the risk of the Guarantors or otherwise operate as a release or
discharge of the Guarantors, all of which may be done without notice to the
Guarantors.

     5. UNENFORCEABILITY OF OBLIGATIONS AGAINST BORROWERS. If for any reason the
Borrowers have no legal existence or are under no legal obligation to discharge
any of the obligations, or if any of the Obligations have become irrecoverable
from the Borrowers by operation of law or for any other reason, this Guaranty
shall nevertheless be binding on the Guarantors to the same extent as if the
Guarantors at all

                                       I-2

<PAGE>

times had been the principal obligor on all such Obligations. In the event that
acceleration of the time for payment of the Obligations is stayed upon the
insolvency, bankruptcy or reorganization of a Borrower, or for any other reason,
all such amounts otherwise subject to acceleration under the terms of any
agreement evidencing, securing or otherwise executed in connection with any
Obligation shall be immediately due and payable by the Guarantors.

     6. SUBROGATION; SUBORDINATION. Until the payment and performance in full of
all Obligations and any and all obligations of the Borrowers to any affiliate of
the Agent and the Lenders, the Guarantors shall not exercise any rights against
the Borrowers arising as a result of payment by the Guarantors hereunder, by way
of subrogation or otherwise, and will not prove any claim in competition with
the Agent and the Lenders or their affiliates in respect of any payment
hereunder in bankruptcy or insolvency proceedings of any nature; the Guarantors
will not claim any set-off or counterclaim against the Borrowers in respect of
any liability of the Guarantors to the Borrowers; and the Guarantors waive any
benefit of and any right to participate in any collateral which may be held by
the Agent or any such affiliate. The payment of any amounts due with respect to
any indebtedness of the Borrowers now or hereafter held by the Guarantors is
hereby subordinated to the prior payment in full of the obligations. The
Guarantors agree that after the occurrence of any default in the payment or
performance of the obligations, the Guarantors will not demand, sue for or
otherwise attempt to collect any such indebtedness of the Borrowers to the
Guarantors until the Obligations shall have been paid in full. If,
notwithstanding the foregoing sentence, the Guarantors shall collect, enforce or
receive any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by the Guarantors as trustee for the Agent and
the Lenders and be paid over to the Agent on account of the Obligations without
affecting in any manner the liability of the Guarantors under the other
provisions of this Guaranty.

     7. SECURITY; SET-OFF. The Guarantors grant to the Agent and the Lenders, as
security for the full and punctual payment and performance of the Guarantors'
obligations hereunder, a continuing lien on and security interest in all
securities or other property belonging to the Guarantors now or hereafter held
by the Agent or the Lenders and in all deposits (general or special, time or
demand, provisional or final) and other sums credited by or due from the Agent
or the Lenders to the Guarantors or subject to withdrawal by the Guarantors; and
regardless of the adequacy of any collateral or other means of obtaining
repayment of the Obligations, the Agent or the Lenders are hereby authorized at
any time and from time to time, without notice to the Guarantors (any such
notice being expressly waived by the Guarantors) and to the fullest extent
permitted by law, to set off and apply such deposits and other sums against the
obligations of the Guarantors under this Guaranty, whether or not the Agent or
the Lenders shall have made any demand under this Guaranty and although such
obligations may be contingent or unmatured.

     8. TERMINATION; REINSTATEMENT. This Guaranty shall remain in full force and
effect until the Agent is given written notice of the Guarantors' intention to
discontinue this Guaranty, notwithstanding any intermediate or temporary payment
or

                                       I-3

<PAGE>

settlement of the whole or any part of the Obligations. No such notice shall be
effective unless received and acknowledged by an officer of the Agent at its
head office. No such notice shall affect any rights of the Agent or the Lenders
or of any affiliate hereunder including, without limitation, the rights set
forth in Sections 4 and 6, with respect to Obligations incurred prior to the
receipt of such notice or Obligations incurred pursuant to any contract or
commitment in existence prior to such receipt, and all checks drafts, notes,
instruments (negotiable or otherwise) and writings made by or for the account of
the Borrowers and drawn on the Agent or any Lender or any of their agents
purporting to be dated on or before the date of receipt of such notice, although
presented to and paid or accepted by the Agent or any Lender after that date,
shall form part of the Obligations. This Guaranty shall continue to be effective
or be reinstated, notwithstanding any such notice, if at any time any payment
made or value received with respect to an Obligation is rescinded or must
otherwise be returned by the Agent or any Lender upon the insolvency, bankruptcy
or reorganization of the Borrowers, or otherwise, all as though such payment had
not been made or value received.

     9.  SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
Guarantors, jointly and severally, their successors and assigns, and shall inure
to the benefit of and be enforceable by the Agent, the Lenders and their
successors, transferees and assigns. Without limiting the generality of the
foregoing sentence, the Agent and the Lenders may assign or otherwise transfer
any agreement or any note held by it evidencing, securing or otherwise executed
in connection with the obligations, or sell participations in any interest
therein, to any other person or entity, in accordance with the provisions of the
Amended and Restated Credit Agreement, and such other person or entity shall
thereupon become vested, to the extent set forth in the agreement evidencing
such assignment, transfer or participation, with all the rights in respect
thereof granted to the Agent and the Lenders herein.

     10. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this
Guaranty nor consent to any departure by the Guarantors therefrom shall be
effective unless the same shall be in writing and signed by the Agent. No
failure on the part of the Agent and the Lenders to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.

     11. NOTICES. All notices and other communications called for hereunder
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or mailed
first class mail postage prepaid or, in the case of telegraphic or telexed
notice, when transmitted, answer back received, addressed as follows: if to the
Guarantors, at the address set forth beneath its signature hereto, and if to the
Agent and the Lenders, c/o Fleet National Bank, as Agent, 100 Federal Street,
Mail Stop: MA DE 10008F, Boston, Massachusetts 02110, Attention: Ms. Kathleen
Dimock, Director, or at such other address as either party may designate in
writing.

                                       I-4

<PAGE>

     12. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty is intended to
take effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts. The Guarantors
agree that any suit for the enforcement of this Guaranty may be brought in the
courts of The Commonwealth of Massachusetts or any Federal Court sitting therein
and consents to the non-exclusive jurisdiction of such court and to service of
process in any such suit being made upon the Guarantors by mail at the address
specified in Section 11 hereof. The Guarantors hereby waive any objection that
they may now or hereafter have to the venue of any such suit or any such court
or that such suit was brought in an inconvenient court.

     13. WAIVER OF JURY TRIAL. THE AGENT AND THE GUARANTORS AGREE THAT NONE OF
THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS
GUARANTY, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH
ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE AGENT
AND THE GUARANTORS, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS.
NEITHER THE AGENT NOR THE GUARANTORS HAVE AGREED WITH OR REPRESENTED TO THE
OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.

     14. MISCELLANEOUS. This Guaranty constitutes the entire agreement of the
Guarantors with respect to the matters set forth herein. The rights and remedies
herein provided are cumulative and not exclusive of any remedies provided by law
or any other agreement, and this Guaranty shall be in addition to any other
guaranty of the obligations. The invalidity or unenforceability of any one or
more sections of this Guaranty shall not affect the validity or enforceability
of its remaining provisions. Captions are for the ease of reference only and
shall not affect the meaning of the relevant provisions. The meanings of all
defined terms used in this Guaranty shall be equally applicable to the singular
and plural forms of the terms defined.

                                       I-5

<PAGE>

     IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed
and delivered by its duly authorized officer as of the date appearing on page
one.

                             BROOKSTONE PROPERTIES, INC.,
                             BROOKSTONE HOLDINGS, INC.,
                             BROOKSTONE RETAIL PUERTO-RICO, INC.
                             BROOKSTONE BY MAIL, INC.

                             By:______________________________
                                  Philip Roizin, Executive Vice President
                                  and Chief Financial Officer

                             Address:

                             17 Riverside Street
                             Nashua, NH 03062
                             Attention: Mr. Philip Roizin

                                        I-6

<PAGE>

                                    EXHIBIT J
                                    ---------

                       [FORM OF ASSIGNMENT AND ACCEPTANCE]

                            ASSIGNMENT AND ACCEPTANCE

                            Dated as of ____________

     Reference is made to the Amended and Restated Credit Agreement, dated as of
February __, 2002 (as amended, modified or otherwise supplemented, the
"Agreement"), by and among BROOKSTONE COMPANY, INC. and certain affiliates
(collectively, the "Borrowers"), certain other affiliates of the Borrowers (the
"Companies"), the Lenders under (and as defined in) the Agreement, and Fleet
National Bank as agent for the Lenders (the "Agent"). Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Agreement.

     ______________________ (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, that Commitment Percentage under
the Lender Agreements as of the Effective Date (as hereinafter defined) with
respect to the Obligations as is specified on Annex I hereto. After giving
effect to such sale and assignment, the Assignor's and Assignee's Commitment
Percentages will be as set forth on Annex I hereto.

     2. The Assignor (i) represents that it is legally authorized to enter into
this Assignment and Acceptance and that, as of the date hereof, its Commitment
Percentage is as set forth on Annex I hereto; (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 Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Agreement, the other Lender Agreements or any other instrument or
document furnished pursuant thereto, other than that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrowers, the Companies, or any other person which
may be primarily or secondarily liable in respect of any of the Obligations or
any of their respective obligations under the Agreement or the other Lender
Agreements or any other instrument or document delivered or executed pursuant
thereto.

     3. The Assignee (i) represents and warrants that (a) it is a Successor
Lender, (b) it is legally authorized to enter into this Assignment and
Acceptance, (c) the execution, delivery and performance of this Assignment and
Acceptance do not conflict with any provision of law or of the charter or
by-laws of the Assignee, or of any agreement binding on the Assignee and (d) all
acts, conditions and things required to be

                                       J-1

<PAGE>

done and performed and to have occurred prior to the execution, delivery and
performance of this Assignment and Acceptance, and to render the same the legal,
valid and binding obligation of the Assignee, enforceable against it in
accordance with its terms, have been done and performed and have occurred in due
and strict compliance with all applicable laws; (ii) confirms that it has
received a copy of the Agreement, together with copies of the most recent
financial statements delivered pursuant to Sections 4.6 and 5.1 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; (iii)
agrees that it will, independently and without reliance upon the Assignor, any
other Lender or the Agent and based on such documents and information as it
shall deem appropriate at the time, continue to make its own appraisals and
credit decisions in taking or not taking action under the Agreement; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers as are reasonably incidental thereto pursuant to the
terms of the Agreement and the other Lender Agreements; and (v) agrees that it
will perform all the obligations which by the terms of the Agreement are
required to be performed by it as a Lender in accordance with the terms of the
Agreement.

     4. The effective date for this Assignment and Acceptance shall be as set
forth on Annex I hereto (the "Effective Date"), provided, however, that on or
                                                --------
before such date (i) this Assignment and Acceptance shall have been executed and
delivered by the parties hereto, (ii) executed copies hereof shall have been
delivered to and consented to by the Agent and, if required, the Borrowers, and
(iii) the Assignor shall have paid to the Agent the fee required by Section
9.2(a) of the Agreement. Following the execution of this Assignment and
Acceptance and the consent thereto by the Agent and, if required, the Borrowers,
it will be delivered to the Agent for acceptance and recording by the Agent. The
Agent shall maintain a copy of each Assignment and Acceptance delivered to it
and a register or similar list (the "Register") for the recordation of the names
and addresses of the Lenders and the Commitment Percentages of, and principal
amount of the Loans owing to, the Lenders from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrowers, the Companies, the Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender for all purposes of the Agreement.
The Register shall be available for inspection by the Borrowers and the Lenders
at any reasonable time and from time to time upon reasonable prior notice.

     5. Upon such acceptance and recording, from and after the Effective Date,
(i) the Assignee shall be a party to the Agreement and, to the extent provided
in this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder, and (ii) provided that the Agent and, if required, the Borrowers
shall have approved the herein assignment pursuant to Section 9.2 of the
Agreement, the Assignor shall, with respect to that portion of its interest
under the Agreement assigned hereunder, relinquish its rights and be released
from its obligations under the Agreement accruing from and after the Effective
Date; provided, however, that the Assignor shall retain its rights to be
      --------  -------
indemnified pursuant to Section 11.12 of the Agreement with respect to any
claims or actions arising prior to the Effective Date.

                                       J-2

<PAGE>

     6. Upon such acceptance and recording, from and after the Effective Date,
the Agent shall make all payments in respect of the interest assigned hereby
(including payments of principal, interest, fees and other amounts) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments
directly between themselves with respect to payments by the Agent for periods
prior to the Effective Date or otherwise with respect to the making of this
assignment.

     7. THIS ASSIGNMENT AND ASSUMPTION IS INTENDED TO BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).

     8. This Assignment and Acceptance may be signed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument.

                           [signatures on next page]

                                       J-3

<PAGE>

     IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned
has caused this Assignment and Acceptance to be executed on its behalf by its
officer thereunto duly authorized, as of the date first above written.

                                The Assignor:
                                --- --------

                                [_______________________________________]

                                By:_____________________________________

                                Title: _________________________________

                                The Assignee:
                                --- --------

                                [_______________________________________]

                                By:_____________________________________

                                Title: _________________________________

                                Notice Address of Assignee:

                                ________________________________________
                                ________________________________________
                                ________________________________________

                                Attn:___________________________________

                                Wire Instructions for Assignee:

                                ________________________________________
                                ________________________________________
                                ________________________________________

                                       J-4

<PAGE>

CONSENTED TO:

The Agent
---------

FLEET NATIONAL BANK

By:_________________________________________

Title:______________________________________

The Borrowers:
--- ---------

BROOKSTONE, INC., for itself
and on behalf of the other Borrowers
and the Companies

By:_________________________________________

Title:______________________________________

                                       J-5

<PAGE>

                      ANNEX FOR ASSIGNMENT AND ACCEPTANCE

                                    ANNEX 1

1.      Borrowers:

        Brookstone Company, Inc., a Delaware corporation, and certain affiliates
        (collectively, the "Borrowers")

2.      Name and Date of Loan Agreement:

        Amended and Restated Credit Agreement, dated as of February __, 2002,
        among the Borrowers, certain of their affiliates, the Lenders parties
        thereto, and Fleet National Bank, as agent for the Lenders

<TABLE>
<S>                                                                       <C>
3.      Date of Assignment and Acceptance:                                ______________, 200_

4.      Commitment Percentages:

        a.       Commitment Percentage being assigned
                 by Assignor to Assignee                                  ___%

        b.       Assignor's Commitment Percentage
                 before giving effect to this Assignment
                 and Acceptance                                           ___%

        c.       Assignor's Commitment Percentage
                 after giving effect to this Assignment and Acceptance
                                                                          ___%
        d.       Assignee's Commitment Percentage after giving effect
                 to this Assignment and Acceptance
                                                                          ___%

5.      Effective Date of assignment:                                     _________________, 200_

ASSIGNOR:                                                                 ASSIGNEE:

_______________________                                                   _______________________

_______________________                                                   _______________________

_______________________                                                   _______________________

_______________________                                                   _______________________

</TABLE>

                                      J-6

<PAGE>

                                  SCHEDULE 1.1

                             Commitment Percentages
                             ----------------------

--------------------------------- ----------------------- ----------------------
                                                            Maximum Amount of
                                         Commitment        Revolving Loans and
         Lender                          Percentage         Letters of Credit
         ------                          ----------         -----------------
--------------------------------- ----------------------- ----------------------
Fleet National Bank
Retail & Apparel Division
100 Federal Street
Mail Stop:  MA DE 10008F
Boston, MA  02110
Attn:    Kathleen Dimock
         Director                           32.5%             $26,000,000

--------------------------------- ----------------------- ----------------------
Citizens Bank of Massachusetts
28 State Street
Boston, MA  02109
Attn:    Daniel Bernard

                                            22.5%             $18,000,000

--------------------------------- ----------------------- ----------------------
Sovereign Bank
75 State Street
Mail Stop:  sst 04-10
Boston, MA  02109
Attn:    Robert Cook                        17.5%             $14,000,000

--------------------------------- ----------------------- ----------------------
Banknorth, N.A.
7 New England Executive Park
Suite 700
Burlington, MA  01803
Attn:    Jeffrey Westling
                                            17.5%             $14,000,000

--------------------------------- ----------------------- ----------------------
National City Bank
One South Broad Street
13/th/ Floor
Philadelphia, PA  19107

Attn:    Thomas McDonnell                   10.0%             $ 8,000,000

--------------------------------- ----------------------- ----------------------
TOTALS                                    100.00%             $80,000,000.00
--------------------------------- ----------------------- ----------------------

                                      1.1-1

<PAGE>

                                  SCHEDULE 1.2

                                Pricing Schedule
                                ----------------

     The Applicable LIBOR Margin, the Applicable Base Rate Margin, the
Documentary Letter of Credit Fee Rate and the Commitment Fee Rate for any day
are the respective percentages set forth below in the applicable row under the
column corresponding to the Status that exists on such day:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                  Status                        Level I         Level II        Level III        Level IV
<S>                                             <C>             <C>             <C>              <C>
         Applicable LIBOR Margin                  2.25            2.00             1.75            1.50

------------------------------------------------------------------------------------------------------------
       Applicable Base Rate Margin                0.75            0.50             0.25            0.00

------------------------------------------------------------------------------------------------------------
     Documentary Letter of Credit Fee            1.125            1.00            0.875            0.75

------------------------------------------------------------------------------------------------------------
              Commitment Fee                     0.750           0.625             0.50            0.50

------------------------------------------------------------------------------------------------------------
</TABLE>

For purposes of this Schedule, the following terms have the following meanings:

     "Level I Status" exists at any date if, at such date, no other Status
exists.

     "Level II Status" exists at any date if, at such date, the Fixed Charge
Coverage ratio for the four consecutive quarters then ending is greater than or
equal to 1.2-to-1.0 and less than 1.4-to-1.0 and no Default exists.

     "Level III Status" exists at any date if, at such date, the Fixed Charge
Coverage ratio for the four consecutive quarters then ending is greater than or
equal to 1.4-to-1.0 and less than 1.60-to-1.0 and no Default exists.

     "Level IV Status" exists at any date if, at such date, the Fixed Charge
Coverage ratio for the four consecutive quarters then ending is greater than or
equal to 1.60-to-1.0 and no Default exists.

     "Status" refers to the determination of which Level I Status, Level II
Status, Level III Status or Level IV Status exists at any date.

     The applicable Fixed Charge Coverage ratio (a) shall be determined and
effective on a date (each a "Determination Date") selected by the Agent within
ten (10) days of the Agent's receipt of the final, signed financial statements
for the Parent's previous fiscal

                                     1.2-1

<PAGE>

quarter for the four consecutive fiscal quarters then ending, commencing with
receipt of the financial statements for the fiscal quarter ending August 3,
2002, (b) shall be equal to the Fixed Charge Coverage ratio in effect as of the
end of such fiscal quarter for the four consecutive fiscal quarters then ending
as reflected on the final, signed financial statements and certified by the
Parent's chief financial officer and (c) shall remain in effect until the next
Determination Date. If the Parent fails to deliver such financial statements in
the time period required, the Level I Status for each of the Applicable LIBOR
Rate Margin, the Applicable Base Rate Margin, the Documentary Letter of Credit
Fee Rate and the Commitment Fee Rate will apply. Anything hereinbefore to the
contrary notwithstanding, Level I Status for each of the Applicable LIBOR Rate
Margin, the Applicable Base Rate Margin, the Documentary Letter of Credit Fee
Rate and the Commitment Fee Rate will apply from the date of this Agreement
through the Determination Date following the Agent's receipt of the final,
signed financial statements for the Parent's fiscal quarter ending August 3,
2002.

                                     1.2-1

<PAGE>

                                 SCHEDULE 2.16.9

                          OUTSTANDING LETTERS OF CREDIT

                            [to be provided by Fleet]

                                    2.16.9-1

<PAGE>

                                  SCHEDULE 4.13

                              CERTAIN ERISA MATTERS

                         [to be provided by the Parent]

                                     4.13-1

<PAGE>

                                  SCHEDULE 6.8

                       LIST OF INVESTMENTS IN SUBSIDIARIES

                         [to be provided by the Parent]

                                     6.8-1<PAGE>

                                                                     EXHIBIT 4.3

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

                             CHITTENDEN CORPORATION

                                       TO

                           ___________________________

                              THE BANK OF NEW YORK

                                     TRUSTEE

                          _____________________________

                          JUNIOR SUBORDINATED INDENTURE

                           Dated as of _________, 20__

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

<PAGE>

                             CHITTENDEN CORPORATION

         Reconciliation and tie between the Trust Indenture Act of 1939
(including cross-references to provisions of Sections 310 to and including 317
which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended
by the Trust Reform Act of 1990, are a part of and govern the Indenture whether
or not physically contained therein) and the Junior Subordinated Indenture,
dated as of __________, 20__.

TRUST INDENTURE
ACT SECTION                                                    INDENTURE SECTION
-----------                                                    -----------------
Section 310(a)(1), (2) and (5) ..............................................6.9
  (a)(3) ...........................................................Inapplicable
  (a)(4) ...........................................................Inapplicable
  (b) .................................................................6.8, 6.10
  (c) ..............................................................Inapplicable
Section 311(a) .............................................................6.13
  (b) ......................................................................6.13
  (c) ..............................................................Inapplicable
Section 312(a) ......................................................7.1, 7.2(a)
  (b) ....................................................................7.2(b)
  (c) ....................................................................7.2(c)
Section 313(a) ...........................................................7.3(a)
  (b) ....................................................................7.3(b)
  (c) ...........................................................7.3(a), 7.3 (b)
  (d) ....................................................................7.3(c)
Section 314(a)(1), (2), (3) and (4) .........................................7.4
  (b) ..............................................................Inapplicable
  (c)(1) ....................................................................1.2
  (c)(2) ....................................................................1.2
  (c)(3) ...........................................................Inapplicable
  (d) ..............................................................Inapplicable
  (e) .......................................................................1.2
  (f) ..............................................................Inapplicable
Section 315(a) .................................................6.1(a), (c), (e)
  (b) ..........................................................6.2, 7.3(a), (b)
  (c) ....................................................................6.1(b)
  (d) ....................................................................6.1(c)
  (d)(1) ..............................................................6.1(a)(1)
  (d)(2) ..............................................................6.1(c)(2)
  (d)(3) ..............................................................6.1(c)(3)
  (e) ......................................................................5.14
Section 316(a)(1)(A) .......................................................5.12
  (a)(1)(B) ................................................................5.13
  (a)(2) ...........................................................Inapplicable
  (b) .......................................................................5.8
  (c) ....................................................................1.4(f)
Section 317(a)(1) ...........................................................5.3
  (a)(2) ....................................................................5.4
  (b) ......................................................................10.3
Section 318(a) ..............................................................1.7

NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Junior Subordinated Indenture.

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                          Page
                                                                                                          ----
<S>                                                                                                       <C>
ARTICLE I - DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION......................................    1
    Section 1.1.    Definitions..........................................................................    1
    Section 1.2.    Compliance Certificate and Opinions..................................................    9
    Section 1.3.    Forms of Documents Delivered to Trustee..............................................   10
    Section 1.4.    Acts of Holders......................................................................   11
    Section 1.5.    Notices, Etc. to Trustee and Company.................................................   13
    Section 1.6.    Notice to Holders; Waiver............................................................   13
    Section 1.7.    Conflict with Trust Indenture Act....................................................   13
    Section 1.8.    Effect of Headings and Table of Contents.............................................   13
    Section 1.9.    Successors and Assigns...............................................................   13
    Section 1.10.   Separability Clause..................................................................   13
    Section 1.11.   Benefits of Indenture................................................................   13
    Section 1.12.   Governing Law........................................................................   14
    Section 1.13.   Non-Business Days....................................................................   14

ARTICLE II - SECURITY FORMS..............................................................................   14
    Section 2.1.    Forms Generally......................................................................   14
    Section 2.2.    Form of Face of Security.............................................................   15
    Section 2.3.    Form of Reverse of Security..........................................................   17
    Section 2.4.    Additional Provisions Required in Global Security....................................   20
    Section 2.5.    Form of Trustee's Certificate of Authentication......................................   21

ARTICLE III - THE SECURITIES.............................................................................   21
    Section 3.1.    Title and Terms......................................................................   21
    Section 3.2.    Denominations........................................................................   23
    Section 3.3.    Execution, Authentication, Delivery and Dating.......................................   23
    Section 3.4.    Temporary Securities.................................................................   25
    Section 3.5.    Registration, Transfer and Exchange..................................................   25
    Section 3.6.    Mutilated, Destroyed, Lost and Stolen Securities.....................................   27
    Section 3.7.    Payment of Interest; Interest Rights Preserved.......................................   27
    Section 3.8.    Persons Deemed Owners................................................................   29
    Section 3.9.    Cancellation.........................................................................   29
    Section 3.10.   Computation of Interest..............................................................   29
    Section 3.11.   Deferrals of Interest Payment Dates..................................................   29
    Section 3.12.   Right of Set-Off.....................................................................   30
    Section 3.13.   Agreed Tax Treatment.................................................................   30
    Section 3.14.   Shortening or Extension of Stated Maturity...........................................   31
    Section 3.15.   CUSIP Numbers........................................................................   31

ARTICLE IV - SATISFACTION AND DISCHARGE..................................................................   31
    Section 4.1.    Satisfaction and Discharge of Indenture..............................................   31
    Section 4.2.    Application of Trust Money...........................................................   32
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                        <C>
ARTICLE V - REMEDIES......................................................................................  32
    Section 5.1.    Events of Default.....................................................................  32
    Section 5.2.    Acceleration of Maturity; Rescission and Annulment....................................  34
    Section 5.3.    Collection of Indebtedness and Suits for Enforcement by Trustee.......................  35
    Section 5.4.    Trustee May File Proofs of Claim......................................................  36
    Section 5.5.    Trustee May Enforce Claim Without Possession of Securities............................  36
    Section 5.6.    Application of Money Collected........................................................  37
    Section 5.7.    Limitation on Suits...................................................................  37
    Section 5.8.    Unconditional Right of Holders to Receive Principal, Premium and Interest;
                    Direct Action by Holders of Capital Securities........................................  38
    Section 5.9.    Restoration of Rights and Remedies....................................................  38
    Section 5.10.   Rights and Remedies Cumulative........................................................  38
    Section 5.11.   Delay or Omission Not Waiver..........................................................  38
    Section 5.12.   Control by Holders....................................................................  38
    Section 5.13.   Waiver of Past Defaults...............................................................  39
    Section 5.14.   Undertaking for Costs.................................................................  39
    Section 5.15.   Waiver of Usury, Stay or Extension Laws...............................................  40

ARTICLE VI - THE TRUSTEE..................................................................................  40
    Section 6.1.    Certain Duties and Responsibilities...................................................  40
    Section 6.2.    Notice of Defaults....................................................................  41
    Section 6.3.    Certain Rights of Trustee.............................................................  41
    Section 6.4.    Not Responsible for Recitals or Issuance of Securities................................  43
    Section 6.5.    May Hold Securities...................................................................  43
    Section 6.6.    Money Held in Trust...................................................................  43
    Section 6.7.    Compensation and Reimbursement........................................................  43
    Section 6.8.    Disqualification; Conflicting Interests...............................................  44
    Section 6.9.    Corporate Trustee Required; Eligibility...............................................  44
    Section 6.10.   Resignation and Removal; Appointment of Successor.....................................  44
    Section 6.11.   Acceptance of Appointment by Successor................................................  46
    Section 6.12.   Merger, Conversion, Consolidation or Succession to Business...........................  47
    Section 6.13.   Preferential Collection of Claims Against Company.....................................  47
    Section 6.14.   Appointment of Authenticating Agent...................................................  47

ARTICLE VII - HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY...........................................  49
    Section 7.1.    Company to Furnish Trustee Names and Addresses of Holders.............................  49
    Section 7.2.    Preservation of Information, Communications to Holders................................  49
    Section 7.3.    Reports by Trustee....................................................................  49
    Section 7.4.    Reports by Company....................................................................  50

ARTICLE VIII - CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE.......................................  50
    Section 8.1.    Company May Consolidate, Etc., Only on Certain Terms..................................  50
    Section 8.2.    Successor Corporation Substituted.....................................................  51
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                        <C>
ARTICLE IX - SUPPLEMENTAL INDENTURES......................................................................  51
    Section 9.1.    Supplemental Indentures without Consent of Holders....................................  51
    Section 9.2.    Supplemental Indentures with Consent of Holders.......................................  53
    Section 9.3.    Execution of Supplemental Indentures..................................................  54
    Section 9.4.    Effect of Supplemental Indentures.....................................................  54
    Section 9.5.    Conformity with Trust Indenture Act...................................................  54
    Section 9.6.    Reference in Securities to Supplemental Indentures....................................  54

ARTICLE X - COVENANTS.....................................................................................  55
    Section 10.1.   Payment of Principal, Premium and Interest............................................  55
    Section 10.2.   Maintenance of Office or Agency.......................................................  55
    Section 10.3.   Money for Security Payments to be Held in Trust.......................................  55
    Section 10.4.   Statement as to Compliance............................................................  57
    Section 10.5.   Waiver of Certain Covenants...........................................................  57
    Section 10.6.   Additional Sums.......................................................................  57
    Section 10.7.   Additional Covenants..................................................................  57
    Section 10.8.   Statement by Officer as to Default....................................................  57

ARTICLE XI - REDEMPTION OF SECURITIES.....................................................................  59
    Section 11.1.   Applicability of this Article.........................................................  59
    Section 11.2.   Election to Redeem; Notice to Trustee.................................................  59
    Section 11.3.   Selection of Securities to be Redeemed................................................  59
    Section 11.4.   Notice of Redemption..................................................................  60
    Section 11.5.   Deposit of Redemption Price...........................................................  60
    Section 11.6.   Payment of Securities Called for Redemption...........................................  60
    Section 11.7.   Right of Redemption of Securities Initially Issued to a Chittenden Capital Trust......  61

ARTICLE XII - SINKING FUNDS...............................................................................  61
    Section 12.1.   Applicability of Article..............................................................  61
    Section 12.2.   Satisfaction of Sinking Fund Payments with Securities.................................  61
    Section 12.3.   Redemption of Securities for Sinking Fund.............................................  62

ARTICLE XIII - SUBORDINATION OF SECURITIES................................................................  63
    Section 13.1.   Securities Subordinate to Senior Debt.................................................  63
    Section 13.2.   Payment Over of Proceeds Upon Dissolution, Etc........................................  63
    Section 13.3.   Prior Payment to Senior Debt Upon Acceleration of Securities..........................  64
    Section 13.4.   No Payment When Senior Debt in Default................................................  65
    Section 13.5.   Payment Permitted If No Default.......................................................  65
    Section 13.6.   Subrogation to Rights of Holders of Senior Debt.......................................  66
    Section 13.7.   Provisions Solely to Define Relative Rights...........................................  66
    Section 13.8.   Trustee to Effectuate Subordination...................................................  66
    Section 13.9.   No Waiver of Subordination Provisions.................................................  67
    Section 13.10.  Notice to Trustee.....................................................................  67
    Section 13.11.  Reliance on Judicial Order or Certificate of Liquidating Agent........................  68
    Section 13.12.  Trustee Not Fiduciary for Holders of Senior Debt......................................  68
</TABLE>

                                      iii

<PAGE>

<TABLE>
<S>                                                                                                        <C>
    Section 13.13.  Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights........... 68
    Section 13.14.  Article Applicable to Paying Agents.................................................... 68
    Section 13.15.  Certain Conversions or Exchanges Deemed Payment........................................ 68

ARTICLE XIV - MEETINGS OF HOLDERS OF SECURITIES............................................................ 69
    Section 14.1.   Purposes for Which Meetings May Be Called.............................................. 69
    Section 14.2.   Call, Notice and Place of Meetings..................................................... 69
    Section 14.3.   Persons Entitled to Vote at Meetings................................................... 69
    Section 14.4.   Quorum; Action......................................................................... 69
    Section 14.5.   Determination of Voting Rights; Conduct and Adjournment of Meetings.................... 70
    Section 14.6.   Counting Votes and Recording Action of Meetings........................................ 71
</TABLE>

                                       iv

<PAGE>

         JUNIOR SUBORDINATED INDENTURE, dated as of ________, 20__, between
CHITTENDEN CORPORATION, a Vermont corporation (hereinafter called the "Company")
having its principal office at Two Burlington Square, Burlington, Vermont 05401,
and THE BANK OF NEW YORK, a New York banking corporation, as Trustee
(hereinafter called the "Trustee").

                             RECITALS OF THE COMPANY

         The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured junior
subordinated debt securities in series (hereinafter called the "Securities") of
substantially the tenor hereinafter provided, including, without limitation,
Securities issued to evidence loans made to the Company, of the proceeds from
the issuance from time to time by one or more business trusts (each a
"Chittenden Capital Trust," and, collectively, the "Chittenden Capital Trusts")
of preferred trust interests in such Trusts (the "Capital Securities") and
common interests in such Trusts (the "Common Securities" and, collectively with
the Capital Securities, the "Trust Securities"), and to provide the terms and
conditions upon which the Securities are to be authenticated, issued and
delivered.

         All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the Company
the valid and legally binding obligations of the Company, and to make this
Indenture a valid and legally binding agreement of the Company, in accordance
with their and its terms, have been done.

         NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of
the premises and the purchase of the Securities by the Holders thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders of the Securities or of any series thereof, as follows:

         ARTICLE I - DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

         Section 1.1.  Definitions.  For all purposes of this Indenture, except
         -----------   -----------
as otherwise expressly provided or unless the context otherwise requires:

                       (1)  the terms defined in this Article have the meanings
         assigned to them in this Article, and include the plural as well as the
         singular;

                       (2)  all other terms used herein which are defined in
         the Trust Indenture Act, either directly or by reference therein, have
         the meanings assigned to them therein;

                       (3)  all accounting terms not otherwise defined herein
         have the meanings assigned to them in accordance with generally
         accepted accounting principles, and the term "generally accepted
         accounting principles" with respect to any computation required or
         permitted hereunder shall mean such accounting principles which are
         generally accepted at the date or time of such computation; provided,
         however, that when two or more principles are so generally accepted, it
         shall mean that set of principles consistent with those in use by the
         Company;

<PAGE>

                       (4)  the words "herein," "hereof" and "hereunder" and
         other words of similar import refer to this Indenture as a whole and
         not to any particular Article, Section or other subdivision; and

                       (5)  the following terms have the following meanings:

         "Act" when used with respect to any Holder has the meaning specified in
Section 1.4.

         "Additional Interest" means the interest, if any, that shall accrue on
any interest on the Securities of any series the payment of which has not been
made on the applicable Interest Payment Date and which shall accrue at the rate
per annum specified or determined as specified in such Security.

         "Additional Sums" has the meaning specified in Section 10.6.

         "Additional Taxes" means the sum of any additional taxes, duties and
other governmental charges to which a Chittenden Capital Trust has become
subject from time to time as a result of a Tax Event.

         "Administrative Trustee" means, in respect of any Chittenden Capital
Trust, each Person identified as an "Administrative Trustee" or an
"Administrative Agent" in the related Trust Agreement, solely in such Person's
capacity as Administrative Trustee or an Administrative Agent, as the case may
be, of such Chittenden Capital Trust under such Trust Agreement and not in such
Person's individual capacity, or any successor administrative trustee or
successor administrative agent, as the case may be, appointed as therein
provided.

         "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that no Chittenden
Capital Trust to which Securities have been issued shall be deemed to be an
Affiliate of the Company. For the purposes of this definition, "control" when
used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.

         "Allocable Amounts," when used with respect to any Senior Debt, means
all amounts due or to become due on such Senior Debt less, if applicable, any
amount which would have been paid to, and retained by, the holders of such
Senior Debt (whether as a result of the receipt of payments by the holders of
such Senior Debt from the Company or any other obligor thereon or from any
holders of, or trustee in respect of, other indebtedness that is subordinate and
junior in right of payment to such Senior Debt pursuant to any provision of such
indebtedness for the payment over of amounts received on account of such
indebtedness to the holders of such Senior Debt or otherwise) but for the fact
that such Senior Debt is subordinate or junior in right of payment to (or
subject to a requirement that amounts received on such Senior Debt be paid over
to obligees on) trade accounts payable or accrued liabilities arising in the
ordinary course of business.

                                       2

<PAGE>

         "Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 6.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.

         "Board of Directors" means either the board of directors of the Company
or any committee of that board duly authorized to act hereunder.

         "Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors, or such committee of the Board of Directors or officers
of the Company to which authority to act on behalf of the Board of Directors has
been delegated, and to be in full force and effect on the date of such
certification, and delivered to the Trustee.

         "Business Day" means any day other than (i) a Saturday or Sunday, (ii)
a day on which banking institutions in the Borough of Manhattan, The City of New
York or Burlington, Vermont are authorized or required by law or executive order
to remain closed or (iii) a day on which the Corporate Trust Office of the
Trustee, or, with respect to the Securities of a series initially issued to a
Chittenden Capital Trust, the principal office of the Property Trustee under the
related Trust Agreement, is closed for business.

         "Capital Securities" has the meaning specified in the first recital of
this Indenture.

         "Chittenden Capital Trust" shall have the meaning specified in the
first recital of this Indenture.

         "Chittenden Guarantee" means the guarantee by the Company of
distributions on the Capital Securities of a Chittenden Capital Trust to the
extent provided in the related Guarantee Agreement.

         "Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties on such date.

         "Common Securities" has the meaning specified in the first recital of
this Indenture.

         "Common Stock" means the common stock, par value $1.00 per share, of
the Company.

         "Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.

         "Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by the Chairman of the Board
of Directors, any Vice Chairman of the Board of Directors, its President or a
Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or
an Assistant Secretary of the Company, and delivered to the Trustee.

                                        3

<PAGE>

         "Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office on the date of execution of this Indenture is located at [insert
address], Attention: Corporate Trust Department.

         "Corporation" includes a corporation, association, company, joint-stock
company or business trust.

         "Coupon Rate" has the meaning specified in Section 2.2.

         "Debt" means, with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent: (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; (vi) all
indebtedness of such Person whether incurred on or prior to the date of this
Indenture or thereafter incurred, for claims in respect of derivative products,
including interest rate, foreign exchange rate and commodity forward contracts,
options and swaps and similar arrangements; and (vii) every obligation of the
type referred to in clauses (i) through (vi) of another Person and all dividends
of another Person the payment of which, in either case, such Person has
guaranteed or is responsible or liable for, directly or indirectly, as obligor
or otherwise.

         "Defaulted Interest" has the meaning specified in Section 3.7.

         "Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Depositary by the Company pursuant to
Section 3.1 with respect to such series (or any successor thereto).

         "Direct Action" has the meaning specified in Section 5.8.

         "Discount Security" means any security which provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the Maturity thereof pursuant to Section 5.2.

         "Distributions," with respect to the Trust Securities issued by a
Chittenden Capital Trust, means amounts payable in respect of such Trust
Securities as provided in the related Trust Agreement and referred to therein as
"Distributions."

         "Dollar" or "U.S. $" means the currency of the United States of America
that, as at the time of payment, is legal tender for the payment of public and
private debts.

         "Event of Default" has the meaning specified in Article V unless
otherwise specified in the supplemental indenture or the Officer's Certificate
delivered pursuant to Section 3.1 hereof creating a series of Securities.

                                       4

<PAGE>

         "Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.

         "Expiration Date" has the meaning specified in Section 1.4(f).

         "Extension Period" has the meaning specified in Section 3.11.

         "Global Security" means a Security in the form prescribed in Section
2.4 evidencing all or part of a series of Securities, issued to the Depositary
or its nominee for such series, and registered in the name of such Depositary or
its nominee.

         "Guarantee Agreement" means the Guarantee Agreement substantially in
the form attached hereto as Annex A, or substantially in such form as may be
specified as contemplated by Section 3.1 with respect to the Securities of any
series, in each case as amended from time to time.

         "Holder" means a Person in whose name a Security is registered in the
Securities Register.

         "Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof or
one or more Officer's Certificates delivered pursuant to Section 3.1 and shall
include the terms of each particular series of Securities established as
contemplated by Section 3.1.

         "Interest Payment Date" means as to each series of Securities the
Stated Maturity of an installment of interest on such Securities.

         "Investment Company Act" means the Investment Company Act of 1940 and
any statute successor thereto, in each case as amended from time to time.

         "Investment Company Event" means the receipt by the Company and the
Trust of an opinion of counsel (which may be the Company's counsel or counsel of
an Affiliate, but not an employee, and which must be reasonably acceptable to
the Property Trustee of the relevant Chittenden Capital Trust) experienced in
matters relating to investment companies, to the effect that, as a result of the
occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), there is more than
an insubstantial risk that the Trust is or will be considered an "investment
company" that is required to be registered under the Investment Company Act,
which Change in 1940 Act Law becomes effective on or after the closing date of
any series of Securities.

         "Junior Subordinated Payment" has the meaning specified in Section
13.2.

         "Maturity" when used with respect to any Security means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.

                                       5

<PAGE>

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

         "Notice of Default" means a written notice of the kind specified in
Section 5.1(3).

         "Officer's Certificate" means a certificate signed by the Chairman of
the Board of Directors, any Vice Chairman of the Board of Directors, the
President, a Vice President, the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.

         "Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be reasonably acceptable to the Trustee.

         "Original Issue Date" means the date of issuance specified as such in
each Security.

         "Outstanding" means, when used in reference to any Securities, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:

                  (i)   Securities theretofore canceled by the Trustee or
         delivered to the Trustee for cancellation;

                  (ii)  Securities for whose payment money in the necessary
         amount has been theretofore deposited with the Trustee or any Paying
         Agent in trust for the Holders of such Securities; and

                  (iii) Securities in substitution for or in lieu of which other
         Securities have been authenticated and delivered or which have been
         paid pursuant to Section 3.6, unless proof satisfactory to the Trustee
         is presented that any such Securities are held by Holders in whose
         hands such Securities are valid, binding and legal obligations of the
         Company;

provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which a Responsible Officer of the Trustee
actually knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or such other
obligor. Upon the written request of the Trustee, the Company shall furnish to
the Trustee promptly an Officer's Certificate listing and identifying all
Securities, if any, known by the Company to be owned or held by or for the
account of the Company, or any other obligor on the Securities or any Affiliate
of the Company or such obligor, and, subject to the provisions of Section 6.1,
the Trustee shall be entitled to accept such Officer's Certificate as conclusive
evidence of the facts therein set forth and of the fact that all Securities not
listed therein are Outstanding for the purpose of any such determination.

                                       6

<PAGE>

         "Paying Agent" means the Trustee or any Person authorized by the
Company to pay the principal of or interest on any Securities on behalf of the
Company.

         "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association or government or any agency
or political subdivision thereof, or any other entity of whatever nature.

         "Place of Payment" means, with respect to the Securities of any series,
the place or places where the principal of (and premium, if any) and interest on
the Securities of such series are payable pursuant to Sections 3.1 and 3.11.

         "Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any security
authenticated and delivered under Section 3.6 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.

         "Proceeding" has the meaning specified in Section 13.2.

         "Property Trustee" means, in respect of any Chittenden Capital Trust,
the commercial bank or trust company identified as the "Property Trustee" in the
related Trust Agreement, solely in its capacity as Property Trustee of such
Chittenden Capital Trust under such Trust Agreement and not in its individual
capacity, or its successor in interest in such capacity, or any successor
property trustee appointed as therein provided.

         "Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.

         "Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.

         "Regular Record Date" for the interest payable on any Interest Payment
Date with respect to the Securities of a series means, unless otherwise provided
pursuant to Section 3.1 with respect to Securities of a series, (i) in the case
of Securities of a series represented by one or more Global Securities, the
Business Day next preceding such Interest Payment Date and (ii) in the case of
Securities of a series not represented by one or more Global Securities, the
date which is fifteen days next preceding such Interest Payment Date (whether or
not a Business Day).

          "Regulatory Capital Event" means the reasonable determination by the
Company that, as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or (b) any official administrative pronouncement or action or
judicial decision for interpreting or applying such laws or regulations, which
amendment or change is effective or such pronouncement or decision is announced
on or after the date of original issuance of the Capital Securities, there is
more than an insubstantial risk of impairment of the Company's ability to treat
the Capital Securities (or any substantial portion thereof) as Tier 1 capital
(or its then equivalent) for purposes of the capital

                                        7

<PAGE>

adequacy guidelines of the Board of Governors of the Federal Reserve System, or
any successor thereto, in effect and applicable to the Company.

         "Responsible Officer" means, with respect to the Trustee, any officer
with direct responsibility for the administration of this Indenture and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of that officer's knowledge of or
familiarity with the particular subject.

         ["S&P" means Standard & Poor's Ratings Services.]

         "Securities" or "Security" means any debt securities or debt security,
as the case may be, authenticated and delivered under this Indenture.

         "Securities Register" and "Securities Registrar" have the respective
meanings specified in Section 3.5.

         "Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not such claim for post-petition interest is allowed in such proceeding), on
Debt of the Company, whether incurred on or prior to the date of this Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Securities; provided,
however, that Senior Debt shall not be deemed to include (a) any Debt of the
Company which, when incurred and without respect to any election under Section
1111(b) of the Bankruptcy Reform Act of 1978, as amended, was without recourse
to the Company, (b) any Debt of the Company to any of its Subsidiaries, (c) Debt
to any employee of the Company, and (d) any Securities or any obligations in
respect of debt securities issued to any trust, or a trustee of such trust,
partnership or other entity affiliated with the Company that is a financing
entity of the Company in connection with the issuance by such financing entity
of securities that are similar to the Capital Securities.

         "Special Event" means a Tax Event, a Regulatory Capital Event or an
Investment Company Event.

         "Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.7.

         "Stated Maturity" when used with respect to any Security or any
installment of principal thereof or interest thereon means the date specified
pursuant to the terms of such Security as the date on which the principal of
such Security or such installment of interest is due and payable, in the case of
such principal, as such date may be shortened or extended as provided pursuant
to the terms of such Security and this Indenture.

         "Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For purposes of this definition, "voting stock" means stock which
ordinarily has voting power for the election of directors, whether at all

                                       8

<PAGE>

times or only so long as no senior class of stock has such voting power by
reason of any contingency.

         "Tax Event" means the receipt by the Company or the Chittenden Capital
Trust of an opinion of tax counsel (which may be the Company's counsel or
counsel of an Affiliate, but not an employee, and which must be reasonably
acceptable to the Property Trustee of the relevant Chittenden Capital Trust)
experienced in such matters, to the effect that, (a) as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, or (b) as a result of any
official administrative pronouncement or action or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or which pronouncement, action or decision is announced on or after
the date of issuance of the Capital Securities of such Chittenden Capital Trust,
there is more than an insubstantial risk that (i) such Trust is, or will be
within 90 days of the date of such opinion, subject to United States federal
income tax with respect to income received or accrued on the corresponding
series of Securities, (ii) interest payable by the Company on such corresponding
series of Securities is not, or within 90 days of the date of such opinion, will
not be, deductible by the Company, in whole or in part, for United States
federal income tax purposes, or (iii) such Chittenden Capital Trust is, or will
be within 90 days of the date of such opinion, subject to more than a de minimis
amount of other taxes, duties or other governmental charges.

         "Trust Agreement" means the Trust Agreement substantially in the form
attached hereto as Annex B, as amended by the form of Amended and Restated Trust
Agreement substantially in the form attached hereto as Annex C, or substantially
in such form as may be specified as contemplated by Section 3.1 with respect to
the Securities of any series, in each case as amended from time to time.

         "Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbb), as amended and as in effect on the date of this
Indenture, except as provided in Section 9.5.

         "Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder and,
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.

         "Trust Securities" has the meaning specified in the first recital of
this Indenture.

         "Vice President" when used with respect to the Company, means any duly
appointed vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."

         Section 1.2. Compliance Certificate and Opinions. Upon any application
         ------------ ------------------------------------
or request by the Company to the Trustee to take any action under any provision
of this Indenture, the Company shall furnish to the Trustee an Officer's
Certificate stating that all conditions precedent

                                       9

<PAGE>

(including covenants, compliance with which constitutes a condition precedent),
if any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent (including covenants compliance with which
constitute a condition precedent), if any, have been complied with, except that
in the case of any such application or request as to which the furnishing of
such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.

         Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than the
certificates provided pursuant to Section 10.5) shall include:

                       (1)  a statement that each such individual signing such
         certificate or opinion has read such covenant or condition and the
         definitions herein relating thereto;

                       (2)  a brief statement as to the nature and scope of
         the examination or investigation undertaken by such individual upon
         which the statements or opinions contained in such certificate or
         opinion are based;

                       (3)  a statement that, in the opinion of such individual,
         such individual has made such examination or investigation as is
         necessary to enable him to express an informed opinion as to whether or
         not such covenant or condition has been complied with; and

                       (4)  a statement as to whether, in the opinion of such
         individual, such condition or covenant has been complied with.

         Section 1.3.  Forms of Documents Delivered to Trustee. In any case
         ------------  ----------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.

         Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.

         Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions, or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

                                       10

<PAGE>

         Section 1.4.  Acts of Holders.
         ------------  ----------------

                  (a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given to or
taken by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent or
proxy duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
is or are delivered to the Trustee, and, where it is hereby expressly required,
to the Company. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.1) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section.

                  (b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a Person acting in other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.

                  (c) The fact and date of the execution by any Person of any
such instrument or writing, or the authority of the Person executing the same,
may also be proved in any other manner which the Trustee deems sufficient and in
accordance with such reasonable rules as the Trustee may determine.

                  (d) The ownership of Securities shall be proved by the
Securities Register.

                  (e) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.

                  (f) The Company may set any day as a record date for the
purpose of determining the Holders of Outstanding Securities of any series
entitled to give, make or take any request, demand, authorization, direction,
notice, consent, waiver or other action provided or permitted by this Indenture
to be given, made or taken by Holders of Securities of such series; provided
that the Company may not set a record date for, and the provisions of this
paragraph shall not apply with respect to, the giving or making of any notice,
declaration, request or direction referred to in the next paragraph. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date, and no other Holders,
shall be entitled to take the relevant action, whether or not such Holders
remain Holders after such record date; provided that no such action shall be
effective hereunder unless taken on or prior to the applicable Expiration Date
by Holders of the requisite principal amount of Outstanding Securities of such
series on such record date. Nothing in this paragraph shall be construed to
prevent the Company from setting a new record date for any action for which a

                                       11

<PAGE>

record date has previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action by any Person
be canceled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities of the relevant series on the date such action
is taken. Promptly after any record date is set pursuant to this paragraph, the
Company, at its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to be given to the
Trustee in writing and to each Holder of Securities of the relevant series in
the manner set forth in Section 1.6.

         The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to join
in the giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 5.2, (iii) any request to institute
proceedings referred to in Section 5.7(2) or (iv) any direction referred to in
Section 5.12, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be canceled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Company's expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Company in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 1.6.

         With respect to any record date set pursuant to this Section, the party
hereto which sets such record date may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day; provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities of the relevant series in the manner set forth in
Section 1.6, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.

         (g)  Without limiting the foregoing, a Holder entitled hereunder to
take any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.

                                       12

<PAGE>

         Section 1.5.   Notices, Etc. to Trustee and Company.  Any request,
         ------------   -------------------------------------
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with:

                        (1)  the Trustee by any Holder, any holder of Capital
         Securities or the Company shall be sufficient for every purpose
         hereunder if made, given, furnished or filed in writing (which may be
         via facsimile) to or with the Trustee at its Corporate Trust Office; or

                        (2)  the Company by the Trustee, any Holder or any
         holder of Capital Securities shall be sufficient for every purpose
         (except as otherwise provided in Section 5.1) hereunder if in writing
         and mailed, first class, postage prepaid, to the Company, addressed to
         it at the address of its principal office specified in the first
         paragraph of this instrument or at any other address previously
         furnished in writing to the Trustee by the Company.

         Section 1.6.   Notice to Holders; Waiver. Where this Indenture provides
         ------------   --------------------------
for notice to Holders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed, first
class postage prepaid, to each Holder affected by such event, at the address of
such Holder as it appears in the Securities Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.

         Section 1.7.   Conflict with Trust Indenture Act. If any provision of
         ------------   ----------------------------------
this Indenture limits, qualifies or conflicts with the duties imposed by any of
Sections 310 to 317, inclusive, of the Trust Indenture Act through operation of
Section 318(c) thereof, such imposed duties shall control.

         Section 1.8.   Effect of Headings and Table of Contents. The Article
         ------------   -----------------------------------------
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.

         Section 1.9.   Successors and Assigns.  All covenants and agreements in
         ------------   -----------------------
this Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.

         Section 1.10.  Separability Clause.  In case any provision in this
         -------------  --------------------
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

         Section 1.11.  Benefits of Indenture. Nothing in this Indenture or in
         -------------  ----------------------
the Securities, express or implied, shall give to any Person, other than the
parties hereto and their successors and assigns, the Holders of Senior Debt, the
Holders of the Securities and, to the extent expressly

                                       13

<PAGE>

provided in Sections 5.2, 5.8, 5.9, 5.11, 5.13, 9.1 and 9.2, the holders of
Capital Securities, any benefit or any legal or equitable right, remedy or
claim under this Indenture.

         Section 1.12.  Governing Law.  THIS INDENTURE AND THE SECURITIES SHALL
         -------------  --------------
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

         Section 1.13.  Non-Business Days. In any case where any Interest
         -------------  ------------------
Payment Date, Redemption Date or Stated Maturity of any Security shall not be a
Business Day, then (notwithstanding any other provision of this Indenture or the
Securities) payment of interest or principal (and premium, if any) need not be
made on such date, but may be made on the next succeeding Business Day (and no
interest shall accrue for the period from and after such Interest Payment Date,
Redemption Date or Stated Maturity, as the case may be, until such next
succeeding Business Day except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the Interest Payment Date or Redemption Date or at the Stated Maturity.

                          ARTICLE II - SECURITY FORMS

         Section 2.1.   Forms Generally. The Securities of each series shall be
         ------------   ----------------
in substantially the forms set forth in this Article, or in such other form or
forms as shall be established by or pursuant to a Board Resolution and set forth
in one or more indentures supplemental hereto or one or more Officer's
Certificates delivered pursuant to Section 3.1, in each case with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may be required to comply with applicable tax laws or the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such securities, as evidenced by their execution of the
Securities. If the form of Securities of any series is established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 3.3 with respect to the authentication and
delivery of such Securities.

         The Trustee's certificates of authentication shall be substantially in
the form set forth in this Article.

         The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods, if required by any securities
exchange on which the Securities may be listed, on a steel engraved border or
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Securities may be listed, all as
determined by the officers executing such Securities, as evidenced by their
execution of such securities.

                                       14

<PAGE>

         Section 2.2.   Form of Face of Security.
         ------------   -------------------------

                             CHITTENDEN CORPORATION

                ___% JUNIOR SUBORDINATED DEBENTURE DUE _________

NO. REGISTERED:                                       PRINCIPAL AMOUNT:
CUSIP NO.:

         Chittenden Corporation, a corporation organized and existing under the
laws of the State of Vermont (hereinafter called the "Company," which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to ____________, or registered
assigns, the principal sum of $_____ Dollars on ______[; provided that the
Company may (i) shorten the Stated Maturity of the principal of this Security to
a date not earlier than _________, and (ii) extend the Stated Maturity of the
principal of this Security at any time on one or more occasions, subject to
certain conditions specified in Section 3.14 of the Indenture, but in no event
to a date later than ________]. The Company further promises to pay interest on
said principal sum from __________, or from the most recent Interest Payment
Date (as defined below) on which interest has been paid or duly provided for,
[specify interest period] (subject to deferral as set forth herein) in arrears
on _________ of each year commencing __________ (each, an "Interest Payment
Date"), at the rate of _____% per annum (the "Coupon Rate") until the principal
hereof shall have become due and payable, and on any overdue principal and
(without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any overdue interest at the Coupon Rate,
compounded [specify interest period]. The amount of interest payable for any
period shall be computed on the basis of twelve 30-day months and a 360-day
year. The amount of interest payable for any partial period shall be computed on
the basis of the number of days elapsed in a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on this Security
is not a Business Day, then payment of the interest payable on such date will be
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on the date the payment was originally payable. A "Business
Day" shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which
banking institutions in the Borough of Manhattan, The City of New York or
Burlington, Vermont are authorized or required by law or executive order to
remain closed or (iii) a day on which the Corporate Trust Office of the Trustee,
or the principal office of the Property Trustee under the Trust Agreement
(hereinafter referred to) for [name of trust] is closed for business. The
interest installment so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
installment, which shall be [insert Record Date] next preceding such Interest
Payment Date. Any such interest installment not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities of this
series not less than

                                       15

<PAGE>

_________ days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities of this series may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in said
Indenture.

         [If applicable, insert - So long as no Event of Default has occurred
and is continuing, the Company shall have the right at any time during the term
of this Security to defer payment of interest on this Security, at any time or
from time to time, for up to ________ consecutive [specify interest period]
interest payment periods with respect to each deferral period (each an
"Extension Period"), (during which Extension Periods the Company shall have the
right to make partial payments of interest on any Interest Payment Date, and at
the end of which the Company shall pay all interest then accrued and unpaid
(together with Additional Interest thereon to the extent permitted by applicable
law)); provided, however, that no Extension Period shall extend beyond the
Stated Maturity of the principal of this Security; and provided further that
during any such Extension Period, the Company shall not, and to the extent
applicable, shall not permit any Subsidiary to, (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock), (ii) make any payment of principal of or interest or premium,
if any, on or repay, repurchase or redeem any debt securities of the Company
(including Securities issued by the Company pursuant to the Indenture other than
the Securities represented by this certificate) that ranks pari passu with or
junior in interest to this Security or (iii) make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any Subsidiary
of the Company (including Guarantee Agreements other than the Guarantee
Agreement related to the Capital Securities issued by [name of trust]) if such
guarantee ranks pari passu with or junior in interest to this Security (other
than (a) dividends or distributions in Common Stock of the Company, (b) any
declaration of a dividend in connection with the implementation of a rights
plan, or the issuance of stock under any such plan in the future or the
redemption or repurchase of any such rights pursuant thereto, (c) as a result of
an exchange or conversion of one class or series of the Company's capital stock
for another class or series of the Company's capital stock, (d) payments under
the Guarantee Agreement related to the Capital Securities issued by [name of
trust], and (e) purchases , repurchases, redemptions or other acquisitions of
shares of Common Stock in connection with any of the Company's benefit plans for
its directors, officers or employees). Prior to the termination of any such
Extension Period, the Company may further extend such Extension Period,
provided, however, that such extension does not cause such Extension Period to
exceed __ consecutive interest payment periods or to extend beyond the Stated
Maturity. Upon the termination of any such Extension Period and upon the payment
of all amounts then due, and subject to the foregoing limitation, the Company
may elect to begin a new Extension Period. No interest shall be due and payable
during an Extension Period except at the end thereof. The Company shall give the
Trustee and the Property Trustee and the Administrative Trustees of [name of
trust] notice of its election to begin any Extension Period at least _____
Business Days prior to the earlier of (i) the date on which Distributions on the
Capital Securities would be payable except for the election to begin such
Extension Period, or (ii) the date the Administrative Trustees are required to
give notice to any securities exchange or automated quotation system or to
holders of such Capital Securities of the record date or the date such
Distributions are payable, but in any event not less than _____ Business Days
prior to such record date.]

                                       16

<PAGE>

         Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the United States, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may be made (i) by check mailed to the address of the Person entitled
thereto as such address shall appear in the Securities Register or (ii) by wire
transfer in immediately available funds at such place and to such account as may
be designated by the Person entitled thereto as specified in the Securities
Register.

         The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, unsecured and will rank junior and subordinate and subject in
right of payments to the prior payment in full of all Senior Debt, and this
Security is issued subject to the provisions of the Indenture with respect
thereto. Each Holder of this Security, by accepting the same, (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs the Trustee on his
behalf to take such actions as may be necessary or appropriate to effectuate the
subordination so provided and (c) appoints the Trustee his attorney-in-fact for
any and all such purposes. Each Holder hereof, by his acceptance hereof, waives
all notice of the acceptance of the subordination provisions contained herein
and in the Indenture by each holder of Senior Debt, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon said
provisions.

         Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

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

         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.

                                        CHITTENDEN CORPORATION

                                        By:___________________________________
                                              [President or Vice President]
Attest:

_____________________________________
[Secretary or Assistant Secretary]

         Section 2.3.   Form of Reverse of Security. This Security is one of a
         ------------   ----------------------------
duly authorized issue of securities of the Company (herein called the
"Securities"), issued and to be issued in one or more series under a Junior
Subordinated Indenture, dated as of _________, 20__ (herein called the
"Indenture"), between the Company and The Bank of New York, as Trustee (herein
called the "Trustee," which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the

                                       17

<PAGE>

respective rights, limitations of rights, duties and immunities thereunder of
the Trustee, the Company and the Holders of the Securities, and of the terms
upon which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereof, limited in
aggregate principal amount to $___________ (or $_________ if the underwriters
purchase additional Capital Securities of Chittenden Capital Trust __ pursuant
to an overallotment option).

         All terms used in this Security that are defined in the Indenture and
in the Trust Agreement, dated as of __________, 20__, as amended (the "Trust
Agreement"), for [name of trust] among Chittenden Corporation, as Sponsor, the
Trustees named therein, and the holders from time to time of the securities of
such Trust, shall have the meanings assigned to them in the Indenture or the
Trust Agreement, as the case may be.

         [If applicable, insert--The Company may at any time, at its option, on
or after ___________, 20__, and subject to the terms and conditions of Article
XI of the Indenture], [if applicable insert--and subject to Chittenden
Corporation having received prior approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve") if then required under applicable
capital guidelines or policies of the Federal Reserve] redeem this Security [in
whole at any time] [or in part from time to time], without premium or penalty,
at a redemption price equal to [insert redemption price] to the Redemption
Date.]

         [If applicable, insert--Upon the occurrence and during the continuation
of a Special Event in respect of a [name of trust], the Company may, at its
option, at any time within 90 days of the occurrence of such Special Event
redeem this Security, [if applicable, insert--in whole but not in part], subject
to the provisions of Section 11.7 and the other provisions of Article XI of the
Indenture, at a redemption price equal to [insert redemption price] to the
Redemption Date.

         [If applicable, insert--In the event of redemption of this Security in
part only, a new Security or Securities of this series for the portion hereof
not redeemed will be issued in the name of the Holder hereof upon the
cancellation hereof.]

         The Indenture contains provisions for satisfaction and discharge of the
entire indebtedness of this Security upon compliance by the Company with certain
conditions set forth in the Indenture.

         The Indenture permits, with certain exceptions as therein provided, the
Company and the Trustee at any time to enter into a supplemental indenture or
indentures for the purpose of modifying in any manner the rights and obligations
of the Company and of the Holders of the Securities, with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Securities of each series to be affected by such supplemental indenture. The
Indenture also contains provisions permitting Holders of specified percentages
in principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the

                                       18

<PAGE>

registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.

         [If the Security is not a Discount Security--As provided in and subject
to the provisions of the Indenture, if an Event of Default with respect to the
Securities of this series at the time Outstanding occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities of this series may declare the
principal amount of all the Securities of this series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders); provided that, in the case of the Securities of this series issued
to a Chittenden Capital Trust, if upon an Event of Default, the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of this series fails to declare the principal of all the Securities of this
series to be immediately due and payable, the holders of at least 25% in
aggregate Liquidation Amount of the Capital Securities then outstanding shall
have such right by a notice in writing to the Company and the Trustee; and upon
any such declaration the principal amount of and the accrued interest (including
any Additional Interest) on all the Securities of this series shall become
immediately due and payable; provided that the payment of principal and interest
(including any Additional Interest) on such Securities shall remain subordinated
to the extent provided in Article XIII of the Indenture. Upon payment (i) of the
amount of principal so declared due and payable and (ii) of interest on any
overdue principal and overdue interest (in each case to the extent that the
payment of such interest shall be legally enforceable), all of the Company's
obligations in respect of the payment of the principal of and interest, if any,
on this Security shall terminate.]

         [If the Security is a Discount Security--As provided in and subject to
the provisions of the Indenture, if an Event of Default with respect to the
Securities of this series at the time Outstanding occurs and is continuing, then
and in every such case the Trustee or the Holders of not less than such portion
of the principal amount as may be specified in the terms of this series may
declare an amount of principal of the Securities of this series to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders); provided that, in the case of the Securities of this
series issued to a Chittenden Capital Trust, if upon an Event of Default, the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of this series fails to declare the principal of all the
Securities of this series to be immediately due and payable, the holders of at
least 25% in aggregate Liquidation Amount of the Capital Securities then
outstanding shall have such right by a notice in writing to the Company and the
Trustee. Such amount shall be equal to [insert formula for determining the
amount]. Upon any such declaration, such amount of the principal of and the
accrued interest (including any Additional Interest) on all the Securities of
this series shall become immediately due and payable; provided that the payment
of principal and interest (including any Additional Interest) on such Securities
shall remain subordinated to the extent provided in Article XIII of the
Indenture. Upon payment (i) of the amount of principal so declared due and
payable and (ii) of interest on any overdue principal and overdue interest (in
each case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and interest, if any, on this Security shall terminate.]

         No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay

                                       19

<PAGE>

the principal of (and premium, if any) and interest on this Security at the
times, place and rate, and in the coin or currency, herein prescribed.

         As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Securities
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company maintained under Section 10.2 of the Indenture
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Securities Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees. No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

         Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

         [If applicable, insert - The Securities of this series are issuable
only in registered form without coupons in denominations of minimum
denominations of $100,000 and any integral multiples of $1,000 in excess
thereof.] As provided in the Indenture and subject to certain limitations
therein set forth, Securities of this series are exchangeable for a like
aggregate principal amount of Securities of such series of a different
authorized denomination, as requested by the Holder surrendering the same.

         The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Security agree that for United States federal, state and local
tax purposes it is intended that this Security constitute indebtedness.

         THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES THEREOF.

         Section 2.4.   Additional Provisions Required in Global Security. Any
         ------------   --------------------------------------------------
Global Security issued hereunder shall, in addition to the provisions contained
in Sections 2.2 and 2.3, bear a legend in substantially the following form:

         "THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE

                                       20

<PAGE>

DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY."

          Section 2.5. Form of Trustee's Certificate of Authentication.
          ------------ -----------------------------------------------

          This is one of the Securities referred to in the within mentioned
Indenture.

Dated:

                                              THE BANK OF NEW YORK, as Trustee

                                              By:______________________________
                                                       Authorized Officer

                          ARTICLE III - THE SECURITIES

          Section 3.1. Title and Terms. The aggregate principal amount of
          ------------ ---------------
Securities which may be authenticated and delivered under this Indenture is
unlimited. The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth in an Officer's
Certificate (such Officer's Certificate shall have the effect of a supplemental
indenture for all purposes hereunder), or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of a series:

               (a)  the title of the securities of such series, which shall
distinguish the Securities of the series from all other Securities;

               (b)  the limit, if any, upon the aggregate principal amount of
the Securities of such series which may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
of the series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.6 and except for any
Securities which, pursuant to Section 3.3, are deemed never to have been
authenticated and delivered hereunder); provided, however, that the authorized
aggregate principal amount of such series may be increased above such amount by
a Board Resolution to such effect;

               (c)  the Stated Maturity or Maturities on which the principal of
the Securities of such series is payable or the method of determination thereof;

               (d)  the rate or rates, if any, at which the Securities of such
series shall bear interest, if any, the rate or rates and extent to which
Additional Interest, if any, shall be payable in respect of any Securities of
such series, the Interest Payment Dates on which such interest shall be payable,
the right, pursuant to Section 3.11 or as otherwise set forth therein, of the
Company to defer or extend an Interest Payment Date, and the Regular Record Date
for the interest payable on any Interest Payment Date or the method by which any
of the foregoing shall be determined;

                                       21

<PAGE>

               (e)  the place or places where the principal of (and premium, if
any) and interest on the Securities of such series shall be payable, the place
or places where the Securities of such series may be presented for registration
of transfer or exchange, and the place or places where notices and demands to or
upon the Company in respect of the Securities of such series may be made;

               (f)  the period or periods within or the date or dates on which,
if any, the price or prices at which and the terms and conditions upon which the
Securities of such series may be redeemed, in whole or in part, at the option of
the Company;

               (g)  the obligation or the right, if any, of the Company to
prepay, repay or purchase the Securities of such series pursuant to any sinking
fund, amortization or analogous provisions, or at the option of a Holder
thereof, and the period or periods within which, the price or prices at which,
the currency or currencies (including currency unit or units) in which and the
other terms and conditions upon which Securities of the series shall be
redeemed, repaid or purchased, in whole or in part, pursuant to such obligation;

               (h)  the denominations in which any Securities of such series
shall be issuable, if other than denominations of $100,000 and any integral
multiples of $1,000 in excess thereof;

               (i)  if other than Dollars, the currency or currencies (including
currency unit or units) in which the principal of (and premium, if any) and
interest, if any, on the Securities of the series shall be payable, or in which
the Securities of the series shall be denominated;

               (j)  the additions, modifications or deletions, if any, in the
Events of Default or covenants of the Company set forth herein with respect to
the Securities of such series;

               (k)  if other than the principal amount thereof, the portion of
the principal amount of Securities of such series that shall be payable upon
declaration of acceleration of the Maturity thereof;

               (l)  the additions or changes, if any, to this Indenture with
respect to the Securities of such series as shall be necessary to permit or
facilitate the issuance of the Securities of such series in bearer form,
registrable or not registrable as to principal, and with or without interest
coupons;

               (m)  any index or indices used to determine the amount of
payments of principal of and premium, if any, on the Securities of such series
or the manner in which such amounts will be determined;

               (n)  whether the Securities of the series, or any portion
thereof, shall initially be issuable in the form of a temporary Global Security
representing all or such portion of the Securities of such series and provisions
for the exchange of such temporary Global Security for definitive Securities of
such series;

               (o)  if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global Securities and,
in such case, the respective Depositaries for such Global Securities, the form
of any legend or legends which shall be borne by any such

                                       22

<PAGE>

Global Security in addition to or in lieu of that set forth in Section 2.4 and
any circumstances in addition to or in lieu of those set forth in Section 3.5 in
which any such Global Security may be exchanged in whole or in part for
Securities registered, and any transfer of such Global Security in whole or in
part may be registered, in the name or names of Persons other than the
Depositary for such Global Security or a nominee thereof;

               (p)  the appointment of any Paying Agent or Agents for the
Securities of such series;

               (q)  the terms of any right to convert or exchange Securities of
such series into any other securities or property of the Company, and the
additions or changes, if any, to this Indenture with respect to the Securities
of such series to permit or facilitate such conversion or exchange;

               (r)  the form or forms of the Guarantee Agreement, Trust
Agreement and Amended and Restated Trust Agreement, if different from the forms
attached hereto as Annexes A, B and C, respectively;

               (s)  the relative degree, if any, to which the Securities of the
series shall be senior to or be subordinated to other series of Securities in
right of payment, whether such other series of Securities are Outstanding or
not; and

               (t)  any other terms of the Securities of such series (which
terms shall not be inconsistent with the provisions of this Indenture).

          All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided herein or in
or pursuant to such Board Resolution and set forth in such Officer's Certificate
or in any such indenture supplemental hereto.

          If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officer's
Certificate setting forth the terms of the series.

          The Securities shall be subordinated in right of payment to Senior
Debt as provided in Article XIII.

          Section 3.2. Denominations. The Securities of each series shall be in
          ------------ -------------
registered form without coupons and shall be issuable in minimum denominations
of $100,000 and integral multiples of $1,000 in excess thereof, unless otherwise
specified as contemplated by Section 3.1.

          Section 3.3. Execution, Authentication, Delivery and Dating. The
          ------------ ----------------------------------------------
Securities shall be executed on behalf of the Company by its President or one of
its Vice Presidents and attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Securities may be
manual or facsimile.

          Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such

                                       23

<PAGE>

individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Securities or did not hold such offices at
the date of such Securities. At any time and from time to time after the
execution and delivery of this Indenture, the Company may deliver Securities of
any series executed by the Company to the Trustee for authentication, together
with a Company Order for the authentication and delivery of such Securities, and
the Trustee in accordance with the Company Order(s) shall authenticate and
deliver such Securities. If the form or terms of the Securities of the series
have been established by or pursuant to one or more Board Resolutions as
permitted by Sections 2.1 and 3.1, in authenticating such Securities, and
accepting the additional responsibilities under this Indenture in relation to
such Securities, the Trustee shall be entitled to receive, and (subject to
Section 6.1) shall be fully protected in relying upon, an Opinion of Counsel
stating,

                         (1)  if the form of such Securities has been
          established by or pursuant to a Board Resolution as permitted by
          Section 2.1, that such form has been established in conformity with
          the provisions of this Indenture;

                         (2)  if the terms of such Securities have been
          established by or pursuant to a Board Resolution as permitted by
          Section 3.1, that such terms have been established in conformity with
          the provisions of this Indenture; and

                         (3)  that such Securities, when authenticated and
          delivered by the Trustee and issued by the Company in the manner and
          subject to any conditions specified in such Opinion of Counsel, will
          constitute valid and legally binding obligations of the Company
          enforceable in accordance with their terms, subject to bankruptcy,
          insolvency, fraudulent transfer, reorganization, moratorium and
          similar laws of general applicability relating to or affecting
          creditors' rights and to general equity principles.

          If such form or terms have been so established, the Trustee shall not
be required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.

          Notwithstanding the provisions of Section 3.1 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officer's Certificate otherwise
required pursuant to Section 3.1 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.

          Each Security shall be dated the date of its authentication.

          No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
officers, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder. Notwithstanding the foregoing, if any Security shall have
been authenticated and delivered

                                       24

<PAGE>

hereunder but never issued and sold by the Company, and the Company shall
deliver such Security to the Trustee for cancellation as provided in Section
3.9, for all purposes of this Indenture such Security shall be deemed never to
have been authenticated and delivered hereunder and shall never be entitled to
the benefits of this Indenture.

          Section 3.4. Temporary Securities. Pending the preparation of
          ------------ --------------------
definitive Securities of any series, the Company may execute, and upon Company
Order the Trustee shall authenticate and deliver, temporary Securities which are
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
denomination, substantially of the tenor of the definitive Securities of such
series in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Securities may determine, as evidenced by their execution of such Securities.

          If temporary Securities of any series are issued, the Company will
cause definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities, the temporary Securities
shall be exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for that purpose
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor one or more definitive Securities
of the same series of authorized denominations having the same Original Issue
Date and Stated Maturity and having the same terms as such temporary Securities.
Until so exchanged, the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of such series.

          Section 3.5. Registration, Transfer and Exchange. The Company shall
          ------------ -----------------------------------
cause to be kept at the Corporate Trust Office of the Trustee a register in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Securities and of transfers of Securities.
Such register is herein sometimes referred to as the "Securities Register." The
Trustee is hereby appointed "Securities Registrar" for the purpose of
registering Securities and transfers of Securities as herein provided.

          Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated for that purpose the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of the same
series of any authorized denominations, of a like aggregate principal amount, of
the same Original Issue Date and Stated Maturity and having the same terms.

          At the option of the Holder, Securities may be exchanged for other
Securities of the same series of any authorized denominations, of a like
aggregate principal amount, of the same Original Issue Date and Stated Maturity
and having the same terms, upon surrender of the Securities to be exchanged at
such office or agency. Whenever any securities are so surrendered for exchange,
the Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.

                                       25

<PAGE>

          All Securities issued upon any transfer or exchange of Securities
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange.

          Every Security presented or surrendered for transfer or exchange shall
(if so required by the Company or the Securities Registrar) be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to the
Company and the Securities Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing.

          No service charge shall be made to a Holder for any transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Securities.

          The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:

                    (1)  Each Global Security authenticated under this Indenture
          shall be registered in the name of the Depositary designated for such
          Global Security or a nominee thereof and delivered to such Depositary
          or a nominee thereof or custodian therefor, and each such Global
          Security shall constitute a single Security for all purposes of this
          Indenture.

                    (2)  Notwithstanding any other provision in this Indenture,
          no Global Security may be exchanged in whole or in part for Securities
          registered, and no transfer of a Global Security in whole or in part
          may be registered, in the name of any Person other than the Depositary
          for such Global Security or a nominee thereof unless (A) such
          Depositary (i) has notified the Company that it is unwilling or unable
          to continue as Depositary for such Global Security or (ii) has ceased
          to be a clearing agency registered under the Exchange Act at a time
          when the Depositary is required to be so registered to act as
          depositary, in each case unless the Company has approved a successor
          Depositary within 90 days, (B) there shall have occurred and be
          continuing an Event of Default with respect to such Global Security,
          (C) the Company in its sole discretion determines that such Global
          Security will be so exchangeable or transferable or (D) there shall
          exist such circumstances, if any, in addition to or in lieu of the
          foregoing as have been specified for this purpose as contemplated by
          Section 3.1.

                    (3)  Subject to Clause (2) above, any exchange of a Global
          Security for other Securities may be made in whole or in part, and all
          Securities issued in exchange for a Global Security or any portion
          thereof shall be registered in such names as the Depositary for such
          Global Security shall direct.

                    (4)  Every Security authenticated and delivered upon
          registration of transfer of, or in exchange for or in lieu of, a
          Global Security or any portion thereof, whether pursuant to this
          Section, Section 3.4, 3.6, 9.6 or 11.6 or otherwise, shall be
          authenticated and delivered in the form of, and shall be, a Global
          Security, unless such

                                       26

<PAGE>

          Security is registered in the name of a Person other than the
          Depositary for such Global Security or a nominee thereof.

          Neither the Company nor the Trustee shall be required, pursuant to the
provisions of this Section, (a) to issue, transfer or exchange any Security of
any series during a period beginning at the opening of business 15 days before
the day of selection for redemption of Securities pursuant to Article XI and
ending at the close of business on the day of mailing of notice of redemption or
(b) to transfer or exchange any Security so selected for redemption in whole or
in part, except, in the case of any Security to be redeemed in part, any portion
thereof not to be redeemed.

          Section 3.6. Mutilated, Destroyed, Lost and Stolen Securities. If any
          ------------ ------------------------------------------------
mutilated Security is surrendered to the Trustee together with such security or
indemnity as may be required by the Company or the Trustee to save each of them
harmless, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Security of the same issue and series of like
tenor and principal amount, having the same Original Issue Date and Stated
Maturity, and bearing a number not contemporaneously outstanding.

          If there shall be delivered to the Company and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security, and (ii) such security or indemnity as may be required by them to save
each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute and upon its request the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same issue and series of like tenor and principal amount, having the same
Original Issue Date and Stated Maturity as such destroyed, lost or stolen
Security, and bearing a number not contemporaneously outstanding.

          In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.

          Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.

          Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.

          The provisions of this Section 3.6 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.

          Section 3.7. Payment of Interest; Interest Rights Preserved. Interest
          ------------ ----------------------------------------------
on any Security of any series which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date, shall be paid to the Person in whose
name that Security (or one or more

                                       27

<PAGE>

Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest in respect of Securities of such series, except
that, unless otherwise provided in the Securities of such series, interest
payable on the Stated Maturity of the principal of a Security shall be paid to
the Person to whom principal is paid. The initial payment of interest on any
Security of any series which is issued between a Regular Record Date and the
related Interest Payment Date shall be payable as provided in such Security or
in the Board Resolution pursuant to Section 3.1 with respect to the related
series of Securities.

          Any interest on any Security which is payable, but is not timely paid
or duly provided for, on any Interest Payment Date for Securities of such series
(herein called "Defaulted Interest"), shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date by virtue of having been
such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or (2) below:

                    (1)  The Company may elect to make payment of any Defaulted
          Interest to the Persons in whose names the Securities of such series
          in respect of which interest is in default (or their respective
          Predecessor Securities) are registered at the close of business on a
          Special Record Date for the payment of such Defaulted Interest, which
          shall be fixed in the following manner. The Company shall notify the
          Trustee in writing of the amount of Defaulted Interest proposed to be
          paid on each Security and the date of the proposed payment, and at the
          same time the Company shall deposit with the Trustee an amount of
          money equal to the aggregate amount proposed to be paid in respect of
          such Defaulted Interest or shall make arrangements satisfactory to the
          Trustee for such deposit prior to the date of the proposed payment,
          such money when deposited to be held in trust for the benefit of the
          Persons entitled to such Defaulted Interest as in this Clause
          provided. Thereupon, the Trustee shall fix a Special Record Date for
          the payment of such Defaulted Interest which shall be not more than 15
          days and not less than 10 days prior to the date of the proposed
          payment and not less than 10 days after the receipt by the Trustee of
          the notice of the proposed payment. The Trustee shall promptly notify
          the Company of such Special Record Date and, in the name and at the
          expense of the Company, shall cause notice of the proposed payment of
          such Defaulted Interest and the Special Record Date therefor to be
          mailed, first class, postage prepaid, to each Holder of a Security of
          such series at the address of such Holder as it appears in the
          Securities Register not less than 10 days prior to such Special Record
          Date. The Trustee may, in its discretion, in the name and at the
          expense of the Company, cause a similar notice to be published at
          least once in a newspaper, customarily published in the English
          language on each Business Day and of general circulation in Borough of
          Manhattan, The City of New York, but such publication shall not be a
          condition precedent to the establishment of such Special Record Date.
          Notice of the proposed payment of such Defaulted Interest and the
          Special Record Date therefor having been mailed as aforesaid, such
          Defaulted Interest shall be paid to the Persons in whose names the
          Securities of such series (or their respective Predecessor Securities)
          are registered on such Special Record Date and shall no longer be
          payable pursuant to the following Clause (2).

                    (2)  The Company may make payment of any Defaulted Interest
          in any other lawful manner not inconsistent with the requirements of
          any securities exchange on which the Securities of the series in
          respect of which interest is in default may be listed

                                       28

<PAGE>

          and, upon such notice as may be required by such exchange (or by the
          Trustee if the Securities are not listed), if, after notice given by
          the Company to the Trustee of the proposed payment pursuant to this
          Clause, such payment shall be deemed practicable by the Trustee.

          Subject to the foregoing provisions of this Section 3.7, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.

          Section 3.8. Persons Deemed Owners. The Company, the Trustee and any
          ------------ ---------------------
agent of the Company or the Trustee may treat the Person in whose name any
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of and (subject to Section 3.7) any interest on
such Security and for all other purposes whatsoever, whether or not such
Security be overdue, and neither the Company, the Trustee nor any agent of the
Company or the Trustee shall be affected by notice to the contrary.

          Section 3.9. Cancellation. All Securities surrendered for payment,
          ------------ ------------
redemption, transfer or exchange shall, if surrendered to any Person other than
the Trustee, be delivered to the Trustee, and any such Securities and Securities
surrendered directly to the Trustee for any such purpose shall be promptly
canceled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all Securities
so delivered shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Securities shall be disposed of by the Trustee in its customary manner and the
Trustee shall deliver to the Company a certificate of such destruction.

          Section 3.10. Computation of Interest. Except as otherwise specified
          ------------- -----------------------
as contemplated by Section 3.1 for Securities of any series, interest on the
Securities of each series for any period shall be computed on the basis of a
360-day year of twelve 30-day months and interest on the Securities of each
series for any partial period shall be computed on the basis of the number of
days elapsed in a 360-day year of twelve 30-day months.

          Section 3.11. Deferrals of Interest Payment Dates. If specified as
          ------------- -----------------------------------
contemplated by Section 2.1 or Section 3.1 with respect to the Securities of a
particular series, so long as no Event of Default has occurred and is
continuing, the Company shall have the right, at any time during the term of
such series, from time to time to defer the payment of interest on such
Securities for such period or periods as may be specified as contemplated by
Section 3.1 (each, an "Extension Period") during which Extension Periods the
Company shall have the right to make partial payments of interest on any
Interest Payment Date. No Extension Period shall end on a date other than an
Interest Payment Date. At the end of any such Extension Period the Company shall
pay all interest then accrued and unpaid on the Securities (together with
Additional Interest thereon, if any, at the rate specified for the Securities of
such series to the extent permitted by applicable law); provided, however, that
no Extension Period shall extend beyond the Stated Maturity of the principal of
the Securities of such series; and provided further that during any such
Extension Period, the Company shall not, and to the extent applicable, shall not
permit any Subsidiary to, (i) declare or pay any dividends or distributions on,
or redeem, purchase, acquire

                                       29

<PAGE>

or make a liquidation payment with respect to, any of the Company's capital
stock (which includes common and preferred stock), (ii) make any payment of
principal of or interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Company (including Securities other than the
Securities of such series) that ranks pari passu with or junior in interest to
the Securities of such series or (iii) make any guarantee payments with respect
to any guarantee by the Company of the debt securities of any Subsidiary of the
Company (including Guarantee Agreements other than the Chittenden Guarantee
related to the Capital Securities issued by the Chittenden Capital Trust holding
Securities of such series) if such guarantee ranks pari passu with or junior in
interest to the Securities of such series (other than (a) dividends or
distributions in Common Stock of the Company, (b) any declaration of a dividend
in connection with the implementation of a rights plan, or the issuance of stock
under any such plan in the future or the redemption or repurchase of any such
rights pursuant thereto, (c) as a result of an exchange or conversion of one
class or series of the Company's capital stock for another class or series of
the Company's Capital Stock, (d) payments under the Chittenden Guarantee related
to the Capital Securities issued by the Chittenden Capital Trust holding
Securities of such series, and (e) purchases, repurchases, redemptions or other
acquisitions of shares of Common Stock in connection with any of the Company's
benefit plans for its directors, officers or employees). Prior to the
termination of any such Extension Period, the Company may further extend such
Extension Period; provided that such extension does not cause such Extension
Period to extend beyond the Stated Maturity of the principal of such Securities.
Upon termination of any Extension Period and upon the payment of all accrued and
unpaid interest and any Additional Interest then due on any Interest Payment
Date, the Company may elect to begin a new Extension Period, subject to the
above requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Company shall give the Trustee and the
Property Trustee and the Administrative Trustees of the Chittenden Capital Trust
holding Securities of such series notice of its election of any Extension Period
(or an extension thereof) at least five Business Days prior to the earlier of
(i) the next succeeding date on which Distributions on the Capital Securities of
such Chittenden Capital Trust would be payable except for the election to begin
or extend such Extension Period or (ii) the date the Administrative Trustees of
such Chittenden Capital Trust are required to give notice to any securities
exchange or automated quotation system or to holders of such Capital Securities
of the record date or the date such Distributions are payable, but in any event
not less than five Business Days prior to such record date. The Trustee shall
promptly give notice of the Company's election to begin any such Extension
Period to the Holders of the Outstanding Securities of such series.

          Section 3.12. Right of Set-Off. Notwithstanding anything to the
          ------------- ----------------
contrary in this Indenture, the Company shall have the right to set-off any
payment it is otherwise required to make hereunder in respect of any Capital
Security to the extent the Company has heretofore made, or is currently on the
date of such payment making, a payment under the Chittenden Guarantee relating
to such Capital Security or in connection with a Direct Action pursuant to
Section 5.8 hereof.

          Section 3.13. Agreed Tax Treatment. Each Security issued hereunder
          ------------- --------------------
shall provide that the Company and, by its acceptance of a Security or a
beneficial interest therein, the Holder of, and any Person that acquires a
beneficial interest in, such Security agree that for United States federal,
state and local tax purposes it is intended that such Security constitute
indebtedness.

                                       30

<PAGE>

         Section 3.14. Shortening or Extension of Stated Maturity. If specified
         ------------  ------------------------------------------
as contemplated by Section 2.1 or Section 3.1 with respect to the Securities of
a particular series, the Company shall have the right to (i) shorten the Stated
Maturity of the principal of the Securities of such series at any time to any
date not earlier than the first date on which the Company has the right to
redeem the Securities of such series, and (ii) extend the Stated Maturity of the
principal of the Securities of such series at any time at its election for one
or more periods, but in no event to a date later than the 49th anniversary of
the first Interest Payment Date following the Original Issue Date of the
Securities of such series; provided that, if the Company elects to exercise its
right to extend the Stated Maturity of the principal of the Securities of such
series pursuant to clause (ii) above, at the time such election is made and at
the time of extension (A) the Company is not in bankruptcy, otherwise insolvent
or in liquidation, (B) the Company is not in default in the payment of any
interest or principal on such Securities, (C) in the case of any series of
Securities issued to a Chittenden Capital Trust, such Chittenden Capital Trust
is not in arrears on payments of Distributions on the Capital Securities issued
by such Chittenden Capital Trust and no deferred Distributions are accumulated
and (D) such Securities are rated not less than [____ by S&P or ____ by Moody's]
or the equivalent by any other nationally recognized statistical rating
organization. In the event the Company elects to shorten or extend the Stated
Maturity of the Securities of any series, it shall give notice to the Trustee,
and the Trustee shall give notice of such shortening or extension to the Holders
thereof no less than 30 and no more than 60 days prior to the effectiveness
thereof.

         Section 3.15. CUSIP Numbers. The Company in issuing the Securities may
         ------------  -------------
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company shall
promptly notify the Trustee of any change in the CUSIP numbers.

                    ARTICLE IV - SATISFACTION AND DISCHARGE

         Section 4.1.  Satisfaction and Discharge of Indenture. This Indenture
         -----------   ---------------------------------------
shall, upon Company Request, cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for and as otherwise provided in this Section 4.1) and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture, when

                       (1)   either:

                            (A) all Securities theretofore authenticated and
                       delivered (other than (i) Securities which have been
                       destroyed, lost or stolen and which have been replaced or
                       paid as provided in Section 3.6 and (ii) Securities for
                       whose payment money has theretofore been deposited in
                       trust or segregated and held in trust by the Company and
                       thereafter repaid to the Company or discharged from such
                       trust, as provided in Section 10.3) have been delivered
                       to the Trustee for cancellation; or

                                       31

<PAGE>

                            (B) all such Securities not theretofore delivered to
                       the Trustee for cancellation

                                (i)     have become due and payable,

                                (ii)    will become due and payable at their
                            Stated Maturity within one year of the date of
                            deposit, or

                                (iii)   are to be called for redemption within
                            one year under arrangements satisfactory to the
                            Trustee for the giving of notice of redemption by
                            the Trustee in the name, and at the expense, of the
                            Company,

         and the Company, in the case of Clause (B) (i), (ii) or (iii) above,
         has deposited or caused to be deposited with the Trustee as trust funds
         in trust for such purpose an amount in the currency or currencies in
         which the Securities of such series are payable sufficient to pay and
         discharge the entire indebtedness on such Securities not theretofore
         delivered to the Trustee for cancellation, for principal (and premium,
         if any) and interest (including any Additional Interest) to the date of
         such deposit (in the case of Securities which have become due and
         payable) or to the Stated Maturity or Redemption Date, as the case may
         be;

                       (2)  the Company has paid or caused to be paid all other
         sums payable hereunder by the Company; and

                       (3)  the Company has delivered to the Trustee an
         Officer's Certificate and an Opinion of Counsel each stating that all
         conditions precedent herein provided for relating to the satisfaction
         and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, the obligations of
the Trustee to any Authenticating Agent under Section 6.14 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 4.2 and the last
paragraph of Section 10.3 shall survive such satisfaction and discharge.

         Section 4.2.  Application of Trust Money. Subject to the provisions of
         -----------   --------------------------
the last paragraph of Section 10.3, all money deposited with the Trustee
pursuant to Section 4.1 shall be held in trust and applied by the Trustee, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal (and premium, if any) and interest for the
payment of which such money or obligations have been deposited with or received
by the Trustee.

                              ARTICLE V - REMEDIES

         Section 5.1.  Events of Default. "Event of Default," wherever used
         -----------   -----------------
herein with respect to the Securities of any series, means any one of the
following events (whatever the reason for

                                       32

<PAGE>

such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):

                       (1)  default in the payment of any interest upon any
         Security of that series, including any Additional Interest in respect
         thereof, when it becomes due and payable, and continuance of such
         default for a period of 30 days (subject to the deferral of any due
         date in the case of an Extension Period); provided, however, that a
         valid extension of an interest payment period by the Company in
         accordance with the terms of any particular series of Securities
         established as contemplated by this Indenture shall not constitute a
         default in the payment of interest for this purpose;

                       (2)  default in the payment of the principal of (or
         premium, if any, on) any Security of that series at its Maturity;
         provided, however, that a valid extension of the maturity of such
         Securities in accordance with the terms of any particular series of
         Securities established as contemplated by this Indenture shall not
         constitute a default in the payment of principal or premium, if any,
         for this purpose;

                       (3) default in the performance, or breach, in any
         material respect, of any covenant or warranty of the Company in this
         Indenture (other than a covenant or warranty default in the performance
         of which or the breach of which is elsewhere in this Section 5.1
         specifically dealt with and other than those set forth exclusively in
         the terms of any particular series of Securities established as
         contemplated by this Indenture), and continuance of such default or
         breach for a period of 60 days after there has been given, by
         registered or certified mail, to the Company by the Trustee or to the
         Company and the Trustee by the Holders of at least 25% in principal
         amount of the Outstanding Securities of that series a written notice
         specifying such default or breach and requiring it to be remedied;

                       (4)  the entry of a decree or order by a court having
         jurisdiction in the premises adjudging the Company a bankrupt or
         insolvent, or approving as properly filed a petition seeking
         reorganization, arrangement, adjustment or composition of or in respect
         of the Company under any applicable federal or state bankruptcy,
         insolvency, reorganization or other similar law, or appointing a
         receiver, liquidator, assignee, trustee, sequestrator (or other similar
         official) of the Company or of any substantial part of its property or
         ordering the winding up or liquidation of its affairs, and the
         continuance of any such decree or order unstayed and in effect for a
         period of 60 consecutive days;

                       (5)  the institution by the Company of proceedings to be
         adjudicated a bankrupt or insolvent, or the consent by it to the
         institution of bankruptcy or insolvency proceedings against it, or the
         filing by it of a petition or answer or consent seeking reorganization
         or relief under any applicable federal or state bankruptcy, insolvency,
         reorganization or other similar law, or the consent by it to the filing
         of any such petition or to the appointment of a receiver, liquidator,
         assignee, trustee, sequestrator (or other similar official) of the
         Company or of any substantial part of its property, or the making by it
         of an assignment for the benefit of creditors, or the admission by it
         in writing of its inability to pay its debts generally as they become
         due and its willingness to be

                                       33

<PAGE>

         adjudicated a bankrupt, or the taking of corporate action by the
         Company in furtherance of any such action; or

                       (6)  any other Event of Default provided with respect to
         Securities of that series.

         Section 5.2. Acceleration of Maturity; Rescission and Annulment. If an
         -----------  --------------------------------------------------
Event of Default (other than an Event of Default specified in Section 5.1(4) or
5.1(5)) with respect to Securities of any series at the time Outstanding occurs
and is continuing, then and in every such case the Trustee or the Holders of not
less than 25% in principal amount of the Outstanding Securities of that series
may declare the principal amount (or, if the Securities of that series are
Discount Securities, such portion of the principal amount as may be specified in
the terms of that series) of all the Securities of that series to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders); provided that, in the case of the Securities of a series
issued to a Chittenden Capital Trust, if, upon an Event of Default, the Trustee
or the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series fail to declare the principal of all the Securities of
that series to be immediately due and payable, the holders of at least 25% in
aggregate liquidation amount of the corresponding series of Capital Securities
then outstanding shall have such right by a notice in writing to the Company and
the Trustee; and upon any such declaration such principal amount (or specified
portion thereof) of and the accrued interest (including any Additional Interest)
on all the Securities of such series shall become immediately due and payable.
Payment of principal and interest (including any Additional Interest) on such
Securities shall remain subordinated to the extent provided in Article XIII
notwithstanding that such amount shall become immediately due and payable as
herein provided. If an Event of Default specified in Section 5.1(4) or 5.1(5)
with respect to Securities of any series at the time Outstanding occurs, the
principal amount of all the Securities of that series (or, if the Securities of
that series are Discount Securities, such portion of the principal amount of
such Securities as may be specified by the terms of that series) shall
automatically, and without any declaration or other action on the part of the
Trustee or any Holder, become immediately due and payable.

         At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if:

                       (1)  the Company has paid or deposited with the Trustee a
         sum sufficient to pay:

                                    (A) all overdue installments of interest
                            (including any Additional Interest) on all
                            Securities of that series,

                                    (B) the principal of (and premium, if any,
                            on) any Securities of that series which have become
                            due otherwise than by such declaration of
                            acceleration and interest thereon at the rate borne
                            by the Securities, and

                                       34

<PAGE>
                            (C) all sums paid or advanced by the Trustee
                       hereunder and the reasonable compensation, expenses,
                       disbursements and advances of the Trustee, its agents and
                       counsel; and

                       (2)  all Events of Default with respect to Securities of
         that series, other than the non-payment of the principal of Securities
         of that series which has become due solely by such acceleration, have
         been cured or waived as provided in Section 5.13.

         In the case of Securities of a series issued to a Chittenden Capital
Trust, the holders of a majority in aggregate Liquidation Amount (as defined in
the Trust Agreement under which such Chittenden Capital Trust is formed) of the
related series of Capital Securities issued by such Chittenden Capital Trust
shall also have the right to rescind and annul such declaration and its
consequences by written notice to the Company and the Trustee subject to the
satisfaction of the conditions set forth in Clauses (1) and (2) above of this
Section 5.2.

         No such rescission shall affect any subsequent default or impair any
right consequent thereon.

         Section 5.3.  Collection of Indebtedness and Suits for Enforcement by
         ------------  -------------------------------------------------------
Trustee.  The Company covenants that if:
-------

                       (1)  default is made in the payment of any installment of
         interest (including any Additional Interest) on any Security when such
         interest becomes due and payable and such default continues for a
         period of 30 days, or

                       (2)  default is made in the payment of the principal of
         (and premium, if any, on) any Security at the Maturity thereof,

the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Securities, the whole amount then due and payable
on such Securities for principal, including any sinking fund payment or
analogous obligations (and premium, if any) and interest (including any
Additional Interest); and, in addition thereto, all amounts owing the Trustee
under Section 6.7.

         If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.

         If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.

                                       35

<PAGE>

     Section 5.4. Trustee May File Proofs of Claim. In case of the pendency of
     ------------ ---------------------------------
any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors,

          (a)  the Trustee (irrespective of whether the principal of the
Securities of any series shall then be due and payable as therein expressed or
by declaration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Company for the payment of overdue principal (and
premium, if any) or interest (including any Additional Interest)) shall be
entitled and empowered, by intervention in such proceeding or otherwise,

               (i)  to file and prove a claim for the whole amount of principal
          (and premium, if any) and interest (including any Additional Interest)
          owing and unpaid in respect to the Securities and to file such other
          papers or documents as may be necessary or advisable and to take any
          and all actions as are authorized under the Trust Indenture Act in
          order to have the claims of the Holders and any predecessor to the
          Trustee under Section 6.7 allowed in any such judicial proceedings;
          and

               (ii) in particular, the Trustee shall be authorized to collect
          and receive any moneys or other property payable or deliverable on any
          such claims and to distribute the same in accordance with Section 5.6;
          and

          (b)  any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee for
distribution in accordance with Section 5.6, and in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it and any predecessor Trustee under Section 6.7.

     Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.

     Section 5.5. Trustee May Enforce Claim Without Possession of Securities.
     ------------ ----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities may be
prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of all the amounts owing the Trustee and any predecessor Trustee
under Section 6.7, its agents and counsel, be for the ratable benefit of the
Holders of the Securities in respect of which such judgment has been recovered.

                                       36

<PAGE>

     Section 5.6. Application of Money Collected. Subject to Article XIII, any
     ------------ ------------------------------
money or property collected or to be applied by the Trustee with respect to a
series of Securities pursuant to this Article shall be applied in the following
order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money or property on account of principal (or premium, if
any) or interest (including any Additional Interest), upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:

     FIRST: To the payment of all amounts due the Trustee and any predecessor
Trustee under Section 6.7;

     SECOND: Subject to Article XIII, to the payment of the amounts then due and
unpaid upon such series of Securities for principal (and premium, if any) and
interest (including any Additional Interest), in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such series of
Securities for principal (and premium, if any) and interest (including any
Additional Interest), respectively; and

     THIRD: The balance, if any, to the Person or Persons entitled thereto.

     Section 5.7. Limitation on Suits. No Holder of any Securities of any series
     ------------ -------------------
shall have any right to institute any proceeding, judicial or otherwise, with
respect to this Indenture or for the appointment of a receiver, assignee,
trustee, liquidator, sequestrator (or other similar official) or for any other
remedy hereunder, unless:

                  (1) such Holder has previously given written notice to the
     Trustee of a continuing Event of Default with respect to the Securities of
     that series;

                  (2) the Holders of not less than 25% in principal amount of
     the Outstanding Securities of that series shall have made written request
     to the Trustee to institute proceedings in respect of such Event of Default
     in its own name as Trustee hereunder;

                  (3) such Holder or Holders have offered to the Trustee
     reasonable indemnity satisfactory to it against the costs, expenses and
     liabilities to be incurred in compliance with such request:

                  (4) the Trustee for 60 days after its receipt of such notice,
     request and offer of indemnity has failed to institute any such proceeding;
     and

                  (5) no direction inconsistent with such written request has
     been given to the Trustee during such 60-day period by the Holders of a
     majority in principal amount of the Outstanding Securities of that series;

it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Securities, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all such Holders.

                                       37

<PAGE>

     Section 5.8.  Unconditional Right of Holders to Receive Principal, Premium
     ------------  ------------------------------------------------------------
and Interest; Direct Action by Holders of Capital Securities. Notwithstanding
------------------------------------------------------------
any other provision in this Indenture, the Holder of any Security shall have the
right which is absolute and unconditional to receive payment of the principal of
(and premium, if any) and (subject to Section 3.7) interest (including any
Additional Interest) on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
right shall not be impaired without the consent of such Holder. In the case of
Securities of a series issued to a Chittenden Capital Trust, any holder of the
corresponding series of Capital Securities issued by such Chittenden Capital
Trust shall have the right, upon the occurrence of an Event of Default described
in Section 5.1(1) or 5.1(2), to institute a suit directly against the Company (a
"Direct Action") for enforcement of payment to such holder of principal of
(premium, if any) and (subject to Section 3.7) interest (including any
Additional Interest) on the Securities having a principal amount equal to the
aggregate Liquidation Amount (as defined in the Trust Agreement under which such
Chittenden Capital Trust is formed) of such Capital Securities of the
corresponding series held by such holder.

     Section 5.9.  Restoration of Rights and Remedies. If the Trustee, any
     ------------  ----------------------------------
Holder or any holder of Capital Securities has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee, such Holder or such holder of Capital Securities, then and in every
such case the Company, the Trustee, the Holders and such holder of Capital
Securities shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee, the Holders and the holders of Capital
Securities shall continue as though no such proceeding had been instituted.

     Section 5.10. Rights and Remedies Cumulative. Except as otherwise provided
     ------------- ------------------------------
in the last paragraph of Section 3.6, no right or remedy herein conferred upon
or reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.

     Section 5.11. Delay or Omission Not Waiver. No delay or omission of the
     ------------- ----------------------------
Trustee, any Holder of any Security or any holder of any Capital Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein.

     Every right and remedy given by this Article or by law to the Trustee or to
the Holders and the right and remedy given to the holders of Capital Securities
by Section 5.8 may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee, the Holders or the holders of Capital Securities, as
the case may be.

     Section 5.12. Control by Holders. The Holders of a majority in principal
     ------------- ------------------
amount of the Outstanding Securities of any series shall have the right to
direct the time, method and place

                                       38

<PAGE>

of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series; provided that:

                   (1) such direction shall not be in conflict with any rule of
     law or with this Indenture;

                   (2) the Trustee may take any other action deemed proper by
     the Trustee which is not inconsistent with such direction; and

                   (3) subject to the provisions of Section 6.1, the Trustee
     shall have the right to decline to follow such direction if a Responsible
     Officer or Officers of the Trustee shall, in good faith, determine that the
     proceeding so directed would be unjustly prejudicial to the Holders not
     joining in any such direction or would involve the Trustee in personal
     liability.

     Section 5.13. Waiver of Past Defaults. The Holders of not less than a
     ------------- -----------------------
majority in principal amount of the Outstanding Securities of any series and, in
the case of any Securities of a series issued to a Chittenden Capital Trust, the
holders of a majority in aggregate liquidation amount of the outstanding Capital
Securities of such Chittenden Capital Trust may waive any past default hereunder
and its consequences with respect to such series except a default:

                   (1) in the payment of the principal of (or premium, if any)
     or interest (including any Additional Interest) on any Security of such
     series, or

                   (2) in respect of a covenant or provision hereof which under
     Article IX cannot be modified or amended without the consent of the Holder
     of each Outstanding Security of such series affected.

     Any such waiver shall be deemed to be on behalf of the Holders of all the
Securities of such series or, in the case of a waiver by holders of Capital
Securities issued by such Chittenden Capital Trust, by all holders of Capital
Securities issued by such Chittenden Capital Trust.

     Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.

     Section 5.14. Undertaking for Costs. All parties to this Indenture agree,
     ------------- ---------------------
and each Holder of any Security by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or defenses
made by such party litigant; but the provisions of this Section shall not apply
to any suit instituted by the Trustee, to any suit instituted by any Holder, or
group of Holders, holding in the aggregate more than 10% in principal amount of
the Outstanding Securities of any series, or to any suit instituted by any
Holder for the enforcement of the

                                       39

<PAGE>

payment of the principal of (or premium, if any) or interest (including any
Additional Interest) on any Security on or after the respective Stated
Maturities expressed in such Security.

          Section 5.15. Waiver of Usury, Stay or Extension Laws. The Company
          ------------- ---------------------------------------
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any usury, stay or extension law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

                            ARTICLE VI - THE TRUSTEE

          Section 6.1. Certain Duties and Responsibilities.
          ------------ -----------------------------------

               (a)  Except during the continuance of an Event of Default:

                    (1)  the Trustee undertakes to perform such duties and only
          such duties as are specifically set forth in this Indenture, and no
          implied covenants or obligations shall be read into this Indenture
          against the Trustee; and

                    (2)  in the absence of bad faith on its part, the Trustee
          may conclusively rely, as to the truth of the statements and the
          correctness of the opinions expressed therein, upon certificates or
          opinions furnished to the Trustee and conforming to the requirements
          of this Indenture, but in the case of any such certificates or
          opinions which by any provisions hereof are specifically required to
          be furnished to the Trustee, the Trustee shall be under a duty to
          examine the same to determine whether or not they substantially
          conform to the requirements of this Indenture (but need not confirm or
          investigate the accuracy of any mathematical calculation or other
          facts stated therein).

               (b)  In case an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.

               (c)  No provision of this Indenture shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct except that:

                    (1)  this Subsection shall not be construed to limit the
          effect of Subsection (a) of this Section,

                    (2)  the Trustee shall not be liable for any error of
          judgment made in good faith by a Responsible Officer, unless it shall
          be proved that the Trustee was negligent in ascertaining the pertinent
          facts, and

                                       40

<PAGE>

                    (3) the Trustee shall not be liable with respect to any
          action taken or omitted to be taken by it in good faith in accordance
          with the direction of Holders pursuant to Section 5.12 relating to the
          time, method and place of conducting any proceeding for any remedy
          available to the Trustee, or exercising any trust or power conferred
          upon the Trustee, under this Indenture with respect to the Securities
          of such series.

               (d)  No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.

               (e)  Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section 6.1.

          Section 6.2. Notice of Defaults. Within 90 days after actual knowledge
          ------------ ------------------
by a Responsible Officer of the Trustee of the occurrence of any default
hereunder with respect to the Securities of any series, the Trustee shall
transmit by mail to all Holders of Securities of such series, as their names and
addresses appear in the Securities Register, notice of such default, unless such
default shall have been cured or waived; provided, however, that, except in the
case of a default in the payment of the principal of (or premium, if any) or
interest (including any Additional Interest) on any Security of such series, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of Securities of
such series; and provided further that, in the case of any default of the
character specified in Section 5.1(3), no such notice to Holders of Securities
of such series shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default with respect to Securities of such series.

          Section 6.3. Certain Rights of Trustee. Subject to the provisions of
          ------------ -------------------------
Section 6.1:

               (a)  the Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, Security or other paper or document (whether in its
original or facsimile form) believed by it to be genuine and to have been signed
or presented by the proper party or parties;

               (b)  any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;

               (c)  whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action

                                       41

<PAGE>

hereunder, the Trustee (unless other evidence be herein specifically prescribed)
may, in the absence of bad faith on its part, rely upon an Officer's
Certificate;

               (d)  the Trustee may consult with counsel of its own selection
and the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;

               (e)  the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity satisfactory to it
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;

               (f)  the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
indenture, Security or other paper or document, but the Trustee in its
discretion may make such inquiry or investigation into such facts or matters as
it may see fit, and, if the Trustee shall determine to make such inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney, at the expense of the
Company, and shall incur no liability of any kind by reason of such inquiry or
investigation;

               (g)  the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care by it
hereunder;

               (h)  the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably believed by
it to be authorized or within the discretion or rights or powers conferred upon
it by this Indenture;

               (i)  the Trustee shall not be deemed to have notice of any
default or Event of Default unless a Responsible Officer of the Trustee has
actual knowledge thereof or unless written notice of any such default or Event
of Default is received by the Trustee at the Corporate Trust Office of the
Trustee, and such notice references the Securities and this Indenture;

               (j)  the rights, privileges, protections, immunities and benefits
given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and each agent, custodian and other Person employed
to act hereunder; and

               (k)  the Trustee may request that the Company deliver an
Officer's Certificate setting forth the names of individuals and/or titles of
officers authorized at such time to take specified actions pursuant to the
Indenture, which Officer's Certificate may be signed by any person authorized to
sign an Officer's Certificate, including any person specified as so authorized
in any such certificate previously delivered and not superseded.

                                       42

<PAGE>

          Section 6.4. Not Responsible for Recitals or Issuance of Securities.
          ------------ ------------------------------------------------------
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of the Securities or the proceeds thereof.

          Section 6.5. May Hold Securities. The Trustee, any Authenticating
          ------------ -------------------
Agent, any Paying Agent, any Securities Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Securities and, subject to Sections 6.8 and 6.13, may otherwise deal
with the Company with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Securities Registrar or such other agent.

          Section 6.6. Money Held in Trust. Money held by the Trustee in trust
          ------------ -------------------
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company.

          Section 6.7. Compensation and Reimbursement. The Company agrees:
          ------------ ------------------------------

                    (1)  to pay to the Trustee from time to time compensation
          for all services rendered by it hereunder in such amounts as the
          Company and the Trustee shall agree in writing from time to time
          (which compensation shall not be limited by any provision of law in
          regard to the compensation of a trustee of an express trust);

                    (2)  to reimburse the Trustee upon its request for all
          reasonable expenses, disbursements and advances incurred or made by
          the Trustee in accordance with any provision of this Indenture
          (including the reasonable compensation and the reasonable expenses and
          disbursements of its agents and counsel), except any such expense,
          disbursement or advance as may be attributable to its negligence or
          bad faith; and

                    (3)  to indemnify the Trustee for, and to hold it harmless
          against, any loss, liability, claim, damage or expense (including the
          reasonable compensation and the reasonable expenses and disbursements
          of its agents and counsel) incurred without negligence or bad faith,
          arising out of or in connection with the acceptance or administration
          of this trust or the performance of its duties hereunder, including
          the reasonable costs and expenses of defending itself against any
          claim or liability in connection with the exercise or performance of
          any of its powers or duties hereunder. This indemnification shall
          survive the termination of this Agreement.

          To secure the Company's payment obligations in this Section 6.7, the
Company and the Holders agree that the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee. Such lien
shall survive the satisfaction and discharge of this Indenture.

<PAGE>

          When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Reform Act of 1978 or any successor statute.

          Section 6.8. Disqualification; Conflicting Interests. The Trustee for
          ------------ ---------------------------------------
the Securities of any series issued hereunder shall be subject to the provisions
of Section 310(b) of the Trust Indenture Act. Nothing herein shall prevent the
Trustee from filing with the Commission the application referred to in the
second to last paragraph of said Section 301(b).

          Section 6.9. Corporate Trustee Required; Eligibility. There shall at
          ------------ ---------------------------------------
all times be a Trustee hereunder which shall be:

               (a)  a corporation organized and doing business under the laws of
the United States of America or of any State or Territory or the District of
Columbia, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by federal, state, territorial or District
of Columbia authority, or

               (b)  a corporation or other Person organized and doing business
under the laws of a foreign government that is permitted to act as Trustee
pursuant to a rule, regulation or order of the Commission, authorized under such
laws to exercise corporate trust powers, and subject to supervision or
examination by authority of such foreign government or a political subdivision
thereof substantially equivalent to supervision or examination applicable to
United States institutional trustees,

in either case having a combined capital and surplus of at least $50,000,000,
subject to supervision or examination by federal or state authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purposes of this Section 6.9, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
6.9, it shall resign immediately in the manner and with the effect hereinafter
specified in this Article VI. Neither the Company nor any Person directly or
indirectly controlling, controlled by or under common control with the Company
shall serve as Trustee for the Securities of any series issued hereunder.

          Section 6.10. Resignation and Removal; Appointment of Successor.
          ------------- -------------------------------------------------

               (a)  No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article VI shall become effective until
the acceptance of appointment by the successor Trustee under Section 6.11.

               (b)  The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 60 days after the giving of such notice of
resignation, the resigning Trustee may petition at the expense of the Company
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.

                                       44

<PAGE>

               (c)  The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 60 days after the giving of such
notice of removal, the removed Trustee may petition at the expense of the
Company any court of competent jurisdiction for the appointment of a successor
Trustee with respect to the Securities of such series.

               (d)  If at any time:

                    (1)  the Trustee shall fail to comply with Section 6.8 after
          written request therefor by the Company or by any Holder who has been
          a bona fide Holder of a Security for at least six months,

                    (2)  the Trustee shall cease to be eligible under Section
          6.9 and shall fail to resign after written request therefor by the
          Company or by any such Holder, or

                    (3)  the Trustee shall become incapable of acting or shall
          be adjudged bankrupt or insolvent or a receiver of the Trustee or of
          its property shall be appointed or any public officer shall take
          charge or control of the Trustee or of its property or affairs for the
          purpose of rehabilitation, conservation or liquidation,

then, in any such case, (i) the Company, acting pursuant to the authority of a
Board Resolution, may remove the Trustee with respect to all Securities, or (ii)
subject to Section 5.14, any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the removal
of the Trustee with respect to all Securities and the appointment of a successor
Trustee or Trustees.

               (e)  If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any cause
with respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee with respect to the
Securities of that or those series. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor Trustee
with respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities of such
series delivered to the Company and the retiring Trustee, the successor Trustee
so appointed shall, forthwith upon its acceptance of such appointment, become
the successor Trustee with respect to the Securities of such series and
supersede the successor Trustee appointed by the Company. If no successor
Trustee with respect to the Securities of any series shall have been so
appointed by the Company or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder of a Security
for at least six months may, subject to Section 5.14, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.

               (f)  The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
by mailing written notice of such event by

                                       45

<PAGE>

first-class mail, postage prepaid, to the Holders of Securities of such series
as their names and addresses appear in the Securities Register. Each notice
shall include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.

     Section 6.11. Acceptance of Appointment by Successor.
     ------------- --------------------------------------

          (a)  In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.

          (b)  In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts, and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.

          (c)  Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all rights, powers and trusts referred to
in paragraph (a) or (b) of this Section 6.11, as the case may be.

                                       46

<PAGE>

          (d)  No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article VI.

     Section 6.12. Merger, Conversion, Consolidation or Succession to Business.
     ------------- -----------------------------------------------------------
Any corporation into which the Trustee may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder (provided that such
corporation shall be otherwise qualified and eligible under this Article VI),
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated, and in case any
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Securities or in this Indenture that the certificate of the Trustee shall have.

     Section 6.13. Preferential Collection of Claims Against Company. If and
     ------------- -------------------------------------------------
when the Trustee shall be or become a creditor of the Company (or any other
obligor upon the Securities), the Trustee shall be subject to the provisions of
the Trust Indenture Act regarding the collection of claims against the Company
(or any such other obligor) in the manner provided in Section 311 of the Trust
Indenture Act.

     Section 6.14. Appointment of Authenticating Agent. The Trustee may appoint
     ------------- -----------------------------------
an Authenticating Agent or Agents with respect to one or more series of
Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series issued upon original issue and upon
exchange, registration of transfer or partial redemption thereof or pursuant to
Section 3.6, and Securities so authenticated shall be entitled to the benefits
of this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, or of any State or Territory or
the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by federal or state authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section 6.14 the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.14, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section 6.14.

                                       47

<PAGE>

     Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder (provided that such corporation shall be
otherwise eligible under this Section), without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating Agent.

     An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.14, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment in the manner provided in Section 1.6 to all Holders
of Securities of the series with respect to which such Authenticating Agent will
serve. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provision of this Section 6.14.

     The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section 6.14.

     If an appointment with respect to one or more series is made pursuant to
this Section 6.14, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:

     This is one of the Securities referred to in the within mentioned
Indenture.

Dated:

                                               THE BANK OF NEW YORK, Trustee

                                               By:_____________________________,
                                                  as Authenticating Agent

                                               By:_____________________________
                                                        Authorized Officer

                                       48

<PAGE>

         ARTICLE VII - HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

     Section 7.1. Company to Furnish Trustee Names and Addresses of Holders. The
     ------------ ---------------------------------------------------------
Company will furnish or cause to be furnished to the Trustee:

           (a)    semi-annually, not more than 15 days after _________ and
________ in each year, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of ___________ and
__________ of such year, and

           (b)    at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the time
such list is furnished, excluding from any such list names and addresses
received by the Trustee in its capacity as Securities Registrar.

     Section 7.2. Preservation of Information, Communications to Holders.
     ------------ ------------------------------------------------------

           (a)    The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 7.1 and the names
and addresses of Holders received by the Trustee in its capacity as Securities
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.

           (b)    The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided in the
Trust Indenture Act.

           (c)    Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of the
disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.

     Section 7.3. Reports by Trustee.
     ------------ ------------------

           (a)    The Trustee shall transmit to Holders such reports concerning
the Trustee and its actions under this Indenture as may be required pursuant to
the Trust Indenture Act, at the times and in the manner provided pursuant
thereto.

           (b)    Reports so required to be transmitted at stated intervals of
not more than 12 months shall be transmitted no later than _________ in each
calendar year, commencing with the first ____________ after the first issuance
of Securities under this Indenture.

           (c)    A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Securities are listed and also with the Commission. The Company will
notify the Trustee when any Securities are listed on any stock exchange.

                                       49

<PAGE>

     Section 7.4. Reports by Company. The Company shall file with the Trustee
     ------------ ------------------
and with the Commission, and transmit to Holders, such information,
documents and other reports, and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided in
the Trust Indenture Act; provided that any such information, documents or
reports required to be filed with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act shall be filed with the Trustee within 15 days
after the same is required to be filed with the Commission. Notwithstanding that
the Company may not be required to remain subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act, the Company shall continue to file
with the Commission and provide the Trustee with the annual reports and the
information, documents and other reports which are specified in Sections 13 and
15(d) of the Exchange Act. The Company also shall comply with the other
provisions of Trust Indenture Act Section 314(a). Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officer's
Certificates).

       ARTICLE VIII - CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

     Section 8.1. Company May Consolidate, Etc., Only on Certain Terms. The
     ------------ ----------------------------------------------------
Company shall not consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to any
Person, and no Person shall consolidate with or merge into the Company or
convey, transfer or lease its properties and assets substantially as an entirety
to the Company, unless:

                  (1)  in case the Company shall consolidate with or merge into
     another Person or convey, transfer or lease its properties and assets
     substantially as an entirety to any Person, the corporation formed by such
     consolidation or into which the Company is merged or the Person which
     acquires by conveyance or transfer, or which leases, the properties and
     assets of the Company substantially as an entirety shall be a corporation,
     partnership or trust organized and existing under the laws of the United
     States of America or any State or the District of Columbia, and shall
     expressly assume, by an indenture supplemental hereto, executed and
     delivered to the Trustee, in form satisfactory to the Trustee, the due and
     punctual payment of the principal of (and premium, if any) and interest
     (including any Additional Interest) on all the Securities and the
     performance of every covenant of this Indenture on the part of the Company
     to be performed or observed;

                  (2)  immediately after giving effect to such transaction, no
     Event of Default, and no event which, after notice or lapse of time, or
     both, would becom e an Event of Default, shall have happened and be
     continuing;

                  (3)  in the case of the Securities of a series issued to a
     Chittenden Capital Trust, such consolidation, merger, conveyance, transfer
     or lease is permitted under the related Trust Agreement and related
     Chittenden Guarantee and does not give

                                       50

<PAGE>

          rise to any breach or violation of the related Trust Agreement or
          related Chittenden Guarantee; and

                    (4) the Company has delivered to the Trustee an Officer's
          Certificate and an Opinion of Counsel, each stating that such
          consolidation, merger, conveyance, transfer or lease and any such
          supplemental indenture comply with this Article and that all
          conditions precedent herein provided for relating to such transaction
          have been complied with; and the Trustee, subject to Section 6.1, may
          rely upon such Officer's Certificate and Opinion of Counsel as
          conclusive evidence that such transaction complies with this Section
          8.1.

          Section 8.2. Successor Corporation Substituted. Upon any consolidation
          ------------ ---------------------------------
or merger by the Company with or into any other Person, or any conveyance,
transfer or lease by the Company of its properties and assets substantially as
an entirety to any Person in accordance with Section 8.1, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; and in the event of any such conveyance, transfer or
lease, the Company shall be discharged from all obligations and covenants under
the Indenture and the Securities and may be dissolved and liquidated.

          Such successor Person may cause to be signed, and may issue either in
its own name or in the name of the Company, any or all of the Securities
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee; and, upon the order of such successor Person
instead of the Company and subject to all the terms, conditions and limitations
in this Indenture prescribed, the Trustee shall authenticate and shall deliver
any Securities which previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication pursuant to such
provisions and any Securities which such successor Person thereafter shall cause
to be signed and delivered to the Trustee on its behalf for the purpose pursuant
to such provisions. All the Securities so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Securities theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Securities had been issued at the date of the execution hereof.

          In case of any such consolidation, merger, sale, conveyance or lease,
such changes in phraseology and form may be made in the Securities thereafter to
be issued as may be appropriate.

                      ARTICLE IX - SUPPLEMENTAL INDENTURES

          Section 9.1. Supplemental Indentures without Consent of Holders.
          ------------ --------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee
(provided, however, that the form and terms of Securities of any series may be
established by a Board Resolution, as set forth in the Officer's Certificate

                                       51

<PAGE>

delivered to the Trustee pursuant to Section 3.1, without entering into a
supplemental indenture for all purposes hereunder) for any of the following
purposes:

                    (1)  to evidence the succession of another Person to the
          Company, and the assumption by any such successor of the covenants of
          the Company herein and in the Securities contained;

                    (2)  to convey, transfer, assign, mortgage or pledge any
          property to or with the Trustee or to surrender any right or power
          herein conferred upon the Company;

                    (3)  to establish the form or terms of Securities of any
          series as permitted by Sections 2.1 or 3.1;

                    (4)  to add to the covenants of the Company for the benefit
          of the Holders of all or any series of Securities (and if such
          covenants are to be for the benefit of less than all series of
          Securities, stating that such covenants are expressly being included
          solely for the benefit of such series) or to surrender any right or
          power herein conferred upon the Company;

                    (5)  to add any additional Events of Default for the benefit
          of the Holders of all or any series of Securities (and if such
          additional Events of Default are to be for the benefit of less than
          all series of Securities, stating that such additional Events of
          Default are expressly being included solely for the benefit of such
          series);

                    (6)  to change or eliminate any of the provisions of this
          Indenture; provided that any such change or elimination shall become
          effective only when there is no Security Outstanding of any series
          created prior to the execution of such supplemental indenture which is
          entitled to the benefit of such provision;

                    (7)  to cure any ambiguity, to correct or supplement any
          provision herein which may be defective or inconsistent with any other
          provision herein, or to make any other provisions with respect to
          matters or questions arising under this Indenture; provided that such
          action pursuant to this clause (7) shall not adversely affect the
          interest of the Holders of Securities of any series in any material
          respect or, in the case of the Securities of a series issued to a
          Chittenden Capital Trust and for so long as any of the corresponding
          series of Capital Securities issued by such Chittenden Capital Trust
          shall remain outstanding, the holders of such Capital Securities;

                    (8)  to evidence and provide for the acceptance of
          appointment hereunder by a successor Trustee with respect to the
          Securities of one or more series and to add to or change any of the
          provisions of this Indenture as shall be necessary to provide for or
          facilitate the administration of the trusts hereunder by more than one
          Trustee, pursuant to the requirements of Section 6.11(b); or

                    (9)  to comply with the requirements of the Commission in
          order to effect or maintain the qualification of this Indenture under
          the Trust Indenture Act.

                                       52

<PAGE>

          Section 9.2. Supplemental Indentures with Consent of Holders. With the
          ------------ -----------------------------------------------
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series affected by such supplemental indenture,
by Act of said Holders delivered to the Company and the Trustee, the Company,
when authorized by a Board Resolution, and the Trustee may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby:

                    (1)  except to the extent permitted by Section 3.11 or as
          otherwise specified as contemplated by Section 2.1 or Section 3.1 with
          respect to the deferral of the payment of interest on the Securities
          of any series, change the Stated Maturity of the principal of, or any
          installment of interest (including any Additional Interest) on, any
          Security, or reduce the principal amount thereof or the rate of
          interest thereon or reduce any premium payable upon the redemption
          thereof, or reduce the amount of principal of a Discount Security that
          would be due and payable upon a declaration of acceleration of the
          Maturity thereof pursuant to Section 5.2, or change the place of
          payment where, or the coin or currency in which, any Security or
          interest thereon is payable, or impair the right to institute suit for
          the enforcement of any such payment on or after the Stated Maturity
          thereof (or, in the case of redemption, on or after the Redemption
          Date); or

                    (2)  reduce the percentage in principal amount of the
          Outstanding Securities of any series, the consent of whose Holders is
          required for any such supplemental indenture, or the consent of whose
          Holders is required for any waiver (of compliance with certain
          provisions of this Indenture or certain defaults hereunder and their
          consequences) provided for in this Indenture; or

                    (3)  modify any of the provisions of this Section, Section
          5.13 or Section 10.5, except to increase any such percentage or to
          provide that certain other provisions of this Indenture cannot be
          modified or waived without the consent of the Holder of each Security
          affected thereby; or

                    (4)  modify the provisions in Article XIII of this Indenture
          with respect to the subordination of Outstanding Securities of any
          series in a manner adverse to the Holders thereof;

and provided further that, in the case of the Securities of a series issued to a
Chittenden Capital Trust, so long as any of the corresponding series of Capital
Securities issued by such Chittenden Capital Trust remains outstanding, (i) no
such amendment shall be made that adversely affects the holders of such Capital
Securities in any material respect, and no termination of this Indenture shall
occur, and no waiver of any Event of Default or compliance with any covenant
under this Indenture shall be effective, without the prior consent of the
holders of at least a majority of the aggregate liquidation amount of such
Capital Securities then outstanding unless and until the principal (and premium,
if any) of the Securities of such series and all accrued and, (subject to
Section 3.7), unpaid interest (including any Additional Interest) thereon have
been paid in full and (ii) no amendment shall be made to Section 5.8 of this
Indenture that would

                                       53

<PAGE>

impair the rights of the holders of Capital Securities provided therein without
the prior consent of the holders of each Capital Security then outstanding
unless and until the principal (and premium, if any) of the Securities of such
series and all accrued and (subject to Section 3.7) unpaid interest (including
any Additional Interest) thereon have been paid in full.

          A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture that has expressly been included solely for
the benefit of one or more particular series of Securities or Capital
Securities, or which modifies the rights of the Holders of Securities or holders
of Capital Securities of such series with respect to such covenant or other
provision, shall be deemed not to affect the rights under this Indenture of the
Holders of Securities or holders of Capital Securities of any other series.

          It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.

          Section 9.3. Execution of Supplemental Indentures. In executing or
          ------------ ------------------------------------
accepting the additional series of Securities created by any supplemental
indenture permitted by this Article or the modifications thereby of any series
of Securities previously created by this Indenture, the Trustee shall be
entitled to receive, and (subject to Section 6.1) shall be fully protected in
relying upon, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture, and that all conditions precedent have been complied with. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.

          Section 9.4. Effect of Supplemental Indentures. Upon the execution of
          ------------ ----------------------------------
any supplemental indenture under this Article IX or delivery to the Trustee of
the Officer's Certificate pursuant to Section 3.1 hereof (which Officer's
Certificate shall have the effect of a supplemental indenture for all purposes
hereunder), this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities of each affected series theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby.

          Section 9.5. Conformity with Trust Indenture Act. Every supplemental
          ------------ -----------------------------------
indenture executed pursuant to this Article IX and every Officer's Certificate
delivered to the trustee pursuant to Section 3.1 hereof shall conform to the
requirements of the Trust Indenture Act as then in effect.

          Section 9.6. Reference in Securities to Supplemental Indentures.
          ------------ --------------------------------------------------
Securities authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article IX or delivery to the Trustee of the
Officer's Certificate pursuant to Section 3.1 hereof (which Officer's
Certificate shall have the effect of a supplemental indenture for all purposes
hereunder) may, and shall if required by the Company, bear a notation in form
approved by the Company as to any matter provided for in such supplemental
indenture or such Officer's Certificate. If the Company shall so determine, new
Securities of any series so modified as to conform, in the opinion of the
Company, to any such supplemental indenture or such Officer's

                                       54

<PAGE>

Certificate may be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities of such series.

                             ARTICLE X - COVENANTS

          Section 10.1. Payment of Principal, Premium and Interest. The Company
          ------------- ------------------------------------------
covenants and agrees for the benefit of each series of Securities that it will
duly and punctually pay the principal of (and premium, if any) and interest on
the Securities of that series in accordance with the terms of such Securities
and this Indenture.

          Section 10.2. Maintenance of Office or Agency. The Company will
          ------------- -------------------------------
maintain in each Place of Payment for any series of Securities, an office or
agency where Securities of that series may be presented or surrendered for
payment and an office or agency where Securities of that series may be
surrendered for transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities of that series and this Indenture may
be served. The Company initially appoints the Trustee, acting through its
Corporate Trust Office, as its agent for said purposes. The Company will give
prompt written notice to the Trustee of any change in the location of any such
office or agency. If at any time the Company shall fail to maintain such office
or agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.

          The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all of such purposes, and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in each
Place of Payment for Securities of any series for such purposes. The Company
will give prompt written notice to the Trustee of any such designation and any
change in the location of any such office or agency.

          Section 10.3. Money for Security Payments to be Held in Trust.
          ------------- -----------------------------------------------

               (a)  If the Company shall at any time act as its own Paying Agent
with respect to any series of Securities, it will, on or before each due date of
the principal of (and premium, if any) or interest on any of the Securities of
such series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided, and will promptly notify the Trustee of its
failure so to act.

               (b)  Whenever the Company shall have one or more Paying Agents,
it will, prior to 10:00 a.m., New York City time on each due date of the
principal of (and premium, if any) or interest on any Securities, deposit with a
Paying Agent a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such principal and premium (if any) or interest, and (unless
such Paying Agent is the Trustee) the Company will promptly notify the Trustee
of its failure so to act.

                                       55

<PAGE>

               (c)  The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section
10.3, that such Paying Agent will:

                    (1) hold all sums held by it for the payment of the
          principal of (and premium, if any) or interest on Securities in trust
          for the benefit of the Persons entitled thereto until such sums shall
          be paid to such Persons or otherwise disposed of as herein provided;

                    (2) give the Trustee notice of any default by the Company
          (or any other obligor upon the Securities) in the making of any
          payment of principal (and premium, if any) or interest;

                    (3) at any time during the continuance of any such default,
          upon the written request of the Trustee, forthwith pay to the Trustee
          all sums so held in trust by such Paying Agent; and

                    (4) comply with the provisions of the Trust Indenture Act
          applicable to it as a Paying Agent.

               (d)  The Company may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.

               (e)  Any money deposited with the Trustee or any Paying Agent,
or then held by the Company, in trust for the payment of the principal of (and
premium, if any) or interest on any Security and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due and
payable shall (unless otherwise required by mandatory provision of applicable
escheat or abandoned or unclaimed property law) be paid on Company Request to
the Company, or (if then held by the Company) shall (unless otherwise required
by mandatory provision of applicable escheat or abandoned or unclaimed property
law) be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.

                                       56

<PAGE>

          Section 10.4. Statement as to Compliance. The Company shall deliver to
          ------------- --------------------------
the Trustee, within 120 days after the end of each calendar year of the Company
ending after the date hereof, an Officer's Certificate covering the preceding
calendar year, stating whether or not to the best knowledge of the signers
thereof the Company is in default in the performance, observance or fulfillment
of or compliance with any of the terms, provisions, covenants and conditions of
this Indenture, and if the Company shall be in default, specifying all such
defaults and the nature and status thereof of which they may have knowledge. For
the purpose of this Section 10.4, compliance shall be determined without regard
to any grace period or requirement of notice provided pursuant to the terms of
this Indenture.

          Section 10.5. Waiver of Certain Covenants. The Company may omit in any
          ------------- ---------------------------
particular instance to comply with any covenant or condition provided pursuant
to Sections 3.1, 9.1(3), or 9.1(4) with respect to the Securities of any series,
if before or after the time for such compliance the Holders of at least a
majority in principal amount of the Outstanding Securities of such series shall,
by Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such covenant or condition, but no such waiver
shall extend to or affect such covenant or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Company in respect of any such covenant or condition shall remain in full
force and effect.

          Section 10.6. Additional Sums. In the case of the Securities of a
          ------------- ---------------
series issued to a Chittenden Capital Trust, so long as no Event of Default has
occurred and is continuing and except as otherwise specified as contemplated by
Section 2.1 or Section 3.1, in the event that (i) such Chittenden Capital Trust
is the Holder of all of the Outstanding Securities of such series, (ii) a Tax
Event in respect of such Chittenden Capital Trust shall have occurred and be
continuing and (iii) the Company shall not have (A) redeemed the Securities of
such series pursuant to Section 11.7(ii) or (B) dissolved such Chittenden
Capital Trust pursuant to Section 8.1(a)(v) of the related Trust Agreement, the
Company shall pay to such Chittenden Capital Trust (and its permitted successors
or assigns under the related Trust Agreement) for so long as such Chittenden
Capital Trust (or its permitted successor or assignee) is the registered holder
of any Securities of such series, such additional amounts as may be necessary in
order that the amount of Distributions (including any Additional Amounts (as
defined in such Trust Agreement)) then due and payable by such Chittenden
Capital Trust on the related Capital Securities and Common Securities that at
any time remain outstanding in accordance with the terms thereof shall not be
reduced as a result of any Additional Taxes (the "Additional Sums"). Whenever in
this Indenture or the Securities there is a reference in any context to the
payment of principal of or interest on the Securities, such mention shall be
deemed to include mention of the payments of the Additional Sums provided for in
this paragraph to the extent that, in such context, Additional Sums are, were or
would be payable in respect thereof pursuant to the provisions of this paragraph
and express mention of the payment of Additional Sums (if applicable) in any
provisions hereof shall not be construed as excluding Additional Sums in those
provisions hereof where such express mention is not made; provided, however,
that the deferral of the payment of interest pursuant to Section 3.11 or the
Securities shall not defer the payment of any Additional Sums that may be due
and payable.

          Section 10.7. Additional Covenants. The Company covenants and agrees
          ------------- ---------------------
with each Holder of Securities of any series that it shall not, and to the
extent applicable, it shall not permit

                                       57

<PAGE>

any Subsidiary of the Company to, (x) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any shares of the Company's capital stock (which includes
common and preferred stock), (y) make any payment of principal of or interest or
premium, if any, on or repay, repurchase or redeem any debt securities of the
Company (including Securities issued by the Company pursuant to this Indenture
other than the Securities of such series) that rank pari passu with or junior in
interest to the Securities of such series or (z) make any guarantee payments
with respect to any guarantee by the Company of the debt securities of any
subsidiary of the Company (including Guarantee Agreements other than the
Chittenden Guarantee related to the Capital Securities issued by the Chittenden
Capital Trust holding Securities of such series) if such guarantee ranks pari
passu with or junior in interest to the Securities (other than (a) dividends or
distributions in Common Stock of the Company, (b) any declaration of a dividend
in connection with the implementation of a rights plan or the issuance of stock
under any such plan in the future or the redemption or repurchase of any such
rights pursuant thereto, (c) as a result of an exchange or conversion of one
class or series of the Company's Capital Stock for another class or series of
the Company's Capital Stock, (d) payments under the Chittenden Guarantee related
to the Capital Securities issued by the Chittenden Capital Trust holding
Securities of such series, and (e) purchases, repurchases, redemptions or other
acquisitions of shares of Common Stock in connection with any of the Company's
benefit plans for its directors, officers or employees) if at such time (i)
there shall have occurred any event of which the Company has actual knowledge
that (A) with the giving of notice or the lapse of time or both, would
constitute an Event of Default with respect to the Securities of such series and
(B) in respect of which the Company shall not have taken reasonable steps to
cure, (ii) if the Securities of such series are held by a Chittenden Capital
Trust, the Company shall be in default with respect to its payment of any
obligations under the Chittenden Guarantee relating to the Capital Securities
issued by such Chittenden Capital Trust or (iii) the Company shall have given
notice of its election to begin an Extension Period with respect to the
Securities of such series as provided herein and shall not have rescinded such
notice, or such Extension Period, or any extension thereof, shall be continuing.

          The Company also covenants with each Holder of Securities of a series
issued to a Chittenden Capital Trust, for so long as the Capital Securities of
such Chittenden Capital Trust remain outstanding, (i) to maintain, directly or
indirectly, 100% ownership of the Common Securities of such Chittenden Capital
Trust; provided, however, that any permitted successor of the Company hereunder
may succeed to the Company's ownership of such Common Securities, (ii) to cause
such Chittenden Capital Trust to remain a statutory business trust and not to
voluntarily dissolve, wind-up, liquidate or terminate such Chittenden Capital
Trust, except as permitted by the applicable Trust Agreement, (iii) to use its
commercially reasonable efforts to ensure that the Chittenden Capital Trust will
not be an "investment company" for purposes of the Investment Company Act and
(iv) to take no action which would be reasonably likely to cause the Chittenden
Capital Trust to be classified as other than a grantor trust for United States
federal income tax purposes.

          Section 10.8. Statement by Officer as to Default. The Company shall
          ------------- ----------------------------------
deliver to the Trustee, as soon as possible and in any event within five
Business Days after the Company becomes aware of the occurrence of any Event of
Default or an event which, with notice or the lapse of time or both, would
constitute an Event of Default, an Officer's Certificate setting forth

                                       58

<PAGE>

in reasonable detail such Event of Default or default and any action which the
Company proposes to take with respect thereto.

                     ARTICLE XI - REDEMPTION OF SECURITIES

          Section 11.1. Applicability of this Article. Redemption of Securities
          ------------- -----------------------------
of any series (whether by operation of a sinking fund or otherwise) as permitted
or required by any form of Security issued pursuant to this Indenture shall be
made in accordance with such form of Security and this Article; provided,
however, that if any provision of any such form of Security shall conflict with
any provision of this Article, the provision of such form of Security shall
govern. Except as otherwise set forth in the form of Security for such series,
each Security of such series shall be subject to partial redemption only in the
amount of $100,000 or, in the case of the Securities of a series issued to a
Chittenden Capital Trust, $100,000, or integral multiples of $1,000 in excess
thereof.

          Section 11.2. Election to Redeem; Notice to Trustee. The election of
          ------------- -------------------------------------
the Company to redeem any Securities shall be evidenced by or pursuant to a
Board Resolution. In case of any redemption at the election of the Company of
less than all of the Securities of any particular series and having the same
terms, the Company shall, not less than 30 nor more than 60 days prior to the
Redemption Date (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee of such date and of the principal amount of Securities of
that series to be redeemed. In the case of any redemption of Securities prior to
the expiration of any restriction on such redemption provided in the terms of
such Securities, the Company shall furnish the Trustee with an Officer's
Certificate and an Opinion of Counsel evidencing compliance with such
restriction.

          Section 11.3. Selection of Securities to be Redeemed. If less than all
          ------------- --------------------------------------
the Securities of any series are to be redeemed (unless all the Securities of
such series and of a specified tenor are to be redeemed or unless such
redemption affects only a single Security), the particular Securities to be
redeemed shall be selected not more than 60 days prior to the Redemption Date by
the Trustee, from the Outstanding Securities of such series not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of a portion
of the principal amount of any Security of such series, provided that the
portion of the principal amount of any Security not redeemed shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security. If less than all the Securities of such series
and of a specified tenor are to be redeemed (unless such redemption affects only
a single Security), the particular Securities to be redeemed shall be selected
not more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such series and specified tenor not previously called
for redemption in accordance with the preceding sentence.

          The Trustee shall promptly notify the Company in writing of the
Securities selected for partial redemption and the principal amount thereof to
be redeemed. For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed. If the Company shall so direct, Securities registered in the name of
the Company, any Affiliate or any Subsidiary thereof shall not be included in
the Securities selected for redemption.

                                       59

<PAGE>

          Section 11.4. Notice of Redemption. Notice of redemption shall be
          ------------- --------------------
given by first-class mail, postage prepaid, mailed not later than the 30/th/
day, and not earlier than the 60/th/ day, prior to the Redemption Date, to each
Holder of Securities to be redeemed, at the address of such Holder as it appears
in the Securities Register. With respect to Securities of each series to be
redeemed, each notice of redemption shall state:

               (a)  the Redemption Date;

               (b)  the Redemption Price;

               (c)  if less than all Outstanding Securities of such particular
series and having the same terms are to be redeemed, the identification (and, in
the case of partial redemption, the respective principal amounts) of the
particular Securities to be redeemed;

               (d)  that on the Redemption Date, the Redemption Price will
become due and payable upon each such Security or portion thereof, and that
interest thereon, if any, shall cease to accrue on and after said date;

               (e)  the place or places where such Securities are to be
surrendered for payment of the Redemption Price; and

               (f)  that the redemption is for a sinking fund, if such is the
case.

Notice of redemption of Securities to be redeemed at the election of the Company
shall be given by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company and shall not be irrevocable. The
notice if mailed in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the Holder receives such notice. In any
case, a failure to give such notice by mail or any defect in the notice to the
Holder of any Security designated for redemption as a whole or in part shall not
affect the validity of the proceedings for the redemption of any other Security.

          Section 11.5. Deposit of Redemption Price. Prior to 10:00 a.m., New
          ------------- ---------------------------
York City time on the Redemption Date specified in the notice of redemption
given as provided in Section 11.4, the Company will deposit with the Trustee or
with one or more Paying Agents (or if the Company is acting as its own Paying
Agent, the Company will segregate and hold in trust as provided in Section 10.3)
an amount of money sufficient to pay the Redemption Price of, and any accrued
interest (including Additional Interest) on, all the Securities which are to be
redeemed on that date.

          Section 11.6. Payment of Securities Called for Redemption. If any
          ------------- -------------------------------------------
notice of redemption has been given as provided in Section 11.4, the Securities
or portion of Securities with respect to which such notice has been given shall
become due and payable on the date and at the place or places stated in such
notice at the applicable Redemption Price. On presentation and surrender of such
Securities at a Place of Payment in said notice specified, the said securities
or the specified portions thereof shall be paid and redeemed by the Company at
the applicable Redemption Price, together with accrued interest (including any
Additional Interest) to the Redemption Date; provided, however, that, unless
otherwise specified as contemplated by Section 3.1, installments of interest
whose Stated Maturity is on or prior to the Redemption Date

                                       60

<PAGE>

will be payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 3.7.

          Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder
thereof, at the expense of the Company, a new Security or Securities of the same
series, of authorized denominations, in aggregate principal amount equal to the
portion of the Security not redeemed so presented and having the same Original
Issue Date, Stated Maturity and terms. If a Global Security is so surrendered,
such new Security will also be a new Global Security.

          If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal of and premium, if any, on such
Security shall, until paid, bear interest from the Redemption Date at the rate
prescribed therefor in the Security.

          Section 11.7. Right of Redemption of Securities Initially Issued to a
          ------------- -------------------------------------------------------
Chittenden Capital Trust. In the case of the Securities of a series initially
------------------------
issued to a Chittenden Capital Trust, except as otherwise specified as
contemplated by Section 3.1, the Company, at its option, may redeem such
Securities (i) on or after the date five years after the Original Issue Date of
such Securities, in whole at any time or in part from time to time, or (ii) upon
the occurrence and during the continuation of a Special Event, at any time
within 90 days following the occurrence of such Special Event in respect of such
Chittenden Capital Trust, in whole (but not in part), in each case at a
Redemption Price equal to 100% of the principal amount thereof.

                          ARTICLE XII - SINKING FUNDS

          Section 12.1. Applicability of Article. The provisions of this Article
          ------------- ------------------------
shall be applicable to any sinking fund for the retirement of Securities of any
series except as otherwise specified as contemplated by Section 3.1 for such
Securities.

          The minimum amount of any sinking fund payment provided for by the
terms of any Securities of any series is herein referred to as a "mandatory
sinking fund payment," and any sinking fund payment in excess of such minimum
amount which is permitted to be made by the terms of such Securities of any
series is herein referred to as an "optional sinking fund payment." If provided
for by the terms of any Securities of any series, the cash amount of any sinking
fund payment may be subject to reduction as provided in Section 12.2. Each
sinking fund payment shall be applied to the redemption of Securities of any
series as provided for by the terms of such Securities.

          Section 12.2. Satisfaction of Sinking Fund Payments with Securities.
          ------------- -----------------------------------------------------
In lieu of making all or any part of a mandatory sinking fund payment with
respect to any Securities of a series in cash, the Company may at its option, at
any time no more than 16 months and no less than 30 days prior to the date on
which such sinking fund payment is due, deliver to the Trustee Securities of
such series (together with the unmatured coupons, if any, appertaining thereto)
theretofore purchased or otherwise acquired by the Company, except Securities of
such series that have been redeemed through the application of mandatory or
optional sinking fund payments pursuant to the terms of the Securities of such
series, accompanied by a Company

                                       61

<PAGE>

Order instructing the Trustee to credit such obligations and stating that the
Securities of such series were originally issued by the Company by way of bona
fide sale or other negotiation for value; provided, however, that the Securities
to be so credited have not been previously so credited. The Securities to be so
credited shall be received and credited for such purpose by the Trustee at the
redemption price for such Securities, as specified in the Securities so to be
redeemed, for redemption through operation of the sinking fund and the amount of
such sinking fund payment shall be reduced accordingly.

          Section 12.3. Redemption of Securities for Sinking Fund. Not less than
          ------------- -----------------------------------------
60 days prior to each sinking fund payment date for any series of Securities,
the Company will deliver to the Trustee an Officer's Certificate specifying the
amount of the next ensuing sinking fund payment for such Securities pursuant to
the terms of such Securities, the portion thereof, if any, which is to be
satisfied by payment of cash in the currency in which the Securities of such
series are payable (except as provided pursuant to Section 3.1) and the portion
thereof, if any, which is to be satisfied by delivering and crediting Securities
pursuant to Section 12.2 and will also deliver to the Trustee any Securities to
be so delivered. Such Officer's Certificate shall be irrevocable and upon its
delivery the Company shall be obligated to make the cash payment or payments
therein referred to, if any, on or before the succeeding sinking fund payment
date. In the case of the failure of the Company to deliver such Officer's
Certificate (or, as required by this Indenture, the Securities and coupons, if
any, specified in such Officer's Certificate), the sinking fund payment due on
the succeeding sinking fund payment date for such series shall be paid entirely
in cash and shall be sufficient to redeem the principal amount of the Securities
of such series subject to a mandatory sinking fund payment without the right to
deliver or credit securities as provided in Section 12.2 and without the right
to make the optional sinking fund payment with respect to such series at such
time.

          Any sinking fund payment or payments (mandatory or optional) made in
cash plus any unused balance of any preceding sinking fund payments made with
respect to the Securities of any particular series shall be applied by the
Trustee (or by the Company if the Company is acting as its own Paying Agent) on
the sinking fund payment date on which such payment is made (or, if such payment
is made before a sinking fund payment date, on the sinking fund payment date
immediately following the date of such payment) to the redemption of Securities
of such series at the Redemption Price specified in such Securities with respect
to the sinking fund. Any sinking fund moneys not so applied or allocated by the
Trustee (or, if the Company is acting as its own Paying Agent, segregated and
held in trust by the Company as provided in Section 10.3) for such series and
together with such payment (or such amount so segregated) shall be applied in
accordance with the provisions of this Section 12.3. Any and all sinking fund
moneys with respect to the Securities of any particular series held by the
Trustee (or if the Company is acting as its own Paying Agent, segregated and
held in trust as provided in Section 10.3) on the last sinking fund payment date
with respect to Securities of such series and not held for the payment or
redemption of particular Securities of such series shall be applied by the
Trustee (or by the Company if the Company is acting as its own Paying Agent),
together with other moneys, if necessary, to be deposited (or segregated)
sufficient for the purpose, to the payment of the principal of the Securities of
such series at Maturity. The Trustee shall select the Securities to be redeemed
upon such sinking fund payment date in the manner specified in Section 11.3 and
cause notice of the redemption thereof to be given in the name of and at the
expense of the Company in the manner provided in Section 11.4. Such notice
having been duly given, the

                                       62

<PAGE>

redemption of such Securities shall be made upon the terms and in the manner
stated in Section 11.6. On or before each sinking fund payment date, the Company
shall pay to the Trustee (or, if the Company is acting as its own Paying Agent,
the Company shall segregate and hold in trust as provided in Section 10.3) in
cash a sum in the currency in which Securities of such series are payable
(except as provided pursuant to Section 3.1) equal to the principal and any
interest accrued to the Redemption Date for Securities or portions thereof to be
redeemed on such sinking fund payment date pursuant to this Section 12.3.

          Neither the Trustee nor the Company shall redeem any Securities of a
series with sinking fund moneys or mail any notice of redemption of Securities
of such series by operation of the sinking fund for such series during the
continuance of a default in payment of interest, if any, on any Securities of
such series or of any Event of Default (other than an Event of Default occurring
as a consequence of this paragraph) with respect to the Securities of such
series, except that if the notice of redemption shall have been provided in
accordance with the provisions hereof, the Trustee (or the Company, if the
Company is then acting as its own Paying Agent) shall redeem such Securities if
cash sufficient for that purpose shall be deposited with the Trustee (or
segregated by the Company) for that purpose in accordance with the terms of this
Article XII. Except as aforesaid, any moneys in the sinking fund for such series
at the time when any such default or Event of Default shall occur and any moneys
thereafter paid into such sinking fund shall, during the continuance of such
default or Event of Default, be held as security for the payment of the
Securities and coupons, if any, of such series; provided, however, that in case
such default or Event of Default shall have been cured or waived herein, such
moneys shall thereafter be applied on the next sinking fund payment date for the
Securities of such series on which such moneys may be applied pursuant to the
provisions of this Section 12.3.

                   ARTICLE XIII - SUBORDINATION OF SECURITIES

          Section 13.1. Securities Subordinate to Senior Debt. The Company
          ------------- -------------------------------------
covenants and agrees, and each Holder of a Security, by its acceptance thereof,
likewise covenants and agrees, that, to the extent and in the manner hereinafter
set forth in this Article XIII, the payment of the principal of (and premium, if
any) and interest (including any Additional Interest) on each and all of the
Securities are hereby expressly made subordinate and subject in right of payment
to the prior payment in full of all amounts then due and payable in respect of
all Senior Debt.

          Section 13.2. Payment Over of Proceeds Upon Dissolution, Etc. In case
          ------------- ----------------------------------------------
of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company (each such event, if any, herein sometimes
referred to as a "Proceeding"), then the holders of Senior Debt shall be
entitled to receive payment in full of Allocable Amounts of such Senior Debt, or
provision shall be made for such payment in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Debt, before the
Holders of the Securities are entitled to receive or retain any payment or
distribution of any kind or character, whether in cash, property or securities
(including any payment or distribution which may be payable or deliverable by
reason of the payment of any other Debt of the Company subordinated to the
payment of the Securities, such payment or distribution being hereinafter
referred to as a "Junior Subordinated Payment"), on account of principal of (or
premium, if any) or interest (including any Additional Interest) on the
Securities or on account of the purchase or other acquisition of Securities by
the Company or any

                                       63

<PAGE>

Subsidiary and to that end the holders of Senior Debt shall be entitled to
receive, for application to the payment thereof, any payment or distribution of
any kind or character, whether in cash, property or securities, including any
Junior Subordinated Payment, which may be payable or deliverable in respect of
the Securities in any such Proceeding.

          In the event that, notwithstanding the foregoing provisions of this
Section 13.2, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any Junior Subordinated
Payment, before all Allocable Amounts of all Senior Debt are paid in full or
payment thereof is provided for in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Senior Debt, and if such fact shall, at or
prior to the time of such payment or distribution, have been made known to the
Trustee or, as the case may be, such Holder, then and in such event such payment
or distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for application
to the payment of all Allocable Amounts of all Senior Debt remaining unpaid, to
the extent necessary to pay all Allocable Amounts of all Senior Debt in full,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Debt.

          For purposes of this Article XIII only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment which securities are subordinated in
right of payment to all then outstanding Senior Debt to substantially the same
extent as the Securities are so subordinated as provided in this Article XIII.
The consolidation of the Company with, or the merger of the Company into,
another Person or the liquidation or dissolution of the Company following the
sale of all or substantially all of its properties and assets as an entirety to
another Person upon the terms and conditions set forth in Article VIII shall not
be deemed a Proceeding for the purposes of this Section 13.2 if the Person
formed by such consolidation or into which the Company is merged or the Person
which acquires by sale such properties and assets as an entirety, as the case
may be, shall, as a part of such consolidation, merger, or sale comply with the
conditions set forth in Article VIII.

          Section 13.3. Prior Payment to Senior Debt Upon Acceleration of
          ------------- -------------------------------------------------
Securities. In the event that any Securities are declared due and payable before
----------
their Stated Maturity, then and in such event the holders of the Senior Debt
outstanding at the time such Securities so become due and payable shall be
entitled to receive payment in full of all Allocable Amounts due on or in
respect of such Senior Debt (including any amounts due upon acceleration), or
provision shall be made for such payment in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior Debt, before the
Holders of the Securities are entitled to receive any payment or distribution of
any kind or character, whether in cash, properties or securities (including any
Junior Subordinated Payment) by the Company on account of the principal of (or
premium, if any) or interest (including any Additional Interest) on the
Securities or on account of the purchase or other acquisition of Securities by
the Company or any Subsidiary; provided, however, that nothing in this Section
13.3 shall prevent the satisfaction of any sinking fund payment in accordance
with this Indenture or as otherwise specified as contemplated by Section 3.1 for
the Securities of any series by delivering and crediting pursuant to Section
12.2 or as

                                       64

<PAGE>

otherwise specified as contemplated by Section 3.1 for the Securities of any
series Securities which have been acquired (upon redemption or otherwise) prior
to such declaration of acceleration.

          In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section 13.3, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.

          The provisions of this Section 13.3 shall not apply to any payment
with respect to which Section 13.2 would be applicable.

          Section 13.4. No Payment When Senior Debt in Default.
          ------------- --------------------------------------

               (a)  In the event and during the continuation of any default in
the payment of principal of (or premium, if any) or interest on any Senior Debt,
or in the event that any event of default with respect to any Senior Debt shall
have occurred and be continuing and shall have resulted in such Senior Debt
becoming or being declared due and payable prior to the date on which it would
otherwise have become due and payable, unless and until such event of default
shall have been cured or waived or shall have ceased to exist and such
acceleration shall have been rescinded or annulled, or (b) in the event any
judicial proceeding shall be pending with respect to any such default in payment
or such event or default, then no payment or distribution of any kind or
character, whether in cash, properties or securities (including any Junior
Subordinated Payment) shall be made by the Company on account of principal of
(or premium, if any) or interest (including any Additional Interest), if any, on
the Securities or on account of the purchase or other acquisition of Securities
by the Company or any Subsidiary, in each case unless and until all Allocable
Amounts of such Senior Debt are paid in full; provided, however, that nothing in
this Section 13.4 shall prevent the satisfaction of any sinking fund payment in
accordance with this Indenture or as otherwise specified as contemplated by
Section 3.1 for the Securities of any series by delivering and crediting
pursuant to Section 12.2 or as otherwise specified as contemplated by Section
3.1 for the Securities of any series Securities which have been acquired (upon
redemption or otherwise) prior to such default in payment or event of default.

               (b)  In the event that, notwithstanding the foregoing, the
Company shall make any payment to the Trustee or the Holder of any Security
prohibited by the foregoing provisions of this Section 13.4, and if such fact
shall, at or prior to the time of such payment, have been made known to the
Trustee or, as the case may be, such Holder, then and in such event such payment
shall be paid over and delivered forthwith to the Company.

               (c)  The provisions of this Section 13.4 shall not apply to any
payment with respect to which Section 13.2 would be applicable.

          Section 13.5. Payment Permitted If No Default. Nothing contained in
          ------------- -------------------------------
this Article XIII or elsewhere in this Indenture or in any of the Securities
shall prevent (a) the Company, at any time except during the pendency of any
Proceeding referred to in Section 13.2 or under the

                                       65

<PAGE>

conditions described in Sections 13.3 and 13.4, from making payments at any time
of principal of (and premium, if any) or interest (including Additional
Interest) on the Securities, or (b) the application by the Trustee of any money
deposited with it hereunder to the payment of or on account of the principal of
(and premium, if any) or interest (including any Additional Interest) on the
Securities or the retention of such payment by the Holders, if, at the time of
such application by the Trustee, it did not have knowledge that such payment
would have been prohibited by the provisions of this Article XIII.

     Section 13.6. Subrogation to Rights of Holders of Senior Debt. Subject to
     ------------- -----------------------------------------------
the payment in full of all amounts due or to become due on all Senior Debt, or
the provision for such payment in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Senior Debt, the Holders of the Securities
shall be subrogated to the extent of the payments or distributions made to the
holders of such Senior Debt pursuant to the provisions of this Article XIII
(equally and ratably with the holders of all indebtedness of the Company which
by its express terms is subordinated to Senior Debt of the Company to
substantially the same extent as the Securities are subordinated to the Senior
Debt and is entitled to like rights of subrogation by reason of any payments or
distributions made to holders of such Senior Debt) to the rights of the holders
of such Senior Debt to receive payments and distributions of cash, property and
securities applicable to the Senior Debt until the principal of (and premium, if
any) and interest on the Securities shall be paid in full. For purposes of such
subrogation, no payments or distributions to the holders of the Senior Debt of
any cash, property or securities to which the Holders of the Securities or the
Trustee would be entitled except for the provisions of this Article, and no
payments over pursuant to the provisions of this Article XIII to the holders of
Senior Debt by Holders of the Securities or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Debt, and the Holders of the
Securities, be deemed to be a payment or distribution by the Company to or on
account of the Senior Debt.

     Section 13.7. Provisions Solely to Define Relative Rights. The provisions
     ------------- -------------------------------------------
of this Article XIII are and are intended solely for the purpose of defining the
relative rights of the Holders of the Securities on the one hand and the holders
of Senior Debt on the other hand. Nothing contained in this Article XIII or
elsewhere in this Indenture or in the Securities is intended to or shall (a)
impair, as between the Company and the Holders of the Securities, the
obligations of the Company, which are absolute and unconditional, to pay to the
Holders of the Securities the principal of (and premium, if any) and interest
(including any Additional Interest) on the Securities as and when the same shall
become due and payable in accordance with their terms, (b) affect the relative
rights against the Company of the Holders of the Securities and creditors of the
Company other than their rights in relation to the holders of Senior Debt, or
(c) prevent the Trustee or the Holder of any Security from exercising all
remedies otherwise permitted by applicable law upon default under this Indenture
including, without limitation, filing and voting claims in any Proceeding,
subject to the rights, if any, under this Article XIII of the holders of Senior
Debt to receive cash, property and securities otherwise payable or deliverable
to the Trustee or such Holder.

     Section 13.8. Trustee to Effectuate Subordination. Each Holder of a
     ------------- -----------------------------------
Security by his or her acceptance thereof authorizes and directs the Trustee on
his or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination

                                       66

<PAGE>

provided in this Article XIII and appoints the Trustee his or her
attorney-in-fact for any and all such purposes.

     Section 13.9. No Waiver of Subordination Provisions. No right of any
     ------------- -------------------------------------
present or future holder of any Senior Debt to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by the Company with the
terms, provisions and covenants of this Indenture, regardless of any knowledge
thereof that any such holder may have or be otherwise charged with.

     Without in any way limiting the generality of the immediately preceding
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Debt, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Debt, or otherwise amend or supplement in any manner Senior Debt or any
instrument evidencing the same or any agreement under which Senior Debt is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person
liable in any manner for the collection of Senior Debt; and (iv) exercise or
refrain from exercising any rights against the Company and any other Person.

     Section 13.10. Notice to Trustee. The Company shall give prompt written
     -------------- -----------------
notice to the Trustee of any fact known to the Company which would prohibit the
making of any payment to or by the Trustee in respect of the Securities.
Notwithstanding the provisions of this Article XIII or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts which would prohibit the making of any payment to or by the Trustee
in respect of the Securities, unless and until the Trustee shall have received
written notice thereof from the Company or a holder of Senior Debt or from any
trustee, agent or representative therefor; provided, however, that if the
Trustee shall not have received the notice provided for in this Section 13.10 at
least two Business Days prior to the date upon which by the terms hereof any
monies may become payable for any purpose (including, without limitation, the
payment of the principal of (and premium, if any) or interest (including any
Additional Interest) on any Security), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such monies and to apply the same to the purpose for which they were
received and shall not be affected by any notice to the contrary which may be
received by it within two Business Days prior to such date.

     Subject to the provisions of Section 6.1, the Trustee shall be entitled to
rely on the delivery to it of a written notice by a Person representing himself
to be a holder of Senior Debt (or a trustee therefor) to establish that such
notice has been given by a holder of Senior Debt (or a trustee therefor). In the
event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this Article, the Trustee
may request such Person to furnish evidence to the reasonable satisfaction of
the Trustee as to the amount of Senior Debt held by such Person, the extent to
which such Person is entitled to participate in such payment or

                                       67

<PAGE>

distribution and any other facts pertinent to the rights of such Person under
this Article, and if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment.

     Section 13.11. Reliance on Judicial Order or Certificate of Liquidating
     -------------- --------------------------------------------------------
Agent. Upon any payment or distribution of assets of the Company referred to in
-----
this Article XIII, the Trustee, subject to the provisions of Section 6.1, and
the Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such Proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Securities, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior Debt and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XIII.

     Section 13.12. Trustee Not Fiduciary for Holders of Senior Debt. The
     -------------- ------------------------------------------------
Trustee, in its capacity as trustee under this Indenture, shall not be deemed to
owe any fiduciary duty to the holders of Senior Debt and shall not be liable to
any such holders if it shall in good faith mistakenly pay over or distribute to
Holders of Securities or to the Company or to any other Person cash, property or
securities to which any holders of Senior Debt shall be entitled by virtue of
this Article or otherwise.

     Section 13.13. Rights of Trustee as Holder of Senior Debt; Preservation of
     -------------- -----------------------------------------------------------
Trustee's Rights. The Trustee in its individual capacity shall be entitled to
----------------
all the rights set forth in this Article XIII with respect to any Senior Debt
which may at any time be held by it, to the same extent as any other holder of
Senior Debt, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.

     Section 13.14. Article Applicable to Paying Agents. In case at any time any
     -------------- -----------------------------------
Paying Agent other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term "Trustee" as used in this Article XIII shall
in such case (unless the context otherwise requires) be construed as extending
to and including such Paying Agent within its meaning as fully for all intents
and purposes as if such Paying Agent were named in this Article XIII in addition
to or in place of the Trustee.

     Section 13.15. Certain Conversions or Exchanges Deemed Payment. For the
     -------------- -----------------------------------------------
purposes of this Article XIII only, (a) the issuance and delivery of junior
securities upon conversion or exchange of Securities shall not be deemed to
constitute a payment or distribution on account of the principal of (or premium,
if any) or interest (including any Additional Interest) on Securities or on
account of the purchase or other acquisition of Securities, and (b) the payment,
issuance or delivery of cash, property or securities (other than junior
securities) upon conversion or exchange of a Security shall be deemed to
constitute payment on account of the principal of such security. For the
purposes of this Section 13.15, the term "junior securities" means (i) shares of
any stock of any class of the Company and (ii) securities of the Company which
are subordinated in right of payment to all Senior Debt which may be outstanding
at the time of issuance or delivery of

                                       68

<PAGE>

such securities to substantially the same extent as, or to a greater extent
than, the Securities are so subordinated as provided in this Article XIII.

                ARTICLE XIV - MEETINGS OF HOLDERS OF SECURITIES

     Section 14.1. Purposes for Which Meetings May Be Called. A meeting of
     ------------- -----------------------------------------
Holders of Securities of any series may be called at any time and from time to
time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities of such
series.

     Section 14.2. Call, Notice and Place of Meetings.
     ------------- ----------------------------------

          (a)      The Trustee may at any time call a meeting of Holders of
Securities of any series for any purpose specified in Section 14.1, to be held
at such time and at such place as the Trustee shall determine. Notice of every
meeting of Holders of Securities of any series, setting forth the time and the
place of such meeting and in general terms the action proposed to be taken at
such meeting, shall be given, in the manner provided in Section 1.6, not less
than 20 nor more than 180 days prior to the date fixed for the meeting.

          (b)      In case at any time the Company, pursuant to a Board
Resolution, or the Holders of at least 25% in principal amount of the
Outstanding Securities of any series shall have requested the Trustee to call a
meeting of the Holders of Securities of such series for any purpose specified in
Section 14.1, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have made the
first publication of the notice of such meeting within 20 days after receipt of
such request or shall not thereafter proceed to cause the meeting to be held as
provided herein, then the Company or the Holders of Securities of such series in
the amount above specified, as the case may be, may determine the time and the
place for such meeting and may call such meeting for such purposes by giving
notice thereof as provided in subsection (a) of this Section.

     Section 14.3. Persons Entitled to Vote at Meetings. To be entitled to vote
     ------------- ------------------------------------
at any meeting of Holders of Securities of any series, a Person shall be (a) a
Holder of one or more Outstanding Securities of such series, or (b) a Person
appointed by an instrument in writing as proxy for a Holder or Holders of one or
more Outstanding Securities of such series by such Holder or Holders. The only
Persons who shall be entitled to be present or to speak at any meeting of
Holders of Securities of any series shall be the Persons entitled to vote at
such meeting and their counsel, any representatives of the Trustee and its
counsel and any representatives of the Company and its counsel.

     Section 14.4. Quorum; Action.
     ------------- --------------

          (a)      The Persons entitled to vote a majority in principal amount
of the Outstanding Securities of a series shall constitute a quorum for a
meeting of Holders of Securities of such series; provided, however, that if any
action is to be taken at such meeting with respect to a consent or waiver which
this Indenture expressly provides may be given by the Holders of not less than a
specified percentage in principal amount of the Outstanding Securities

                                       69

<PAGE>

of a series, the Persons entitled to vote such specified percentage in principal
amount of the Outstanding Securities of such series shall constitute a quorum.
In the absence of a quorum within 30 minutes after the time appointed for any
such meeting, the meeting shall, if convened at the request of Holders of
Securities of such series, be dissolved. In any other case the meeting may be
adjourned for a period of not less than ten days as determined by the chairman
of the meeting prior to the adjournment of such meeting. In the absence of a
quorum at the reconvening of any such adjourned meeting, such adjourned meeting
may be further adjourned for a period of not less than ten days; at the
reconvening of any meeting adjourned or further adjourned for lack of a quorum,
the persons entitled to vote 25% in aggregate principal amount of the then
Outstanding Securities shall constitute a quorum for the taking of any action
set forth in the notice of the original meeting. Notice of the reconvening of
any adjourned meeting shall be given as provided in Section 14.2(a), except that
such notice need be given only once not less than five days prior to the date on
which the meeting is scheduled to be reconvened.

          (b)  Except as otherwise provided in this Indenture, any resolution
presented to a meeting or adjourned meeting duly reconvened at which a quorum is
present as aforesaid may be adopted by the affirmative vote of the persons
entitled to vote a majority in aggregate principal amount of the Outstanding
Securities represented at such meeting.

          (c)  Any resolution passed or decision taken at any meeting of Holders
of Securities of any series duly held in accordance with this Section shall be
binding on all the Holders of Securities of such series and the related coupons,
whether or not present or represented at the meeting.

          (d)  Notwithstanding the foregoing provisions of this Section 14.4, if
any action is to be taken at a meeting of Holders of Securities of any series
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that this Indenture expressly provides may be made, given
or taken by the Holders of a specified percentage in principal amount of all
Outstanding Securities affected thereby, or of the Holders of such series and
one or more additional series:

               (1)  there shall be no minimum quorum requirement for such
     meeting; and

               (2)  the principal amount of the Outstanding Securities of such
     series that vote in favor of such request, demand, authorization,
     direction, notice, consent, waiver or other action shall be taken into
     account in determining whether such request, demand, authorization,
     direction, notice, consent, waiver or other action has been made, given or
     taken under this Indenture.

     Section 14.5. Determination of Voting Rights; Conduct and Adjournment of
     ------------- ----------------------------------------------------------
Meetings.
--------

          (a)  Notwithstanding any provisions of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Holders of Securities of a series in regard to proof of the holding of
Securities of such series and of the appointment of proxies and in regard to the
appointment and duties of inspectors of votes, the submission and

                                       70

<PAGE>

examination of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as it shall deem
appropriate. Except as otherwise permitted or required by any such regulations,
the holding of Securities shall be proved in the manner specified in Section 1.4
and the appointment of any proxy shall be proved in the manner specified in
Section 1.4. Such regulations may provide that written instruments appointing
proxies, regular on their face, may be presumed valid and genuine without the
proof specified in Section 1.4 or other proof.

               (b)  The Trustee shall, by an instrument in writing appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Holders of Securities as provided in Section 14.2 (b), in
which case the Company or the Holders of Securities of the series calling the
meeting, as the case may be, shall in like manner appoint a temporary chairman.
A permanent chairman and a permanent secretary of the meeting shall be elected
by vote of the Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting.

               (c)  At any meeting each Holder of a Security of such series or
proxy shall be entitled to one vote for each $1,000 principal amount of the
Outstanding Securities of such series held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Security challenged as not Outstanding and ruled by the chairman of the meeting
to be not Outstanding. The chairman of the meeting shall have no right to vote,
except as a Holder of a Security of such series or proxy.

               (d)  Any meeting of Holders of Securities of any series duly
called pursuant to Section 14.2 at which a quorum is present may be adjourned
from time to time by Persons entitled to vote a majority in principal amount of
the Outstanding Securities of such series represented at the meeting, and the
meeting may be held as so adjourned without further notice.

          Section 14.6. Counting Votes and Recording Action of Meetings. The
          ------------- -----------------------------------------------
vote upon any resolution submitted to any meeting of Holders of Securities of
any series shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities of such series or of their
representatives by proxy and the principal amounts and serial numbers of the
Outstanding Securities of such series held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record, at least in duplicate, of
the proceedings of each meeting of Holders of Securities of any series shall be
prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
fact, setting forth a copy of the notice of the meeting and showing that said
notice was given as provided in Section 14.2 and, if applicable, Section 14.4.
Each copy shall be signed and verified by the affidavits of the permanent
chairman and secretary of the meeting and one such copy shall be delivered to
the Company and another to the Trustee to be preserved by the Trustee, the
latter to have attached thereto the ballots voted at the meeting. Any record so
signed and verified shall be conclusive evidence of the matters therein stated.

                                     * * * *

                                       71

<PAGE>

          This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.

                                       72

<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.

                                          CHITTENDEN CORPORATION

                                          By:___________________________________
                                          Its:__________________________________
Attest:

By: ________________________________
Its: _______________________________

                                          THE BANK OF NEW YORK, as Trustee

                                          By:___________________________________
                                          Its:__________________________________
Attest:

By:  _______________________________
Its: _______________________________

                                       73

<PAGE>

                                     ANNEX A

                           Form of Guarantee Agreement

                                       74

<PAGE>

                                     ANNEX B

                             Form of Trust Agreement

                                       75

<PAGE>

                                     ANNEX C

                  Form of Amended and Restated Trust Agreement

                                       76

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00038-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00038-of-00352.parquet"}]]