Document:

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                                                                  Exhibit 10.3.1

                               AMENDMENT NO. 1 TO

             AMENDED AND RESTATED SENIOR CONVERTIBLE LOAN AGREEMENT

         Amendment No. 1, dated as of June 11, 2002, to the Amended and Restated
Senior Convertible Loan Agreement (the "LOAN AGREEMENT") dated as of June 11,
2002, by and among Value City Department Stores, Inc., an Ohio corporation (the
"BORROWER"), Shonac Corporation, an Ohio corporation ("SHONAC"), DSW Shoe
Warehouse, Inc., a Missouri corporation ("DSW"), Gramex Retail Stores, Inc., a
Delaware corporation ("GRAMEX"), VCM, Ltd., an Ohio limited liability company
("VCM"), Filene's Basement, Inc., a Delaware corporation ("FILENE'S"), GB
Retailers, Inc., a Delaware corporation ("GB"), J.S. Overland Delivery, Inc., a
Delaware corporation ("JS"), Value City Department Stores Services, Inc. a
Delaware corporation ("VC SERVICES"), Value City Limited Partnership, an Ohio
limited partnership ("VCLP"), Value City of Michigan, Inc., a Michigan
corporation ("VC MICHIGAN"), Westerville Road GP, Inc., a Delaware corporation
("WESTERVILLE GP"), Westerville Road LP, Inc. a Delaware corporation
("WESTERVILLE LP", and together with Shonac, DSW, Gramex, VCM, Filene's, GB, JS,
VC Services, VCLP, VC Michigan and Westerville GP, each a "GUARANTOR", and
collectively, the "GUARANTORS"), the lenders from time to time party hereto
(each a "LENDER" and collectively, the "LENDERS"), and Schottenstein Stores
Corporation, a Delaware corporation ("SSC"), as Agent (in such capacity,
together with its successors, if any, the "AGENT") and as a Lender.

                                    RECITALS

         WHEREAS, the Borrower, the Guarantors, the Lenders and the Agent are
parties to the Loan Agreement;

         WHEREAS, SSC, the sole Lender under the Loan Agreement, will,
concurrently with the effectiveness of this Amendment, sell and assign to
Cerberus Partners, L.P. ("CPLP"), 50% of its right, title and interest as Lender
under the Loan Agreement pursuant to the terms of the Assignment and Acceptance,
dated the date hereof, between SSC and CPLP (the "SSC ASSIGNMENT");

         WHEREAS, it is a condition precedent to the effectiveness of the SSC
Assignment that the Loan Agreement be amended to reflect the transactions
contemplated by the SSC Assignment;

         WHEREAS, in connection with such amendment the Borrower has requested
and the Lenders have agreed to amend certain terms and conditions of the Loan
Agreement; and

         NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:

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         1. DEFINITIONS. All terms used herein which are defined in the Loan
Agreement and not otherwise defined herein are used herein as defined therein.

         2. DEFINITIONS IN LOAN AGREEMENT.

                (a) Section 1.01 of the Loan Agreement is hereby amended by
adding the following defined terms in the appropriate alphabetical order
therein:

            "ACCOUNT DEBTOR" means each debtor, customer or obligor in any way
obligated on or in connection with any Accounts Receivable.

            "ACCOUNTS RECEIVABLE" means, with respect to any Person, any and all
rights of such Person to payment for goods sold and/or services rendered,
including accounts, general intangibles and any and all such rights evidenced by
chattel paper, instruments or documents, whether due or to become due and
whether or not earned by performance, and whether now or hereafter acquired or
arising in the future, and any proceeds arising therefrom or relating thereto.

            "AGENT ADVANCES" has the meaning specified therefor in section
10.08(a).

            "ALLOCATED WARRANTS" has the meaning specified therefor in Section
14.02(c).

            "APPROVED EXISTING TRANSACTION" has the meaning specified therefor
in Section 14.01.

            "BORROWING BASE CERTIFICATE" has the meaning set forth in the
Revolving Credit Facility as in effect from time to time.

            "BUYOUT EXERCISE NOTICE" has the meaning specified therefor in
Section 14.02(a).

            "BUYOUT OPTION" has the meaning specified therefor in Section
14.02(a).

            "BUYOUT SECURITIES" has the meaning specified therefor in Section
14.02(c).

            "COLLATERAL" means all of the property and assets and all interests
therein and proceeds thereof now owned or hereafter acquired by any Person upon
which a Lien is granted or purported to be granted by such Person as security
for all or any part of the Obligations.

            "CONTROL AGREEMENT" means the Collection Account Agreements (as
defined in the Revolving Credit Facility) made by a Loan Party and the financial
institutions maintaining Collection Accounts (as defined in the Revolving Credit
Facility) in favor of the Revolving Credit Facility Agent for the benefit of the
Lenders (among others) securing the Obligations (and the obligations owing to
certain other lenders).

            "CPLP" has the meaning specified therefore in the preamble hereto.

            "CPLP NON-CONVERSION NOTICE" has the meaning specified in Section
14.02.

            "DRAG ALONG CONVERSION NOTICE" has the meaning specified therefor in
Section 13.01(c).

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            "DRAG ALONG CONVERSION RIGHT" has the meaning specified therefor in
Section 13.01(c).

            "EXCESS AVAILABILITY" has the meaning specified in the Revolving
Credit Facility.

            "EXCESS AVAILABILITY RESERVE" has the meaning specified in the
Revolving Credit Facility.

            "FAIRNESS COMMITTEE" has the meaning specified therefor in Section
14.02(b).

            "INTERCREDITOR AGREEMENT" means the Intercreditor and Lien
Subordination Agreement, by and among the Agent, on behalf of itself and the
Lenders, the Revolving Credit Facility Agent, on behalf of itself and the
Revolving Facility Lenders, the Term Loan Agent, on behalf of itself and the
Term Loan Lenders and acknowledged and agreed by the Borrower and the
Guarantors.

            "KEY LOAN PARTIES" means, collectively, the Borrower, Shonac, DSW,
Gramex, VCM, Filene's, GB, VCLP and VC Michigan.

            "LANDLORD'S AGREEMENT" means a landlord's agreement consenting to
the recording of the Mortgages, in form and substance satisfactory to the Agent,
made by the fee owner (or ground or prime lessee with the consent of the fee
owner) of the real property secured by a Mortgage in favor of the Agent for the
benefit of the Lenders (among others) and delivered to the Agent pursuant to
Sections 4.01(d) and 6.01(a) and (i).

            "LEASEHOLD MORTGAGE STATUS REPORT" means a monthly report that
reflects the Loan Parties' efforts to obtain leasehold Mortgages on
substantially all Leases of the Loan Parties, such report to contain sufficient
detail to enable the Agent to evaluate the status of the Loan Parties' efforts
on a property-by-property basis.

            "MORTGAGE" means a mortgage (including, without limitation, a
leasehold mortgage, deed of trust or deed to secure debt), in form and substance
satisfactory to the Agent, made by a Loan Party in favor of the Agent for the
benefit of the Lenders (among others), securing the Obligations and the
obligations owing to certain other lenders, and delivered to the Agent pursuant
to Section 4.01(d), Section 6.01(a), Section 6.01(i) or otherwise.

            "NON-CONVERSION NOTICE" has the meaning specified therefore in
Section 13.02(c).

            "NOTIFICATION DATE" has the meaning specified therefor in Section
14.01.

            "OBJECTION DATE" has the meaning specified therefor in Section
14.01.

            "OBJECTION NOTICE" has the meaning specified therefor in Section
14.01.

            "PLEDGE AGREEMENT" means a Pledge and Security Agreement made by a
Loan Party in favor of the Agent for the benefit of the Lenders, substantially
in the form of Exhibit F, securing the Obligations and delivered to the Agent.

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            "REFERRAL NOTICE" has the meaning specified therefor in Section
14.02(b).

            "REFERRED SSC TRANSACTION" has the meaning specified therefor in
Section 14.02(b).

            "REVOLVING CREDIT FACILITY" means the $350,000,000 working capital
facility, of even date herewith, among the Borrower and certain of its
Subsidiaries, as borrowers and as guarantors, the Revolving Credit Facility
Agent and the Revolving Credit Facility Lenders.

            "REVOLVING CREDIT FACILITY AGENT" means National City Commercial
Finance, Inc. ("NCCF"), as Administrative Agent and/or NCCF and Fleet Retail
Finance, Inc., as Collateral Agents for the Revolving Credit Facility Lenders,
and each of their respective successors and assigns.

            "REVOLVING CREDIT FACILITY DOCUMENTS" means any agreement,
instrument or other document executed and delivered pursuant to the Revolving
Credit Facility or otherwise securing or evidencing any loan or obligation
thereunder.

            "REVOLVING CREDIT FACILITY LENDERS" means the financial institutions
party to the Revolving Credit Facility.

            "SECURITY AGREEMENT" means a Security Agreement made by a Loan Party
in favor of the Agent for the benefit of the Lenders, substantially in the form
of Exhibit E, securing the Obligations and delivered to the Agent.

            "SSC" means Schottenstein Stores Corporation.

            "SSC ASSIGNMENT" means the sale and assignment by SSC to CPLP of a
50% interest in the Borrower's Obligations under this Agreement, pursuant to the
terms of the SSC Assignment Agreement.

            "SSC ASSIGNMENT AGREEMENT" means the Assignment and Acceptance
Agreement, dated June 11, 2002 by and between SSC and CPLP.

            "SSC ASSIGNMENT DOCUMENTS" means the SSC Assignment Agreement and
each of the other documents delivered in connection with the SSC Agreement.

            "SSC TRANSACTION" has the meaning specified therefor in Section
14.01.

            "TERM LOAN AGENT" means CPLP, in its capacity as agent to the Term
Loan Lenders, or any successor thereto.

            "TERM LOAN AGREEMENT" means the Financing Agreement dated as of June
11, 2002, among the Borrower and certain of its Subsidiaries, as borrowers and
as guarantors, the Term Loan Agent and the Term Loan Lenders.

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            "TERM LOAN DOCUMENTS" means the Term Loan Agreement and any
agreement, instrument or other document executed and delivered pursuant to the
Term Loan Agreement or otherwise securing evidencing any loan or obligation
thereunder.

            "TERM LOAN LENDERS" means the financial institutions party to the
Term Loan Agreement.

            "UCC FILING AUTHORIZATION LETTER" means a letter duly executed by
each Loan Party authorizing the Agent to file appropriate financing statements
on Form UCC-1 without the signature of such Loan Party in such office or offices
as may be necessary or, in the opinion of the Agent, desirable to perfect the
security interests purported to be created by each Security Agreement, each
Pledge Agreement and each Mortgage.

            "UNIFORM COMMERCIAL CODE" has the meaning specified therefor in
Section 1.03.

            "WARRANTS" means any of the warrants issued pursuant to the terms of
the Term Loan Agreement.

            "WARRANT STOCK" means the shares of Common Stock issuable on the
exercise of the Warrants.

                    (b) Section 1.01 of the Loan Agreement is hereby amended by
deleting the definitions of the terms "Change in Control", "Equipment", "Fair
Market Value", "Loan Documents", "Market Price", "Payment Office", "Registration
Rights Agreement" and "Required Lenders" and substituting the following
therefor:

            "CHANGE IN CONTROL" means the occurrence of any of the following:
(i) the acquisition, by any person or group (within the meaning of Section
13(d)(3) of the Exchange Act) of beneficial ownership (within the meaning of
Rule 13d-3 of the Exchange Act) of 25% or more of the issued and outstanding
capital stock of the Borrower having the right, under ordinary circumstances, to
vote for the election of directors of the Borrower, excluding from the foregoing
any acquisition pursuant to the issuance of the Warrants or the exercise of
conversion rights under this Agreement; (ii) other than as a result of the
exercise by CPLP of Board representation rights under this Agreement, more than
half of the Persons who were directors of the Borrower on the first day of any
period consisting of twelve (12) consecutive calendar months (the first of which
twelve (12) month periods commencing with the first day of the month during
which this Agreement was executed), cease, for any reason other than death,
disability, or replacement by other Persons nominated by a nominating committee
controlled by SSC to be directors of the Borrower; (iii) the failure of the
Borrower to own, directly or indirectly, 95% of the capital stock of each of the
other Loan Parties; or (iv) the failure of SSC to possess, directly or
indirectly, the power to cause the direction of the management and policies of
the Key Loan Parties.

            "EQUIPMENT" means, , without limitation, "equipment" as defined in
the UCC, and also all furniture, store fixtures, motor vehicles, rolling stock,
machinery, office equipment, plant equipment, tools, dies, molds, and other
goods, property, and assets which are used and/or were purchased for use in the
operation or furtherance of a Borrower's business, and any and all accessions or
additions thereto, and substitutions therefor.

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            "FAIR MARKET VALUE" means, on any date specified herein (i) in the
case of cash, the dollar amount thereof, (ii) in the case of a security, the
Current Market Price, and (iii) in all other cases, the fair value thereof (as
of a date which is within 20 days of the date as of which the determination is
to be made) determined in good faith by a committee of Borrower's Board of
Directors consisting of directors who are not Affiliates of Borrower, SSC or
CPLP; PROVIDED, however, that at the request of CPLP, the Fair Market Value
shall be determined in good faith by an independent investment banking firm
selected by Borrower, SSC and CPLP or, if that selection cannot be made within
ten days, by an independent investment banking firm selected by the American
Arbitration Association in accordance with its rules, and PROVIDED, further,
that Borrower shall pay all of the reasonable fees and expenses of any third
parties incurred in connection with determining the Fair Market Value.

            "LOAN DOCUMENT" means this Agreement, any Guaranty, any Security
Agreement, any Pledge Agreement, any Mortgage, any Landlord's Agreement, any
Control Agreement, any UCC Filing Authorization Letter, the Intercreditor
Agreement, the Warrants, the Registration Rights Agreement and any other
agreement, instrument or other document executed and delivered pursuant hereto
or thereto or otherwise evidencing or securing any Loan or any other Obligation.

            "MARKET PRICE" means, on any date specified herein, the amount per
share of the Common Stock, equal to (i) the last reported sale price of such
Common Stock, regular way, on such date or, in case no such sale takes place on
such date, the average of the closing bid and asked prices thereof regular way
on such date, in either case as officially reported on the principal national
securities exchange on which such Common Stock is then listed or admitted for
trading, (ii) if such Common Stock is not then listed or admitted for trading on
any national securities exchange but is designated as a national market system
security by the NASD, the last reported trading price of the Common Stock on
such date, (iii) if there shall have been no trading on such date or if the
Common Stock is not so designated, the average of the closing bid and asked
prices of the Common Stock on such date as shown by the NASD automated quotation
system, (iv) if trading in such Common Stock is quoted in the over-the-counter
market, the average of the closing bid and asked prices of the Common Stock on
such date as shown on the OTC Bulletin Board, or (v) if such Common Stock is not
then listed or admitted for trading on any national exchange or quoted in the
over-the-counter market, the fair value thereof (as of a date which is within 20
days of the date as of which the determination is to be made) determined in good
faith by a committee of Borrower's Board of Directors consisting of directors
who are not Affiliates of Borrower or SSC; PROVIDED, however, that at the
request of CPLP, the Market Price shall be determined in good faith by an
independent investment banking firm selected by Borrower, SSC and CPLP or, if
that selection cannot be made within 10 days, by an independent investment
banking firm selected by the American Arbitration Association in accordance with
its rules, and PROVIDED, further, that Borrower shall pay all of the reasonable
fees and expenses of any third parties incurred in connection with determining
the Market Price.

            "PAYMENT OFFICE" means the Agent's office located at 450 Park
Avenue, 28th Floor, New York, New York, 10022, or at such other office or
offices of the Agent as may be designated in writing from time to time by the
Agent to the Borrower.

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            "REGISTRATION RIGHTS AGREEMENT" means the Amended and Restated
Registration Rights Agreement, in form and substance satisfactory to the Agent,
by and between the Borrower, the Lenders and the Term Loan C Lenders (as defined
in the Term Loan Agreement) with respect to the matters covered thereby.

            "REQUIRED LENDERS" means CPLP and any of its affiliates to whom it
assigns all or any portion of its rights and obligations under this Agreement or
any of the Loan Documents.

                    (c) The definition of "EBITDA" in Section 1.01 of the Loan
Agreement is hereby amended by deleting the existing clause (E) and substituting
the following therefor:

               (E) expenses incurred in connection with the Term Loan Agreement,
               this Agreement, the Revolving Credit Facility, the refinancing of
               the Borrower's existing credit facilities and any subsequent
               refinancing of the Borrower.

                    (d) The definition of "Permitted Acquisition" in Section
1.01 of the Loan Agreement is hereby amended by restating clauses (g) and (h)
thereof in their entirety, and by adding a new section (i) thereto, in each
case, to read as follows:

               (g) if the Person which is the subject of such Acquisition will
               be maintained as a Subsidiary of a key Loan Party, such
               Subsidiary shall have executed such documents as may be necessary
               to be joined as a "Guarantor" hereunder, and the Agent shall have
               received subject to the terms of the Intercreditor Agreement a
               first priority security and mortgage interest (subject to
               Permitted Liens) in such Subsidiary's capital stock, inventory,
               accounts, equipment, real estate, leaseholds, and other property
               of the same nature as constitutes Collateral under this Agreement
               in order to secure the Obligations; (h) the total consideration
               paid for all Acquisitions (whether in cash, tangible property,
               notes or other property (other than capital stock of the
               Borrower)) after the Effective Date, shall not exceed in the
               aggregate the sum of $15,000,000; and (i) Excess Availability
               immediately prior to such Acquisition, immediately after giving
               effect thereto, and projected Excess Availability on a pro forma
               projected basis for the twelve (12) months immediately following
               such Acquisition, shall not be less than $70,000,000.

                    (e) The definition of "Permitted Indebtedness" in Section
1.01 of the Loan Agreement is hereby amended by restating clauses (ii) and (v)
thereof to read in their entirety as follows:

               (ii) any Indebtedness incurred under the Revolving Credit
               Facility and the Term Loan Agreement;

               (v) Indebtedness of the Loan Parties and any Subsidiary under (a)
               the NCB Hedging Agreement, and (b) Hedging Agreements

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               with any Revolving Credit Lender or an Affiliate of a Revolving
               Credit Lender; PROVIDED that (1) such agreement is
               non-speculative in nature, and (2) the Loan Parties have received
               the written consent of the Agent (which consent shall not be
               unreasonably withheld) prior to entering into such agreement;

                    (f) The definition of "Permitted Liens" in Section 1.01 of
the Loan Agreement is hereby amended by deleting the words "property or assets
of such Loan Party" in clause (ii)(y) thereof, and substituting the word
"Collateral" therefor, and (ii) by adding a new clause (xiv) and (xv) at the end
thereof to read in their entirety as follows:

               (xiv) Liens securing Indebtedness assumed in connection with, or
               continuing to exist after, but not incurred in connection with,
               or contemplation of, a Permitted Acquisition, which Liens were in
               effect prior to the consummation of the Permitted Acquisition;
               PROVIDED, that such Liens may not extend to any Collateral of the
               Loan Parties, or the Inventory, Accounts Receivable or General
               Intangibles of the Person so acquired; and (xv) a Lien granted by
               any Loan Party in connection with the Revolving Credit Facility
               or the Term Loan Documents.

         3. PREPAYMENTS. Section 2.04 of the Loan Agreement is hereby amended by
inserting the following after the words "After March 31, 2007" in the second
sentence thereof:

               , and subject in all respects to the limitations contained in the
               Revolving Credit Facility, the Term Loan Agreement and the
               Intercreditor Agreement as in effect on the Effective Date,

         4. FEES. (a) Section 3.01 of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:

               Section 3.01 AUDIT AND COLLATERAL MONITORING FEES. The Key Loan
               Parties acknowledge that representatives of the Agent may visit
               any or all of the Loan Parties and/or conduct audits, inspections
               and valuations of any or all of the Loan Parties in accordance
               with the terms and conditions set forth in Sections 7.02 and
               7.09. The Borrower agrees to pay the costs and expenses of such
               visits, audits, inspections and valuations, whether conducted by
               the Agent itself or by third-party representatives of the Agent.

               (b) Section 3.04(b) of the Loan Agreement is hereby amended by
adding the words "and all proceeds of the Collateral," immediately prior to the
words "subject to the provisions of this Agreement".

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         5.   REPRESENTATIONS AND WARRANTIES. (a) Section 5.01(e)(ii) of the
Loan Agreement is hereby amended by deleting the last sentence thereof and
substituting the following therefore:

               Except as indicated on such Schedule and the Liens created
               pursuant to the Term Loan Documents, the Revolving Credit
               Facility Documents and the Loan Documents, all such Capital Stock
               is owned by the Borrower or one or more of its wholly-owned
               Subsidiaries, free and clear of all Liens.

               (b) Section 5.01(ee) of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:

               (ee) LOCATION OF COLLATERAL. Except as permitted by Section
               6.02(r), there is no location at which any Loan Party has any
               Collateral or the books, records and papers of the Loan Parties
               pertaining thereto other than (i) those locations listed on
               Schedule 5.01(ee) and (ii) at such other locations as to which
               the Borrower has provided ten (10) days prior written notice to
               the Agent of the intended location of the Collateral, books,
               records and papers thereat. Schedule 5.01(ee) hereto contains a
               true, correct and complete list, as of the Effective Date, of the
               legal names and addresses of each warehouse at which Collateral
               of each Loan Party is stored and/or the name and address of the
               landlord on the Lease which covers such location and of all
               service bureaus with which such records are maintained. None of
               the receipts received by any Loan Party from any warehouse states
               that the goods covered thereby are to be delivered to bearer or
               to the order of a named Person or to a named Person and such
               named Person's assigns. No tangible personal property of any Loan
               Party is in the care or custody of any third party or stored or
               entrusted with a bailee or other third party, except (x) as
               otherwise disclosed pursuant to, or permitted by this Section, or
               (y) for Inventory in an amount not to exceed $1,000,000 at Cost
               (as defined in the Revolving Credit Facility) in the aggregate at
               any time in the ordinary course of business.

               (c) Section 5.01(ff) of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:

               (ff) SECURITY INTERESTS. Each Security Agreement creates in favor
               of the Agent, for the benefit of the Lenders, a legal, valid and
               enforceable security interest in the Collateral secured thereby.
               Upon the filing of the UCC-1 financing statements described in
               Section 4.01(d) and the recording of the Collateral Assignments
               for Security referred to in each Security Agreement in the United
               States Patent and Trademark Office and the United States
               Copyright Office, as applicable, such security interests in and

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               Liens on the Collateral granted thereby shall be perfected
               security interests to the extent such security interests may be
               perfected by such filings, and no further recordings or filings
               are or will be required in connection with the creation,
               perfection or enforcement of such security interests and Liens,
               other than (i) the filing of continuation statements in
               accordance with Applicable Law, (ii) the recording of the
               Collateral Assignments for Security pursuant to each Security
               Agreement in the United States Patent and Trademark Office and
               the United States Copyright Office, as applicable, with respect
               to after-acquired U.S. patent and trademark applications and
               registrations and U.S. copyrights, (iii) the recordation of
               appropriate evidence of the security interest in the appropriate
               foreign registry with respect to all foreign intellectual
               property, and (iv) control agreements for deposit accounts, liens
               on titles and similar items. Subject to Permitted Liens, such
               security interests in, and Liens on the Collateral shall be
               first-priority security interests; provided, however, that any
               security interest in and Lien on Collateral that is Revolving
               Lender Primary Collateral (as defined in the Intercreditor
               Agreement) shall be a perfected, second-priority Lien on and
               security interest (subject only to Permitted Liens and the prior
               Lien on and security interest in favor of the Revolving Credit
               Facility Agent for the benefit of the Revolving Credit Facility
               Lenders).

               (d) Section 5.01(gg) of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:

               (gg) LIENS IN FAVOR OF AGENT. Other than the Excluded Property
               (as defined in the Security Agreement), no Loan Party is the
               owner of, nor has any interest in, any property or asset which is
               not subject to a Lien in favor of the Agent (subject only to
               Permitted Liens) to secure the Obligations.

         6.    COVENANTS.

                        (a) Section 6.01(a) of the Loan Agreement is hereby
amended and restated in its entirety to read as follows:

               (a) ADDITIONAL GUARANTIES AND COLLATERAL SECURITY. Cause (i) each
               Subsidiary of any Loan Party not in existence on the Effective
               Date, or any Unrestricted Subsidiary that at any time fails to
               meet the requirements for an Unrestricted Subsidiary, to execute
               and deliver to the Agent promptly and in any event within three
               (3) Business Days after the formation, acquisition or change in
               status thereof (A) a Guaranty guaranteeing the Obligations, (B) a
               Security Agreement, (C) if such Subsidiary has any Subsidiaries,
               a Pledge Agreement together with (x) certificates evidencing all
               of the

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               Capital Stock of any Person owned by such Subsidiary, (y) undated
               stock powers executed in blank with signature guaranteed, and (z)
               such opinion of counsel and such approving certificate of such
               Subsidiary as the Agent may reasonably request in respect of
               complying with any legend on any such certificate or any other
               matter relating to such shares, (D) one or more Mortgages
               creating on any real property having a book value in excess of
               $1,000,000, or leased property having an annual minimum fixed
               rent in excess of $750,000 (if the lease term (including
               extensions) is less than five years) or $250,000 (if the lease
               term (including extensions) is equal to or greater than five
               years) of such Subsidiary a perfected, Lien on such real property
               subject only to Permitted Liens, a Title Insurance Policy
               covering such owned real property, a current ALTA survey thereof
               and a surveyor's certificate, each in form and substance
               satisfactory to the Agent, together with such other agreements,
               instruments and documents as the Agent may reasonably require
               whether comparable to the documents required under Section
               6.01(i) or otherwise (it being understood that the Loan Parties
               shall use their reasonable best efforts (which shall not include
               the payment of additional sums (other than incidental expenses))
               to obtain such Mortgage and other documents) , and (E) such other
               agreements, instruments, approvals, legal opinions or other
               documents reasonably requested by the Agent in order to create,
               perfect, establish the first priority of or otherwise protect any
               Lien purported to be covered by any such Security Agreement,
               Pledge Agreement or Mortgage or otherwise to effect the intent
               that such Subsidiary shall become bound by all of the terms,
               covenants and agreements contained in the Loan Documents and that
               all property and assets of such Subsidiary shall become
               Collateral for the Obligations; and (ii) each owner of the
               Capital Stock of any such Subsidiary to execute and deliver
               promptly and in any event within three (3) Business Days after
               the formation or acquisition of such Subsidiary a Pledge
               Agreement, together with (A) certificates evidencing all of the
               Capital Stock of such Subsidiary, (B) undated stock powers or
               other appropriate instruments of assignment executed in blank
               with signature guaranteed, (C) such opinion of counsel and such
               approving certificate of such Subsidiary as the Agent may
               reasonably request in respect of complying with any legend on any
               such certificate or any other matter relating to such shares and
               (D) such other agreements, instruments, approvals, legal opinions
               or other documents requested by the Agent; PROVIDED, HOWEVER,
               that nothing contained herein shall be deemed a modification of
               any other provisions of this Agreement restricting the formation
               or Acquisition of Subsidiaries by the Loan Parties, or the
               requirements applicable to Unrestricted Subsidiaries.

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                        (b) Section 6.01(d) of the Loan Agreement is hereby
amended by deleting the words "its properties and assets" in clause (i) thereof,
and substituting the words "the Collateral" therefor.

                        (c) Section 6.01(e) of the Loan Agreement is hereby
amended and restated in its entirety to read as follows:

               (e) MAINTENANCE OF INSURANCE. Maintain, and cause each of its
               Subsidiaries to maintain, insurance (including, without
               limitation, comprehensive general liability, hazard, rent and
               business interruption insurance) with responsible and reputable
               insurance companies or associations (which shall include the
               companies presently providing such insurance, or such other
               companies as may be selected by the Borrower with the consent of
               the Agent, whose consent shall not be unreasonably withheld) with
               respect to its properties (including all real properties leased
               or owned by it) and business, in such amounts, in such form, for
               such periods and covering such risks as is required by any
               Governmental Authority having jurisdiction with respect thereto
               or as is carried generally in accordance with sound business
               practice by companies in similar businesses similarly situated
               and in any event in amount, adequacy and scope reasonably
               satisfactory to the Agent. All policies covering the Collateral
               are to be made payable to the Agent for the benefit of the
               Lenders, as its interests may appear, in case of loss, under a
               standard non-contributory "lender" or "secured party" clause and
               shall provide that the insurance, to the extent of the Agent's
               interest therein, shall not be impaired or invalidated, in whole
               or in part, by reason of any act or neglect of any Loan Party or
               by the failure of any Loan Party to comply with any warranty or
               condition of the policy and are to contain such other provisions
               as the Agent may reasonably require to fully protect the Lenders'
               interest in the Collateral and to obtain any payments to be made
               under such policies. Such policy shall not include an endorsement
               in favor of any other Person (other than the Revolving Credit
               Agent, the Term Loan Agent, the holder of any Permitted Liens and
               those Persons intended as beneficiaries of any builder's risk
               insurance). All certificates of insurance are to be delivered to
               the Agent and the policies are to be premium prepaid or with
               customary payment terms (which shall be complied with in a timely
               fashion by such Loan Parties), with the loss payable and
               additional insured endorsement in favor of the Agent and such
               other Persons as the Agent may designate from time to time, and
               shall provide for not less than thirty (30) days' prior written
               notice to the Agent of the exercise of any right of cancellation.
               The Key Loan Parties shall furnish the Agent with certificates or
               other evidence satisfactory to the Agent regarding compliance by
               the Loan Parties with the foregoing requirements. If any Loan
               Party or

                                       12
<PAGE>

               any of its Subsidiaries fails to maintain such insurance, the
               Agent may arrange for such insurance, but at the Key Loan
               Parties' expense and without any responsibility on the Agent's
               part for obtaining the insurance, the solvency of the insurance
               companies, the adequacy of the coverage, or the collection of
               claims; PROVIDED, HOWEVER, that the Agent's obtaining such
               insurance shall not constitute a waiver of any Event of Default
               occasioned by the Loan Parties' failure to have maintained such
               insurance. Upon the occurrence and during the continuance of an
               Event of Default and subject to the terms of the Intercreditor
               Agreement, the Agent shall have the sole right, in the name of
               the Lenders, any Loan Party and its Subsidiaries, to file claims
               under any insurance policies, to receive, receipt and give
               acquittance for any payments that may be payable thereunder, and
               to execute any and all endorsements, receipts, releases,
               assignments, reassignments or other documents that may be
               necessary to effect the collection, compromise or settlement of
               any claims under any such insurance policies. The Borrower shall
               provide the Agent with prompt written notice of any change in the
               insurance policies owned by the Loan Parties, or under which any
               Loan Party is the named insured, from those in effect as of the
               Effective Date.

                        (d) Section 6.01(h) of the Loan Agreement is hereby
amended and restated in its entirety to read as follows:

               (h) FURTHER ASSURANCES. Take such action and execute, acknowledge
               and deliver, and cause each of its Subsidiaries to take such
               action and execute, acknowledge and deliver, at its sole cost and
               expense, such agreements, instruments or other documents as the
               Agent may reasonably require from time to time in order (i) to
               carry out more effectively the purposes of this Agreement and the
               other Loan Documents, (ii) to subject to valid and perfected
               first priority Liens (subject to Permitted Liens) any of the
               Collateral of any Loan Party and its Subsidiaries, (iii) to
               establish and maintain the validity and effectiveness of any of
               the Loan Documents and the validity, perfection and priority of
               the Liens intended to be created thereby, and (iv) to better
               assure, convey, grant, assign, transfer and confirm unto the
               Agent and each Lender the rights now or hereafter intended to be
               granted to it under this Agreement or any other Loan Document. In
               furtherance of the foregoing, to the maximum extent permitted by
               Applicable Law, each Loan Party (x) authorizes the Agent to
               execute any such agreements, instruments or other documents
               deemed reasonably necessary by the Agent in connection with this
               Agreement in such Loan Party's name and to file such agreements,
               instruments or other documents in any appropriate filing office,
               (y) authorizes the Agent to file any financing statement required
               hereunder or under any other Loan

                                       13
<PAGE>

               Document, and any continuation statement or amendment with
               respect thereto, in any appropriate filing office without the
               signature of such Loan Party, and (z) ratifies the filing of any
               financing statement, and any continuation statement or amendment
               with respect thereto, filed without the signature of such Loan
               Party prior to the date hereof.

                        (e) Section 6.01(i) of the Loan Agreement is hereby
amended and restated in its entirety to read as follows:

               (i) AFTER ACQUIRED REAL PROPERTY. Upon the acquisition by it or
               any of its Subsidiaries after the date hereof of any interest
               (whether fee or leasehold) in any real property (wherever
               located) (each such interest being an "AFTER ACQUIRED PROPERTY")
               (x) with a Current Value (as defined below) in excess of
               $1,000,000 in the case of a fee interest, or (y) requiring, in
               the case of a leasehold interest, the payment of annual minimum
               fixed rent exceeding in the aggregate $750,000 (if the Lease term
               (including extensions) is less than five years) or $250,000 (if
               the Lease term (including extensions) is equal to or greater than
               five years), immediately so notify the Agent, setting forth with
               specificity a description of the interest acquired, the location
               of the real property, any structures or improvements thereon and
               either an appraisal or such Loan Party's good-faith estimate of
               the current value of such real property (for purposes of this
               Section, THE "CURRENT VALUE"). The Agent shall notify such Loan
               Party whether it intends to require a Mortgage and the other
               documents referred to below or in the case of leasehold, a
               leasehold Mortgage or Landlord's Agreement (pursuant to Section
               6.01(i) hereof). Upon receipt of such notice requesting a
               Mortgage, the Person which has acquired such After Acquired
               Property shall promptly furnish to the Agent the following, each
               in form and substance satisfactory to the Agent: (i) a Mortgage
               with respect to such real property and related assets located at
               the After Acquired Property, each duly executed by such Person
               and in recordable form; (ii) evidence of the recording of the
               Mortgage referred to in clause (i) above in such office or
               offices as may be necessary or, in the reasonable good faith
               opinion of the Agent, desirable to create and perfect a valid and
               enforceable first priority lien on the property purported to be
               covered thereby or to otherwise protect the rights of the Agent
               and the Lenders thereunder; (iii) in the case of a fee interest,
               a title insurance policy, a survey of such real property,
               certified to the Agent and to the issuer of the Title Insurance
               Policy by a licensed professional surveyor reasonably
               satisfactory to the Agent and a Phase I Environmental Site
               Assessment with respect to such real property, certified to the
               Agent by a company reasonably satisfactory to the Agent; (iv) in
               the case of a leasehold interest, a certified copy of

                                       14
<PAGE>

               the lease between the landlord and such Person with respect to
               such real property in which such Person has a leasehold interest,
               and the certificate of occupancy with respect thereto; (v) in the
               case of a leasehold interest, an attornment and nondisturbance
               agreement between the landlord (and any fee mortgagee) with
               respect to such real property and the Agent; and (vi) such other
               documents or instruments (including, without limitation,
               guarantees and opinions of counsel) as the Agent may reasonably
               require, PROVIDED, HOWEVER, that nothing contained herein shall
               be deemed a modification of any other provisions of this
               Agreement restricting Acquisitions or investments by the Loan
               Parties. The Key Loan Parties shall pay all reasonable fees and
               expenses, including reasonable attorneys' fees and expenses, and
               all title insurance charges and premiums, in connection with each
               Loan Party's obligations under this Section 6.01(i).

                        (f) Section 6.01 of the Loan Agreement is hereby amended
by inserting the following provisions at the end thereof to read in their
entirety as follows:

               (q) LEASEHOLD MORTGAGES. Each of the Loan Parties shall use their
               reasonable best efforts to obtain leasehold Mortgages on
               substantially all Leases of the Loan Parties it being understood
               that reasonable best efforts shall require a bona fide request be
               made in writing to the appropriate parties with a copy to the
               Agent (or in lieu thereof, a short memorandum describing a
               telephone request made in respect thereof, which memorandum shall
               include the date of the conversation and the name of the person
               with whom the Loan Party spoke) with appropriate follow-up as
               reasonably required by the Agent, which in each case shall be
               included in the Leasehold Mortgage Status Report; PROVIDED, that
               no Loan Parties shall be required to pay any money (other than
               incidental expenses), agree to amended Lease terms (unless such
               amendments are immaterial in the reasonable judgment of the Key
               Loan Parties), or commence any legal action.

               (r) BOARD OF DIRECTORS RIGHTS.

               (i)   BOARD OBSERVERS. From the Effective Date until the date
                     that the provisions of Section 6.01(r)(ii) below are
                     applicable, the Borrower shall allow two representatives
                     designated by CPLP to attend all meetings, including
                     telephonic meetings, of the Borrower's Board of Directors
                     in a non-voting capacity. The Borrower will give such
                     representatives written notice of each meeting of its Board
                     of Directors in advance and at the same time and in the
                     same manner as notice is given to the directors. Such
                     representatives shall also be provided with all written

                                       15
<PAGE>

                    materials and other information (including minutes of
                    meetings) given to directors in connection with such
                    meetings at the same time such materials and information are
                    given to the directors. If the Borrower proposes to take any
                    action by written consent in lieu of a meeting of its Board
                    of Directors, the Borrower shall give written notice thereof
                    to such representatives promptly following the effective
                    date of such consent describing in reasonable detail the
                    nature and substance of such action. In the event the
                    Borrower establishes separate committees of the Board of
                    Directors, the right to representatives granted hereunder
                    shall extend to meetings of such committees.

              (ii)  BOARD REPRESENTATIVES. From and after the date on which
                    CPLP holds 50% of the Conversion Shares issuable upon the
                    conversion of its Pro Rata share of the Loan as of the
                    Effective Date, CPLP shall be entitled to designate two
                    directors to serve on the Board of Directors of the
                    Borrower. The Borrower shall promptly take all action
                    necessary to cause such individuals to be appointed to the
                    Board, including either increasing the size of the Board or
                    securing the resignations of incumbent directors or both.
                    At each annual or other meeting of shareholders at which
                    the election of directors is considered, if CPLP is
                    entitled to designate directors under this Section
                    6.01(r)(ii), the Board of Directors of the Borrower shall
                    continue to nominate at least two designees of CPLP for
                    election to the Board. At any such shareholder meeting, if
                    CPLP is entitled to designate directors under this Section
                    6.01(r)(ii), SSC hereby agrees that it shall vote all
                    shares of Common Stock and other voting securities of the
                    Borrower over which such SSC has voting control, and shall
                    take all other reasonably necessary actions within its
                    control (whether in its capacity as a shareholder,
                    director, member of a Board committee or officer of the
                    Borrower or otherwise, and including attendance at meetings
                    in person or by proxy for purposes of obtaining a quorum
                    and execution of written consents in lieu of meetings), and
                    the Borrower shall take all reasonably necessary actions
                    within its control (including calling special board and
                    shareholder meetings), so that persons designated by CPLP
                    will be elected to the Borrower's Board of Directors. Any
                    vacancy on the Board of Directors created by reason of the
                    death, removal or resignation of a director who is a
                    designee of CPLP shall be filled by an individual
                    designated by the CPLP.

                                       16
<PAGE>

              (iii) TERMINATION. The rights of CPLP pursuant to Section
                    6.01(r)(i) shall terminate and be of no further force and
                    effect from and after the date that CPLP converts at least
                    50% of its Pro Rata Share of the Loan as of the Effective
                    Date. The rights of CPLP pursuant to Section 6.01(r)(ii)
                    shall terminate and be of no further force and effect from
                    and after the date that CPLP holds, or is entitled to hold
                    upon conversion of its Pro Rata Share of the Loan, in the
                    aggregate shares of Common Stock representing less than 50%
                    of the Conversion Shares issued or issuable upon Conversion
                    of its Pro Rata Share of the Loan as of the Effective Date.

                        (g) Section 6.02(c) of the Loan Agreement is hereby
amended and restated in its entirety as follows:

               (c) FUNDAMENTAL CHANGES; DISPOSITIONS. (i) Wind-up, liquidate or
               dissolve, or permit any of its Subsidiaries to wind-up, liquidate
               or dissolve; (ii) merge, consolidate or amalgamate with any
               Person, or permit any of its Subsidiaries to merge, consolidate
               or amalgamate with any Person; (iii) purchase or otherwise
               acquire, whether in one transaction or a series of related
               transactions, all or substantially all of the assets of any
               Person (or any division thereof), or permit any of its
               Subsidiaries to do any of the foregoing; (iv) suffer or cause, or
               permit any of its Subsidiaries to suffer or cause the waste or
               destruction of any material part of the Collateral; (v) use or
               permit any of its Subsidiaries to use, any of the Collateral in
               violation of any policy of insurance thereon; (vi) sell, lease,
               sublease, convey, transfer or otherwise dispose of, or permit any
               of its Subsidiaries to sell, lease, sublease, convey, transfer or
               otherwise dispose of any of the Collateral; and (vii) other than
               leased departments and similar arrangements with third parties,
               commit to open or close any location at which any Loan Party
               maintains, offers for sale, or stores any of the Collateral, in
               any fiscal year such that the actual number of stores of all Key
               Loan Parties in the aggregate (x) exceeds by ten (10) the number
               of stores reflected on the Business Plan for such fiscal year, or
               (y) is more than ten (10) fewer than the number of stores
               reflected on the Business Plan for such fiscal year (without
               giving effect to any new stores which the Business Plan projected
               to be opened or closed, but which have not in fact been opened or
               closed); PROVIDED, HOWEVER, that each of the following shall be
               permitted:

                        (A)   if no Default or Event of Default shall have
                              occurred and be continuing or would result
                              therefrom, with the prior written consent of the
                              Agent (which consent shall not be unreasonably

                                       17
<PAGE>

                              withheld) any wholly-owned Subsidiary may merge,
                              consolidate or amalgamate with or into a Borrower
                              or with or into another wholly-owned Subsidiary of
                              a Borrower, so long as in any merger,
                              consolidation or amalgamation involving a
                              Borrower, the Borrower is the surviving,
                              continuing or resulting corporation;

                        (B)   if no Default or Event of Default shall have
                              occurred and be continuing or would result
                              therefrom, any Loan Party may liquidate or
                              dissolve any Unrestricted Subsidiary;

                        (C)   if no Default or Event of Default shall have
                              occurred and be continuing or would result
                              therefrom, any Loan Party may engage in any
                              Acquisition which is a Permitted Acquisition,
                              provided that all of the conditions contained in
                              the definition of the term Permitted Acquisition
                              are satisfied; and

                        (D)   any Loan Party may engage in (1) the sale of
                              Inventory in compliance with this Agreement; (2)
                              the disposal of Equipment which is obsolete, worn
                              out, or damaged beyond repair, or no longer useful
                              in the Loan Parties' businesses; (3) Permitted
                              Dispositions; (4) the turning over to the Agent of
                              certain Collateral as provided herein, or to the
                              Revolving Credit Agent of all Receipts (as defined
                              in the Revolving Credit Facility) as provided in
                              the Revolving Credit Facility; and (5) the use of
                              the Collateral to pay obligations arising in the
                              ordinary course.

                        (h) Section 6.02(e) of the Loan Agreement is hereby
amended and restated in its entirety as follows:

               (e) LOANS; ADVANCES; INVESTMENTS, ETC. (i) Make or commit or
               agree to make any loan, advance guarantee of obligations, other
               extension of credit or capital contributions to, or hold or
               invest in or commit or agree to hold or invest in, or purchase or
               otherwise acquire any shares of the Capital Stock, bonds, notes,
               debentures or other securities of, or make or commit or agree to
               make any other investment in, any other Person; (ii) purchase or
               own any futures contract or otherwise become liable for the
               purchase or sale of currency or other commodities at a future
               date in the nature of a futures contract; (iii) subordinate any
               debts or obligations owed to

                                       18
<PAGE>

               that Loan Party by any third party (but not by another Loan
               Party) to any other debts owed by such third party to any other
               Person; (iv) enter into leases of property or assets not
               constituting Permitted Acquisitions, unless such leases are not
               otherwise in violation of this Agreement; (v) organize or create
               any Affiliate other than in connection with a Permitted
               Acquisition; or (vi) acquire any assets other than in the
               ordinary course and conduct of that Loan Party's business as
               conducted at the execution of this Agreement, other than in
               connection with a Permitted Acquisition or as otherwise permitted
               in this Agreement, or permit any of its Subsidiaries to do any of
               the foregoing, except for:

                        (A)   Permitted Investments and investments directly
                              related to Permitted Acquisitions;

                        (B)   advance payments made to that Loan Party's
                              suppliers in the ordinary course;

                        (C)   advances to that Loan Party's officers, employees,
                              and salespersons with respect to reasonable
                              expenses to be incurred by such officers,
                              employees, and salespersons for the benefit of
                              that Loan Party, which expenses are properly
                              substantiated by the Person seeking such advance
                              and properly reimbursable by that Loan Party;

                        (D)   loans and advances to employees for
                              business-related moving expenses, costs of
                              replacement homes, business machines or supplies,
                              automobiles and other similar expenses, in each
                              case incurred in the ordinary course of business
                              not to exceed (together with loans and advances
                              under Section 6.02(e)(E) and investments permitted
                              under clause (xiii) of the definition of Permitted
                              Investment) $6,000,000 in the aggregate
                              outstanding to all employees at any one time;

                        (E)   loans and advances to that Loan Party's officers,
                              employees, and salespersons in connection with any
                              employment agreements or arrangements, or any
                              stock options or option plans not to exceed
                              $6,000,000 (together with loans and advances under
                              Section 6.02(e)(D) and investments permitted under
                              clause (xiii) of the definition of Permitted
                              Investments) in the aggregate outstanding to all
                              employees at any one time;

                                       19
<PAGE>

                        (F)   intercompany loans (1) existing on the date hereof
                              and described on Schedule 6.02(e)(vi)(F) hereof,
                              and (2) hereafter made amongst any Loan Parties
                              pursuant to the terms of the Revolving Credit
                              Facility;

                        (G)   loans and advances of a Person outstanding at the
                              time such Person becomes a Subsidiary as a result
                              of a Permitted Acquisition, PROVIDED, that any
                              such loans or advances were not made at the time
                              of or in contemplation of the acquisition of such
                              Person by a Loan Party or any Subsidiaries;

                        (H)   to the extent not permitted by the foregoing
                              clauses, the existing loans and advances described
                              on Schedule 6.02(e)(vi)(H) hereto;

                        (I)   any other loans and advances to or for the benefit
                              of any Person which (1) is not itself a Loan
                              Party, (2) are not otherwise permitted by the
                              foregoing clauses, and (3) are made after the
                              Effective Date, which loans and advances have been
                              approved in advance by the Agent.

                        (i) Section 6.02(i) of the Loan Agreement is hereby
amended by adding the following proviso at the end thereof:

               PROVIDED, HOWEVER, that notwithstanding anything to the contrary
               contained in this Section 6.02(i), no Loan Party may engage in
               any SSC Transaction or CPLP Transaction except in accordance with
               the terms of Article XIV.

                        (j) Section 6.02(j) of the Loan Agreement is hereby
amended and restated in its entirety as follows:

               (j) LIMITATIONS ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
               AFFECTING SUBSIDIARIES AND RESTRICTIONS ON OBLIGATIONS. Create or
               otherwise cause, incur, assume, suffer or permit to exist or
               become effective any consensual encumbrance or restriction of any
               kind on the ability of (i) any Loan Party to create or grant
               liens in favor of the Agent or to incur Obligations or (ii) any
               Subsidiary of any Loan Party (A) to pay dividends or to make any
               other distribution on any shares of Capital Stock of such
               Subsidiary owned by any Loan Party or any of its Subsidiaries,
               (B) to pay or prepay or to subordinate any Indebtedness owed to
               any Loan Party or any of its Subsidiaries, (C) to make loans or
               advances to any Loan Party or any of its Subsidiaries or (D) to
               transfer any of its property or

                                       20
<PAGE>

               assets to any Loan Party or any of its Subsidiaries, or permit
               any of its Subsidiaries to do any of the foregoing; PROVIDED,
               HOWEVER, that nothing in any of clauses (A) through (D) of this
               Section 6.02(j) shall prohibit or restrict compliance with:

                         (1) this Agreement and the other Loan Documents, the
                    Revolving Credit Facility Documents or the Term Loan
                    Documents;

                         (2) any agreements in effect on the date of this
                    Agreement and described on Schedule 6.02(j);

                         (3) any Applicable Law, rule or regulation (including,
                    without limitation, applicable currency control laws and
                    applicable state corporate statutes restricting the payment
                    of dividends in certain circumstances);

                         (4) in the case of clause (D) any agreement setting
                    forth customary restrictions on the subletting, assignment
                    or transfer of any property or asset that is a lease,
                    license, conveyance or contract of similar property or
                    assets; or

                         (5) in the case of clause (D), any agreement,
                    instrument or other document evidencing a Permitted Lien
                    from restricting on customary terms the transfer of any
                    property or assets subject thereto.

                    (k) Section 6.02(k) of the Loan Agreement is hereby amended
and restated in its entirety as follows:

               (k) LIMITATION ON ISSUANCE OF CAPITAL STOCK. Issue or sell or
               enter into any agreement or arrangement for the issuance and sale
               of, or permit any of its Subsidiaries to issue or sell or enter
               into any agreement or arrangement for the issuance and sale of,
               any shares of its Capital Stock, any securities convertible into
               or exchangeable for its Capital Stock or any warrants, PROVIDED,
               that Borrower may issue (i) the Warrant Stock, (ii) the shares
               issuable upon conversion of the Loan pursuant to the terms of
               this Agreement, (iii) up to 5,000,000 shares of Common Stock (and
               following the fifth anniversary of the Effective Date, up to an
               additional 5,000,000 shares of Common Stock) that are issued to
               Persons other than Affiliates of the Borrower, including (A)
               shares of Common Stock or options exercisable therefor, issued or
               to be issued under the Borrower's 2000 Stock Option Plan as in
               effect on the Effective Date or under any other employee stock
               option or purchase plan or plans, or pursuant to compensatory or
               incentive agreements, for officers, employees or consultants of
               the Borrower or any of its Subsidiaries, in each case adopted or
               assumed after

                                       21
<PAGE>

               such date by the Borrower's Board of Directors; provided in each
               case that the exercise or purchase price for any such share shall
               not be less than 95% of the fair market value (determined in good
               faith by the Borrower's Board of Directors) of the Common Stock
               on the date of the grant, and such additional number of shares as
               may become issuable pursuant to the terms of any such plans by
               reason of adjustments required pursuant to antidilution
               provisions applicable to such securities in order to reflect any
               subdivision or combination of Common Stock, by reclassification
               or otherwise, or any dividend on Common Stock payable in Common
               Stock, (B) shares of restricted stock issued by the Borrower to
               executive officers of the Borrower, and (C) shares of Common
               Stock issued by the Borrower as charitable gifts.

                        (l) Section 6.02(l) of the Loan Agreement is hereby
amended and restated in its entirety as follows:

               (l) MODIFICATIONS OF INDEBTEDNESS, ORGANIZATIONAL DOCUMENTS AND
               CERTAIN OTHER AGREEMENTS, ETC. (i) Amend, modify or otherwise
               change (or permit the amendment, modification or other change) in
               any manner of any of the provisions of any of its or its
               Subsidiaries' Indebtedness or of any instrument or agreement
               (including, without limitation, any purchase agreement,
               indenture, loan agreement or security agreement) relating to any
               such Indebtedness if such amendment, modification or change (A)
               would shorten the final maturity or average life to maturity of,
               or require any payment to be made earlier than the date
               originally scheduled on, such Indebtedness, or would increase the
               interest rate applicable to such Indebtedness unless (x) Excess
               Availability, both immediately prior to, immediately after giving
               effect to and on a pro forma projected basis for the 12 months
               immediately following such amendment, modification or change, is
               at least $100 million, or (y) the total amount of such
               Indebtedness so amended, modified or changed since the Effective
               Date (together with the amounts permitted under clause (ii)
               hereof), does not exceed $500,000 in any Fiscal Year of the
               Borrower; (B) would change the subordination provision, if any,
               of such Indebtedness, or (C) would otherwise be adverse to the
               Lenders in any respect; (ii) except for the Obligations and
               except as otherwise explicitly permitted herein, make any
               voluntary or optional payment, prepayment, redemption,
               defeasance, sinking fund payment or other acquisition for value
               of any of its or its Subsidiaries' Indebtedness (including,
               without limitation, by way of depositing money or securities with
               the trustee therefor before the date required for the purpose of
               paying any portion of such Indebtedness when due), or refund,
               refinance, replace or exchange any other Indebtedness for any
               such Indebtedness (except to the

                                       22
<PAGE>

               extent such Indebtedness is otherwise expressly permitted by the
               definition of "Permitted Indebtedness"), or make any payment,
               prepayment, redemption, defeasance, sinking fund payment or
               repurchase of any outstanding Indebtedness as a result of any
               asset sale, change of control, issuance and sale of debt or
               equity securities or similar event, or give any notice with
               respect to any of the foregoing unless (x) Excess Availability,
               both immediately prior to, immediately after giving effect to and
               on a pro forma projected basis for the 12 months immediately
               following such event is at least $100 million, or (y) the total
               amount of such Indebtedness so paid since the Effective Date
               (together with the amounts permitted under clause (i)(A) hereof),
               does not exceed $500,000 in any Fiscal Year of the Borrower;
               (iii) except as permitted by Section 6.02(c), amend, modify or
               otherwise change its name, jurisdiction of organization,
               organizational identification number or FEIN; (iv) amend, modify
               or otherwise change its certificate of incorporation or bylaws
               (or other similar organizational documents), including, without
               limitation, by the filing or modification of any certificate of
               designation, or any agreement or arrangement entered into by it,
               with respect to any of its Capital Stock (including any
               shareholders' agreement), or enter into any new agreement with
               respect to any of its Capital Stock, except any such amendments,
               modifications or changes or any such new agreements or
               arrangements pursuant to this clause (iv) that either
               individually or in the aggregate, could not have a Material
               Adverse Effect; (v) amend, modify, waive or otherwise change (or
               permit the amendment, modification, waiver or other change in any
               manner) of any provisions in the Revolving Credit Facility
               Documents relating to (A) Availability, Excess Availability,
               Excess Availability Reserve, Gross Availability or the Borrowing
               Base (as each is defined in the Revolving Credit Facility) which
               amendment has or could have the effect of increasing
               Availability, Excess Availability, Gross Availability or the
               Borrowing Base or decreasing the Availability Reserve, (B) the
               Credit Card Advance Rate, the Inventory Advance Rate, the
               Appraised Inventory Percentage or the Appraised Inventory
               Liquidation Value (as each is defined in the Revolving Credit
               Facility), in each case, to an amount in excess of the rates set
               forth in the Revolving Credit Facility as in effect on the date
               hereof, (C) the definition of Cash Control Event and the related
               provisions contained in Article VII of the Revolving Credit
               Agreement, (D) the provisions of the Revolving Credit Agreement
               relating to the Term Loan Debt, and (E) any covenants or Events
               of Default contained in the Revolving Credit Agreement, if such
               amendments imposes any additional or more restrictive
               representations, covenants (financial or otherwise) or events of
               default than is

                                       23
<PAGE>

               contained in the Revolving Credit Agreements in effect on the
               date hereof, and, if, notwithstanding the foregoing, such
               amendment is made, the Borrower shall promptly notify, and
               furnish a copy thereof to the Agent; (vi) agree to any material
               amendment or other material change to or waiver of any of its
               rights under any Material Contract without the consent of the
               Agent (which consent shall not be unreasonably withheld); or
               (vii) alter, modify or amend any Lease in a manner which is
               reasonably likely to have a Material Adverse Effect.

                        (m) Section 6.02(n) of the Loan Agreement is hereby
amended and restated in its entirety as follows:

               (n) PROPERTIES. Other than in the ordinary course of business,
               permit any property to become a fixture with respect to real
               property or to become an accession with respect to other personal
               property with respect to which real or personal property the
               Agent does not have a valid and perfected first priority Lien.

                        (n) Section 6.02(q) of the Loan Agreement is hereby
amended and restated in its entirety as follows:

               (q) EXCESS AVAILABILITY RESERVE. Permit the Excess Availability
               Reserve at any time to be less than the sum of $35,000,000.

                        (o) Section 6.02(r) of the Loan Agreement is hereby
amended and restated in its entirety as follows:

               (r) LOCATION OF COLLATERAL. (i) Remove any Collateral from
               locations described in Schedule 5.01(ee) except for the following
               purposes:

                        (A)   to accomplish sales of Inventory in the ordinary
                              course of business;

                        (B)   to move Inventory or other Collateral from one
                              such location to another such location; or

                        (C)   to utilize such of the Collateral as is removed
                              from such locations in the ordinary course of
                              business.

               (ii) place any tangible personal property of any Loan Party in
                    the care or custody of any third party, or store or entrust
                    any such personal property with a bailee or other third
                    party, except (A) as otherwise disclosed to the Agent
                    pursuant to Section 5.01(ee), or permitted by this Section
                    6.02(r), or (B) for Inventory in an amount not to exceed
                    $1,000,000 at Cost (as defined in the Revolving Credit

                                       24
<PAGE>

                    Facility) in the aggregate at any time in the ordinary
                    course of business;

         7.    REPORTING REQUIREMENTS. (a) Section 7.01(c) of the Loan Agreement
is hereby amended and restated in its entirety to read as follows:

               (c) At all times, keep accurate current records of the Collateral
               including, without limitation, accurate current stock, cost, and
               sales records of its Inventory for each Division, accurately and
               sufficiently itemizing and describing the kinds, types, and
               quantities of Inventory and the cost and selling prices thereof.

               (b) Section 7.02(b) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:

               (b) Each Loan Party hereby authorizes the Agent to (i) inspect,
               copy, duplicate, review, cause to be reduced to hard copy, run
               off, draw off, and otherwise use any and all computer or
               electronically stored information or data which relates to any
               Loan Party. Each Loan Party shall request full cooperation with
               the Agent from any service bureau, contractor, accountant, or
               other Person; and (ii) verify at any time the Collateral or any
               portion thereof, including verification with Account Debtors,
               and/or with each Loan Party's computer billing companies,
               collection agencies, and accountants.

               (c) Section 7.03(a)(xi) of the Loan Agreement is hereby amended
and restated in its entirety to read as follows:

               (xi) any material adverse change relating to the type, quantity
               or quality of the Collateral or the Lien granted thereon;

               (d) Sections 7.04, 7.05 and 7.09 of the Loan Agreement are hereby
amended and restated to read in their entirety as follows:

               Section 7.04 WEEKLY REPORTS. Weekly, on Friday of each week (as
               of the then immediately preceding Saturday) the Borrower shall
               provide the Agent with Borrowing Base Certificates (in the form
               of Exhibit G annexed hereto, as such form may be revised from
               time to time by the Revolving Credit Agent) prepared separately
               for each Division and combined for all Key Loan Parties, and
               sales audit reports and flash collateral reports (each in such
               form as may be specified from time to time by the Collateral
               Agents) prepared separately for each Division and combined for
               all Key Loan Parties. Such reports may be sent to the Agent by
               facsimile transmission, provided that the original thereof is
               forwarded to the Agent on the date of such transmission.

                                       25
<PAGE>

               Section 7.05 MONTHLY REPORTS. Monthly, the Borrower shall provide
               the Agent with those financial statements and reports described
               on Schedule 7.05, annexed hereto, at the times set forth in such
               Schedule and a Leasehold Mortgage Status Report.

               Section 7.09 INVENTORY, APPRAISALS AND AUDITS.

               (a) The Agent, at the reasonable expense of the Loan Parties, may
               participate in and/or observe each scheduled physical count of
               Inventory which is undertaken on behalf of any Loan Party.

               (b) The Loan Parties, at their own expense, shall cause not less
               than one (1) physical inventory of each of Division to be
               undertaken in each twelve (12) month period during which this
               Agreement is in effect; (i) the Borrower, within forty-five (45)
               days following the completion of such inventory, shall provide
               the Agent with a reconciliation of the results of each such
               inventory (as well as of any other physical inventory undertaken
               by any Loan Party) and shall post such results to the Loan
               Parties' stock ledger and, as applicable to the Loan Parties'
               other financial books and records; and (ii) the Agent, in its
               reasonable, good faith discretion, if any Event of Default has
               occurred and is continuing, may cause such additional inventories
               to be taken as the Agent determines (each, at the expense of the
               Loan Parties).

               (c) The Agent may require the Collateral Agents (as defined in
               the Revolving Credit Facility) to obtain appraisals of the
               Collateral (copies of which, subject to the approval of the
               appraiser, shall be provided to the Borrower promptly upon
               receipt thereof), at any time (i) after the occurrence and during
               the continuance of an Event of Default, (ii) that Excess
               Availability (as defined in the Revolving Credit Facility) is
               equal to or less than $60,000,000, or (iii) after an Inadvertent
               Overadvance (as defined in the Intercreditor Agreement) has
               occurred (in all events, at the Loan Parties' expenses) conducted
               by Hilco Appraisal Services, LLC or such appraisers as are
               satisfactory to the Agent and the Revolving Credit Agent, in
               addition to those appraisals permitted to be obtained by the
               Collateral Agents (as defined in the Revolving Credit Facility)
               pursuant to Section 5.9 of the Revolving Credit Facility.
               Following the termination of the Revolving Credit Facility, the
               Agent shall be entitled to conduct appraisals independently on
               the same terms granted to the Collateral Agents under the terms
               of the Revolving Credit Facility in effect on the Effective Date.

               (d) If made available to any Loan Party, the Agent shall receive
               copies of the results of any commercial finance field

                                       26
<PAGE>

               examination of the Loan Parties' books and records conducted
               during any period in which this Agreement is in effect.

               (e) The Agent from time to time may undertake "mystery shopping"
               (so-called) visits to all or any of the Loan Parties' business
               premises.

         8. USE OF COLLATERAL. Article VIII is hereby amended and restated to
read in its entirety as follows:

                                  ARTICLE VIII

                                USE OF COLLATERAL

         Section 8.01 USE OF INVENTORY CONTROL.

                 (a) No Loan Party shall engage in any of the following with
respect to its Inventory (i) any sale, other than for fair consideration in the
conduct of the Loan Parties' business in the ordinary course; (ii) sales or
other dispositions to creditors, except returns in the ordinary course of
business; (iii) sales or other dispositions in bulk, except in the ordinary
course of business consistent with past practices; (iv) sales in breach of any
provision of this Agreement; and (v) sales in connection with Permitted
Dispositions.

                 (b) No sale of Inventory shall be on consignment (other than
between Loan Parties), approval, or under any other circumstances such that,
with the exception of the Loan Parties' customary return policy applicable to
the return of inventory purchased by the Loan Parties' retail customers in the
ordinary course, such Inventory may be returned to a Loan Party without the
consent of the Agent.

         Section 8.02 INVENTORY QUALITY. All Inventory now owned or hereafter
acquired by each Loan Party is and will be of good and merchantable quality,
consistent with past practices.

         Section 8.03 ADJUSTMENTS AND ALLOWANCES. Each Loan Party may grant such
allowances or other adjustments to that Loan Party's Account Debtors as that
Loan Party may reasonably deem to accord with sound business practice and which
are normal and customary extensions and adjustments in the ordinary course of
business, provided, however, the authority granted the Loan Parties pursuant to
this Section 8.03 may be limited or terminated by the Agent at any time in the
Agent's reasonable, good faith discretion after the occurrence and during the
continuance of an Event of Default.

         Section 8.04 VALIDITY OF ACCOUNTS.

                 (a) Except for adjustments and disputes in the ordinary course
of business, the amount of each of the Accounts Receivable shown on the books,
records, and invoices of the Loan Parties represented as owing by each Account
Debtor is the correct amount actually owing by such Account Debtor and shall
have been fully earned by performance by the Loan Parties.

                                       27
<PAGE>

                 (b) No Loan Party has any knowledge of any impairment of the
validity or collectibility of any of the Accounts Receivable, other than
returns, reserves, unauthorized use of credit cards, bad checks, adjustments and
disputes which occur in the ordinary course of business. The Borrower shall
notify the Agent of any such impairment immediately after any Loan Party becomes
aware of any such impairment.

                 (c) No Loan Party shall post any bond to secure any Loan
Party's performance under any agreement to which any Loan Party is a party nor
cause any surety, guarantor, or other third party obligee to become liable to
perform any obligation of any Loan Party (other than to the Agent) in the event
of any Loan Party's failure so to perform, if, as a result of the surety,
guarantor or third party obligee's performance, such Person would obtain a Lien
on any Collateral having priority to the Lien of the Agent.

         Section 8.05 NOTIFICATION TO ACCOUNT DEBTORS. The Agent shall have the
right (after the occurrence of a Cash Control Event (as defined in the Revolving
Credit Facility)) to notify any of the Loan Parties' Account Debtors to make
payment directly to the Agent and to collect all amounts due on account of the
Collateral, in each case, subject to the terms of the Intercreditor Agreement.

         Section 8.06 APPOINTMENT AS ATTORNEY-IN-FACT. Each Key Loan Party
hereby irrevocably constitutes and appoints the Agent (acting through any
officer of the Agent) as that Key Loan Party's true and lawful attorney, with
full power of substitution, following the occurrence and during the continuance
of an Event of Default and subject to the terms of the Intercreditor Agreement,
to convert the Collateral into cash at the sole risk, cost, and expense of that
Key Loan Party, but for the sole benefit of the Agent and the Lenders. The
rights and powers granted the Agent by this appointment include but are not
limited to the right and power to:

                 (a) Prosecute, defend, compromise, or release any action
relating to the Collateral;

                 (b) Sign change of address forms to change the address to
which each Key Loan Parties' mail is to be sent to such address as the Agent
shall designate (after which copies of all such mail shall be promptly furnished
to the Borrower); receive and open each Key Loan Parties' mail; remove any
Collateral and proceeds of Collateral therefrom and turn over the balance of
such mail either to the Key Loan Party or to any trustee in bankruptcy or
receiver of the Borrower, or other legal representative of a Borrower whom the
Agent determines to be the appropriate Person to whom to so turn over such mail;

                 (c) Endorse the name of the relevant Key Loan Party in favor of
the Agent upon any and all checks, drafts, notes, acceptances, or other items or
instruments; sign and endorse the name of the relevant Key Loan Party on, and
receive as secured party, any of the Collateral, any invoices, schedules of
Collateral, freight or express receipts, or bills of lading, storage receipts,
warehouse receipts, or other documents of title respectively relating to the
Collateral;

                                       28
<PAGE>

                 (d) Sign the name of the relevant Key Loan Party on any notice
to that Key Loan Parties' Account Debtors or verification of the Collateral;
sign the relevant Key Loan Parties' name on any proof of claim in bankruptcy
against Account Debtors, and on notices of lien, claims of mechanic's liens, or
assignments or releases of mechanic's liens securing the Accounts Receivable;

                 (e) Take all such action as may be necessary to obtain the
payment of any letter of credit and/or banker's acceptance of which any Key Loan
Party is a beneficiary;

                 (f) Repair, manufacture, assemble, complete, package, deliver,
alter or supply goods, if any, necessary to fulfill in whole or in part the
purchase order of any customer of each Key Loan Party; and

                 (g) Use, license or transfer any or all General Intangibles of
each Key Loan Party.

         Section 8.07 NO OBLIGATION TO ACT. The Agent shall not be obligated to
do any of the acts or to exercise any of the powers authorized by Section 8.06
herein, but if the Agent elects to do any such act or to exercise any of such
powers, it shall not be accountable for more than it actually receives as a
result of such exercise of power, and shall not be responsible to any Borrower
for any act or omission to act except for any act or omission to act as to which
there is a final determination made in a judicial proceeding (in which
proceeding the Agent has had an opportunity to be heard) which determination
includes a specific finding that the subject act or omission to act had been
grossly negligent or in actual bad faith, or willful misconduct.

         9. EVENTS OF DEFAULT.

                 (a) Section 9.01(c) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:

            (c) the failure by any Loan Party to promptly, punctually,
            faithfully and timely perform, discharge, or comply with any
            covenant or Obligation included in any of the following provisions
            hereof:

                                       29
<PAGE>

                SECTION                       RELATES TO
                -------                       ----------
                6.02(b)                       Indebtedness
                6.01(b)                       Pay Taxes
                6.02(g)                       Dividends. Investments. Other
                                                 Corporate Actions
                6.02(e)                       Loans and Advances
                6.02(i)                       Affiliate Transactions
                6.02(q)                       Excess Availability Reserve
                Article VII                   Reporting Requirements (except as
                                                 set forth in Section 9.01(d))
                5(k) of the Security          Cash Management
                   Agreement

                 (b) Section 9.01(d) of the Loan Agreement is hereby amended and
restated in is entirety as follows:

            (d) the failure by the Key Loan Parties to promptly, punctually,
            faithfully and timely perform, discharge, or comply with the
            financial reporting requirements included in Section 7.04, subject,
            however, to the following limited number of grace periods applicable
            to certain of those requirements:

<TABLE>
<CAPTION>

                                                                                                   NUMBER OF
       REPORT/STATEMENT             REQUIRED BY SECTION             GRACE PERIOD                 GRACE PERIODS
       ----------------             -------------------             ------------                 -------------
<S>                                        <C>                     <C>                          <C>
        Weekly Report                      7.04                    2 Business Days              Twice any 12 consecutive
                                                                                                months
</TABLE>

                 (c) Section 9.01(g) of the Loan Agreement is hereby amended and
restated in is entirety as follows:

            (g) the occurrence and continuance of any Event of Default or other
            event, which with the giving of notice, the passage of time or both,
            would be an Event of Default under (i) the Revolving Credit
            Facility, (ii) the Term Loan Documents, or (iii) any other
            Indebtedness of any Loan Party equal to or in excess of One Million
            Dollars ($1,000,000.00) to any creditor other than the Agent or any
            Lender, (whether or not such Indebtedness has been accelerated), or,
            Leases aggregating more than five percent (5%) of all Leases of the
            Loan Parties existing from time to time could be terminated due to a
            default by a Loan Party thereunder (whether or not the subject
            creditor or lessor takes any action on account of such occurrence);

                                       30
<PAGE>

                 (d) Section 9.01(i) of the Loan Agreement is hereby amended by
deleting the words "property or assets of the Loan Parties" and substituting the
word "Collateral" therefor.

                 (e) Section 9.01(n) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:

            (n) (i) any challenge by or on behalf of any Loan Party to the
            validity of any Loan Document or the applicability or enforceability
            of any Loan Document strictly in accordance with the subject Loan
            Document's terms or which seeks to void, avoid, limit, or otherwise
            adversely affect any security interest created by or in any Loan
            Document or any payment made pursuant thereto;

            (ii) any determination by any court or any other judicial or
            Government Authority that any Loan Document is not enforceable
            strictly in accordance with the subject Loan Document's terms or
            which voids, avoids, limits, or otherwise adversely affects any
            security interest created by any Loan Document or any payment made
            pursuant thereto; or

                 (f) Section 9.01(q) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:

            (q) the Loan Parties refinance the Loan (as defined in the Term Loan
            Agreement) and 80% or more of the proceeds of such refinancing is
            derived from the incurrence of Indebtedness.

         10. AGENT.

            (a) Section 10.01 of the Loan Agreement is hereby amended by
deleting the words "properties and assets of the Loan Parties" in clause (iii)
thereof and substituting the word "Collateral" therefor, deleting the words "and
take any enforcement action in clause (C) thereof, and substituting the words
"take action to realize upon the Collateral" therefor and amending and restating
clause (v) thereof to read in its entirety as follows:

            (v) to make Agent Advances, for the Agent or on behalf of the
            applicable Lenders as provided in this Agreement or any other Loan
            Document;

            (b) Section 10.02 of the Loan Agreement is hereby amended by
deleting the words "properties and asset of the Loan Parties" in the final
sentence thereof and substituting the word "Collateral" therefor.

            (c) Section 10.03 of the Loan Agreement is hereby amended by
deleting the word "and" immediately prior to clause (v) thereof and inserting
the following at the end thereof:

                                       31
<PAGE>

            ; and (vi) shall not be deemed to have made any representation or
            warranty regarding the existence, value or collectibility of the
            Collateral, the existence, priority or perfection of the Agent's
            Lien thereon, or any certificate prepared by any Loan Party in
            connection therewith, nor shall the Agent or the Required Lenders be
            responsible or liable to the Lenders for any failure to monitor or
            maintain any portion of the Collateral.

            (d) Section 10.08 and 10.09 of the Loan Agreement is hereby amended
and restated in their entirety to read as follows:

         Section 10.08 COLLATERAL MATTERS.

                 (a) The Agent may from time to time make such disbursements and
advances ("AGENT ADVANCES") which the Agent, in its sole discretion, deems
reasonably necessary or desirable to preserve, protect, prepare for sale or
lease or dispose of the Collateral or any portion thereof, to enhance the
likelihood or maximize the amount of repayment by the Borrower of the Loan and
other Obligations or to pay any other amount chargeable to the Key Loan Parties
pursuant to the terms of this Agreement, including, without limitation, costs,
fees and expenses as described in Section 12.04. The Agent Advances shall be
repayable on demand and be secured by the Collateral. The Agent Advances shall
constitute Obligations hereunder. The Agent shall notify each Lender and the
Borrower in writing of each such Agent Advance, which notice shall include a
description of the purpose of such Agent Advance. Without limitation to its
obligations pursuant to Section 10.05, each Lender agrees that it shall make
available to the Agent, upon the Agent's demand, in Dollars in immediately
available funds, the amount equal to such Lender's Pro Rata Share of each such
Agent Advance. If such funds are not made available to the Agent by such Lender,
the Agent shall be entitled to recover such funds on demand from such Lender,
together with interest thereon for each day from the date such payment was due
until the date such amount is paid to the Agent, at the Federal Funds Rate for
three Business Days and thereafter at the Reference Rate.

                 (b) The Lenders hereby irrevocably authorize the Agent, at its
option and in its discretion, to release any Lien granted to or held by the
Agent upon any Collateral upon payment and satisfaction of the Loan and all
other Obligations which have matured and which the Agent has been notified in
writing are then due and payable; or constituting property being sold or
disposed of in the ordinary course of any Loan Party's business and in
compliance with the terms of this Agreement and the other Loan Documents; or
constituting property in which the Loan Parties owned no interest at the time
the Lien was granted or at any time thereafter; or if approved, authorized or
ratified in writing by the Lenders. Upon request by the Agent at any time, the
Lenders will confirm in writing the Agent's authority to release particular
types or items of Collateral pursuant to this Section 10.08(b).

                 (c) Without in any manner limiting the Agent's authority to act
without any specific or further authorization or consent by the Lenders (as set
forth in Section 10.08(b)), each Lender agrees to confirm in writing, upon
request by the Agent, the authority to release Collateral conferred upon the
Agent under Section 10.08(b). Upon receipt by the Agent of confirmation from the
Lenders of its authority to release any particular item or types of

                                       32
<PAGE>

Collateral, and upon prior written request by any Loan Party, the Agent shall
(and is hereby irrevocably authorized by the Lenders to) execute such documents
as may be necessary to evidence the release of the Liens granted to the Agent
for the benefit of the Lenders upon such Collateral; PROVIDED, HOWEVER, that (i)
the Agent shall not be required to execute any such document on terms which, in
the Agent's opinion, would expose the Agent to liability or create any
obligations or entail any consequence other than the release of such Liens
without recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Lien upon (or obligations of
any Loan Party in respect of) all interests in the Collateral retained by any
Loan Party.

                 (d) The Agent shall have no obligation whatsoever to any Lender
to assure that the Collateral exists or is owned by the Loan Parties or is cared
for, protected or insured or has been encumbered or that the Lien granted to the
Agent pursuant to this Agreement or any other Loan Document has been properly or
sufficiently or lawfully created, perfected, protected or enforced or is
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
the Agent in this Section 10.08 or in any other Loan Document, it being
understood and agreed that in respect of the Collateral, or any act, omission or
event related thereto, the Agent may act in any manner it may deem appropriate,
in its sole discretion, given the Agent's own interest in the Collateral as one
of the Lenders and that the Agent shall have no duty or liability whatsoever to
any other Lender, except as otherwise provided herein.

         Section 10.09 AGENCY FOR PERFECTION. Each Lender hereby appoints the
Agent and each other Lender as agent and bailee for the purpose of perfecting
the security interests in and liens upon the Collateral in assets which, in
accordance with Article 9 of the Uniform Commercial Code, can be perfected only
by possession or control (or where the security interest of a secured party with
possession or control has priority over the security interest of another secured
party) and each Agent and each Lender hereby acknowledges that it holds
possession of or otherwise controls any such Collateral for the benefit of the
Agent and the Lenders as secured party. Should any Lender obtain possession or
control of any such Collateral, such Lender shall notify the Agent thereof, and,
promptly upon the Agent's request therefor shall deliver such Collateral to the
Agent or in accordance with the Agent's instructions. Each Loan Party by its
execution and delivery of this Agreement hereby consents to the foregoing.

         11.   GUARANTY.

               (a) Section 11.02(c) of the Loan Agreement is hereby amended
and restated in its entirety as follows:

               (c) Any taking, exchange, release or non-perfection of any
               Collateral, or any taking, release or amendment or waiver of or
               consent to departure from any other Guaranty, for all or any of
               the Guaranteed Obligations;

               (b) Section 11.03 of the Loan Agreement is hereby amended by
adding the words "or any Collateral" at the end of the first sentence thereof.

                                       33
<PAGE>

               (c) Section 11.05 of the Loan Agreement is hereby amended (i) by
adding the words "or any Collateral" immediately prior to the word "whether" in
the first sentence thereof, and (ii) by adding the words "or to be held as
Collateral for any Guaranteed Obligations or other amounts payable under this
Article XI thereafter arising" at the end of the penultimate sentence thereof.

         12.   MISCELLANEOUS.

               (a) Section 12.01 of the Loan Agreement shall be amended and
restated to read in its entirety as follows:

         Section 12.01 NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage, prepaid and return receipt requested), telecopied or delivered,
if to any Loan Party, at the following address:

                Value City Department Stores, Inc.
                3241 Westerville Road
                Columbus, OH 43224
                Attention:  James A. McGrady
                Telephone:  (614) 478-2300
                Telecopier:  (614) 473-2721

                with a copy to:

                Schottenstein Stores Corporation
                1800 Moler Road
                Columbus, OH  43207
                Attention:  Irwin A. Bain, Esq.
                Telephone:  614-449-4332
                Telecopier:  614-443-0927

                and

                Porter Wright Morris & Arthur LLP
                41 South High Street
                Columbus, OH  43215
                Attention:  Robert J. Tannous, Esq. and Timothy E. Grady, Esq.
                Telephone:  614-227-1953
                Telecopier:  614-227-2100

                if to the Agent, to it at the following address:

                Cerberus Partners, L.P.
                450 Park Avenue, 28th Floor
                New York, New York  10022
                Attention:  Lenard Tessler
                Telephone:  (212) 909-1464
                Telecopier:  (212) 755-3009

                                       34
<PAGE>

                with a copy to:

                Schulte Roth & Zabel LLP
                919 Third Avenue
                New York, New York  10022
                Attention:  Nancy Finkelstein, Esq.
                Telephone:  212-756-2419
                Telecopier:  212-593-5955

                or, as to each party, at such other address as shall be
designated by such party in a written notice to the other parties complying as
to delivery with the terms of this Section 12.01. All such notices and other
communications shall be effective, (i) if sent by certified mail, return receipt
requested, the date when actually received, (ii) if sent by recognized overnight
express delivery, the Business Day following the day when sent, (iii) if
delivered by hand on a Business Day after 9:00 AM and no later than three (3)
hours prior to the close of customary business hours of the recipient, when
delivered (otherwise, at the opening of the then next Business Day), and (iv) by
telecopier and sent on a Business Day after 9:00 AM and no later than three (3)
hours prior to the close of customary business hours of the recipient, one (1)
hour after being sent (otherwise, at the opening of the then next Business Day).

                (b) Section 12.02 of the Loan Agreement is hereby amended and
                restating in its entirety to read as follows:

                AMENDMENTS, ETC. Subject to Section 6.02(l), no amendment or
                waiver of any provision of this Agreement, and no consent to any
                departure by any Loan Party therefrom, shall in any event be
                effective unless the same shall be in writing and signed by the
                Agent, the Borrower and the Guarantors, and then such waiver or
                consent shall be effective only in the specific instance and for
                the specific purpose for which given, PROVIDED, HOWEVER, that no
                amendment, waiver or consent shall (i) reduce the principal of,
                or interest on, the Loan, reduce the amount of any fee payable
                for the account of any Lender, or postpone or extend any date
                fixed for any payment of principal of, or interest or fees on
                the Loan payable to any Lender, in each case without the written
                consent of any Lender affected thereby, (ii) amend the
                definition of "Pro Rata Share", (iii) release all or a
                substantial portion of the Collateral (except as otherwise
                provided in this Agreement and the other Loan Documents),
                subordinate any Lien granted in favor of the Agent for the
                benefit of the Lenders, or release the Borrower or any Guarantor
                or (iv) amend, modify or waive Section 3.04, Article XII or this
                Section 12.02 of this Agreement in each case, without the
                written consent of each Lender. Notwithstanding the foregoing,
                no amendment, waiver or consent shall, unless in writing and
                signed by the Agent, affect the rights or duties of the Agent
                (but not in its capacity as a Lender) under this Agreement or
                the other Loan Documents.

                                       35
<PAGE>

                (c) Section 12.04 of the Loan Agreement is hereby amended by
adding the words "appraisals of Collateral," after the words "monitoring of
assets" in the first sentence thereof, and by amending and restating clauses
(f), (g), and (h) in their entirety and substituting the following therefor:

                (f) the filing of any petition, complaint, answer, motion or
                other pleading by the Agent or any Lender, or the taking of any
                action in respect of the Collateral or other security, in
                connection with this Agreement or any other Loan Document; (g)
                the protection, collection, lease, sale, taking possession of or
                liquidation of, any Collateral or other security in connection
                with this Agreement or any other Loan Document; (h) any attempt
                to enforce any Lien or security interest in any Collateral or
                other security in connection with this Agreement or any other
                Loan Document;

         13. CONVERSION PROVISIONS. (a) Section 13.01 of the Loan Agreement is
hereby amended by adding the following subsection (c) at the end thereof:

                (c) Except as provided in Section 14.03, at any time that CPLP
                converts all or any portion of its Pro Rata Share of the Loan
                into Conversion Shares, CPLP may require that simultaneous with
                such Conversion, SSC convert up to an equivalent amount of the
                Loan owed to it into Conversion Shares (the "DRAG ALONG
                CONVERSION RIGHT"). In order to exercise its Drag Along
                Conversion Right, CPLP must provide SSC with five (5) Business
                Days prior written notice of its conversion (the "DRAG ALONG
                CONVERSION NOTICE") which shall set forth (i) the amount of the
                Loan that it intends to convert, (ii) the Conversion Date for
                such conversion and (iii) the amount of the Loan that SSC must
                convert. Within two (2) Business Days of receipt of a Drag Along
                Conversion Notice, SSC shall provide the Borrower with a
                Conversion Notice (as defined below) that it will convert at
                least the same amount of the Loan as is set forth in such Drag
                Along Conversion Notice on the Conversion Date set forth in such
                Drag Along Conversion Notice; PROVIDED, HOWEVER, that if SSC has
                already converted a portion of the Loan initially held by it
                other than in response to a Drag Along Conversion Notice, it
                shall only be required to convert that portion of its Loan up to
                the amount set forth in the Drag Along Conversion Notice as is
                necessary so that following the conversion set forth in the
                Conversion Notice delivered in response to such Drag Along
                Conversion Notice, it shall have converted the same amount of
                its initial Loan as is set forth in the Drag Along Conversion
                Notice. In the event that CPLP converts all or any portion of
                the Loan after it receives a Buyout Exercise Notice (as defined
                below) relating to an SSC Transaction (defined below) which is
                not a

                                       36
<PAGE>

                Referred SSC Transaction (as defined below) and before
                thirty-one (31) days following the receipt of such Buyout
                Exercise Notice, CPLP shall not be entitled to exercise its Drag
                Along Conversion Right with respect to such conversion.

         (b) Section 13.03(a)(iv) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:

                (iv) (A) shares of Common Stock issued upon exercise of the
                Warrants and (B) such additional number of shares as may become
                issuable upon the exercise of any such securities by reason of
                adjustments required pursuant to anti-dilution provisions
                applicable to such securities as in effect on the date hereof.

         (c) Sections 13.03(e)(i)(B) and (C) of the Loan Agreement are hereby
amended and restated in their entirety as follows:

                (B) insofar as it consists of property other than cash, be
                computed at the fair value thereof at the time of such issue, as
                determined in good faith by a committee of the Borrower's Board
                of Directors consisting of directors who are not Affiliates of
                the Borrower, SSC or CPLP; PROVIDED, HOWEVER, that at the
                request of any Lender, the fair value shall be determined in
                good faith by an independent investment banking firm selected by
                the Borrower, SSC and CPLP or, if that selection cannot be made
                within ten days, by an independent investment banking firm
                selected by the American Arbitration Association in accordance
                with its rules, and PROVIDED, FURTHER, that the Borrower shall
                pay all of the reasonable fees and expenses of any third parties
                incurred in connection with determining the fair value; and

                (C) in the event Additional Shares of Common Stock are issued
                together with other shares of securities or other assets of the
                Borrower for a single undivided consideration, be the proportion
                of such consideration so received allocable to such Additional
                Shares of Common Stock, computed as provided in clauses (A) and
                (B) above, as determined in good faith by the a committee of the
                Borrower's Board of Directors consisting of directors who are
                not Affiliates of the Borrower, SSC or CPLP, or at the request
                of any Lender, of the proportion of such consideration so
                received allocable to such Additional Shares of Common Stock
                value shall be determined in good faith by an independent
                investment banking firm selected by the Borrower, SSC and CPLP
                or, if that selection cannot be made within ten days, by an
                independent investment banking firm selected by the American
                Arbitration Association in

                                       37
<PAGE>

                accordance with its rules, and PROVIDED, FURTHER, that the
                Borrower shall pay all of the reasonable fees and expenses of
                any third parties incurred in connection with determining the
                proportion of such consideration so received allocable to such
                Additional Shares of Common Stock.

            (d) The Loan Agreement is hereby amended by adding a new Section
13.13 to read in its entirety as follows:

            Section 13.13. TERMINATION. All provisions of the Loan Agreement
except Section 6.01(r) shall terminate upon the conversion of the entirety of
the Loan into Conversion Shares. Section 6.01(r) shall terminate in accordance
with the terms set forth in Section 6.01(r)(iii).

         14. The Loan Agreement is hereby amended to add a new Article XIV to
read in its entirety as follows:

                                   ARTICLE XIV

                          TRANSACTIONS WITH AFFILIATES

            Section 14.01 TRANSACTION APPROVAL. Unless the Buyout Option (as
defined below) has been exercised, neither Borrower nor any of their respective
Subsidiaries shall enter into an SSC Transaction (as defined below) without the
prior written consent of CPLP. In the event that the Borrower, SSC or any of its
Subsidiaries propose to enter into an SSC Transaction, Borrower shall promptly
notify CPLP in writing of the proposed SSC Transaction (the "NOTIFICATION DATE")
which notice shall (i) describe the proposed SSC Transaction in reasonable
detail and (ii) be accompanied by such information as Borrower reasonably
believes that a third party investor would reasonably require in order to
determine the fairness of the proposed SSC Transaction. The Borrower shall
promptly provide such additional information (and make personnel available to
discuss the same) as CPLP may reasonably request regarding the SSC Transaction
during the three (3) Business Days following the Notification Date. Within five
(5) Business Days of the Notification Date, CPLP shall deliver to the Borrower
and SSC a written notice (an "OBJECTION NOTICE") stating that it objects to such
SSC Transaction (the "OBJECTION DATE"). If CPLP does not deliver an Objection
Notice with respect to an SSC Transaction on or prior to the Objection Date, it
shall be deemed (subject to the provisions of Section 14.02(b)) to have
consented to such SSC Transaction.

            An "SSC TRANSACTION" means any transaction, agreement, arrangement,
lease, guaranty, loan or advance of money (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
service) or a series of related transactions or the material amendment or
modification of any existing or previously approved transaction, between (i) the
Borrower or any of its Subsidiaries and (ii) SSC or any Affiliate of SSC (other
than Borrower and its Subsidiaries) unless: (x) the transaction, or series of
related transactions, has a value of at less than $500,000, (y) such
transactions and other prior transactions of the Borrower and its Subsidiaries
in any fiscal year of the Borrower have a value of less than $5,000,000 in the
aggregate, or (iii) the transaction is an Approved Existing Transaction.

                                       38
<PAGE>

            An "APPROVED EXISTING TRANSACTION" means a transaction, agreement,
arrangement, lease, guaranty, loan or advance of money (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) described in the confidential side letter between the
Borrower and the Agent of even date herewith on the terms in effect as of the
date hereof and excluding any material modification or amendment thereto.

            Section 14.02 BUYOUT OPTION. (a) In the event that CPLP delivers an
Objection Notice, SSC shall have the right exercisable by delivering a written
notice, not more that five (5) Business Days after the Objection Date, to CPLP
stating that it elects to exercise its Buyout Option (a "BUYOUT EXERCISE
NOTICE") to purchase all but not less than all of the Buyout Securities (as
defined below) for a cash purchase price equal to all principal and interest due
to CPLP pursuant to the Term Loan Agreement, all principal and interest due to
CPLP with respect to the Loan and CPLP's pro rata portion of any fees payable to
it under the Term Loan Agreement or this Agreement (the "BUYOUT OPTION");
PROVIDED, HOWEVER, that if CPLP has exercised a portion of the Warrants that
would otherwise be deemed Allocated Warrants (the shares of Common Stock issued
upon exercise of the Allocated Warrants shall be referred to as the "ALLOCATED
SHARES"), then the purchase price paid by SSC for the Buyout Option shall be
reduced (by an amount not less than zero) (i) if CPLP then owns all or a portion
of the Allocated Shares, by the product of (a) the number of Allocated Shares
then owned and (b) the difference between the Current Market Price on the date
of the Buyout Exercise Notice and the exercise price paid by CPLP for such
Allocated Shares or (ii) if CPLP has sold all or a portion of the Allocated
Shares, by the product of (x) the number of Allocated Shares so sold and (y) the
difference between the consideration received by CPLP upon the sale of the
Allocated Shares so sold and the exercise price paid by CPLP for such Allocated
Shares; PROVIDED, FURTHER, that if CPLP has acquired the Allocated Shares via
cashless exercise, the foregoing computation shall be made as if such exercise
had been a cash exercise. If SSC does not deliver a Buyout Exercise Notice in
accordance with the terms of this Section 14.02, then SSC shall be deemed to
have waived its Buyout Option as to the transactions stated in the Buyout
Exercise Notice, and the parties may not proceed with the SSC Transaction that
is the subject of such Objection Notice.

                (b) If a Buyout Exercise Notice is delivered, CPLP, within
five (5) Business Days of delivery of such Buyout Exercise Notice, may request
by written notice to Borrower and SSC (a "REFERRAL NOTICE") that a committee
comprised of all of the independent directors of the Borrower not affiliated
with SSC, CPLP or the Borrower's management (the "FAIRNESS COMMITTEE") review
and approve the SSC Transaction that is the subject of the Buyout Exercise
Notice (a "REFERRED SSC TRANSACTION") as to its fairness to the Borrower and its
unaffiliated shareholders. The Borrower shall cause a Fairness Committee to be
appointed within five (5) Business Days of its receipt of a Referral Notice. In
the event that the Fairness Committee reviews and approves as fair to Borrower
and its unaffiliated shareholders the Referred SSC Transaction as proposed by
SSC or if the Fairness Committee modifies the Referred SSC Transaction, and as
modified approves the Referred SSC Transaction as fair to Borrower and its
unaffiliated shareholders, CPLP shall be deemed to have consented to the SSC
Transaction as so approved. In the event that CPLP requests that an SSC
Transaction be reviewed by a Fairness Committee, such request shall be
irrevocable, SSC shall not have any rights to exercise a Buyout Option in
connection with such Referred SSC Transaction, and Section 14.03 shall not apply
to such Referred SSC Transaction.

                                       39
<PAGE>

                (c) If SSC elects to exercise the Buyout Option and CPLP does
not timely deliver a Referral Notice pursuant to Section 14.02(b), then the
closing of the Buyout Option regarding the amounts payable under the Term Loan
Agreement shall occur on the 30th day following the delivery of the Buyout
Exercise Notice. CPLP shall have the right to convert or elect not to convert
any portion of the Loan payable to CPLP for a period of up to 30 days following
the delivery of the Buyout Exercise Notice. The closing of the Buyout Option
regarding the portion of the Loan payable to CPLP shall occur on the earlier to
occur of (i) the 30th day following the delivery by CPLP to the Borrower and SSC
of a notice that it does not elect to convert the outstanding portion of the
Loan payable to it or specifying which portion of the Loan it does elect to
convert (the "CPLP NON-CONVERSION NOTICE") and (ii) the 60th day following the
delivery of a Buyout Exercise Notice.

         "BUYOUT SECURITIES" means (i) amounts payable to CPLP under the Term
Loan Agreement, (ii) the portion of the Loan payable to CPLP and (iii) the
Allocated Warrants (as defined below) but shall in no event include (a)
Conversion Shares, (b) shares issued upon exercise of the Warrant previously
issued to CPLP (subject to the provisions of Section 14.02(a)) and (c) the
portion of the Warrant not constituting the Allocated Warrants. To the extent
that CPLP has partially exercised the Warrant prior to the delivery of a Buyout
Exercise Notice, the Warrant shall be deemed first exercised as to the portion
of the Warrant that is not deemed Allocated Warrants. The "ALLOCATED WARRANTS"
shall be (x) 75% of the Warrant until the first anniversary of the Effective
Date, (y) 50% of the Warrant from the first anniversary of the Effective Date
until the second anniversary of the Effective Date, (z) 25% of the Warrant from
the second anniversary of the Effective Date until the third anniversary of the
Effective Date, and (iv) zero from and after the third anniversary of the
Effective Date.

         Section 14.03 EXERCISABILITY. The Allocated Warrants shall not be
exercisable by CPLP from the date on which CPLP receives the Buyout Exercise
Notice until the date which is thirty-one (31) days after the receipt by CPLP of
the Buyout Exercise Notice. The Loan shall not be convertible by CPLP from the
date of delivery of the Non-Conversion Notice until the date which is thirty-one
(31) days following the date of delivery of the Non-Conversion Notice.

         Section 14.04 CPLP TRANSACTION. Neither the Borrower nor its
Subsidiaries will enter into any transaction with CPLP or its Affiliates, other
than the transactions contemplated by the Term Loan Agreement and this
Agreement, without the prior written consent of the Borrower's Board of
Directors and SSC unless the transaction, or series of related transactions, is
valued at less than $500,000.

                                       40
<PAGE>

         15. RESIGNATION/APPOINTMENT OF AGENT. On the effectiveness of this
Amendment on the First Amendment Effective Date (as defined below), SSC shall
resign all of its functions and duties as agent, and CPLP will thereupon become
the successor Agent and shall succeed to and become vested with all the rights,
powers and privileges of the Agent. Each of the parties hereto hereby agrees to
such resignation and such appointment and waives the notice requirements of
Section 10.07 of the Loan Agreement.

         16. CONDITIONS. This Amendment shall become effective on the date (the
"First Amendment Effective Date") as of which each of the following conditions
precedent shall have been satisfied in a manner satisfactory to each Lender:

             (a) FEES AND EXPENSES.

                 (i) All fees, expenses and taxes accrued and unpaid or
otherwise due and payable by the Borrower or a Loan Party pursuant to either the
Loan Agreement or this Amendment shall have been paid in full.

                 (ii) The Lenders shall have received either (A) evidence that
any and all placement fees associated with the SSC Assignment have been paid in
full, or (B) a certificate from an Authorized Officer of the Borrower that no
such fees are applicable.

             (b) REPRESENTATIONS AND WARRANTIES; NO EVENT OF DEFAULT. Both
before and after giving effect to the transactions contemplated by this
Amendment, the representations and warranties contained in the Loan Agreement,
as amended, are true and correct in all respects, and no Default or Event of
Default has occurred and is continuing.

             (c) LEGALITY. This Amendment and the transactions contemplated
thereby shall not contravene any law, rule or regulation applicable top the
Agent or any Lender. The Agent shall have received on or before the First
Amendment Effective Date, each of the following in form and substance
satisfactory to the Agent:

             (i) this Amendment, duly executed by each of the Loan Parties;

             (ii) the Notes, payable to the order of each Lender and duly
executed by the Borrower;

             (iii) a Security Agreement, duly executed by each Loan Party;

             (iv) an Assignment for Security (as defined in the Security
Agreement) with respect to trademarks and trademark licenses, duly executed by
each Loan Party;

             (v) an Assignment for Security (as defined in the Security
Agreement) with respect to copyrights and copyright licenses, duly executed by
each Loan Party;

             (vi) a Pledge Agreement, duly executed by each Loan Party (as
applicable) together with the original stock certificates or other certificated
securities or instruments representing all of the Capital Stock of such Loan
Party's subsidiaries accompanied by undated stock powers executed in blank and
other proper instruments of transfer;

                                       41
<PAGE>

             (vii) Mortgages and Landlord's Agreements with respect to all
Leases set forth on Schedule 4.01(d) hereto;

             (viii) the Control Agreements and such other depository account,
notices and other similar documents entered into in connection with the
Revolving Credit Facility Documents with respect to the accounts controlled
under such agreements subject to the priority set forth in the Intercreditor
Agreement, each in form and substance satisfactory to the Agent, with respect to
the Key Loan Parties' cash management system;

             (ix) payoff letters and termination and release agreements and all
related documents, and UCC-3 termination statements for all UCC-1 financing
statements covering any portion of the Collateral; a UCC Filing Authorization
Letter, duly executed by each Loan Party, together with appropriate financing
statements on Form UCC-1, duly executed by each Loan Party and duly filed in
such office or offices as may be necessary or, in the opinion of the Agent,
desirable to perfect the security interests purported to be created by each
Security Agreement, each Pledge Agreement and each Mortgage;

             (x) evidence of the recording of the leasehold Mortgages in such
office or offices as may be necessary or, in the opinion of the Agent, desirable
to perfect the Lien purported to be created thereby or to otherwise protect the
rights of the Agent and the Lenders thereunder;

             (xi) the Intercreditor Agreement, in form and substance
satisfactory to the Agent, duly executed by each of the parties thereto;

             (xii) the Registration Rights Agreement, duly executed by each of
the parties thereto;

             (xiii) an opinion of Porter, Wright, Morris & Arthur LLP, counsel
to the Loan Parties, substantially in the form of Exhibit H and as to such other
matters as the Agent may reasonably request as well as opinions of local counsel
with respect to Key Loan Parties or Guarantors formed in Michigan and Missouri;

             (xiv) a copy of the resolutions of each Loan Party, certified as of
the Effective Date by an Authorized Officer thereof, authorizing (A) the
transactions contemplated by the Loan Documents to which such Loan Party is or
will be a party, and (B) the execution, delivery and performance by such Loan
Party of each Loan Document to which such Loan Party is or will be a party and
the execution and delivery of the other documents to be delivered by such Person
in connection herewith and therewith;

             (xv) evidence of the insurance coverage required by Section 6.01
and the terms of each Security Agreement and each Mortgage and such other
insurance coverage with respect to the business and operations of the Loan
Parties as the Agent may reasonably request, in each case, where requested by
the Agent, with such endorsements as to the named insureds or loss payees
thereunder as the Agent may request and providing that such policy may be
terminated or canceled (by the insurer or the insured thereunder) only upon
thirty (30) days' prior written notice to the Agent and each such named insured
or loss payee, together with evidence of the payment of all premiums due in
respect thereof for such period as the Agent may request;

                                       42
<PAGE>

             (xvi) copies of the Revolving Credit Facility Documents, the Term
Loan Documents and the SSC Assignment Documents, in each case, duly executed by
the parties thereto and certified as true and correct copies thereof by an
Authorized Officer of the Borrower, each of which shall be in form and substance
satisfactory to the Agent; and

             (xvii) evidence of completion of certain documentation as
requested by the Agent in connection with Collateral consisting of intellectual
property.

             (e) MATERIAL ADVERSE EFFECT. The Agent shall have determined, in
its sole judgment, that no event or development shall have occurred since
February 2, 2002 which could have a Material Adverse Effect.

             (f) APPROVALS. All consents, authorizations and approvals of, and
filings and registrations with, and all other actions in respect of, any
Governmental Authority or other Person required in connection with the making of
the Loans or the conduct of the Loan Parties' business shall have been obtained
and shall be in full force and effect.

             (g) PROCEEDINGS; RECEIPT OF DOCUMENTS. All proceedings in
connection with the making of the Loans and the other transactions contemplated
by this Agreement and the other Loan Documents, and all documents incidental
hereto and thereto, shall be satisfactory to the Agent and its counsel, and the
Agent and such counsel shall have received all such information and such
counterpart originals or certified copies or other copies of such documents as
the Agent or such counsel may reasonably request, including, without limitation,
interim financial statements and monthly availability projections.

             (h) CASH MANAGEMENT. The Lenders shall be satisfied with the cash
management systems and procedures of each of the Loan Parties.

             (i) EXCESS AVAILABILITY. After giving effect to all the
transactions contemplated hereby (including transaction costs), the Key Loan
Parties shall have Excess Availability (calculated without regard to the Excess
Availability Reserve) of not less than $115,000,000.

             (j) TRANSACTION COSTS. The Lenders shall be satisfied with the
costs in connection with the transactions contemplated hereby.

             (k) REVOLVING CREDIT FACILITY AND TERM LOAN AGREEMENT. All
conditions precedent to the Revolving Credit Facility shall have been met to the
satisfaction of the Lenders and Agents thereto.

         17. MISCELLANEOUS.

                 (a) CONTINUED EFFECTIVENESS OF THE LOAN AGREEMENT. Except as
otherwise expressly provided herein, each Loan Agreement and the other Loan
Documents are, and shall continue to be, in full force and effect and are hereby
ratified and confirmed in all respects.

                                       43
<PAGE>

                 (b) COUNTERPARTS. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.

                 (c) HEADINGS. Section headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

                 (d) GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the law of the State of New York.

                 (e) COSTS AND EXPENSES. The Borrower and other Loan Parties
jointly and severally agree to pay on demand all reasonable fees, costs and
expenses of the Lenders in connection with the preparation, execution and
delivery of this Amendment and the other related agreements, instruments and
documents.

                 (f) AMENDMENT AS LOAN DOCUMENT. The Borrower and other Loan
Parties hereby acknowledge and agree that this Amendment constitutes a "Loan
Document" under the Loan Agreement. Accordingly, it shall be an Event of Default
under the Loan Agreement if (i) any representation or warranty made by the
Borrower or any other Loan Party under or in connection with this Amendment
shall have been untrue, false or misleading in any material respect when made,
or (ii) the Borrower or any other Loan Party shall fail to perform or observe in
any material respect any term, covenant or agreement contained in this Amendment

                 (g) WAIVER OF JURY TRIAL. THE BORROWER, EACH OTHER LOAN PARTY
AND THE LENDERS EACH HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE ACTIONS OF EITHER
LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.

                                       44
<PAGE>

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

                                    BORROWER:

                                    VALUE CITY DEPARTMENT STORES, INC.,
                                    an Ohio corporation

                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President

                                    SUBSIDIARY GUARANTORS:

                                    SHONAC CORPORATION,
                                    an Ohio corporation

                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President

                                    DSW SHOE WAREHOUSE, INC.,
                                    a Missouri Corporation

                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President

                                    GRAMEX RETAIL STORES, INC.,
                                    a Delaware corporation

                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President

                                       45
<PAGE>

                                    FILENE'S BASEMENT, INC.,
                                    a Delaware corporation

                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President

                                    GB RETAILERS, INC.,
                                    a Delaware corporation

                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President

                                    J.S. OVERLAND DELIVERY, INC.,
                                    a Delaware corporation

                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President

                                    VALUE CITY DEPARTMENT STORES SERVICES, INC.
                                    a Delaware corporation

                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President

                                    VALUE CITY LIMITED PARTNERSHIP,
                                    an Ohio limited partnership

                                    By:  Westerville Road GP, Inc., its
                                         General Partner

                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President

                                       46
<PAGE>

                                    VALUE CITY OF MICHIGAN, INC.,
                                    a Michigan corporation

                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President

                                   VCM, LTD.,
                                   an Ohio limited liability company

                                   By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President

                                    WESTERVILLE ROAD GP, INC.
                                    a Delaware corporation

                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President

                                    WESTERVILLE ROAD LP, INC.
                                    a Delaware corporation

                                    By:  /s/ John C. Rossler
                                       ----------------------------------------
                                       Name:  John C. Rossler
                                       Title:  President

                                       47
<PAGE>

                                    RESIGNING AGENT AND LENDER:

                                    SCHOTTENSTEIN STORES CORPORATION

                                    By:
                                       ----------------------------------------
                                       Name:
                                       Title:

                                    SUCCESSOR AGENT AND LENDER:

                                    CERBERUS PARTNERS, L.P.

                                    By:
                                       ----------------------------------------
                                       Name:
                                       Title:<PAGE>

                                                                  Exhibit 10.4

                              AMENDED AND RESTATED
                          REGISTRATION RIGHTS AGREEMENT

                                  by and among

                       VALUE CITY DEPARTMENT STORES, INC.,

                                       and

                        THE INITIAL HOLDERS SPECIFIED ON
                           THE SIGNATURE PAGES HEREOF

                            Dated as of June 11, 2002

<PAGE>

                                TABLE OF CONTENTS

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<S>                                                                                                        <C>
1.   DEFINITIONS.............................................................................................2

2.   REGISTRATION UNDER THE SECURITIES ACT...................................................................6

      2.1   Demand Registration..............................................................................6
      2.2   Incidental Registration..........................................................................9
      2.3   Shelf Registration..............................................................................11
      2.4   Underwritten Offerings..........................................................................11
      2.5   Expenses........................................................................................12

3.   HOLDBACK ARRANGEMENTS..................................................................................12

      3.1   Restrictions on Sale by Holders of Registrable Securities.......................................12
      3.2   Restrictions on Sale by the Company and Others..................................................12

4.   REGISTRATION PROCEDURES................................................................................13

      4.1   Obligations of the Company......................................................................13
      4.2   Seller Information..............................................................................17
      4.3   Notice to Discontinue...........................................................................17

5.   INDEMNIFICATION; CONTRIBUTION..........................................................................18

      5.1   Indemnification by the Company..................................................................18
      5.2   Indemnification by Holders......................................................................18
      5.3   Conduct of Indemnification Proceedings..........................................................19
      5.4   Contribution....................................................................................20
      5.5   Other Indemnification...........................................................................20
      5.6   Indemnification Payments........................................................................20

6.   GENERAL................................................................................................21

      6.1   Adjustments Affecting Registrable Securities....................................................21
      6.2   Registration Rights to Others...................................................................21
      6.3   Availability of Information; Rule 144; Other Exemptions.........................................21
      6.4   Amendments and Waivers..........................................................................22
      6.5   Notices.........................................................................................22
      6.6   Successors and Assigns..........................................................................24
      6.7   Counterparts....................................................................................24
      6.8   Descriptive Headings, Etc.......................................................................24
      6.9   Severability....................................................................................24
      6.10   Choice of Law and Venue; Jury Trial Waiver.....................................................25
      6.11   Remedies; Specific Performance.................................................................25
      6.12   Entire Agreement...............................................................................26
      6.13   Further Assurances.............................................................................26
      6.14   Construction...................................................................................26
      6.15   No Inconsistent Agreement......................................................................26
      6.16   Costs and Attorneys' Fees......................................................................26
</TABLE>

                                      -i-
<PAGE>

<TABLE>

<S>                                                                                                         <C>
      6.17   Nominees for Beneficial Owners.................................................................26
</TABLE>

                                      -ii-

<PAGE>

         This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (the
"AGREEMENT") dated as of June 11, 2002, by and among Value City Department
Stores, Inc., an Ohio corporation (the "COMPANY"), and the parties specified on
the signature pages to this Agreement amends and restates in its entirety that
certain Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT")
dated as of March 15, 2000 by and between the Company and Prudential Securities
Credit Corp., LLC ("PSCC").

                              W I T N E S S E T H :
                              - - - - - - - - - -

         WHEREAS, in connection with the Financing Agreement dated as of the
date hereof, as such agreement is amended or otherwise modified from time to
time, by and among the Company, certain subsidiaries of the Company, Cerberus
Partners, L.P. and the lenders set forth therein (the "FINANCING AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions of the
Financing Agreement, to issue warrants (the "WARRANTS") to each Initial Holder
exercisable for up to 2,954,793 shares (subject to adjustment pursuant to the
terms of the Warrant), of the Company's Common Stock without par value (the
"COMMON SHARES") (the Common Shares issued or issuable upon exercise of the
Warrant are hereinafter referred to as the "WARRANT SHARES"); and

         WHEREAS, pursuant to the Amended and Restated Convertible Loan
Agreement as amended by Amendment No. 1 to Amended and Restated Convertible Loan
Agreement dated as of the date hereof, as such agreement is further amended or
otherwise modified from time to time, by and among the Company, certain
Subsidiaries of the Company, Cerberus Partners, L.P. and Schottenstein Stores
Corporation (the "LOAN AGREEMENT"), amounts outstanding under the Loan Agreement
(the "ADVANCES") shall be convertible into Common Shares by each of the Initial
Holders at any time in their sole discretion, pursuant to the terms of the Loan
Agreement (the Common Shares issued or issuable upon conversion of the Advances
are hereinafter referred to as the "CONVERSION SHARES"); and

         WHEREAS, to induce the Initial Holders to enter into the Financing
Agreement and to amend and restate the Loan Agreement, the Company has agreed to
provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the "SECURITIES ACT"), and applicable state securities
laws; and

         WHEREAS, the Company and PSCC entered into the Registration Rights
Agreement; and

         WHEREAS, as of December 11, 2000, PSCC sold to Schottenstein Stores
Corporation ("SSC") the convertible notes which were subject to the Registration
Rights Agreement; and

         WHEREAS, in connection with the transactions contemplated by the
Financing Agreement and the Loan Agreement, the Company and SSC have agreed to
amend and restate the Registration Rights Agreement in its entirety as set forth
herein;

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and in order to induce the Initial Holders to enter
into the Financing Agreement

<PAGE>

and to amend and restate the Loan Agreement, the Company and the Initial Holders
hereby agree as follows:

         1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:

         "ADVANCES" shall have the meaning set forth in the preamble.

         "AFFILIATE" shall mean, with respect to any Person, any other Person
that directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, "control," "controls," "controlled by," or "under common
control with" shall mean the possession, direct or indirect of the power to
cause the direction of the management and policies of a Person whether through
the ownership of voting securities, by contract or otherwise. A Person shall be
deemed to have control of another Person if it is a "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13-d-5 under the Securities Exchange Act)
or a member of a "group" that is the beneficial owner, directly or indirectly,
of 20% or more of the voting stock of or equity interest in such Person. A
Person shall be deemed to direct the management and policies of a Person if it,
without limitation, obtains the power (whether or not exercised) to elect a
majority of the Board of Directors of such Person.

         "COMMON SHARES" shall have the meaning set forth in the preamble.

         "COMPANY" shall have the meaning set forth in the introductory
paragraph.

         "CONVERSION SHARES" shall have the meaning set forth in the preamble.

         "DEMAND REGISTRATION" shall mean a registration required to be effected
by the Company pursuant to Section 2.1.

         "DEMAND REGISTRATION STATEMENT" shall mean a registration statement of
the Company which covers the Registrable Securities requested to be included
therein pursuant to the provisions of Section 2.1 and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference (or deemed to be incorporated by
reference) therein.

         "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations thereunder, or any
successor statute.

         "FINANCING AGREEMENT" shall have the meaning set forth in the preamble.

         "HOLDERS" shall mean the Initial Holders for so long as they are the
registered owners of any Registrable Securities and such of their respective
heirs, successors and permitted assigns (including any permitted transferees of
Registrable Securities) who acquire or are otherwise the transferee of
Registrable Securities, directly or indirectly, from such Initial Holders (or
any subsequent Holder), for so long as such heirs, successors and permitted
assigns are the registered owners of any Registrable Securities. For purposes of
this Agreement, a Person will

                                      -2-
<PAGE>

be deemed to be a Holder whenever such Person holds an option to purchase, or a
security convertible into or exercisable or exchangeable for, Registrable
Securities, whether or not such purchase, conversion, exercise or exchange has
actually been effected and disregarding any legal restrictions upon the exercise
of such rights. Registrable Securities issuable upon exercise of an option or
upon conversion, exchange or exercise of another security shall be deemed
outstanding for the purposes of this Agreement.

         "HOLDERS' COUNSEL" shall mean one firm of counsel (per registration) to
the Holders of Registrable Securities participating in such registration, which
counsel shall be selected (i) in the case of a Demand Registration, by the
Initiating Holder who requested registration in the Request, and (ii) in all
other cases, by the Initial Holders of the Registration.

         "INCIDENTAL REGISTRATION" shall mean a registration required to be
effected by the Company pursuant to Section 2.2.

         "INCIDENTAL REGISTRATION STATEMENT" shall mean a registration statement
of the Company, which covers the Registrable Securities requested to be included
therein pursuant to the provisions of Section 2.2 and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference (or deemed to be incorporated by
reference) therein.

         "INITIAL HOLDERS" shall mean the parties specified on the signature
pages to this Agreement and any party to whom any such party transfers at least
50% of its Registrable Securities.

         "INITIAL HOLDERS OF THE REGISTRATION" shall mean, with respect to a
particular registration, the Initial Holders who hold Registrable Securities to
be included in such registration.

         "INITIATING HOLDER" shall mean, with respect to a particular
registration, the Holder who initiated the Request for such registration.

         "LOAN AGREEMENT" shall have the meaning set forth in the preamble.

         "NYSE" shall mean the New York Stock Exchange, Inc.

         "PERSON" shall mean any individual, firm, partnership, corporation,
trust, joint venture, association, joint stock company, limited liability
company, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof, and shall
include any successor (by merger or otherwise) of such entity.

         "PROSPECTUS" shall mean the prospectus included in a Registration
Statement (including, without limitation, any preliminary prospectus and any
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act) and any such Prospectus as amended or
supplemented by any prospectus supplement, and all other amendments and
supplements to such Prospectus, including post-effective amendments, and in

                                      -3-
<PAGE>

each case including all material incorporated by reference (or deemed to be
incorporated by reference) therein.

         "REGISTRABLE SECURITIES" shall mean (i) any Warrant Shares issued upon
exercise of the Warrants, (ii) any Conversion Shares issued upon conversion of
the Advances, and (iii) any other securities of the Company (or any successor or
assign of the Company, whether by merger, consolidation, sale of assets or
otherwise) which may be issued with respect to, in exchange for, or in
substitution of, Registrable Securities referenced in clauses (i) and (ii) above
by reason of any dividend or stock split, combination of shares, merger,
consolidation, recapitalization, reclassification, reorganization, sale of
assets or similar transaction. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (A) a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and either (i) the registration statement
with respect thereto has remained effective for 150 days from the time the
Warrant Shares are issued pursuant to the Warrants or from the time the
Conversion Shares are issued upon conversion of the Advances (PROVIDED, that
this clause (A)(i) shall not apply to a registration statement that is a shelf
registration) or (ii) such securities shall have been disposed of in accordance
with such registration statement, (B) such securities are eligible for sale
pursuant to Rule 144(k) (or any similar provisions then in force) under the
Securities Act, (C) such securities have been otherwise transferred, a new
certificate or other evidence of ownership for them not bearing the legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not require registration under the
Securities Act, or (D) such securities shall have ceased to be outstanding.

         "REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement by the Company and its
subsidiaries, including, without limitation (i) all SEC, stock exchange, NYSE
and other registration, listing and filing fees, (ii) all fees and expenses of
the Company incurred in connection with compliance with state securities or blue
sky laws and compliance with the rules of any stock exchange (including fees and
disbursements of counsel in connection with such compliance and the preparation
of a blue sky memorandum and legal investment survey), (iii) all expenses of any
Persons in preparing or assisting in preparing, word processing, printing,
distributing, mailing and delivering any Registration Statement, any Prospectus,
any underwriting agreements, transmittal letters, securities sales agreements,
securities certificates and other documents relating to the performance of or
compliance with this Agreement, (iv) the fees and disbursements of counsel for
the Company, (v) the fees and disbursements of Holders' Counsel up to $15,000
per Registration Statement, (vi) the fees and disbursements of all independent
public accountants (including the expenses of any audit and/or "cold comfort"
letters) and the fees and expenses of other Persons, including experts, retained
by the Company, (vii) the expenses incurred in connection with making road show
presentations and holding meetings with potential investors to facilitate the
distribution and sale of Registrable Securities, and (viii) except as set forth
below, any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities; PROVIDED, HOWEVER, that Registration Expenses shall not
include discounts and commissions payable to underwriters, selling brokers,
dealer managers or other similar Persons engaged in the distribution of any of
the Registrable Securities; and PROVIDED FURTHER, that in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses of the
Company, auditing

                                      -4-
<PAGE>

fees, premiums or other expenses relating to liability insurance required by
underwriters of the Company or other expenses for the preparation of financial
statements or other data normally prepared by the Company in the ordinary course
of its business or which the Company would have incurred in any event; and
PROVIDED FURTHER, that in the event the Company shall not register any
securities with respect to which it had given written notice of its intention to
register to Holders, notwithstanding anything to the contrary in the foregoing,
all of the costs incurred by the Holders in connection with such registration
shall be deemed to be Registration Expenses.

         "REGISTRATION STATEMENT" shall mean any registration statement of the
Company which covers any Registrable Securities and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference (or deemed to be
incorporated by reference) therein.

         "REQUEST" shall have the meaning set forth in Section 2.1(a).

         "RULE 144" means Rule 144 issued by the SEC under the Securities Act,
or any subsequent rule pertaining to the disposition of securities without
registration.

         "RULE 144A" means Rule 144A issued by the SEC under the Securities Act,
or any subsequent rule pertaining to private resales of securities to
institutions.

         "SEC" shall mean the Securities and Exchange Commission, or any
successor agency having jurisdiction to enforce the Securities Act.

         "SECURITIES ACT" shall have the meaning set forth in the preamble.

         "SHELF REGISTRATION" shall have the meaning set forth in Section
2.1(a).

         "UNDERWRITERS" shall mean the underwriters, if any, of the offering
being registered under the Securities Act.

         "UNDERWRITTEN OFFERING" shall mean a sale of securities of the Company
to an Underwriter or Underwriters for reoffering to the public.

         "WARRANTS" shall have the meaning set forth in the preamble.

         "WARRANT SHARES" shall have the meaning set forth in the preamble.

         "WITHDRAWN DEMAND REGISTRATION" shall have the meaning set forth in
Section 2.1(a).

         "WITHDRAWN REQUEST" shall have the meaning set forth in Section 2.1(a).

         Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Financing Agreement.

                                      -5-
<PAGE>

         2. REGISTRATION UNDER THE SECURITIES ACT.

         2.1 DEMAND REGISTRATION.

         (a) RIGHT TO DEMAND REGISTRATION. Subject to Section 2.1(c), at any
time or from time to time each Initial Holder shall have the right to request in
writing that the Company register all or part of such Holder's Registrable
Securities (a "REQUEST") (which Request shall specify the amount of Registrable
Securities intended to be disposed of by such Holder and the intended method of
disposition thereof) by filing with the SEC a Demand Registration Statement. As
promptly as practicable, but no later than 10 days after receipt of a Request,
the Company shall give written notice of such requested registration to all
other Holders of Registrable Securities. Subject to Section 2.1(b), the Company
shall include in a Demand Registration (i) the Registrable Securities intended
to be disposed of by the Initiating Holder and (ii) the Registrable Securities
intended to be disposed of by any other Holder which shall have made a written
request (which request shall specify the amount of Registrable Securities to be
registered and the intended method of disposition thereof) to the Company for
inclusion thereof in such registration within 30 days after the receipt of such
written notice from the Company. The Company shall, promptly, following a
Request, use its reasonable best efforts to cause to be filed with the SEC a
Demand Registration Statement providing for the registration under the
Securities Act of the Registrable Securities which the Company has been so
requested to register by all such Holders, to the extent necessary to permit the
disposition of such Registrable Securities to be registered in accordance with
the intended methods of disposition thereof specified in such Request or further
requests (including, without limitation, by means of a shelf registration
pursuant to Rule 415 under the Securities Act (a "SHELF REGISTRATION") if so
requested and if the Company is then eligible to use such a registration. The
Company shall use its reasonable best efforts to have such Demand Registration
Statement declared effective by the SEC as soon as practicable thereafter and to
keep such Demand Registration Statement continuously effective for the period
specified in Section 4.1(b).

         A Request may be withdrawn prior to the filing of the Demand
Registration Statement by the Initiating Holder (a "WITHDRAWN REQUEST") and a
Demand Registration Statement may be withdrawn prior to the effectiveness
thereof by the Initiating Holder (a "WITHDRAWN DEMAND REGISTRATION"), and such
withdrawals shall be treated as a Demand Registration which shall have been
effected pursuant to this Section 2.1, unless the Holders of Registrable
Securities to be included in such Registration Statement reimburse the Company
for its reasonable out-of-pocket Registration Expenses relating to the
preparation and filing of such Demand Registration Statement (to the extent
actually incurred), in which case such withdrawal shall not be treated as a
Demand Registration effected pursuant to this Section 2.1 (and shall not be
counted toward the number of Demand Registrations); PROVIDED, HOWEVER, that if a
Withdrawn Request or Withdrawn Registration Statement is made (A) because of a
material adverse change in the business, financial condition or prospects of the
Company, or (B) because the sole or lead managing Underwriter advises that the
amount of Registrable Securities to be sold in such offering be reduced pursuant
to Section 2.1(b) by more than 25% of the Registrable Securities to be included
in such Registration Statement, then such withdrawal shall not be treated as a
Demand Registration effected pursuant to this Section 2.1 (and shall not be
counted toward the number of Demand Registrations), and the Company shall pay
all Registration Expenses in connection therewith. Any Holder requesting
inclusion in a Demand Registration

                                      -6-
<PAGE>

may, at any time prior to the effective date of the Demand Registration
Statement (and for any reason) revoke such request by delivering written notice
to the Company revoking such requested inclusion.

         The registration rights granted pursuant to the provisions of this
Section 2.1 shall be in addition to the registration rights granted pursuant to
the other provisions of Section 2 hereof.

         (b) PRIORITY IN DEMAND REGISTRATIONS. If a Demand Registration involves
an Underwritten Offering, and the sole or lead managing Underwriter, as the case
may be, of such Underwritten Offering shall advise the Company in writing (with
a copy to each Holder requesting registration) on or before the date five days
prior to the date then scheduled for such offering that, in its opinion, the
amount of Registrable Securities requested to be included in such Demand
Registration exceeds the number which can be sold in such offering within a
price range acceptable to the Initiating Holder (such writing to state the
approximate number of Registrable Securities which may be included in such
offering), and the Request is not thereafter withdrawn, the Company shall
include in such Demand Registration, to the extent of the number which the
Company is so advised may be included in such offering, the Registrable
Securities requested to be included in the Demand Registration by the Holders
allocated PRO RATA in proportion to the number of Registrable Securities
requested to be included in such Demand Registration by each of them; PROVIDED,
however, that from and after the date on which a Buyout Exercise Notice (as
defined in the Loan Agreement) has been delivered by SSC (unless a Referral
Notice (as defined in the Loan Agreement is delivered by Cerberus Partners, L.P.
in connection with such Buyout Exercise Notice), the Company shall include in
such Demand Registration, (A) first, the Registrable Securities requested to be
included in the Demand Registration by Cerberus Partners, L.P. (or its assignee)
and (B) second, to the extent of the number which the Company is so advised may
be included in such offering, the Registrable Securities requested to be
included in the Demand Registration by the other Holders allocated PRO RATA in
proportion to the number of Registrable Securities requested to be included in
such Demand Registration by each of them. In the event the Company shall not, by
virtue of this Section 2.1(b), include in any Demand Registration all of the
Registrable Securities of any Holder requested to be included in such Demand
Registration, such Holder may, upon written notice to the Company given within
five days of the time such Holder first is notified of such matter, further
reduce the amount of Registrable Securities it desires to have included in such
Demand Registration, whereupon only the Registrable Securities, if any, that it
desires to have included will be so included and the Holders not so reducing
shall be entitled to a corresponding pro rata increase in the amount of
Registrable Securities to be included in such Demand Registration.

         (c) LIMITATIONS ON REGISTRATIONS. The rights of Holders of Registrable
Securities to request Demand Registrations pursuant to Section 2.1(a) are
subject to the limitation that in no event shall the Company be required to
effect more than three Demand Registrations requested by each Initial Holder as
the Initiating Holder; PROVIDED, HOWEVER, that such number shall be increased to
the extent the Company (x) does not include in what would otherwise be such
registration, for which the Company is required to pay Registration Expenses,
the number of Registrable Securities requested to be registered by the Holders
by reason of Section 2.1(b) or (y) terminates a Shelf Registration pursuant to
Section 2.3 prior to the earlier of the time that all Registrable Securities
covered by such Shelf Registration have been sold or one

                                      -7-
<PAGE>

year following the effectiveness of such Shelf Registration. The Holders of the
Registrable Securities may only make one Demand Registration per 180 days. In
order to effect a Demand Registration, the Holder seeking such Demand
Registration must seek to register at least a number of shares with a Current
Market Value of $5,000,000, or such lesser number which is all of the
Registrable Securities held by such Holder.

         (d) UNDERWRITING; SELECTION OF UNDERWRITERS. Notwithstanding anything
to the contrary contained in Section 2.1(a), if the Initiating Holder who
requested registration in the Request so elects, the offering of such
Registrable Securities pursuant to such Demand Registration shall be in the form
of a firm commitment Underwritten Offering and such Initiating Holder may
require that all Persons (including other Holders) participating in such
registration sell their Registrable Securities to the Underwriters at the same
price and on the same terms of underwriting applicable to the Initiating Holder.
If any Demand Registration involves an Underwritten Offering, the sole or
managing Underwriters and any additional investment bankers and managers to be
used in connection with such registration shall be selected by the Company,
subject to the approval of the Initiating Holder who requested such registration
in the Request (such approval not to be unreasonably withheld).

         (e) EFFECTIVE REGISTRATION STATEMENT; SUSPENSION. A Demand Registration
Statement shall not be deemed to have become effective (and the related
registration will not be deemed to have been effected) (i) unless it has been
declared effective by the SEC and remains effective in compliance with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such Demand Registration Statement for the
shorter of (i) one year for a Shelf Registration or 90 days for any other
Registration Statement or (ii) the time period specified in Section 4.1(b), (ii)
if the offering of any Registrable Securities pursuant to such Demand
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other governmental agency or court, or
(iii) if, in the case of an Underwritten Offering, the conditions to closing
specified in an underwriting agreement to which the Company is a party are not
satisfied (other than by the sole reason of any breach or failure by the Holders
of Registrable Securities) and are not otherwise waived.

         (f) REGISTRATION OF OTHER SECURITIES. Whenever the Company shall effect
a Demand Registration, no securities other than the Registrable Securities shall
be covered by such registration unless each Initial Holder of the Registration
shall have consented in writing to the inclusion of such other securities;
provided, however, that the number of shares of Registrable Securities to be
registered by the Holders shall not be reduced pursuant to Section 2.1(b) unless
all other securities are first entirely excluded from the underwriting.

         (g) REGISTRATION STATEMENT FORM. Registrations under this Section 2.1
shall be on such appropriate registration form of the SEC (i) as shall be
reasonably selected by the Company, and (ii) which shall be available for the
sale of Registrable Securities in accordance with the intended method or methods
of disposition specified in the requests for registration.

         2.2 INCIDENTAL REGISTRATION.

         (a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company at any time
or from time to time proposes to register any of its securities under the
Securities Act (other than in

                                      -8-
<PAGE>

a registration on Form S-4 or S-8 or any successor form to such forms and other
than pursuant to Section 2.1 or 2.3) whether or not pursuant to registration
rights granted to other holders of its securities and whether or not for sale
for its own account, the Company shall deliver prompt written notice (which
notice shall be given at least five Business Days prior to filing with the SEC
such proposed registration) to all Holders of Registrable Securities of its
intention to undertake such registration, describing in reasonable detail the
proposed registration and distribution (including the anticipated range of the
proposed offering price, the class and number of securities proposed to be
registered and the distribution arrangements) and of such Holders' right to
participate in such registration under this Section 2.2 as hereinafter provided.
Subject to the other provisions of this paragraph (a) and Section 2.2(b), upon
the written request of any Holder made within five Business Days after the
receipt of such written notice (which request shall specify the amount of
Registrable Securities to be registered and the intended method of disposition
thereof), the Company shall effect the registration under the Securities Act of
all Registrable Securities requested by Holders to be so registered (an
"INCIDENTAL REGISTRATION"), to the extent requisite to permit the disposition
(in accordance with the intended methods thereof as aforesaid) of the
Registrable Securities so to be registered, by inclusion of such Registrable
Securities in the Registration Statement which covers the securities which the
Company proposes to register and shall cause such Registration Statement to
become and remain effective with respect to such Registrable Securities in
accordance with the registration procedures set forth in Section 4. If an
Incidental Registration involves an Underwritten Offering, immediately upon
notification to the Company from the Underwriter of the price at which such
securities are to be sold, the Company shall so advise each participating
Holder. If such price is 15% (or $1.50 per share, whichever is less) less than
the Current Market Value of the Registrable Securities on the date that a Holder
delivered its notice requesting inclusion in an Incidental Registration, such
Holder may, at any time prior to the effective date of the Incidental
Registration Statement (and for any reason), revoke such request by delivering
written notice to the Company revoking such requested inclusion.

         If at any time after giving written notice of its intention to register
any securities and prior to the effective date of the Incidental Registration
Statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Holder of Registrable Securities and, thereupon, (A) in
the case of a determination not to register, the Company shall be relieved of
its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses
incurred in connection therewith), without prejudice, however, to the rights of
Holders to cause such registration to be effected as a registration under
Section 2.1 and (B) in the case of a determination to delay such registration,
the Company shall be permitted to delay the registration of such Registrable
Securities for the same period as the delay in registering such other
securities; PROVIDED, HOWEVER, that if such delay shall extend beyond 120 days
from the date the Company received a request to include Registrable Securities
in such Incidental Registration, then the Company shall again give all Holders
the opportunity to participate therein and shall follow the notification
procedures set forth in the preceding paragraph. There is no limitation on the
number of such Incidental Registrations pursuant to this Section 2.2 which the
Company is obligated to effect; PROVIDED, HOWEVER, that the Company shall not be
obligated to include any shares requested unless the number of shares has a
Current Market Value of at least $5,000,000, or is all of the Registrable
Securities held by a Holder.

                                      -9-
<PAGE>

         The registration rights granted pursuant to the provisions of this
Section 2.2 shall be in addition to the registration rights granted pursuant to
the other provisions of Section 2 hereof.

         (b) PRIORITY IN INCIDENTAL REGISTRATION. If an Incidental Registration
involves an Underwritten Offering (on a firm commitment basis), and the sole or
the lead managing Underwriter, as the case may be, of such Underwritten Offering
shall advise the Company in writing (with a copy to each Holder requesting
registration) on or before the date five days prior to the date then scheduled
for such offering that, in its opinion, the amount of securities (including
Registrable Securities) requested to be included in such registration exceeds
the amount which can be sold in such offering without materially interfering
with the successful marketing of the securities being offered (such writing to
state the approximate number of such securities which may be included in such
offering without such effect), the Company shall include in such registration,
to the extent of the number which the Company is so advised may be included in
such offering without such effect, (i) in the case of a registration initiated
by the Company, (A) first, the securities that the Company proposes to register
for its own account, and (B) second, on a PRO RATA basis, in proportion to the
number of securities requested to be included in such registration, the
Registrable Securities requested to be included in such registration by the
Holders and the holders of other securities of the Company to be registered on
behalf of any other Person, and (ii) in the case of a registration initiated by
any Persons other than the Company, (A) first, the securities of the Company
requested to be included in such registration by any Persons initiating such
registration, and (B) second, on a PRO RATA basis, in proportion to the number
of securities requested to be included in such registration, the Registrable
Securities requested to be included in such registration by the Holders, the
securities requested to be included in such registration by any other Persons
and the securities that the Company proposes to register for its own account;
PROVIDED, HOWEVER, that in the event the Company will not, by virtue of this
Section 2.2(b), include in any such registration all of the Registrable
Securities of any Holder requested to be included in such registration, such
Holder may, upon written notice to the Company given within three days of the
time such Holder first is notified of such matter, reduce the amount of
Registrable Securities it desires to have included in such registration,
whereupon only the Registrable Securities, if any, it desires to have included
will be so included and the Holders not so reducing shall be entitled to a
corresponding pro rata increase in the amount of Registrable Securities to be
included in such registration.

         (c) SELECTION OF UNDERWRITERS. If any Incidental Registration involves
an Underwritten Offering, the sole or managing Underwriter(s) and any additional
investment bankers and managers to be used in connection with such registration
shall be selected by the Company in its sole discretion.

         2.3 SHELF REGISTRATION.

         (a) SHELF REGISTRATION. If a request made pursuant to Section 2.1 is
for a Shelf Registration, the Company shall use its reasonable best efforts to
keep the Shelf Registration continuously effective through the date on which all
of the Registrable Securities covered by such Shelf Registration may be sold
pursuant to Rule 144(k) under the Securities Act (or any successor provision
having similar effect); PROVIDED, HOWEVER, that prior to the termination of such
Shelf Registration, the Company shall first furnish to each Holder of
Registrable Securities

                                      -10-
<PAGE>

participating in such Shelf Registration (i) an opinion, in form and substance
reasonably satisfactory to each Initial Holder of the Registration, of counsel
for the Company satisfactory to each Initial Holder of the Registration (it
being agreed that Porter, Wright, Morris & Arthur LLP is reasonably
satisfactory) stating that such Registrable Securities are freely saleable
pursuant to Rule 144(k) under the Securities Act (or any successor provision
having similar effect) or (ii) a "No-Action Letter" from the staff of the SEC
stating that the SEC would not recommend enforcement action if the Registrable
Securities included in such Shelf Registration were sold in a public sale other
than pursuant to an effective registration statement.

         2.4 UNDERWRITTEN OFFERINGS.

         (a) DEMAND UNDERWRITTEN OFFERINGS. If requested by the sole or lead
managing Underwriter and the Initial Holders of the Registration for any
Underwritten Offering effected pursuant to a Demand Registration, the Company
shall enter into a customary underwriting agreement with the Underwriters for
such offering to contain such representations and warranties by the Company and
the Initial Holders of the Registration and such other terms as are generally
prevailing in agreements of that type, including, without limitation,
indemnification and contribution to the effect and to the extent provided in
Section 5.

         (b) HOLDERS OF REGISTRABLE SECURITIES TO BE PARTIES TO UNDERWRITING
AGREEMENT. The Holders of Registrable Securities to be distributed by
Underwriters in an Underwritten Offering contemplated by Section 2 shall be
parties to the underwriting agreement between the Company and such Underwriters
and may, at such Holders' option, require that any or all of the representations
and warranties by, and the other agreements on the part of, the Company to and
for the benefit of such Underwriters shall also be made to and for the benefit
of such Holders of Registrable Securities and that any or all of the conditions
precedent to the obligations of such Underwriters under such underwriting
agreement be conditions precedent to the obligations of such Holders of
Registrable Securities; PROVIDED, HOWEVER, that the Company shall not be
required to make any representations or warranties with respect to written
information specifically provided by a selling Holder for inclusion in the
Registration Statement. No Holder shall be required to make any representations
or warranties to, or agreements with, the Company or (in the case of an
Incidental Registration) the Underwriters other than representations, warranties
or agreements regarding such Holder, such Holder's Registrable Securities and
such Holder's intended method of disposition.

         (c) PARTICIPATION IN UNDERWRITTEN REGISTRATION. Notwithstanding
anything herein to the contrary, no Person may participate in any underwritten
registration hereunder unless such Person (i) agrees to sell its securities on
the same terms and conditions provided in any underwritten arrangements approved
by the Persons entitled hereunder to approve such arrangement and (ii)
accurately completes and executes in a timely manner all questionnaires, powers
of attorney, indemnities, custody agreements, underwriting agreements and other
documents reasonably required under the terms of such underwriting arrangements.

         2.5 EXPENSES. The Company shall pay all Registration Expenses in
connection with any Demand Registration, Incidental Registration or Shelf
Registration whether or not such registration shall become effective and whether
or not all Registrable Securities originally requested to be included in such
registration are withdrawn or otherwise ultimately not

                                      -11-
<PAGE>

included in such registration, except as otherwise provided with respect to a
Withdrawn Request and a Withdrawn Demand Registration in Section 2.1(a).

         3. HOLDBACK ARRANGEMENTS

         3.1 RESTRICTIONS ON SALE BY HOLDERS OF REGISTRABLE SECURITIES. Each
Holder of Registrable Securities agrees, by acquisition of such Registrable
Securities, if timely requested in writing by the sole or lead managing
Underwriter, not to make any short sale of, loan, grant any option for the
purchase of or effect any public sale or distribution, including a sale pursuant
to Rule 144 (or any successor provision having similar effect) under the
Securities Act of any Registrable Securities (except as part of such
registration), during the seven days prior to, and during the time period
reasonably requested by the sole or lead managing Underwriter (or the closing
date for any Underwritten Offering sold pursuant to a Shelf Registration), not
to exceed 90 days, beginning on the effective date of the applicable
registration statement, unless the sole or lead Managing Underwriter in such
Underwritten Offering otherwise agrees; PROVIDED, that the Company, each officer
and director of the Company and each other holder of 5% or more of the equity
securities (or any security convertible into or exchangeable or exercisable for
any of its equity securities) of the Company so agree.

         3.2 RESTRICTIONS ON SALE BY THE COMPANY AND OTHERS. The Company agrees
that if timely requested in writing by the sole or lead managing Underwriter in
an Underwritten Offering of any Registrable Securities, not to make any short
sale of, loan, grant any option for the purchase of or effect any public sale or
distribution of any of the Company's equity securities (or any security
convertible into or exchangeable or exercisable for any of the Company's equity
securities) during the seven days prior to, and during the time period
reasonably requested by the sole or lead managing Underwriter not to exceed 90
days, beginning on the effective date of the applicable registration statement
(except as part of such underwritten registration or pursuant to registrations
on Forms S-4 or S-8 or any successor form to such forms), unless the sole or
lead Managing Underwriter in such Underwritten Offering otherwise Agrees. The
Company will use its reasonable best efforts to cause each director and officer
of the Company and each holder of 5% or more of the equity securities (or any
security convertible into or exchangeable or exercisable for any of its equity
securities) of the Company to so agree.

         4. REGISTRATION PROCEDURES.

         4.1 OBLIGATIONS OF THE COMPANY. Whenever the Company is required to
effect the registration of Registrable Securities under the Securities Act
pursuant to Section 2 of this Agreement, the Company shall, as expeditiously as
possible:

         (a) prepare and file with the SEC (promptly, and in any event within 45
days after receipt of a request to register Registrable Securities) the
requisite Registration Statement to effect such registration, which Registration
Statement shall comply as to form in all material respects with the requirements
of the applicable form and include all financial statements required by the SEC
to be filed therewith, and the Company shall use its reasonable best efforts to
cause such Registration Statement to become effective (promptly, and in any
event within 60 days of the initial filing of the Registration Statement with
the SEC) (PROVIDED, HOWEVER, that the Company may discontinue any registration
of its securities that are not Registrable Securities,

                                      -12-
<PAGE>

and, under the circumstances specified in Section 2.2, its securities that are
Registrable Securities); and PROVIDED FURTHER, that before filing a Registration
Statement or Prospectus or any amendments or supplements thereto, or comparable
statements under securities or blue sky laws of any jurisdiction, the Company
shall (i) provide Holders' Counsel and any other Inspector with an adequate and
appropriate opportunity to participate in the preparation of such Registration
Statement and each Prospectus included therein (and each amendment or supplement
thereto or comparable statement) to be filed with the SEC, which documents shall
be subject to the review and comment of Holders' Counsel, and (ii) not file any
such Registration Statement or Prospectus (or amendment or supplement thereto or
comparable statement) with the SEC to which Holder's Counsel, any selling Holder
or any other Inspector shall have reasonably objected on the grounds that such
filing does not comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;

         (b) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the Prospectus used in connection therewith as
may be necessary (i) to keep such Registration Statement effective, and (ii) to
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such Registration Statement, in each
case until such time as all of such Registrable Securities have been disposed of
in accordance with the intended methods of disposition by the seller(s) thereof
set forth in such Registration Statement;

         (c) furnish, without charge, to each selling Holder of such Registrable
Securities and each Underwriter, if any, of the securities covered by such
Registration Statement, such number of copies of such Registration Statement,
each amendment and supplement thereto (in each case including all exhibits), and
the Prospectus included in such Registration Statement (including each
preliminary Prospectus) in conformity with the requirements of the Securities
Act, and other documents, as such selling Holder and Underwriter may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such selling Holder (the Company hereby
consenting to the use in accordance with applicable law of each such
Registration Statement (or amendment or post-effective amendment thereto) and
each such Prospectus (or preliminary prospectus or supplement thereto) by each
such selling Holder of Registrable Securities and the Underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such Registration Statement or Prospectus);

         (d) prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify all Registrable Securities and
other securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as any selling Holder of
Registrable Securities covered by such Registration Statement or the sole or
lead managing Underwriter, if any, may reasonably request to enable such selling
Holder to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such selling Holder and to continue such registration or
qualification in effect in each such jurisdiction for as long as such
Registration Statement remains in effect (including through new filings or
amendments or renewals), and do any and all other acts and things which may be
necessary or advisable to enable any such selling Holder to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
selling Holder;

                                      -13-
<PAGE>

         (e) use its reasonable best efforts to obtain all other approvals,
consents, exemptions or authorizations from such governmental agencies or
authorities as may be necessary to enable the selling Holders of such
Registrable Securities to consummate the disposition of such Registrable
Securities;

         (f) notify Holders' Counsel, each Holder of Registrable Securities
covered by such Registration Statement and the sole or lead managing
Underwriter, if any: (i) when the Registration Statement, any pre-effective
amendment, the Prospectus or any prospectus supplement related thereto or
post-effective amendment to the Registration Statement has been filed and, with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC or any state
securities or blue sky authority for amendments or supplements to the
Registration Statement or the Prospectus related thereto or for additional
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation or threat of any
proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation of any proceeding for such purpose, (v) of the
existence of any fact of which the Company becomes aware or the happening of any
event which results in (A) the Registration Statement containing an untrue
statement of a material fact or omitting to state a material fact required to be
stated therein or necessary to make any statements therein not misleading, or
(B) the Prospectus included in such Registration Statement containing an untrue
statement of a material fact or omitting to state a material fact required to be
stated therein or necessary to make any statements therein, in the light of the
circumstances under which they were made, not misleading, (vi) if at any time
the representations and warranties contained in any underwriting agreement in
respect of such offering cease to be true and correct in all material respects,
and (vii) of the Company's reasonable determination that a post-effective
amendment to a Registration Statement would be appropriate or that there exists
circumstances not yet disclosed to the public which make further sales under
such Registration Statement inadvisable pending such disclosure and
post-effective amendment; and, if the notification relates to an event described
in any of the clauses (ii) through (vii) of this Section 4.1(f), the Company
shall promptly prepare a supplement or post-effective amendment to such
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that (1) such
Registration Statement shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (2) as thereafter delivered to
the purchasers of the Registrable Securities being sold thereunder, such
Prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading (and shall furnish to each such Holder and each Underwriter, if
any, a reasonable number of copies of such Prospectus so supplemented or
amended); and if the notification relates to an event described in clause (iii)
of this Section 4.1(f), the Company shall take all reasonable action required to
prevent the entry of such stop order or to remove it if entered;

         (g) make available for inspection by any selling Holder of Registrable
Securities, any sole or lead managing Underwriter participating in any
disposition pursuant to such Registration Statement, Holders' Counsel and any
attorney, accountant or other agent

                                      -14-
<PAGE>

retained by any such seller or any Underwriter (each, an "INSPECTOR" and,
collectively, the "INSPECTORS"), all financial and other records, pertinent
corporate documents and properties of the Company and any subsidiaries thereof
as may be in existence at such time relevant to the Offering (collectively, the
"RECORDS") as shall be necessary, in the reasonable opinion of such Holders' and
such Underwriters' respective counsel, to enable them to exercise their due
diligence responsibility and to conduct a reasonable investigation within the
meaning of the Securities Act, and cause the Company's and any subsidiaries'
officers, directors and employees, and the independent public accountants of the
Company, to supply all information reasonably requested by any such Inspectors
in connection with such Registration Statement;

         (h) obtain an opinion from the Company's counsel and a "cold comfort"
letter from the Company's independent public accountants who have certified the
Company's financial statements included or incorporated by reference in such
Registration Statement, in each case dated the effective date of such
Registration Statement (and if such registration involves an Underwritten
Offering, dated the date of the closing under the underwriting agreement), in
customary form and covering such matters as are customarily covered by such
opinions and "cold comfort" letters delivered to underwriters in underwritten
public offerings, which opinion and letter shall be in customary form, and
furnish to each Holder participating in the offering and to each Underwriter, if
any, a copy of such opinion and letter addressed to such Holder (in the case of
the opinion) and Underwriter (in the case of the opinion and the "cold comfort"
letter);

         (i) provide a CUSIP number for all Registrable Securities and provide
and cause to be maintained a transfer agent and registrar for all such
Registrable Securities covered by such Registration Statement not later than the
effectiveness of such Registration Statement;

         (j) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC and any other governmental agency or
authority having jurisdiction over the offering, and make available to its
security holders, as soon as reasonably practicable but no later than 90 days
after the end of any 12-month period, an earnings statement (i) commencing at
the end of any month in which Registrable Securities are sold to Underwriters in
an Underwritten Offering and (ii) commencing with the first day of the Company's
calendar month next succeeding each sale of Registrable Securities after the
effective date of a Registration Statement, which statement shall cover such
12-month periods, in a manner which satisfies the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder;

         (k) if so requested by an Initial Holder of the Registration, use its
reasonable best efforts to cause all such Registrable Securities to be duly
included for quotation on the national securities exchange on which the
Company's similar securities are then listed, if applicable, or if securities of
the Company are not at the time listed on any national securities exchange (or
if the listing of Registrable Securities is not permitted under the rules of
each national securities exchange on which the Company's securities are then
listed), on a national securities exchange to which it meets the listing
requirements designated by the Initial Holders of the Registration;

         (l) enter into and perform customary agreements (including, if
applicable, an underwriting agreement in customary form) and provide officers'
certificates and other customary closing documents;

                                      -15-
<PAGE>

         (m) reasonably cooperate with each selling Holder of Registrable
Securities and each Underwriter participating in the disposition of such
Registrable Securities and their respective counsel in connection with any
filings required to be made with the NYSE and make reasonably available its
employees and personnel and otherwise provide reasonable assistance to the
Underwriters (taking into account the needs of the Company's businesses and the
requirements of the marketing process) in the marketing of Registrable
Securities in any Underwritten Offering;

         (n) cooperate with the selling Holders of Registrable Securities and
the sole or lead managing Underwriter, if any, to facilitate the timely
preparation and delivery of certificates not bearing any restrictive legends
representing the Registrable Securities to be sold, and cause such Registrable
Securities to be issued in such denominations and registered in such names in
accordance with the underwriting agreement prior to any sale of Registrable
Securities to the Underwriters or, if not an Underwritten Offering, in
accordance with the instructions of the selling Holders of Registrable
Securities at least three business days prior to any sale of Registrable
Securities;

         (o) keep each selling Holder of Registrable Securities advised in
writing as to the initiation and progress of any registration under Section 2
hereunder;

         (p) furnish to each Holder participating in the offering and the sole
or lead managing Underwriter, if any, without charge, at least one
manually-signed copy of the Registration Statement and any post-effective
amendments thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those deemed to be
incorporated by reference);

         (q) if requested by the sole or lead managing Underwriter or any
selling Holder of Registrable Securities, immediately incorporate in a
prospectus supplement or post-effective amendment such information concerning
such Holder of Registrable Securities, the Underwriters or the intended method
of distribution as the sole or lead managing Underwriter or the selling Holder
of Registrable Securities reasonably requests to be included therein and as is
appropriate in the reasonable judgment of the Company, including, without
limitation, information with respect to the number of shares of the Registrable
Securities being sold to the Underwriters, the purchase price being paid
therefor by such Underwriters and with respect to any other terms of the
Underwritten Offering of the Registrable Securities to be sold in such offering;
make all required filings of such Prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; and supplement or make
amendments to any Registration Statement if requested by the sole or lead
managing Underwriter of such Registrable Securities; and

         (r) use its reasonable best efforts to take all other steps necessary
to expedite or facilitate the registration and disposition of the Registrable
Securities contemplated hereby.

         4.2 SELLER INFORMATION. The Company may require each selling Holder of
Registrable Securities as to which any registration is being effected to furnish
to the Company such information regarding such seller and the disposition of
such securities as the Company may from time to time reasonably request in
writing; PROVIDED, HOWEVER, that such information

                                      -16-
<PAGE>

shall be used only in connection with such Registration. If any Registration
Statement or comparable statement under "blue sky" laws refers to any Holder by
name or otherwise as the Holder of any securities of the Company, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder and the Company, to
the effect that the holding by such Holder of such securities is not to be
construed as a recommendation by such Holder of the investment quality of the
Company's securities covered thereby and that such holding does not imply that
such Holder will assist in meeting any future financial requirements of the
Company, and (ii) in the event that such reference to such Holder by name or
otherwise is not in the judgment of the Company, as advised by counsel, required
by the Securities Act or any similar federal statute or any state "blue sky" or
securities law then in force, the deletion of the reference to such Holder.

         4.3 NOTICE TO DISCONTINUE. Each Holder of Registrable Securities agrees
by acquisition of such Registrable Securities that, (i) upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 4.1(f)(ii) through 4.1(f)(v), such Holder shall forthwith discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 4.1(f) and, if
so directed by the Company, such Holder shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
Holder's possession of the Prospectus covering such Registrable Securities which
is current at the time of receipt of such notice. If the Company shall give any
such notice, the Company shall extend the period during which such Registration
Statement shall be maintained effective pursuant to this Agreement (including,
without limitation, the period referred to in Section 4.1(b)) by the number of
days during the period from and including the date of the giving of such notice
pursuant to Section 4.1(f) to and including the date when the Holder shall have
received the copies of the supplemented or amended prospectus contemplated by
and meeting the requirements of Section 4.1(f).

         5. INDEMNIFICATION; CONTRIBUTION.

         5.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless, to the fullest extent permitted by law, each Holder of
Registrable Securities, its officers, directors, partners, members,
shareholders, employees, Affiliates, advisers, attorneys and agents
(collectively, "AGENTS") and each Person who controls such Holder (within the
meaning of the Securities Act) and its Agents with respect to each registration
which has been effected pursuant to this Agreement, against any and all losses,
claims, damages or liabilities, joint or several, actions or proceedings
(whether commenced or threatened) in respect thereof, and expenses (as incurred
or suffered and including, but not limited to, any and all expenses incurred in
investigating, preparing or defending any litigation or proceeding, whether
commenced or threatened, and the reasonable fees, disbursements and other
charges of legal counsel) in respect thereof (collectively, "CLAIMS"), insofar
as such Claims arise out of or are based upon any untrue or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus (including any preliminary, final or summary prospectus and any
amendment or supplement thereto) related to any such registration or any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction

                                      -17-
<PAGE>

required of the Company in connection with any such registration, or any
qualification or compliance incident thereto; PROVIDED, HOWEVER, that the
Company will not be liable in any such case to the extent that any such Claims
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact or omission or alleged omission of a material fact so made in
reliance upon and in conformity with written information furnished to the
Company in an instrument duly executed by such Holder specifically stating that
it was expressly for use therein. The Company shall enter into an agreement with
any Underwriters of the Registrable Securities to provide for customary
indemnification of any such Underwriter, their Agents and each Person who
controls any such Underwriter (within the meaning of the Securities Act). Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of any Person who may be entitled to indemnification
pursuant to this Section 5 and shall survive the transfer of securities by such
Holder or Underwriter.

         5.2 INDEMNIFICATION BY HOLDERS. Each Holder, if Registrable Securities
held by it are included in the securities as to which a registration is being
effected, agrees to, severally and not jointly, indemnify and hold harmless, to
the fullest extent permitted by law, the Company, its directors and officers,
each other Person who participates as an Underwriter in the offering or sale of
such securities and its Agents and each Person who controls the Company against
any and all Claims, insofar as such Claims arise out of or are based upon any
untrue or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus (including any preliminary, final or
summary prospectus and any amendment or supplement thereto) related to such
registration, or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company in an instrument duly executed by such Holder specifically stating that
it was expressly for use therein; PROVIDED, HOWEVER, that the aggregate amount
which any such Holder shall be required to pay pursuant to this Section 5.2
shall in no event be greater than the amount of the net proceeds received by
such Holder upon the sale of the Registrable Securities pursuant to the
Registration Statement giving rise to such Claims less all amounts previously
paid by such Holder with respect to any such Claims.

         5.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt by
an indemnified party of notice of any Claim or the commencement of any action or
proceeding involving a Claim under this Section 5, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying party
pursuant to Section 5, (i) notify the indemnifying party in writing of the Claim
or the commencement of such action or proceeding; PROVIDED, HOWEVER, that the
failure of any indemnified party to provide such notice shall not relieve the
indemnifying party of its obligations under this Section 5, except to the extent
the indemnifying party is materially and actually prejudiced thereby and shall
not relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than under this Section 5, and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; PROVIDED, HOWEVER, that any indemnified
party shall have the right to employ separate counsel and to participate in the
defense of such claim, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (A) the indemnifying party has agreed
in writing to pay such fees and expenses, (B) the indemnifying party shall have
failed to assume the defense of such claim and employ counsel

                                      -18-
<PAGE>

reasonably satisfactory to such indemnified party within 20 days after receiving
notice from such indemnified party that the indemnified party believes it has
failed to do so, (C) in the reasonable judgment of any such indemnified party,
based upon advice of counsel, a conflict of interest shall exist between such
indemnified party and the indemnifying party with respect to such claims; it
being understood, however, that the indemnifying party shall not, in connection
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to no more than one firm of local
counsel) at any time for all such indemnified parties or (D) such indemnified
party is a defendant in an action or proceeding which is also brought against
the indemnifying party and reasonably shall have concluded that there may be one
or more legal defenses available to such indemnified party which are not
available to the indemnifying party. No indemnifying party shall be liable for
any settlement of any such claim or action effected without its written consent,
which consent shall not be unreasonably withheld. No indemnifying party shall,
without the consent of the indemnified party, which consent shall not be
unreasonably withheld, consent to entry of any judgment or enter into any
settlement or compromise of any pending or threatened claim or action in respect
of which indemnification or contribution may be sought hereunder (whether or not
the indemnified party is an actual or potential party to such claim or action),
unless such settlement, (i) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim, (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party, and (3) does not provide for any
action on the part of any party other than the payment of money damages which is
to be paid in full by or on behalf of the indemnifying party.

         5.4 CONTRIBUTION. If the indemnification provided for in Section 5.1 or
5.2 from the indemnifying party for any reason is unavailable to (other than by
reason of exceptions provided therein), or is insufficient to hold harmless an
indemnified party hereunder in respect of any Claim, then the indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such Claim in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and the indemnified party, on the other
hand, in connection with the actions which resulted in such Claim, as well as
any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. If, however, the foregoing allocation is not permitted by applicable
law, then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party in such proportion as is appropriate to reflect not
only such relative faults but also the relative benefits of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations.

         The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5.4 were determined by PRO RATA allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by a party as a result of any

                                      -19-
<PAGE>

Claim referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth in Section 5.3, any legal or other
fees, costs or expenses reasonably incurred by such party in connection with any
investigation or proceeding. Notwithstanding anything in this Section 5.4 to the
contrary, no indemnifying party (other than the Company) shall be required
pursuant to this Section 5.4 to contribute any amount in excess of the net
proceeds received by such indemnifying party from the sale of the Registrable
Securities pursuant to the Registration Statement giving rise to such Claims,
less all amounts previously paid by such indemnifying party with respect to such
Claims. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.

         5.5 OTHER INDEMNIFICATION. Indemnification similar to that specified in
the preceding Sections 5.1 and 5.2 (with appropriate modifications) shall be
given by the Company and each selling Holder of Registrable Securities with
respect to any required registration or other qualification of securities under
any Federal or state law or regulation of any governmental authority, other than
the Securities Act. The indemnity agreements contained herein shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract.

         5.6 INDEMNIFICATION PAYMENTS. The indemnification and contribution
required by this Section 5 shall be made by periodic payments of the amount
thereof during the course of any investigation or defense, as and when bills are
received or any expense, loss, damage or liability is incurred.

         6. GENERAL.

         6.1 ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company agrees
that it shall not effect or permit to occur any combination or subdivision of
shares which would adversely affect the ability of the Holder of any Registrable
Securities to include such Registrable Securities in any registration
contemplated by this Agreement or the marketability of such Registrable
Securities in any such registration.

         6.2 REGISTRATION RIGHTS TO OTHERS. The Company is not currently party
to any agreement with respect to its securities granting any registration rights
to any Person. If the Company shall at any time hereafter provide to any
Affiliate of the Company rights with respect to the registration of such
securities under the Securities Act, (i) such rights shall not be in conflict
with or adversely affect any of the rights provided in this Agreement to the
Holders and (ii) if such rights are provided on terms or conditions more
favorable to such holder than the terms and conditions provided in this
Agreement, the Company shall provide (by way of amendment to this Agreement or
otherwise) such more favorable terms or conditions to the Holders.

         6.3 AVAILABILITY OF INFORMATION; RULE 144; OTHER EXEMPTIONS. At any
time during which the Company is not subject to the reporting requirements of
the Exchange Act, the Company shall, at any time and from time to time, upon the
request of any Holder of Registrable Securities or upon the request of any
Person designated by such Holder as a prospective purchaser of any Registrable
Securities, furnish in writing to such Holder or such prospective

                                      -20-
<PAGE>

purchaser, as the case may be, a statement as of a date not earlier than 12
months prior to the date of such request of the nature of the business of the
Company and the products and services it offers and copies of the Company's most
recent balance sheet and profit and loss and retained earnings statements,
together with similar financial statements for such part of the two preceding
fiscal years as the Company shall have been in operation, all such financial
statements to be audited to the extent audited statements are reasonable
available, PROVIDED, that, in any event the most recent financial statements so
furnished shall include a balance sheet as of a date less than 16 months prior
to the date of such request, statements of profit and loss and retained earnings
for the 12 months preceding the date of such balance sheet, and, if such balance
sheet is not as of a date less than 6 months prior to the date of such request,
additional statements of profit and loss and retained earnings for the period
from the date of such balance sheet to a date less than 6 months prior to the
date of such request. During any time during which the Company is not subject to
the reporting requirements of the Exchange Act and as long as any Registrable
Securities are outstanding , the Warrants have not yet expired or the Advances
have not yet been converted, the Company shall deliver to the Holders all
reports, financial statements and other documents required to be provided under
Section 6.01(a)(i) of the Financing Agreement and Section 6.01(a) of the Loan
Agreement, without regard to (A) whether, at any time, such reporting
requirements are required pursuant to Section 6.01(a)(i) of the Financing
Agreement and Section 6.01(a) of the Loan Agreement and (B) whether all Liens,
Reimbursement Obligations, Letter of Credit Obligations and all other
Obligations under the Financing Agreement and the Loan Agreement have been paid
or whether any Lender shall have any commitment thereunder. The Company will use
its best efforts to take such steps as are necessary to allow the Company to
become, and remain, eligible to register securities on Form S-3 (or any
comparable form adopted by the SEC) for resale purposes, and to make publicly
available and available to the Holder of Registrable Securities to make sales of
Registrable Securities pursuant to such rules.

         The Company covenants that it will use its reasonable best efforts to
timely file any reports required to be filed by it under the Securities Act or
the Exchange Act (including, but not limited to, the reports under Sections 13
and 15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144 under
the Securities Act), and that it shall take such further action as any Holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such rule may be amended
from time to time, or (ii) any other rule or regulation now existing or
hereafter adopted by the SEC. The Company will furnish to any Holder of
Registrable Securities, upon request made by such Holder at any time, a written
statement signed by the Company, addressed to such Holder, as to whether the
Company has complied with the current public information requirements of Rule
144 or Rule 144A. The Company will, at the request of any Holder of Registrable
Securities (upon receipt from such Holder of a certificate certifying (i) that
such Holder has held such Registrable Securities for a period of not less than
one (1) year, and (ii) that such Holder has not been an affiliate (as defined in
Rule 144) of the Company for more than the ninety (90) preceding days), remove
from the stock certificates representing such Registrable Securities that
portion of any restrictive legend which relates to the registration provisions
of the Securities Act.

                                      -21-
<PAGE>

         6.4 AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified, supplemented or
terminated, and waivers or consents to departures from the provisions hereof may
not be given, without the written consent of the Company and each Initial
Holder; PROVIDED, HOWEVER, that no such amendment, modification, supplement,
waiver or consent to departure shall reduce the aforesaid percentage of
Registrable Securities without the written consent of all of the Holders of
Registrable Securities; and PROVIDED FURTHER, that nothing herein shall prohibit
any amendment, modification, supplement, termination, waiver or consent to
departure the effect of which is limited only to those Holders who have agreed
to such amendment, modification, supplement, termination, waiver or consent to
departure.

         6.5 NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, telecopier, any
courier guaranteeing overnight delivery or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to the applicable
party at the address set forth below or such other address as may hereafter be
designated in writing by such party to the other parties in accordance with the
provisions of this Section:

If to the Company:                        Value City Department Stores, Inc.
                                          3241 Westerville Road
                                          Columbus, OH 43224
                                          Attn: James A. McGrady
                                          Fax No. (614) 478-2721

with copies to:                           Porter, Wright, Morris & Arthur LLP
                                          41 S. High Street
                                          Columbus, OH 43215
                                          Attn:  Robert J. Tannous
                                          Fax No.  (614) 227-2100

If to the Initial Holders:                Cerberus Partners, L.P.
                                          450 Park Avenue, 28th Floor
                                          New York, NY 10022
                                          Attn: Lenard Tessler
                                          Fax No. (212) 758-5305

with copies to:                           Schulte Roth & Zabel LLP
                                          919 Third Avenue
                                          New York, New York 10022
                                          Attn:  Stuart D. Freedman, Esq.
                                          Fax No. (212) 593-5955

                                          Schottenstein Stores Corporation
                                          1800 Moler Road

                                      -22-
<PAGE>

                                          Columbus, OH 43207
                                          Attn: Irwin A. Bain
                                          Fax No. (614) 443-0972

with copies to:                           Cadwalader, Wickersham & Taft
                                          100 Maiden Lane
                                          New York, NY 10038
                                          Attn:  Dennis J. Block
                                          Fax No. (212) 504-5557

                                          If to any subsequent
                                          Holder, to the address of
                                          such Person set forth in
                                          the records of the Company.

         All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when receipt is
acknowledged, if telecopied; on the next business day, if timely delivered to a
courier guaranteeing overnight delivery; and five days after being deposited in
the mail, if sent first class or certified mail, return receipt requested,
postage prepaid.

         6.6 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, successors
and permitted assigns (including any permitted transferee of the Warrants,
Advances or Registrable Securities). Any Holder may assign to any permitted (as
determined under the Warrants, Financing Agreement and Loan Agreement)
transferee of its Warrants, Advances or Registrable Securities (other than a
transferee that acquires such Registrable Securities in a registered public
offering or pursuant to a sale under Rule 144 of the Securities Act (or any
successor rule)), its rights and obligations under this Agreement; PROVIDED,
HOWEVER, if any permitted transferee shall take and hold the Warrants, Advances
or Registrable Securities, such transferee shall promptly notify the Company and
by taking and holding such Registrable Securities such permitted transferee
shall automatically be entitled to receive the benefits of and be conclusively
deemed to have agreed to be bound by and to perform all of the terms and
provisions of this Agreement as if it were a party hereto (and shall, for all
purposes, be deemed a Holder under this Agreement). If the Company shall so
request, any heir, successor or permitted assign (including any permitted
transferee) wishing to avail itself of the benefits of this Agreement shall
agree in writing to acquire and hold the Registrable Securities subject to all
of the terms hereof. For purposes of this Agreement, "successor" for any entity
other than a natural person shall mean a successor to such entity as a result of
such entity's merger, consolidation, sale of substantially all of its assets, or
similar transaction. Except as provided above or otherwise permitted by this
Agreement, neither this Agreement nor any right, remedy, obligation or liability
arising hereunder or by reason hereof shall be assignable by any Holder or by
the Company without the consent of the other parties hereto.

                                      -23-
<PAGE>

         6.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but all of which counterparts, taken together, shall constitute
one and the same instrument.

         6.8 DESCRIPTIVE HEADINGS, ETC. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise requires: (1) words of any gender shall be deemed to include each
other gender; (2) words using the singular or plural number shall also include
the plural or singular number, respectively; (3) the words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Section and paragraph references are to the Sections and
paragraphs of this Agreement unless otherwise specified; (4) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation," unless otherwise specified; (5) "or" is not
exclusive; and (6) provisions apply to successive events and transactions.

         6.9 SEVERABILITY. In the event that any one or more of the provisions,
paragraphs, words, clauses, phrases or sentences contained herein, or the
application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the other remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not be in any way
impaired, it being intended that all rights, powers and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.

         6.10 CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. THE VALIDITY OF THIS
AGREEMENT, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE
RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR
RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF).

         THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK. THE COMPANY AND THE
INITIAL HOLDERS WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT
EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
6.10. NOTHING HEREIN CONTAINED SHALL BE DEEMED TO AFFECT THE RIGHT OF ANY PARTY
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST ANY OTHER PARTY IN ANY OTHER JURISDICTION TO ENFORCE
JUDGMENTS OBTAINED IN ANY ACTION, SUIT OR PROCEEDING BROUGHT PURSUANT TO THIS
SECTION.

                                      -24-
<PAGE>

         THE COMPANY AND THE INITIAL HOLDERS HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. THE COMPANY AND THE INITIAL HOLDERS REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.

         6.11 REMEDIES; SPECIFIC PERFORMANCE. The parties hereto acknowledge
that money damages would not be an adequate remedy at law if any party fails to
perform in any material respect any of its obligations hereunder, and
accordingly agree that each party, in addition to any other remedy to which it
may be entitled at law or in equity, shall be entitled to seek to compel
specific performance of the obligations of any other party under this Agreement,
without the posting of any bond, in accordance with the terms and conditions of
this Agreement in any court specified in Section 6.10 hereof, and if any action
should be brought in equity to enforce any of the provisions of this Agreement,
none of the parties hereto shall raise the defense that there is an adequate
remedy at law. Except as otherwise provided by law, a delay or omission by a
party hereto in exercising any right or remedy accruing upon any such breach
shall not impair the right or remedy or constitute a waiver of or acquiescence
in any such breach. No remedy shall be exclusive of any other remedy. All
available remedies shall be cumulative.

         6.12 ENTIRE AGREEMENT. This Agreement, the Financing Agreement, the
Loan Agreement, the Warrants and the other transaction documents (collectively,
the "OTHER AGREEMENTS") are intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, representations,
warranties, covenants or undertakings relating to such subject matter, other
than those set forth or referred to herein or in the Other Agreements. This
Agreement and the Other Agreements supersede all prior agreements and
understandings between the Company and the other parties to this Agreement with
respect to such subject matter.

         6.13 FURTHER ASSURANCES. Each party hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as any other party hereto reasonably may request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.

         6.14 CONSTRUCTION. The Company and the Initial Holders acknowledge that
each of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by the Company and the
Holders.

                                      -25-
<PAGE>

         6.15 NO INCONSISTENT AGREEMENT. The Company will not hereafter enter
into any agreement which is inconsistent with the rights granted to the Holders
in this Agreement.

         6.16 COSTS AND ATTORNEYS' FEES. In the event that any action, suit or
other proceeding is instituted concerning or arising out of this Agreement, the
Company and the Initial Holders agree that the prevailing party shall recover
from the non-prevailing party all of such prevailing party's costs and
reasonable attorneys' fees incurred in each and every such action, suit or other
proceeding, including any and all appeals or petitions therefrom.

         6.17 NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Securities held by any holder or holders of Registrable
Securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.

                                      -26-
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.

COMPANY:                                INITIAL HOLDERS:

VALUE CITY DEPARTMENT STORES,           CERBERUS PARTNERS, L.P.
INC.

By: /s/ John C. Rossler                 By:
   ---------------------------             -------------------------------------
   Name:   John C. Rossler                 Name:
   Title:  President                       Title:

                                        SCHOTTENSTEIN STORES
                                        CORPORATION

                                        By:
                                           -------------------------------------
                                           Name:
                                           Title:

                                      -27-

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