Document:

<PAGE>

                                                                    Exhibit 4.14

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

                                KCS ENERGY, INC.

                                   GUARANTORS
                                  NAMED HEREIN

                                       AND

                              [                   ]

                                     TRUSTEE

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

                                    INDENTURE

                  DATED AS OF                           , 2003
                              --------------------------

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

                          SUBORDINATED DEBT SECURITIES

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

<PAGE>

                                KCS ENERGY, INC.
     RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939, AS AMENDED,
                AND INDENTURE, DATED AS OF ________________, 2003

<TABLE>
<CAPTION>
TRUST INDENTURE ACT SECTION                                    INDENTURE SECTION
---------------------------                                    -----------------
<S>                                                            <C>
Section 310(a)(1)...........................................                 6.9
     (a)(2).................................................                 6.9
     (a)(3).................................................      Not Applicable
     (a)(4).................................................      Not Applicable
     (a)(5).................................................                 6.9
     (b)....................................................                 6.8

Section 311.................................................                6.13

Section 312(a)..............................................         7.1, 7.2(a)
     (b)....................................................              7.2(b)
     (c)....................................................              7.2(c)

Section 313(a)..............................................                 7.3
     (b)....................................................                   *
     (c)....................................................                   *
     (d)....................................................                 7.3

Section 314(a)..............................................                 7.4
     (a)(4).................................................                10.7
     (b)....................................................      Not Applicable
     (c)(1).................................................                 1.3
     (c)(2).................................................                 1.3
     (c)(3).................................................      Not Applicable
     (d)....................................................      Not Applicable
     (e)....................................................                 1.3

Section 315(a)..............................................              6.1(a)
     (b)....................................................                 6.2
     (c)....................................................              6.1(b)
     (d)....................................................              6.1(c)
     (d)(1).................................................           6.1(a)(1)
     (d)(2).................................................           6.1(c)(2)
     (d)(3).................................................           6.1(c)(3)
     (e)....................................................                5.14

Section 316(a)..............................................            1.1, 1.2
     (a)(1)(A)..............................................           5.2, 5.12
     (a)(1)(B)..............................................                5.13
     (a)(2).................................................      Not Applicable
     (b)....................................................                 5.8
     (c)....................................................              1.5(f)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
TRUST INDENTURE ACT SECTION                                    INDENTURE SECTION
---------------------------                                    -----------------
<S>                                                            <C>
Section 317(a)(1)...........................................                 5.3
     (a)(2).................................................                 5.4
     (b)....................................................                10.3

Section 318(a)..............................................                 1.8
</TABLE>

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

* Deemed included pursuant to Section 318(c) of the Trust Indenture Act

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<S>                                                                                                                <C>
PARTIES..........................................................................................................   1

RECITALS OF THE COMPANY:.........................................................................................   1

ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION..............................................   1
   Section 1.1.    Definitions...................................................................................   1
   Section 1.2.    Incorporation by Reference of Trust Indenture Act.............................................   8
   Section 1.3.    Compliance Certificates and Opinions..........................................................   8
   Section 1.4.    Form of Documents Delivered to Trustee........................................................   9
   Section 1.5.    Acts of Holders; Record Dates.................................................................   9
   Section 1.6.    Notices, Etc., to Trustee, Company and Guarantors.............................................  10
   Section 1.7.    Notice to Holders; Waiver.....................................................................  11
   Section 1.8.    Conflict with Trust Indenture Act.............................................................  11
   Section 1.9.    Effect of Headings and Table of Contents......................................................  11
   Section 1.10.   Successors and Assigns........................................................................  11
   Section 1.11.   Separability Clause...........................................................................  11
   Section 1.12.   Benefits of Indenture.........................................................................  11
   Section 1.13.   Governing Law.................................................................................  12
   Section 1.14.   Legal Holidays................................................................................  12
   Section 1.15.   Securities in a Composite Currency, Currency Unit or Foreign Currency.........................  12
   Section 1.16.   Payment in Required Currency; Judgment Currency...............................................  13
   Section 1.17.   Language of Notices, Etc. ....................................................................  13
   Section 1.18.   Incorporators, Shareholders, Officers and Directors of the Company and
                   the Guarantors Exempt from Individual Liability...............................................  14

ARTICLE TWO SECURITY FORMS.......................................................................................  14
   Section 2.1.    Forms Generally...............................................................................  14
   Section 2.2.    Form of Face of Security......................................................................  14
   Section 2.3.    Form of Reverse of Security...................................................................  16
   Section 2.4.    Global Securities.............................................................................  21
   Section 2.5.    Form of Trustee's Certificate of Authentication...............................................  22

ARTICLE THREE THE SECURITIES.....................................................................................  22
   Section 3.1.    Amount Unlimited; Issuable in Series..........................................................  22
   Section 3.2.    Denominations.................................................................................  25
   Section 3.3.    Execution, Authentication, Delivery and Dating................................................  25
   Section 3.4.    Temporary Securities..........................................................................  26
   Section 3.5.    Registration, Registration of Transfer and Exchange...........................................  27
   Section 3.6.    Mutilated, Destroyed, Lost and Stolen Securities..............................................  29
   Section 3.7.    Payment of Interest; Interest Rights Preserved................................................  30
   Section 3.8.    Persons Deemed Owners.........................................................................  31
   Section 3.9.    Cancellation..................................................................................  31
   Section 3.10.   Computation of Interest.......................................................................  31
   Section 3.11.   CUSIP or CINS Numbers.........................................................................  32
</TABLE>

                                        i
<PAGE>

<TABLE>
<S>                                                                                                                <C>
ARTICLE FOUR SATISFACTION AND DISCHARGE..........................................................................  32
   Section 4.1.    Satisfaction and Discharge of Indenture.......................................................  32
   Section 4.2.    Application of Trust Money....................................................................  33

ARTICLE FIVE REMEDIES............................................................................................  33
   Section 5.1.    Events of Default.............................................................................  33
   Section 5.2.    Acceleration of Maturity; Rescission and Annulment............................................  34
   Section 5.3.    Collection of Indebtedness and Suits for Enforcement by Trustee...............................  35
   Section 5.4.    Trustee May File Proofs of Claim..............................................................  36
   Section 5.5.    Trustee May Enforce Claims Without Possession of Securities...................................  36
   Section 5.6.    Application of Money Collected................................................................  36
   Section 5.7.    Limitation on Suits...........................................................................  37
   Section 5.8.    Unconditional Right of Holders to Receive Principal, Premium and Interest.....................  37
   Section 5.9.    Restoration of Rights and Remedies............................................................  37
   Section 5.10.   Rights and Remedies Cumulative................................................................  38
   Section 5.11.   Delay or Omission Not Waiver..................................................................  38
   Section 5.12.   Control by Holders............................................................................  38
   Section 5.13.   Waiver of Past Defaults.......................................................................  38
   Section 5.14.   Undertaking for Costs.........................................................................  39
   Section 5.15.   Waiver of Stay or Extension Laws..............................................................  39

ARTICLE SIX THE TRUSTEE..........................................................................................  39
   Section 6.1.    Certain Duties and Responsibilities...........................................................  39
   Section 6.2.    Notice of Defaults............................................................................  40
   Section 6.3.    Certain Rights of Trustee.....................................................................  41
   Section 6.4.    Not Responsible for Recitals or Issuance of Securities........................................  42
   Section 6.5.    May Hold Securities...........................................................................  42
   Section 6.6.    Money Held in Trust...........................................................................  42
   Section 6.7.    Compensation and Reimbursement................................................................  42
   Section 6.8.    Disqualification; Conflicting Interests.......................................................  43
   Section 6.9.    Corporate Trustee Required; Eligibility.......................................................  43
   Section 6.10.   Resignation and Removal; Appointment of Successor.............................................  43
   Section 6.11.   Acceptance of Appointment by Successor........................................................  45
   Section 6.12.   Merger, Conversion, Consolidation or Succession to Business...................................  46
   Section 6.13.   Preferential Collection of Claims Against Company.............................................  46
   Section 6.14.   Appointment of Authenticating Agent...........................................................  46

ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY..................................................  48
   Section 7.1.    Company to Furnish Trustee Names and Addresses of Holders.....................................  48
   Section 7.2.    Preservation of Information; Communications to Holders........................................  48
   Section 7.3.    Reports by Trustee............................................................................  49
   Section 7.4.    Reports by Company............................................................................  49

ARTICLE EIGHT CONSOLIDATION, AMALGAMATION, MERGER AND SALE.......................................................  50
   Section 8.1.    Company May Consolidate, Etc., Only on Certain Terms..........................................  50
   Section 8.2.    Successor Substituted.........................................................................  50
</TABLE>

                                       ii
<PAGE>

<TABLE>
<S>                                                                                                                <C>
ARTICLE NINE SUPPLEMENTAL INDENTURES.............................................................................  51
   Section 9.1.    Supplemental Indentures Without Consent of Holders............................................  51
   Section 9.2.    Supplemental Indentures with Consent of Holders...............................................  52
   Section 9.3.    Execution of Supplemental Indentures..........................................................  53
   Section 9.4.    Effect of Supplemental Indentures.............................................................  53
   Section 9.5.    Conformity with Trust Indenture Act...........................................................  53
   Section 9.6.    Reference in Securities to Supplemental Indentures............................................  53

ARTICLE TEN COVENANTS............................................................................................  54
   Section 10.1.   Payment of Principal, Premium and Interest....................................................  54
   Section 10.2.   Maintenance of Office or Agency...............................................................  54
   Section 10.3.   Money for Securities Payments to Be Held in Trust.............................................  54
   Section 10.4.   Existence.....................................................................................  55
   Section 10.5.   Statement by Officers as to Default...........................................................  55
   Section 10.6.   Waiver of Certain Covenants...................................................................  56
   Section 10.7.   Additional Amounts............................................................................  56

ARTICLE ELEVEN REDEMPTION OF SECURITIES..........................................................................  57
   Section 11.1.   Applicability of Article......................................................................  57
   Section 11.2.   Election to Redeem; Notice to Trustee.........................................................  57
   Section 11.3.   Selection. by Trustee of Securities to Be Redeemed............................................  57
   Section 11.4.   Notice of Redemption..........................................................................  58
   Section 11.5.   Deposit of Redemption Price...................................................................  58
   Section 11.6.   Securities Payable on Redemption Date.........................................................  58
   Section 11.7.   Securities Redeemed in Part...................................................................  59

ARTICLE TWELVE SINKING FUNDS.....................................................................................  59
   Section 12.1.   Applicability of Article......................................................................  59
   Section 12.2.   Satisfaction of Sinking Fund Payments with Securities.........................................  59
   Section 12.3.   Redemption of Securities for Sinking Fund.....................................................  59

ARTICLE THIRTEEN DEFEASANCE......................................................................................  60
   Section 13.1.   Applicability of Article......................................................................  60
   Section 13.2.   Legal Defeasance..............................................................................  60
   Section 13.3.   Covenant Defeasance...........................................................................  61
   Section 13.4.   Deposited Money and U.S. Government Obligations to be Held in Trust...........................  63
   Section 13.5.   Repayment to Company; Qualifying Trustee......................................................  63

ARTICLE FOURTEEN GUARANTEE OF SECURITIES.........................................................................  63
   Section 14.1.   Unconditional Guarantee.......................................................................  63
   Section 14.2.   Execution and Delivery of Notation of Guarantee...............................................  65
   Section 14.3.   Reports by Guarantor..........................................................................  66
   Section 14.4.   Subordination of Guarantees...................................................................  66

ARTICLE FIFTEEN SUBORDINATION OF SECURITIES......................................................................  66
   Section 15.1.   Securities Subordinated to Senior Debt........................................................  66
   Section 15.2.   Distribution on Dissolution, Liquidation and Reorganization; Subrogation of Securities........  67
</TABLE>

                                       iii
<PAGE>

<TABLE>
<S>                                                                                                                <C>
   Section 15.3.   Payments on Securities Permitted..............................................................  69
   Section 15.4.   Authorization of Holders of Securities to Trustee to Effect Subordination.....................  69
   Section 15.5.   Notices to Trustee............................................................................  69
   Section 15.6.   Trustee as Holder of Senior Debt. ............................................................  70
   Section 15.7.   Modification of Terms of Senior Debt. ........................................................  70
</TABLE>

NOTE: This table of contents shall not, for any purpose, be deemed to be a part
      of the Indenture.

                                       iv
<PAGE>

                                     PARTIES

         INDENTURE, dated as of ____________ [__], 2003, among KCS ENERGY, INC.,
a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company"), having an office at 5555 San Felipe,
Houston, Texas 77056, the GUARANTORS (as defined hereinafter) and [      ],
a [      ] banking corporation, as Trustee (the "Trustee").

                            RECITALS OF THE COMPANY:

         The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
subordinated debentures, notes or other evidences of indebtedness (herein called
the "Securities"), which may but are not required to be guaranteed by the
Guarantors, to be issued in one or more series as in this Indenture provided.
The Company directly or indirectly owns 100% of the capital stock of the
Guarantors.

         All things necessary to make this Indenture a valid agreement of the
Company and of the Guarantor, in accordance with its terms, have been done.

         This Indenture is subject to the provisions of the Trust Indenture Act
that are required to be a part of this Indenture and, to the extent applicable,
shall be governed by such provisions.

         NOW, THEREFORE, THIS INDENTURE WITNESSETH:

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

                                   ARTICLE ONE
             DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

Section 1.1.      Definitions.

         For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:

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

                  (2)      all terms used in this Indenture that are defined in
         the Trust Indenture Act, defined by a Trust Indenture Act reference to
         another statute or defined by a Commission rule under the Trust
         Indenture Act have the meanings so assigned to them;

                  (3)      all accounting terms not otherwise defined herein
         have the meanings assigned to them in accordance with GAAP;

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

                  (5)      the words "Article" and "Section" refer to an Article
         and Section, respectively, of this Indenture; and

<PAGE>

                  (6)      the word "includes" and its derivatives means
         "includes, but is not limited to" and corresponding derivative
         definitions.

         Certain terms, used principally in Article Six, are defined in that
Article.

"Act", when used with respect to any Holder, has the meaning specified in
Section 1.5.

"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

"Authenticating Agent" means any Person authorized by the Trustee to act on
behalf of the Trustee to authenticate Securities.

"Banking Day" means, in respect of any city, any date on which commercial banks
are open for business in that city.

"Bankruptcy Law" means any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law.

"Board of Directors" means either the board of directors of the Company or of a
Guarantor, as applicable, or any duly authorized committee of that board to
which the powers of that board have been lawfully delegated.

"Board Resolution" means a copy of a resolution certified by the Secretary or an
Assistant Secretary of the Company, the principal financial officer of the
Company or a Guarantor, any other authorized officer of the Company or a
Guarantor, or a person duly authorized by any of them, in each case as
applicable, to have been duly adopted by the Board of Directors and to be in
full force and effect on the date of such certification, and delivered to the
Trustee. Where any provision of this Indenture refers to action to be taken
pursuant to a Board Resolution (including the establishment of any series of the
Securities and the forms and terms thereof), such action may be taken by any
committee, officer or employee of the Company or a Guarantor, as applicable,
authorized to take such action by the Board of Directors as evidenced by a Board
Resolution.

"Business Day", when used with respect to any Place of Payment or other
location, means, except as otherwise provided as contemplated by Section 3.1
with respect to any series of Securities, each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in that
Place of Payment or other location are authorized or obligated by law, executive
order or regulation to close.

"CINS" means CUSIP International Numbering System.

"Commission" means the Securities and Exchange Commission, as from time to time
constituted, created under the Securities Exchange Act of 1934, or, if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.

                                       2
<PAGE>

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

"Company Request" or "Company Order" means, in the case of the Company, a
written request or order signed in the name of the Company by its Chairman of
the Board, its Chief Executive Officer, its President, any of its Vice
Presidents or any other duly authorized officer of the Company or any person
duly authorized by any of them, and delivered to the Trustee and, in the case of
a Guarantor, a written request or order signed in the name of such Guarantor by
its Chairman of the Board, its Chief Executive Officer, its President, any of
its Vice Presidents or any other duly authorized officer of such Guarantor or
any person duly authorized by any of them, and delivered to the Trustee.

"Consolidated Net Worth" means, at any date of determination, the amount of
total shareholders' equity shown in most recent consolidated statement of
financial position of the Company, including any preferred stock not reflected
as a liability on such consolidated statement of financial position.

"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered
and which, at the date hereof, is located at [      ].

"corporation" includes corporations, companies, associations, partnerships,
limited partnerships, limited liability companies, joint-stock companies and
trusts.

"covenant defeasance" has the meaning specified in Section 13.3.

"CUSIP" means the Committee on Uniform Securities Identification Procedures.

"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.

"Debt" means any obligation created or assumed by any Person for the repayment
of money borrowed and any purchase money obligation created or assumed by such
Person and any guarantee of the foregoing.

"Default" means, with respect to a series of Securities, any event that is, or
after notice or lapse of time or both would be, an Event of Default.

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

"defeasance" has the meaning specified in Section 13.2.

"Definitive Security" means a security other than a Global Security or a
temporary Security.

"Depositary" means, with respect to the Securities of any series issuable or
issued in whole or in part in the form of one or more Global Securities, a
clearing agency registered under the Exchange Act that is designated to act as
Depositary for such Securities as contemplated by Section 3.1, until a successor
Depositary shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter shall mean or include each Person which is a
Depositary hereunder, and if at any time there is more than one such Person,
shall be a collective reference to such Persons.

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

                                       3
<PAGE>

"Event of Default" has the meaning specified in Section 5.1.

"Foreign Currency" means a currency used by the government of a country other
than the United States of America.

"GAAP" means generally accepted accounting principles in the United States set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, as in effect from time to time.

"Global Security" means a Security in global form that evidences all or part of
a series of Securities and is authenticated and delivered to, and registered in
the name of, the Depositary for the Securities of such series or its nominee.

"Guarantee" has the meaning specified in Section 14.1.

"Guarantor" means (i) KCS Resources, Inc., a corporation duly organized and
existing under the laws of the State of Delaware, (ii) Medallion California
Properties Company, a corporation duly organized and existing under the laws of
the State of Texas and (iii) any Person that becomes a successor guarantor
pursuant to the applicable provisions of this Indenture.

"Guarantor Senior Debt" means, unless otherwise provided with respect to the
Securities of a series as contemplated by Section 3.1, (1) all Debt of a
Guarantor, whether currently outstanding or hereafter issued, unless, by the
terms of the instrument creating or evidencing such Debt, it is provided that
such Debt is not superior in right of payment to the Guarantee or to other Debt
which is pari passu with or subordinated to the Guarantee, and (2) any
modifications, refunding, deferrals, renewals or extensions of any such Debt or
securities, notes or other evidence of Debt issued in exchange for such Debt;
provided that in no event shall "Guarantor Senior Debt" include (a) Debt of a
Guarantor owed or owing to any Subsidiary of such Guarantor or any officer,
director or employee of such Guarantor or any Subsidiary of such Guarantor, (b)
Debt to trade creditors or (c) any liability for taxes owed or owing by a
Guarantor.

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

"Indenture" means this instrument as originally executed or as it may from time
to time be supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof, including, for all
purposes of this instrument, and any such supplemental indenture, the provisions
of the Trust Indenture Act that are deemed to be part of and govern this
instrument and any such supplemental indenture, respectively. The term
"Indenture" also shall include the terms of particular series of Securities
established as contemplated by Section 3.1.

"interest", when used with respect to an Original Issue Discount Security which
by its terms bears interest only after Maturity, means interest payable after
Maturity.

"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.

"Judgment Currency" has the meaning specified in Section 1.16.

"Lien" means any mortgage, pledge, security interest, charge, lien or other
encumbrance of any kind, whether or not filed, recorded or perfected under
applicable law.

                                       4
<PAGE>

"mandatory sinking fund payment" has the meaning specified in Section 12.1.

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

"Notice of Default" means a written notice of the kind specified in Section
5.1(3) or Section 5.1(4).

"Officer's Certificate" means, in the case of the Company, a certificate signed
by the Chairman of the Board, the Chief Executive Officer, the President, any
Vice President or any other duly authorized officer of the Company, or a person
duly authorized by any of them, and delivered to the Trustee and, in the case of
a Guarantor, a certificate signed by the Chairman of the Board, the Chief
Executive Officer, the President, any Vice President or any other duly
authorized officer of such Guarantor, or a person duly authorized by any of
them, and delivered to the Trustee.

"Opinion of Counsel" means a written opinion of counsel, who may be an employee
of or counsel for the Company or a Guarantor, as the case may be, and who shall
be reasonably acceptable to the Trustee.

"optional sinking fund payment" has the meaning specified in Section 12.1.

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

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

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

                  (ii)     Securities for whose payment or redemption money in
         the necessary amount has been theretofore deposited with the Trustee or
         any Paying Agent (other than the Company) in trust or set aside and
         segregated in trust by the Company (if the Company shall act as its own
         Paying Agent) for the Holders of such Securities; provided, however,
         that, if such Securities are to be redeemed, notice of such redemption
         has been duly given pursuant to this Indenture or provision therefor
         satisfactory to the Trustee has been made;

                  (iii)    Securities which have been paid pursuant to Section
         3.6 or in exchange for or in lieu of which other Securities have been
         authenticated and delivered pursuant to this Indenture, other than any
         such Securities in respect of which there shall have been presented to
         the Trustee proof satisfactory to it that such Securities are held by a
         bona fide purchaser in whose hands such Securities are valid
         obligations of the Company; and

                  (iv)     Securities, except to the extent provided in Section
         13.2 and 13.3, with respect to which the Company has effected
         defeasance or covenant defeasance as provided in Article Thirteen,
         which defeasance or covenant defeasance then continues in effect;

provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, (A) the principal
amount of an Original Issue Discount Security that shall be deemed to be
Outstanding shall be the amount of the principal thereof that would be due and
payable as of the date

                                       5
<PAGE>

of such determination upon acceleration of the Maturity thereof on such date
pursuant to Section 5.2, (B) the principal amount of a Security denominated in
one or more currencies or currency units other than U.S. dollars shall be the
U.S. dollar equivalent of such currencies or currency units, determined in the
manner provided as contemplated by Section 3.1 on the date of original issuance
of such Security or by Section 1.15, if not otherwise so provided pursuant to
Section 3.1, of the principal amount (or, in the case of an Original Issue
Discount Security, the U.S. dollar equivalent (as so determined) on the date of
original issuance of such Security of the amount determined as provided in
Clause (A) above) of such Security, and (C) Securities owned by the Company, any
Guarantor or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which the Trustee knows to be so owned shall
be so disregarded. Securities so owned as described in Clause (C) of the
immediately preceding sentence which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company, a Guarantor or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.

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

"Periodic Offering" means an offering of Securities of a series from time to
time, the specific terms of which Securities, including, without limitation, the
rate or rates of interest or formula for determining the rate or rates of
interest thereon, if any, the Stated Maturity or Stated Maturities thereof, the
original issue date or dates thereof, the redemption provisions, if any, with
respect thereto, and any other terms specified as contemplated by Section 3.1
with respect thereto, are to be determined by the Company upon the issuance of
such Securities.

"Person" means any individual, corporation, company, limited liability company,
partnership, limited partnership, joint venture, association, joint-stock
company, trust, other entity, unincorporated organization or government or any
agency or political subdivision thereof.

"Place of Payment", when used with respect to the Securities of any series,
means, unless otherwise specifically provided for with respect to such series as
contemplated by Section 3.1, the office or agency of the Company in the City of
New York and such other place or places where, subject to the provisions of
Section 10.2, the principal of and any premium and interest on the Securities of
that series are payable as contemplated by Section 3.1.

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

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

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

"Regular Record Date" for the interest payable on any Interest Payment Date on
the Securities of any series means the date specified for that purpose as
contemplated by Section 3.1.

                                       6
<PAGE>

"Required Currency" has the meaning specified in Section 1.16.

"Securities" has the meaning stated in the first recital of this Indenture and
more particularly means any Securities authenticated and delivered under this
Indenture.

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

"Senior Debt" means (1) all Debt of the Company, whether currently outstanding
or hereafter issued, unless, by the terms of the instrument creating or
evidencing such Debt, it is provided that such Debt is not superior in right of
payment to the Securities, and (2) any modifications, refunding, deferrals,
renewals or extensions of any such Debt or securities, notes or other evidence
of Debt issued in exchange for such Debt; provided that in no event shall
"Senior Debt" include (a) Debt of the Company owed or owing to any Subsidiary of
the Company or any officer, director or employee of the Company or any
Subsidiary of the Company, (b) Debt to trade creditors or (c) any liability for
taxes owned or owing by the Company.

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

"Stated Maturity", when used with respect to any Security or any installment of
principal thereof or interest thereon, means the date specified in such Security
as the fixed date on which the principal of such Security or such installment of
principal or interest is due and payable.

"Subsidiary" means (i) a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries or
(ii) any partnership or similar business organization more than 50% of the
ownership interests having ordinary voting power of which shall at the time be
so owned. For the purposes of this definition, "voting stock" means capital
stock or equity interests which ordinarily have voting power for the election of
directors, whether at all times or only so long as no senior class of stock has
such voting power by reason of any contingency.

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

"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as in
force at the date as of which this instrument was executed, except as provided
in Section 9.5; provided, however, that if the Trust Indenture Act of 1939 is
amended after such date, "Trust Indenture Act" means, to the extent required by
any such amendment, the Trust Indenture Act of 1939 as so amended.

"U.S. Person" shall have the meaning assigned to such term in Section
7701(a)(30) of the Internal Revenue Code of 1986, as amended.

"U.S. Government Obligations" means securities which are (i) direct obligations
of the United States for the payment of which its full faith and credit is
pledged, or (ii) obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the United States, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States, each of which are not callable or redeemable at the option of the issuer
thereof.

                                       7
<PAGE>

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

Section 1.2.      Incorporation by Reference of Trust Indenture Act.

         Whenever this Indenture refers to a provision of the Trust Indenture
Act, the provision is incorporated by reference in and made a part of this
Indenture. The following Trust Indenture Act terms used in this Indenture have
the following meanings:

                  "commission" means the Commission.

                  "indenture securities" means the Securities.

                  "indenture security holder" means a Holder.

                  "indenture to be qualified" means this Indenture.

                  "indenture trustee" or "institutional trustee" means the
                  Trustee.

                  "obligor" on the indenture securities means the Company, the
                  Guarantor (if applicable) or any other obligor on the
                  indenture securities.

         All terms used in this Indenture that are defined by the Trust
Indenture Act, defined by a Trust Indenture Act reference to another statute or
defined by a Commission rule under the Trust Indenture Act have the meanings so
assigned to them.

Section 1.3.      Compliance Certificates and Opinions.

         Upon any application or request by the Company or a Guarantor to the
Trustee to take any action under any provision of this Indenture, the Company or
such Guarantor, as the case may be, shall furnish to the Trustee an Officer's
Certificate stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and an Opinion
of Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished except as required under Section 314(c) of the Trust Indenture Act.

         Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (except for certificates
provided for in Section 10.5) shall include

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

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

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

                                       8
<PAGE>

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

Section 1.4.      Form of Documents Delivered to Trustee.

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

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

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

Section 1.5.      Acts of Holders; Record Dates.

                           (a)      Any request, demand, authorization,
                  direction, notice, consent, waiver or other action provided by
                  this Indenture to be given or taken by Holders may be embodied
                  in and evidenced by one or more instruments of substantially
                  similar tenor signed (either physically or by means of a
                  facsimile or an electronic transmission, provided that such
                  electronic transmission is transmitted through the facilities
                  of a Depositary) by such Holders in person or by agent duly
                  appointed in writing; and, except as herein otherwise
                  expressly provided, such action shall become effective when
                  such instrument or instruments are delivered to the Trustee
                  and, where it is hereby expressly required, to the Company or
                  the Guarantors. Such instrument or instruments (and the action
                  embodied therein and evidenced thereby) are herein sometimes
                  referred to as the "Act" of the Holders signing such
                  instrument or instruments. Proof of execution of any such
                  instrument or of a writing appointing any such agent shall be
                  sufficient for any purpose of this Indenture and (subject to
                  Section 315 of the Trust Indenture Act) conclusive in favor of
                  the Trustee, the Company and, if applicable, the Guarantors,
                  if made in the manner provided in this Section.

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

                                       9
<PAGE>

                  instrument or writing, or the authority of the Person
                  executing the same, may also be proved in any other manner
                  which the Trustee deems sufficient.

                           (c)      The ownership, principal amount and serial
                  numbers of Securities held by any Person, and the date of
                  commencement of such Person's holding of same, shall be proved
                  by the Security Register.

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

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

                           (f)      The Company may set any day as the record
                  date for the purpose of determining the Holders of Outstanding
                  Securities of any series entitled to give or take any request,
                  demand, authorization, direction, notice, consent, waiver or
                  other Act provided or permitted by this Indenture to be given
                  or taken by Holders of Securities of such series, but the
                  Company shall have no obligation to do so. With regard to any
                  record date set pursuant to this paragraph, the Holders of
                  Outstanding Securities of the relevant series on such record
                  date (or their duly appointed agents), and only such Persons,
                  shall be entitled to give or take the relevant action, whether
                  or not such Holders remain Holders after such record date.

Section 1.6.      Notices, Etc., to Trustee, Company and Guarantors.

         Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,

                  (1)      the Trustee by any Holder, a Guarantor or by the
         Company shall be sufficient for every purpose hereunder if made, given,
         furnished or filed in writing to or with the Trustee at its Corporate
         Trust Office, Attention: [Corporate Trust Department],

                  (2)      the Company by the Trustee, a Guarantor or by any
         Holder shall be sufficient for every purpose hereunder (unless
         otherwise herein expressly provided) if in writing and mailed,
         first-class postage prepaid, to the Company addressed to it at the
         address of its principal office specified in the first paragraph of
         this instrument to the attention of the Corporate Secretary, or at any
         other address previously furnished in writing to the Trustee by the
         Company, or

                  (3)      a Guarantor by the Company, the Trustee or by any
         Holder shall be sufficient for every purpose hereunder (unless
         otherwise herein expressly provided) if in writing and mailed,
         first-class postage prepaid, to such Guarantor addressed to it at 5555
         San Felipe, Houston, Texas 77056 to the attention of the Corporate
         Secretary, or at any other address previously furnished in writing to
         the Trustee by the Guarantor.

                                       10
<PAGE>

Section 1.7.      Notice to Holders; Waiver.

         Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Holders is given by mail,
neither the failure to mail such notice, nor any defect in any notice so mailed,
to any particular Holder shall affect the sufficiency of such notice with
respect to other Holders. Any notice mailed to a Holder in the manner herein
prescribed shall be conclusively deemed to have been received by such Holder,
whether or not such Holder actually receives such notice.

         Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.

         In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.

Section 1.8.      Conflict with Trust Indenture Act.

         If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act that is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
that may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or excluded, as the case may be.

Section 1.9.      Effect of Headings and Table of Contents.

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

Section 1.10.     Successors and Assigns.

         All covenants and agreements in this Indenture by each of the Company
and the Guarantors shall bind their respective successors and assigns, whether
so expressed or not.

Section 1.11.     Separability Clause.

         In case any provision in this Indenture or in the Securities or, if
applicable, the Guarantee shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

Section 1.12.     Benefits of Indenture.

         Nothing in this Indenture or in the Securities or, if applicable, the
Guarantee, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, the holders of Senior Debt and the
Holders, any benefit or any legal or equitable right, remedy or claim under this
Indenture.

                                       11
<PAGE>

Section 1.13.     Governing Law.

         THIS INDENTURE, THE SECURITIES AND THE GUARANTEE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

         To the fullest extent permitted by applicable law, each of the Company
and the Guarantors hereby irrevocably submits to the jurisdiction of any Federal
or state court located in the Borough of Manhattan in The City of New York, New
York in any suit, action or proceeding based on or arising out of or relating to
this Indenture, any Securities or, if applicable, the Guarantee and irrevocably
agrees that all claims in respect of such suit or proceeding may be determined
in any such court. Each of the Company and the Guarantors irrevocably waives, to
the fullest extent permitted by law, any objection which it may have to the
laying of the venue of any such suit, action or proceeding brought in an
inconvenient forum. Each of the Company and the Guarantors hereby irrevocably
designates and appoints ______________________, New York, New York (the "Process
Agent") as its authorized agent for purposes of this Section 1.13, it being
understood that the designation and appointment of the Process Agent as such
authorized agent shall become effective immediately without any further action
on the part of the Company or a Guarantor, as the case may be. Each of the
Company and the Guarantors further agrees that, unless otherwise required by
law, service of process upon the Process Agent and written notice of said
service to the Company or a Guarantor, as the case may be, mailed by prepaid
registered first class mail or delivered to the Process Agent at its principal
office, shall be deemed in every respect effective service of process upon the
Company or such Guarantor, as the case may be, in any such suit or proceeding.
Each of the Company and the Guarantors further agrees to take any and all
action, including the execution and filing of any and all such documents and
instruments as may be necessary, to continue such designation and appointment of
the Process Agent in full force and effect so long as the Company or such
Guarantor, as the case may be, has any outstanding obligations under this
Indenture. To the extent the Company or a Guarantor, as the case may be, has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service of notice, attachment prior to judgment,
attachment in aid of execution, executor or otherwise) with respect to itself or
its property, each of the Company and such Guarantor hereby irrevocably waives
such immunity in respect of its obligations under this Indenture to the extent
permitted by law.

Section 1.14.     Legal Holidays.

         In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Securities
or, if applicable, the Guarantee (other than a provision of the Securities of
any series or, if applicable, the Guarantee that specifically states that such
provision shall apply in lieu of this Section 1.14)) payment of interest or
principal and any premium need not be made at such Place of Payment on such
date, but may be made on the next succeeding Business Day at such Place of
Payment with the same force and effect as if made on the Interest Payment Date
or Redemption Date, or at the Stated Maturity, provided that no interest shall
accrue for the period from and after such Interest Payment Date, Redemption Date
or Stated Maturity, as the case may be.

Section 1.15.     Securities in a Composite Currency, Currency Unit or Foreign
Currency.

         Unless otherwise specified in an Officer's Certificate delivered
pursuant to Section 3.1 of this Indenture with respect to a particular series of
Securities, whenever for purposes of this Indenture any action may be taken by
the Holders of a specified percentage in aggregate principal amount of
Securities of all series or all series affected by a particular action at the
time Outstanding and, at such time, there are Outstanding Securities of any
series which are denominated in a coin, currency or currencies other than

                                       12
<PAGE>

Dollars (including, but not limited to, any composite currency, currency units
or Foreign Currency), then the principal amount of Securities of such series
which shall be deemed to be Outstanding for the purpose of taking such action
shall be that amount of Dollars that could be obtained for such amount at the
Market Exchange Rate. For purposes of this Section 1.15, the term "Market
Exchange Rate" shall mean the noon Dollar buying rate in The City of New York
for cable transfers of such currency or currencies as published by the Federal
Reserve Bank of New York, as of the most recent available date. If such Market
Exchange Rate is not so available for any reason with respect to such currency,
the Trustee shall use, in its sole discretion and without liability on its part,
such quotation of the Federal Reserve Bank of New York as of the most recent
available date, or quotations or rates of exchange from one or more major banks
in The City of New York or in the country of issue of the currency in question,
which for purposes of euros shall be Brussels, Belgium, or such other quotations
or rates of exchange as the Trustee shall deem appropriate. The provisions of
this paragraph shall apply in determining the equivalent principal amount in
respect of Securities of a series denominated in a currency other than Dollars
in connection with any action taken by Holders of Securities pursuant to the
terms of this Indenture.

         All decisions and determinations of the Trustee regarding the Market
Exchange Rate or any alternative determination provided for in the preceding
paragraph shall be in its sole discretion and shall, in the absence of manifest
error, be conclusive to the extent permitted by law for all purposes and
irrevocably binding upon the Issuer and all Holders.

Section 1.16.     Payment in Required Currency; Judgment Currency.

         Each of the Company and the Guarantors agrees, to the fullest extent
that it may effectively do so under applicable law, that (a) if for the purpose
of obtaining judgment in any court it is necessary to convert the sum due in
respect of the principal of or interest on the Securities of any series (the
"Required Currency") into a currency in which a judgment will be rendered (the
"Judgment Currency"), the rate of exchange used shall be the rate at which in
accordance with normal banking procedures the Trustee could purchase in The City
of New York the Required Currency with the Judgment Currency on the day on which
final unappealable judgment is entered, unless such day is not a Banking Day,
then, to the extent permitted by applicable law, the rate of exchange used shall
be the rate at which in accordance with normal banking procedures the Trustee
could purchase in The City of New York the Required Currency with the Judgment
Currency on the Banking Day next preceding the day on which final unappealable
judgment is entered and (b) its obligations under this Indenture to make
payments in the Required Currency (i) shall not be discharged or satisfied by
any tender, or any recovery pursuant to any judgment (whether or not entered in
accordance with subclause (a)), in any currency other than the Required
Currency, except to the extent that such tender or recovery shall result in the
actual receipt, by the payee, of the full amount of the Required Currency
expressed to be payable in respect of such payments, (ii) shall be enforceable
as an alternative or additional cause of action for the purpose of recovering in
the Required Currency the amount, if any, by which such actual receipt shall
fall short of the full amount of the Required Currency so expressed to be
payable and (iii) shall not be affected by judgment being obtained for any other
sum due under this Indenture.

Section 1.17.     Language of Notices, Etc.

         Any request, demand, authorization, direction, notice, consent, waiver
or Act required or permitted under this Indenture shall be in the English
language, except that any published notice may be in an official language of the
country of publication.

                                       13
<PAGE>

Section 1.18.     Incorporators, Shareholders, Officers and Directors of
the Company and the Guarantors Exempt from Individual Liability.

         No recourse under or upon any obligation, covenant or agreement of or
contained in this Indenture or of or contained in any Security or, if
applicable, the Guarantee, or for any claim based thereon or otherwise in
respect thereof, or in any Security or, if applicable, the Guarantee, or because
of the creation of any indebtedness represented thereby, shall be had against
any incorporator, shareholder, member, officer, manager or director, as such,
past, present or future, of the Company, any Guarantor or any successor Person,
either directly or through the Company, any Guarantor or any successor Person,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a part of the consideration for, the execution of this
Indenture and the issue of the Securities.

                                   ARTICLE TWO
                                 SECURITY FORMS

Section 2.1.      Forms Generally.

         The Securities of each series and, if applicable, the notation thereon
relating to the Guarantee, shall be in substantially the form set forth in this
Article Two, or in such other form or forms as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental hereto,
in each case with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities and, if applicable, the Guarantee, as
evidenced by their execution thereof.

         The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution
thereof. If the form of Securities of any series is established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by an authorized officer or other authorized person on behalf
of the Company and delivered to the Trustee at or prior to the delivery of the
Company Order contemplated by Section 3.3 for the authentication and delivery of
such Securities.

         The forms of Global Securities of any series shall have such provisions
and legends as are customary for Securities of such series in global form,
including without limitation any legend required by the Depositary for the
Securities of such series.

Section 2.2.      Form of Face of Security.

[If the Security is an Original Issue Discount Security, insert--FOR PURPOSES OF
SECTION 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE
AMOUNT OF THE ORIGINAL ISSUE DISCOUNT IS . . . . . . . ., THE ISSUE DATE IS . .
.. . . ., 20. . . [AND] [,] THE YIELD TO MATURITY IS . . . . . . . . [,] [AND THE
ORIGINAL ISSUE DISCOUNT FOR THE SHORT ACCRUAL PERIOD IS . . . . . . . . AND THE
METHOD USED TO DETERMINE THE YIELD THEREFOR IS . . . . .]]

[Insert any other legend required by the United States Internal Revenue Code or
the regulations thereunder.]

                                       14
<PAGE>

[If a Global Security,--insert legend required by Section 204 of the Indenture]
[If applicable, insert -- UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

                                KCS ENERGY, INC.

                               [TITLE OF SECURITY]

No . . . . . . .                                               U.S. $. . . . . .

[CUSIP No. ]

KCS ENERGY, INC., a company duly incorporated under the laws of the State of
Delaware (herein called the "Company ", which term includes any successor or
resulting Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to .......... . . . . . . . . . . . . . . . . .
.. . . . ., or registered assigns, the principal sum of . . . .
................................................. United States Dollars on
......................................... [If the Security is to bear interest
prior to Maturity, insert--, and to pay interest thereon from . . . . . . . . .
.. or from the most recent Interest Payment Date to which interest has been paid
or duly provided for, semi-annually on . . . . . . and . . . . . . in each year,
commencing . . . . . ., at the rate of . . . . % per annum, until the principal
hereof is paid or made available for payment [if applicable, insert--, and at
the rate of ___% per annum on any overdue principal and premium and on any
installment of interest (to the extent that the payment of such interest shall
be legally enforceable)]. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the . . . . or . . . . (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture].

[If the Security is not to bear interest prior to Maturity, insert--The
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal of this Security shall bear
interest at the rate of . . . .% per annum (to the extent that the payment of
such interest shall be legally enforceable), which shall accrue from the date of
such default in payment to the date payment of such principal has been made or
duly provided for. Interest on any overdue principal shall be payable on demand.
Any such interest on any overdue principal that is not so paid on demand shall
bear interest at the rate of . . . . % per annum (to the extent that the payment
of such interest shall be legally enforceable), which shall accrue from the date
of

                                       15
<PAGE>

such demand for payment to the date payment of such interest has been made or
duly provided for, and such interest shall also be payable on demand.]

[If a Global Security, insert--Payment of the principal of (and premium, if any)
and [if applicable, insert--any such] interest on this Security will be made by
transfer of immediately available funds to a bank account in ___________
designated by the Holder in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts [state other currency].]

[If a Definitive Security, insert--Payment of the principal of (and premium, if
any) and [if applicable, insert--any such] interest on this Security will be
made at the office or agency of the Company maintained for that purpose in
_______________, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts]
[state other currency] [or subject to any laws or regulations applicable thereto
and to the right of the Company (as provided in the Indenture) to rescind the
designation of any such Paying Agent, at the [main] offices of ________________
in _____________, or at such other offices or agencies as the Company may
designate, by [United States Dollar] [state other currency] check drawn on, or
transfer to a [United States Dollar] account maintained by the payee with, a
bank in The City of New York (so long as the applicable Paying Agency has
received proper transfer instructions in writing at least ___ days prior to the
payment date)] [if applicable, insert--; provided, however, that payment of
interest may be made at the option of the Company by [United States Dollar]
[state other currency] check mailed to the addresses of the Persons entitled
thereto as such addresses shall appear in the Security Register] [or by transfer
to a [United States Dollar] [state other currency] account maintained by the
payee with a bank in The City of New York [state other Place of Payment] (so
long as the applicable Paying Agent has received proper transfer instructions in
writing by the Record Date prior to the applicable Interest Payment Date)].]

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

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

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

         Dated:

                                            KCS ENERGY, INC.

                                            By:_________________________________

Section 2.3.      Form of Reverse of Security.

This Security is one of a duly authorized issue of subordinated securities of
the Company (herein called the "Securities"), issued and to be issued in one or
more series under an Indenture, dated as of _____________ [      ], 200__
(herein called the "Indenture"), between the Company, the Guarantors and [
], as Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement, of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Guarantors, the Trustee and the Holders of the Securities and of the terms

                                       16
<PAGE>

upon which the Securities are, and are to be, authenticated and delivered. As
provided in the Indenture, the Securities may be issued in one or more series,
which different series may be issued in various aggregate principal amounts, may
mature at different times, may bear interest, if any, at different rates, may be
subject to different redemption provisions, if any, may be subject to different
sinking, purchase or analogous funds, if any, may be subject to different
covenants and Events of Default and may otherwise vary as in the Indenture
provided or permitted. This Security is one of the series designated on the face
hereof [, limited in aggregate principal amount to $ . . . . . . . . . . ].

This security is the general, unsecured, subordinated obligation of the Company
[if applicable, insert--and is guaranteed pursuant to a guarantee (the
"Guarantee") by [insert name of each Guarantor] (the "Guarantors"). The
Guarantee is the general, unsecured, subordinated obligation of each Guarantor.]

[If applicable, insert--The Securities of this series are subject to redemption
upon not less than ... days' notice by mail, [if applicable, insert, --(1) on .
.. . . . . . . . . . . . . in any year commencing with the year . . . . and
ending with the year . . . . through operation of the sinking fund for this
series at a Redemption Price equal to 100% of the principal amount, and (2) ] at
any time [on or after . . . . . . . . . ., 20. . . ], as a whole or in part, at
the election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [on or before . . . . . . . .
.. . . . . . . , . . . . . %, and if redeemed] during the 12-month period
beginning . . . . . . . . of the years indicated,

<TABLE>
<CAPTION>
YEAR          REDEMPTION PRICE          YEAR          REDEMPTION PRICE
<S>           <C>                       <C>           <C>
</TABLE>

and thereafter at a Redemption Price equal to . . . . . % of the principal
amount, together in the case of any such redemption [if applicable,
insert--(whether through operation of the sinking fund or otherwise)] with
accrued interest to the Redemption Date, but interest installments whose Stated
Maturity is on or prior to such Redemption Date will be payable to the Holders
of such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Record Dates referred to on the face hereof,
all as provided in the Indenture.]

[If applicable, insert--The Securities of this series are subject to redemption
upon not less than... nor more than ... days' notice by mail, (1) on . . . . . .
.. . in any year commencing with the year . . . . and ending with the year . . .
.. through operation of the sinking fund for this series at the Redemption Prices
for redemption through operation of the sinking fund (expressed as percentages
of the principal amount) set forth in the table below, and (2) at anytime [on or
after . . . . . . . . . . ], as a whole or in part, at the election of the
Company, at the Redemption Prices for redemption otherwise than through
operation of the sinking fund (expressed as percentages of the principal amount)
set forth in the table below: If redeemed during the 12-month period beginning .
.. . . . . . . . . . . . . of the years indicated,

                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                       REDEMPTION PRICE FOR
                         REDEMPTION PRICE FOR        REDEMPTION OTHERWISE THAN
                          REDEMPTION THROUGH          THROUGH OPERATION OF THE
YEAR                 OPERATION OF THE SINKING FUND          SINKING FUND
<S>                  <C>                             <C>
</TABLE>

and thereafter at a Redemption Price equal to .... % of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]

[If applicable, insert--Notwithstanding the foregoing, the Company may not,
prior to .........., redeem any Securities of this series as contemplated by
[Clause (2) of] the preceding paragraph as a part of, or in anticipation of, any
refunding operation by the application, directly or indirectly, of moneys
borrowed having an interest cost to the Company (calculated in accordance with
generally accepted financial practice) of less than....% per annum.]

[If applicable, insert--The sinking fund for this series provides for the
redemption on ............ in each year beginning with the year .... and ending
with the year .... of [not less than] $............ [ ("mandatory sinking
fund") and not more than $............ ] aggregate principal amount of
Securities of this series. [Securities of this series acquired or redeemed by
the Company otherwise than through [mandatory] sinking fund payments may be
credited against subsequent [mandatory] sinking fund payments otherwise required
to be made [If applicable, insert--in the inverse order in which they become
due].]

[If the Securities are subject to redemption in part of any kind, insert--In the
event of redemption of this Security in part only, a new Security or Securities
of this series and of like tenor for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.]

[If applicable, insert--The Securities of this series are not redeemable prior
to Stated Maturity.]

[If the Security is not an Original Issue Discount Security,--If an Event of
Default with respect to Securities of this series shall occur and be continuing,
the principal of the Securities of this series may be declared due and payable
in the manner and with the effect provided in the Indenture.]

[If the Security is an Original Issue Discount Security,--If an Event of Default
with respect to Securities of this series shall occur and be continuing, an
amount of principal of the Securities of this series may be declared due and
payable in the manner and with the effect provided in the Indenture. Such amount
shall be equal to --insert formula for determining the amount. Upon payment (i)
of the amount of principal so declared due and payable and (ii) of interest on
any overdue principal and overdue interest (in each case to the extent that the
payment of such interest shall be legally enforceable), all of the Company's

                                       18
<PAGE>

obligations in respect of the payment of the principal of and interest, if any,
on the Securities of this series shall terminate.]

The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company [If applicable, insert--and the Guarantors] and the rights of the
Holders of the Securities of each series to be affected under the Indenture at
any time by the Company [If applicable, insert--and the Guarantors] and the
Trustee with the consent of the Holders of a majority in principal amount of the
Securities at the time Outstanding of each series to be affected. The Indenture
also contains provisions permitting the Holders of specified percentages in
principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company [If applicable, insert--and the Guarantors] with certain provisions
of the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange herefor or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Security.

No reference herein to the Indenture and no provision of this Security or of the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of (and premium, if any) and interest on
this Security at the times, place(s) and rate, and in the coin or currency,
herein prescribed.

[If a Global Security, insert--This Global Security or portion hereof may not be
exchanged for Definitive Securities of this series except in the limited
circumstances provided in the Indenture. The holders of beneficial interests in
this Global Security will not be entitled to receive physical delivery of
Definitive Securities except as described in the Indenture and will not be
considered the Holders thereof for any purpose under the Indenture.]

[If a Definitive Security, insert--As provided in the Indenture and subject to
certain limitations therein set forth, the transfer of this Security is
registerable in the Security Register, upon surrender of this Security for
registration of transfer at the office or agency of the Company in [if
applicable, insert--any place where the principal of and any premium and
interest on this Security are payable] [if applicable, insert--The City of New
York [, or, subject to any laws or regulations applicable thereto and to the
right of the Company (limited as provided in the Indenture) to rescind the
designation of any such transfer agent, at the [main] offices of _______________
in ________________ or at such other offices or agencies as the Company may
designate]], duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of this series and of like tenor, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.]

The Securities of this series are issuable only in registered form without
coupons in denominations of U.S. $ ........ and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate principal
amount of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

                                       19
<PAGE>

Prior to due presentment of this Security for registration of transfer, the
Company, [If applicable, insert--any Guarantor,] the Trustee and any agent of
the Company [If applicable, insert--, a Guarantor] or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and none of the Company, [If
applicable, insert--the Guarantors,] the Trustee nor any such agent shall be
affected by notice to the contrary.

This Security is subordinated in right of payment to Senior Debt [If applicable,
insert-and the Guarantee is subordinated in right of payment to Guarantor Senior
Debt], to the extent and in the manner provided in the Indenture.

No recourse under or upon any obligation, covenant or agreement of or contained
in the Indenture or of or contained in any Security, [If applicable, insert--,
or the Guarantee endorsed thereon,] or for any claim based thereon or otherwise
in respect thereof, or in any Security [If applicable, insert--or in the
Guarantee], or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, shareholder, member, officer, manager or
director, as such, past, present or future, of the Company [If applicable,
insert--or any Guarantor] or of any successor Person, either directly or through
the Company [If applicable, insert--or any Guarantor] or any successor Person,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment, penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released by
the acceptance hereof and as a condition of, and as part of the consideration
for, the Securities and the execution of the Indenture.

The Indenture provides that the Company [If applicable, insert--and the
Guarantors] (a) will be discharged from any and all obligations in respect of
the Securities (except for certain obligations described in the Indenture), or
(b) need not comply with certain restrictive covenants of the Indenture, in each
case if the Company [If applicable, insert--or a Guarantor] deposits, in trust,
with the Trustee money or U.S. Government Obligations (or a combination thereof)
which through the payment of interest thereon and principal thereof in
accordance with their terms will provide money, in an amount sufficient to pay
all the principal of and interest on the Securities, but such money need not be
segregated from other funds except to the extent required by law.

Except as otherwise defined herein, all terms used in this Security which are
defined in the Indenture shall have the meanings assigned to them in the
Indenture.

[If a Definitive Security, insert as a separate page--

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto

_______________________________________________________________
(Please Print or Typewrite Name and Address of Assignee)

the within instrument of KCS ENERGY, INC. and does hereby irrevocably constitute
and appoint ___________________ Attorney to transfer said instrument on the
books of the within-named Company, with full power of substitution in the
premises.

Please Insert Social Security or Other Identifying Number of Assignee:

_______________________________________      ___________________________________

Dated:_________________________________      ___________________________________
                                                         (Signature)

                                       20
<PAGE>

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular, without
alteration or enlargement or any change whatever.]

[If a Security to which Article Fourteen has been made applicable, insert the
following Form of Notation on such Security relating to the Guarantee--

Each of the Guarantors (which term includes any successor Person in such
capacity under the Indenture), has fully, unconditionally and absolutely
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture, the due and punctual payment of the principal of,
and premium, if any, and interest on the Securities and all other amounts due
and payable under the Indenture and the Securities by the Company.

The obligations of the Guarantors to the Holders of Securities and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth in
Article Fourteen of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee.

                                             Guarantors:

                                             [NAME OF EACH GUARANTOR]

                                             By:    ____________________________

                                                    ___________________________]

Section 2.4.      Global Securities.

         Every Global Security authenticated and delivered hereunder shall bear
a legend in substantially the following form:

                  THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
                  INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE
                  NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY
                  NOT BE TRANSFERRED TO, OR REGISTERED OR EXCHANGED FOR
                  SECURITIES REGISTERED IN THE NAME OF, ANY PERSON OTHER THAN
                  THE DEPOSITARY OR A NOMINEE THEREOF AND NO SUCH TRANSFER MAY
                  BE REGISTERED, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
                  IN THE INDENTURE.

                  EVERY SECURITY AUTHENTICATED AND DELIVERED UPON REGISTRATION
                  OF TRANSFER OF, OR IN EXCHANGE FOR OR IN LIEU OF, THIS
                  SECURITY SHALL BE A GLOBAL SECURITY SUBJECT TO THE FOREGOING,
                  EXCEPT IN SUCH LIMITED CIRCUMSTANCES.

         If Securities of a series are issuable in whole or in part in the form
of one or more Global Securities, as specified as contemplated by Section 3.1,
then, notwithstanding clause (9) of Section 3.1 and the provisions of Section
3.2, any Global Security shall represent such of the Outstanding Securities of
such series as shall be specified therein and may provide that it shall
represent the aggregate amount of Outstanding Securities from time to time
endorsed thereon and that the aggregate amount of Outstanding

                                       21
<PAGE>

Securities represented thereby may from time to time be reduced or increased,
as the case may be, to reflect exchanges. Any endorsement of a Global Security
to reflect the amount, or any reduction or increase in the amount, of
Outstanding Securities represented thereby shall be made in such manner and upon
instructions given by such Person or Persons as shall be specified therein or in
a Company Order. Subject to the provisions of Sections 3.3, 3.4 and 3.5, the
Trustee shall deliver and redeliver any Global Security in the manner and upon
instructions given by the Person or Persons specified therein or in the
applicable Company Order. Any instructions by the Company with respect to
endorsement or delivery or redelivery of a Global Security shall be in a Company
Order (which need not comply with Section 1.3 and need not be accompanied by an
Opinion of Counsel).

         The provisions of the last sentence of Section 3.3 shall apply to any
Security represented by a Global Security if such Security was never issued and
sold by the Company and the Company delivers to the Trustee the Global Security
together with a Company Order (which need not comply with Section 1.3 and need
not be accompanied by an Opinion of Counsel) with regard to the reduction or
increase, as the case may be, in the principal amount of Securities represented
thereby, together with the written statement contemplated by the last sentence
of Section 3.3.

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

         The Trustee's certificate(s) of authentication shall be in
substantially the following form:

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

                                            [                     ],
                                            as Trustee

                                            By: _______________________________
                                                Authorized Officer

                                 ARTICLE THREE
                                 THE SECURITIES

Section 3.1.      Amount Unlimited; Issuable in Series.

         The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is unlimited.

         The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth, or determined
in the manner provided, in an Officer's Certificate, or established in one or
more indentures supplemental hereto, prior to the issuance of Securities of any
series,

                  (1)      the title of the Securities of the series (which
         shall distinguish the Securities of the series from all other
         Securities and which may be part of a series of Securities previously
         issued);

                  (2)      any limit upon the aggregate principal amount of the
         Securities of the series which may be authenticated and delivered under
         this Indenture (except for Securities authenticated and delivered upon
         registration of transfer of, or in exchange for, or in lieu of, other

                                       22
<PAGE>

         Securities of the series pursuant to Sections 3.4, 3.5, 3.6, 9.6 or
         11.7 and except for any Securities which, pursuant to Section 3.3, are
         deemed never to have been authenticated and delivered hereunder);

                  (3)      the Person to whom any interest on a Security of the
         series shall be payable, if other than the Person in whose name that
         Security (or one or more Predecessor Securities) is registered at the
         close of business on the Regular Record Date for such interest;

                  (4)      the date or dates on which the principal of the
         Securities of the series is payable or the method of determination
         thereof;

                  (5)      the rate or rates at which the Securities of the
         series shall bear interest, if any, or the formula, method or provision
         pursuant to which such rate or rates are determined, the date or dates
         from which such interest shall accrue or the method of determination
         thereof, the Interest Payment Dates on which such interest shall be
         payable and the Regular Record Date for the interest payable on any
         Interest Payment Date;

                  (6)      the place or places where, subject to the provisions
         of Section 10.2, the principal of and any premium and interest on
         Securities of the series shall be payable, Securities of the series may
         be surrendered for registration of transfer, Securities of the series
         may be surrendered for exchange and notices, and demands to or upon the
         Company in respect of the Securities of the series and this Indenture
         may be served;

                  (7)      the period or periods within which, the price or
         prices at which and the terms and conditions upon which Securities of
         the series may be redeemed, in whole or in part, at the option of the
         Company;

                  (8)      the obligation, if any, of the Company to redeem or
         purchase Securities of the series pursuant to any sinking fund or
         analogous provisions or at the option of a Holder thereof and the
         period or periods within which, the price or prices at which and the
         terms and conditions upon which Securities of the series shall be
         redeemed or purchased, in whole or in part, pursuant to such
         obligation;

                  (9)      if other than denominations of $1,000 and any
         integral multiple thereof, the denominations in which Securities of the
         series shall be issuable;

                  (10)     whether payment of principal of and premium, if any,
         and interest, if any, on the Securities of the series shall be without
         deduction for taxes, assessments or governmental charges paid by
         Holders of the series;

                  (11)     if other than the principal amount thereof, the
         portion of the principal amount of Securities of the series which shall
         be payable upon declaration of acceleration of the Maturity thereof
         pursuant to Section 5.2;

                  (12)     if the amount of payments of principal of and any
         premium or interest on the Securities of the series may be determined
         with reference to an index, the manner in which such amounts shall be
         determined;

                  (13)     if and as applicable, that the Securities of the
         series shall be issuable in whole or in part in the form of one or more
         Global Securities and, in such case, the Depositary or Depositaries for
         such Global Security or Global Securities and any circumstances other
         than those

                                       23
<PAGE>

         set forth in Section 3.5 in which any such Global Security may be
         transferred to, and registered and exchanged for Securities registered
         in the name of, a Person other than the Depositary for such Global
         Security or a nominee thereof and in which any such transfer may be
         registered;

                  (14)     any deletions from, modifications of or additions to
         the Events of Default set forth in Section 5.1 or the covenants of the
         Company set forth in Article Ten with respect to the Securities of such
         series;

                  (15)     whether and under what circumstances the Company will
         pay additional amounts on the Securities of the series held by a Person
         who is not a U.S. person in respect of any tax, assessment or
         governmental charge withheld or deducted and, if so, whether the
         Company will have the option to redeem the Securities of the series
         rather than pay such additional amounts;

                  (16)     if the Securities of the series are to be issuable in
         definitive form (whether upon original issue or upon exchange of a
         temporary Security of such series) only upon receipt of certain
         certificates or other documents or satisfaction of other conditions,
         the form and terms of such certificates, documents or conditions;

                  (17)     if the Securities of the series are to be convertible
         into or exchangeable for any other security or property of the Company,
         including, without limitation, securities of another Person held by the
         Company or its Affiliates and, if so, the terms thereof;

                  (18)     if other than as provided in Sections 13.2 and 13.3,
         the means of defeasance or covenant defeasance as may be specified for
         the Securities of the Series;

                  (19)     if other than the Trustee, the identity of the
         initial Security Registrar and any initial Paying Agent;

                  (20)     whether the Securities of the series will be
         guaranteed pursuant to the Guarantee, any modifications to the terms of
         Article Fourteen applicable to the Securities of such series and the
         applicability of any other guarantees; and

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

         All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 3.3) set
forth, or determined in the manner provided, in the Officer's Certificate
referred to above or in any such indenture supplemental hereto.

         All Securities of any one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent of
the Holders, for increases in the aggregate principal amount of such series of
Securities and issuances of additional Securities of such series or for the
establishment of additional terms with respect to the Securities of such series.

         If any of the terms of the series are established by action taken by or
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by an authorized officer or other authorized person on behalf
of the Company and, if applicable, the Guarantors and delivered to the Trustee
at or prior to the delivery of the Officer's Certificate setting forth, or
providing the manner for determining, the terms of the series.

                                       24
<PAGE>

         With respect to Securities of a series subject to a Periodic Offering,
such Board Resolution or Officer's Certificate may provide general terms for
Securities of such series and provide either that the specific terms of
particular Securities of such series shall be specified in a Company Order or
that such terms shall be determined by the Company and, if applicable, the
Guarantors or one or more agents thereof designated in an Officer's Certificate,
in accordance with a Company Order.

Section 3.2.      Denominations.

         The Securities of each series shall be issuable in registered form
without coupons in such denominations as shall be specified as contemplated by
Section 3.1. In the absence of any such provisions with respect to the
Securities of any series, the Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple thereof.

Section 3.3.      Execution, Authentication, Delivery and Dating.

         The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Chief Executive Officer, its President, its Chief
Financial Officer or any of its Vice Presidents and need not be attested. The
signature of any of these officers on the Securities may be manual or facsimile.
Any Guarantee endorsed on the Securities shall be executed on behalf of the
applicable Guarantor by its Chairman of the Board, its Chief Executive Officer,
its President, its Chief Financial Officer or any of its Vice Presidents and
need not be attested.

         Securities and any Guarantee bearing the manual or facsimile signatures
of individuals who were at any time the proper officers of the Company or a
Guarantor, as the case may be, shall bind the Company or such Guarantor, as the
case may be, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.

         At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities; provided,
however, that in the case of Securities offered in a Periodic Offering, the
Trustee shall authenticate and deliver such Securities from time to time in
accordance with such other procedures (including, without limitation, the
receipt by the Trustee of oral or electronic instructions from the Company or
its duly authorized agents, thereafter promptly confirmed in writing) acceptable
to the Trustee as may be specified by or pursuant to a Company Order delivered
to the Trustee prior to the time of the first authentication of Securities of
such series. If the forms or terms of the Securities of the series have been
established in or pursuant to one or more Board Resolutions as permitted by
Sections 2.1 and 3.1, in authenticating such Securities, and accepting the
additional responsibilities under this Indenture in relation to such Securities,
the Trustee shall be entitled to receive such documents as it may reasonably
request. The Trustee shall also be entitled to receive, and (subject to Section
6.1) shall be fully protected in relying upon, an Opinion of Counsel stating,

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

                           (b)      if the terms of such Securities have been,
                  or in the case of Securities of a series offered in a Periodic
                  Offering will be, established in or pursuant to a Board
                  Resolution as permitted by Section 3.1, that such terms have
                  been, or in the case of

                                       25
<PAGE>

                  Securities of a series offered in a Periodic Offering will be,
                  established in conformity with the provisions of this
                  Indenture, subject, in the case of Securities of a series
                  offered in a Periodic Offering, to any conditions specified in
                  such Opinion of Counsel; and

                           (c)      that such Securities when authenticated and
                  delivered by the Trustee and issued by the Company in the
                  manner and subject to any conditions and assumptions specified
                  in such Opinion of Counsel, will constitute valid and legally
                  binding obligations of the Company and, if applicable, the
                  Guarantors, enforceable in accordance with their terms,
                  subject to the following limitations: (i) bankruptcy,
                  insolvency, moratorium, reorganization, liquidation,
                  fraudulent conveyance or transfer and other similar laws of
                  general applicability relating to or affecting the enforcement
                  of creditors' rights, or to general equity principles, (ii)
                  the availability of equitable remedies being subject to the
                  discretion of the court to which application therefor is made;
                  and (iii) such other usual and customary matters as shall be
                  specified in such Opinion of Counsel.

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

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

         With respect to Securities of a series offered in a Periodic Offering,
the Trustee may rely, as to the authorization by the Company of any of such
Securities, the form or forms and terms thereof and the legality, validity,
binding effect and enforceability thereof, upon the Opinion of Counsel and the
other documents delivered pursuant to Sections 2.1 and 3.1 and this Section, as
applicable, in connection with the first authentication of Securities of such
series.

         Each Security shall be dated the date of its authentication.

         No Security, nor any Guarantee endorsed thereon, shall be entitled to
any benefit under this Indenture or be valid or obligatory for any purpose
unless there appears on such Security a certificate of authentication
substantially in the form provided for herein executed by the Trustee by manual
signature of an authorized officer, and such certificate upon any Security shall
be conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder and is entitled to the benefits of this
Indenture. Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 3.9 for all purposes of this Indenture such Security shall
be deemed never to have been authenticated and delivered hereunder and shall
never be entitled to the benefits of this Indenture.

Section 3.4.      Temporary Securities.

         Pending the preparation of Definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,

                                       26
<PAGE>

substantially of the tenor of the Definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.

         If temporary Securities of any series are issued, the Company will
cause Definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of Definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for Definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities of any series the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a like principal
amount of Definitive Securities of the same series and tenor of authorized
denominations. Until so exchanged the temporary Securities of any series shall
in all respects be entitled to the same benefits under this Indenture as
Definitive Securities of such series.

Section 3.5.      Registration, Registration of Transfer and Exchange.

         The Company shall cause to be kept at the office or agency of the
Company in the Borough of Manhattan, the City of New York or in any other office
or agency of the Company in a Place of Payment required by Section 10.2 a
register (the register maintained in such office being herein sometimes referred
to as the "Security Register") in which, subject to such reasonable regulations
as it may prescribe, the Company shall provide for the registration of
Securities and of transfers of Securities. The Trustee is hereby appointed as
the initial "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided and its corporate trust office,
which, at the date hereof, is located at [              ], [NEW YORK, NEW YORK]
[   ], is the initial office or agency in the Borough of Manhattan where the
Securities Register will be maintained. The Company may at any time replace such
Security Registrar, change such office or agency or act as its own Security
Registrar. The Company will give prompt written notice to the Trustee of any
change of the Security Registrar or of the location of such office or agency.

         Upon surrender for registration of transfer of any Security of any
series at the office or agency maintained pursuant to Section 10.2 for such
purpose, the Company and, if applicable, the Guarantors shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Securities, with an endorsement of the
Guarantee, if applicable, executed by the Guarantors, of the same series and
tenor, of any authorized denominations and of a like aggregate principal amount.

         At the option of the Holder, Securities of any series (except a Global
Security) may be exchanged for other Securities of the same series and tenor, of
any authorized denominations and of a like aggregate principal amount, upon
surrender of the Securities to be exchanged at such office or agency. Whenever
any Securities are so surrendered for exchange, the Company and, if applicable,
the Guarantors shall execute and the Trustee shall authenticate and deliver, the
Securities, with an endorsement of the Guarantee, if applicable, executed by the
Guarantors, which the Holder making the exchange is entitled to receive.

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

                                       27
<PAGE>

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

         No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.4, 9.6 or 11.7 not involving any transfer.

         The Company shall not be required (i) to issue, register the transfer
of or exchange Securities of any series during a period beginning at, the
opening of business 15 days before the day of the mailing of a notice of
redemption of Securities of that series selected for redemption under Section
11.3 and ending at the close of business on the day of such mailing, or (ii) to
register the transfer of or exchange any Security so selected for redemption in
whole or in part, except the unredeemed portion of any Security being redeemed
in part.

         Notwithstanding any other provisions of this Indenture and except as
otherwise specified with respect to any particular series of Securities as
contemplated by Section 3.1, a Global Security representing all or a portion of
the Securities of a series may not be transferred, except as a whole by the
Depositary for such series to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor Depositary for such series or
a nominee of such successor Depositary. Every Security authenticated and
delivered upon registration of, transfer of, or in exchange for or in lieu of, a
Global Security shall be a Global Security except as provided in the two
paragraphs immediately following.

         If at any time the Depositary for any Securities of a series
represented by one or more Global Securities notifies the Company that it is
unwilling or unable to continue as Depositary for such Securities or if at any
time the Depositary for such Securities shall no longer be eligible to continue
as Depositary under Section 1.1 or ceases to be a clearing agency registered
under the Exchange Act, the Company shall appoint a successor Depositary with
respect to such Securities. If a successor Depositary for such Securities is not
appointed by the Company within 90 days after the Company receives such notice
or becomes aware of such ineligibility, the Company's election pursuant to
Section 3.1 that such Securities be represented by one or more Global Securities
shall no longer be effective and the Company and, if applicable, the Guarantors
will execute and the Trustee, upon receipt of a Company Order for the
authentication and delivery of Definitive Securities of such series, will
authenticate and deliver, Securities, with an endorsement of the Guarantee, if
applicable, executed by the Guarantors, of such series in definitive registered
form without coupons, in any authorized denominations, in an aggregate principal
amount equal to the principal amount of the Global Security or Securities
representing such Securities in exchange for such Global Security or Securities
registered in the names of such Persons as the Depositary shall direct.

         The Company may at any time and in its sole discretion determine that
the Securities of any series issued in the form of one or more Global Securities
shall no longer be represented by a Global Security or Securities. In such event
the Company and, if applicable, the Guarantors will execute and the Trustee,
upon receipt of a Company Order for the authentication and delivery of the
Definitive Securities of such series, will authenticate and deliver, Securities,
with an endorsement of the Guarantee, if applicable, executed by the Guarantors,
of such series in definitive registered form without coupons, in any authorized
denominations, in an aggregate principal amount equal to the principal amount of
the Global Security or Securities representing such Securities in exchange for
such Global Security or Securities registered in the names of such Persons as
the Depositary shall direct.

                                       28
<PAGE>

         If specified by the Company pursuant to Section 3.1 with respect to
Securities represented by a Global Security, the Depositary for such Global
Security may surrender such Global Security in exchange in whole or in part for
Securities of the same series and tenor in definitive registered form on such
terms as are acceptable to the Company and such Depositary. Thereupon, the
Company and, if applicable, the Guarantors shall execute, and the Trustee, upon
receipt of a Company Order for the authentication and delivery of Securities in
definitive registered form, shall authenticate and deliver, without service
charge,

                  (1)      to the Person specified by such Depositary a new
         Security or Securities, with an endorsement of the Guarantee, if
         applicable, executed by the Guarantors, of the same series and tenor,
         of any authorized denominations as requested by such Person, in an
         aggregate principal amount equal to and in exchange for such Person's
         beneficial interest in the Global Security; and

                  (2)      to such Depositary a new Global Security, with an
         endorsement of the Guarantee, if applicable, executed by the
         Guarantors, in a denomination equal to the difference, if any, between
         the principal amount of the surrendered Global Security and the
         aggregate principal amount of Securities authenticated and delivered
         pursuant to clause (1) above.

Every Person who takes or holds any beneficial interest in a Global Security
agrees that:

                           (a)      the Company, the Guarantors (if applicable)
                  and the Trustee may deal with the Depositary as sole owner of
                  the Global Security and as the authorized representative of
                  such Person;

                           (b)      such Person's rights in the Global Security
                  shall be exercised only through the Depositary and shall be
                  limited to those established by law and agreement between such
                  Person and the Depositary and/or direct and indirect
                  participants of the Depositary;

                           (c)      the Depositary and its participants make
                  book-entry transfers of beneficial ownership among, and
                  receive and transmit distributions of principal and interest
                  on the Global Securities to, such Persons in accordance with
                  their own procedures; and

                           (d)      none of the Company, the Guarantors (if
                  applicable), the Trustee, nor any agent of any of them will
                  have any responsibility or liability for any aspect of the
                  records relating to or payments made on account of beneficial
                  ownership interests of a Global Security or for maintaining,
                  supervising or reviewing any records relating to such
                  beneficial ownership interests.

Section 3.6.      Mutilated, Destroyed, Lost and Stolen Securities.

         If any mutilated Security is surrendered to the Trustee, together with,
in proper cases, such security or indemnity as may be required by the Company,
the Guarantors (if applicable) or the Trustee to save each of them and any agent
of any of them harmless, the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a new Security, with an
endorsement of the Guarantee, if applicable, executed by the Guarantors, of the
same series and of like tenor and principal amount and bearing a number not
contemporaneously outstanding.

         If there shall be delivered to the Company, the Guarantors (if
applicable) and the Trustee (i) evidence to their satisfaction of the
destruction, loss or theft of any Security and (ii) such security or indemnity
as may be required by them to save each of them and any agent of either of them
harmless,

                                       29
<PAGE>

then, in the absence of notice to the Company or the Trustee that such Security
has been acquired by a bona fide purchaser, the Company and, if applicable, the
Guarantors shall execute and upon its request the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security,
with an endorsement of the Guarantee, if applicable, executed by the Guarantors,
of the same series and of like tenor and principal amount and bearing a number
not contemporaneously outstanding.

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

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

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

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

Section 3.7.      Payment of Interest; Interest Rights Preserved.

         Except as otherwise provided as contemplated by Section 3.1 with
respect to any series of Securities, interest on any Security which is payable,
and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.

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

                  (1)      The Company may elect to make payment of any
         Defaulted Interest to the Persons in whose names the Securities of such
         series (or their respective Predecessor Securities) are registered at
         the close of business on a Special Record Date for the payment of such
         Defaulted Interest, which shall be fixed in the following manner. The
         Company shall notify the Trustee in writing of the amount of Defaulted
         Interest proposed to be paid on each Security of such series and the
         date of the proposed payment, and at the same time the Company shall
         deposit with the Trustee an amount of money equal to the aggregate
         amount proposed to be paid in respect of such Defaulted Interest or
         shall make arrangements satisfactory to the Trustee for such deposit
         prior to the date of the proposed payment, such money when deposited to
         be held in trust for the benefit of the Persons entitled to such
         Defaulted Interest as in this clause provided. Thereupon, the Trustee
         shall fix a Special Record Date for the payment of such Defaulted
         Interest which shall be not more than 15 days and not less than 10 days
         prior to the date of the proposed payment and not less than 10 days
         after the receipt by the Trustee of the notice of the proposed payment.
         The Trustee shall promptly notify the Company of such Special Record
         Date and, in the name and at the expense of the Company, shall cause
         notice of the proposed payment of such Defaulted

                                       30
<PAGE>

         Interest and the Special Record Date therefor to be mailed, first-class
         postage prepaid, to each Holder of Securities of such series at his
         address as it appears in the Security Register, not less than 10 days
         prior to such Special Record Date. Notice of the proposed payment of
         such Defaulted Interest and the Special Record Date therefor having
         been so mailed, such Defaulted Interest shall be paid to the Persons in
         whose names the Securities of such series (or their respective
         Predecessor Securities) are registered at the close of business on such
         Special Record Date and shall no longer be payable pursuant to the
         following clause (2).

                  (2)      The Company may make payment of any Defaulted
         Interest on the Securities of any series in any other lawful manner not
         inconsistent with the requirements of any securities exchange on which
         such Securities may be listed, and upon such notice as may be required
         by such exchange, if, after notice given by the Company to the Trustee
         of the proposed payment pursuant to this clause, such manner of payment
         shall be deemed practicable by the Trustee.

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

Section 3.8.      Persons Deemed Owners.

         Except as otherwise provided as contemplated by Section 3.1 with
respect to any series of Securities, prior to due presentment of a Security for
registration of transfer, the Company, the Trustee and, if applicable, the
Guarantors and any agent thereof may treat the Person in whose name such
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of and any premium and (subject to Sections 3.5
and 3.7) any interest on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and none of the Company, the Trustee
nor, if applicable, the Guarantors nor any agent of any of them shall be
affected by notice to the contrary.

         No holder of any beneficial interest in any Global Security held on its
behalf by a Depositary shall have any rights under this Indenture with respect
to such Global Security, and such Depositary may be treated by the Company, the
Trustee, and, if applicable, the Guarantors and any agent of thereof as the
owner of such Global Security for all purposes whatsoever.

Section 3.9.      Cancellation.

         All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Company may at any time deliver to the
Trustee for cancellation any Securities previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Securities previously authenticated hereunder which the Company
has not issued and sold, and all Securities so delivered shall be promptly
canceled by the Trustee. No Securities shall be authenticated in lieu of or in
exchange for any Securities canceled as provided in this Section, except as
expressly permitted by this Indenture. All canceled Securities held by the
Trustee shall be disposed of in accordance with its customary practices, and the
Trustee shall thereafter deliver to the Company a certificate with respect to
such disposition.

Section 3.10.     Computation of Interest.

         Except as otherwise specified as contemplated by Section 3.1 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a year of twelve 30-day months.

                                       31
<PAGE>

Section 3.11.     CUSIP or CINS Numbers.

         The Company in issuing the Securities may use "CUSIP" or "CINS" numbers
(if then generally in use, and in addition to the other identification numbers
printed on the Securities), and, if so, the Trustee shall use "CUSIP" or "CINS"
numbers in notices of redemption as a convenience to Holders; provided, however,
that any such notice may state that no representation is made as to the
correctness of such "CUSIP" or "CINS" numbers either as printed on the
Securities or as contained in any notice of a redemption and that reliance may
be placed only on the other identification numbers printed on the Securities,
and any such redemption shall not be affected by any defect in or omission of
such "CUSIP" or "CINS" numbers.

                                  ARTICLE FOUR
                           SATISFACTION AND DISCHARGE

Section 4.1.      Satisfaction and Discharge of Indenture.

         This Indenture shall cease to be of further effect with respect to the
Securities of any series (except as to any surviving rights of registration of
transfer or exchange of Securities herein expressly provided for), and the
Trustee, upon Company Request and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to such Securities, when:

                  (1)      either

                           (a)      all such Securities theretofore
                  authenticated and delivered (other than (i) such Securities
                  which have been destroyed, lost or stolen and which have been
                  replaced or paid as provided in Section 3.6, and (ii) such
                  Securities for whose payment money has theretofore been
                  deposited in trust or segregated and held in trust by the
                  Company and thereafter repaid to the Company or discharged
                  from such trust, as provided in Section 1.3) have been
                  delivered to the Trustee for cancellation; or

                           (b)      all such Securities not theretofore
                  delivered to the Trustee for cancellation

                                    (1)      have become due and payable, or

                                    (2)      will become due and payable at
                           their Stated Maturity within one year, or

                                    (3)      are to be called for redemption
                           within one year under arrangements satisfactory to
                           the Trustee for the giving of notice of redemption by
                           the Trustee in the name, and at the expense, of the
                           Company,

                  and the Company, in the case of (1), (2) or (3) above, has
                  deposited or caused to be deposited with the Trustee as trust
                  funds in trust for such purpose an amount sufficient to pay
                  and discharge the entire indebtedness on such Securities not
                  theretofore delivered to the Trustee for cancellation, for
                  principal (and premium, if any) and interest to the date of
                  such deposit (in the case of Securities which have become due
                  and payable) or to the Stated Maturity or Redemption Date, as
                  the case may be;

                  (2)      the Company has paid or caused to be paid all other
         sums payable hereunder by the Company with respect to such Securities;
         and

                                       32
<PAGE>

                  (3)      the Company has delivered to the Trustee an Officer's
         Certificate and an Opinion of Counsel, each stating that all conditions
         precedent herein provided for relating to the satisfaction and
         discharge of this Indenture with respect to such Securities have been
         complied with.

Notwithstanding the satisfaction and discharge of this Indenture with respect to
the Securities of any series, (x) the obligations of the Company to the Trustee
under Section 6.7, the obligations of the Trustee to any Authenticating Agent
under Section 6.14 and the right of the Trustee to resign under Section 6.10
shall survive, and (y) if money shall have been deposited with the Trustee
pursuant to subclause (B) of clause (1) of this Section, the obligations of the
Company and the Trustee under Section 4.2, 6.6 and 10.2 and the last paragraph
of Section 10.3 shall survive.

Section 4.2.      Application of Trust Money.

         Subject to the provisions of the last paragraph of Section 10.3, all
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee.

                                  ARTICLE FIVE
                                    REMEDIES

Section 5.1.      Events of Default.

         "Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

                  (1)      default in the payment of any interest upon any
         Security of that series when it becomes due and payable, and
         continuance of such default for a period of 30 days (whether or not
         such payment is prohibited by the provisions of Article Fifteen
         hereof); or

                  (2)      default in the payment of the principal of (or
         premium, if any, on) any Security of that series at its Maturity
         (whether or not such payment is prohibited by the provisions of Article
         Fifteen hereof); or

                  (3)      default in the performance, or breach, of any
         covenant set forth in Article X in this Indenture (other than a
         covenant a default in whose performance or whose breach is elsewhere in
         this Section specifically dealt with or which has expressly been
         included in this Indenture solely for the benefit of series of
         Securities other than that series), and continuance of such default or
         breach for a period of 90 days after there has been given, by
         registered or certified mail, to the Company by the Trustee or to the
         Company and the Trustee by the Holders of at least 25% in principal
         amount of the Outstanding Securities of that series a written notice
         specifying such default or breach and requiring it to be remedied and
         stating that such notice is a "Notice of Default" hereunder; or

                  (4)      default in the performance, or breach, of any
         covenant in this Indenture (other than a covenant in Article X or any
         other covenant a default in whose performance or whose

                                       33
<PAGE>

         breach is elsewhere in this Section specifically dealt with or which
         has expressly been included in this Indenture solely for the benefit of
         series of Securities other than that series), and continuance of such
         default or breach for a period of 180 days after there has been given,
         by registered or certified mail, to the Company by the Trustee or to
         the Company and the Trustee by the Holders of at least 25% in principal
         amount of the Outstanding Securities of that series a written notice
         specifying such default or breach and requiring it to be remedied and
         stating that such notice is a "Notice of Default" hereunder; or

                  (5)      the Company pursuant to or within the meaning of any
         Bankruptcy Law (a) commences a voluntary case, (b) consents to the
         entry of any order for relief against it in an involuntary case, (c)
         consents to the appointment of a Custodian of it or for all or
         substantially all of its property, or (d) makes a general assignment
         for the benefit of its creditors; or

                  (6)      a court of competent jurisdiction enters an order or
         decree under any Bankruptcy Law that (a) is for relief against the
         Company in an involuntary case, (b) appoints a Custodian of the Company
         or for all or substantially all of its property, or (c) orders the
         liquidation of the Company; and the order or decree remains unstayed
         and in effect for 90 consecutive days; or

                  (7)      default in the deposit of any sinking fund payment
         when due; or

                  (8)      any other Event of Default provided with respect to
         Securities of that series in accordance with Section 3.1.

Section 5.2.      Acceleration of Maturity; Rescission and Annulment.

         If an Event of Default with respect to Securities of any series at the
time Outstanding occurs and is continuing, then in every such case the Trustee
or the Holders of a specified percentage in aggregate principal amount of the
Outstanding Securities of that series may declare the principal amount (or, if
the Securities of that series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of that series)
of all of the Securities of that series to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by Holders), and
upon any such declaration such principal amount (or specified amount) shall
become immediately due and payable. Notwithstanding the foregoing, if an Event
of Default specified in clause (5) or (6) of Section 5.1 occurs, the Securities
of any series at the time Outstanding shall be due and payable immediately
without further action or notice.

         At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article Five provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if:

                  (1)      the Company or, if applicable, one or more of the
         Guarantors has paid or deposited with the Trustee a sum sufficient to
         pay:

                           (a)      all overdue interest on all Securities of
                  that series,

                           (b)      the principal of (and premium, if any, on)
                  any Securities of that series which have become due otherwise
                  than by such declaration of acceleration and any interest
                  thereon at the rate or rates prescribed therefor in such
                  Securities,

                                       34
<PAGE>

                           (c)      to the extent that payment of such interest
                  is lawful, interest upon overdue interest at the rate or rates
                  prescribed therefor in such Securities, and

                           (d)      all sums paid or advanced by the Trustee
                  hereunder and the reasonable compensation, expenses,
                  disbursements and advances of the Trustee, its agents and
                  counsel; and

                  (2)      all Events of Default with respect to Securities of
         that series, other than the non-payment of the principal of Securities
         of that series which have become due solely by such declaration of
         acceleration, have been cured or waived as provided in Section 5.13.

No such rescission shall affect any subsequent default or impair any right
consequent thereon.

Section 5.3.      Collection of Indebtedness and Suits for Enforcement by
Trustee.

The Company covenants that if:

                  (1)      default is made in the payment of any installment of
         interest on any Security when such interest becomes due and payable and
         such default continues for a period of 60 days (whether or not such
         payment is prohibited by the provisions of Article Fifteen herof), or

                  (2)      default is made in the payment of the principal of
         (or premium, if any, on) any Security at the Maturity thereof (whether
         or not such payment is prohibited by the provisions of Article Fifteen
         hereof),

the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and any premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.

         If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or, if applicable, the Guarantors or any other obligor upon
such Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or, if applicable, the
Guarantors or any other obligor upon such Securities, wherever situated.

         If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.

                                       35
<PAGE>

Section 5.4.      Trustee May File Proofs of Claim.

         In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or, if applicable, any
Guarantor or any other obligor upon the Securities, their property or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company or, if applicable, the Guarantors for the payment of overdue
principal or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,

                  (i)      to file and prove a claim for the whole amount of
         principal (and premium, if any) and interest owing and unpaid in
         respect of the Securities and to file such other papers or documents as
         may be necessary or advisable in order to have the claims of the
         Trustee (including any claim for the reasonable compensation, expenses,
         disbursements and advances of the Trustee, its agents and counsel) and
         of the Holders allowed in such judicial proceeding, and

                  (ii)     to collect and receive any moneys or other property
         payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, if the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.7.

         No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, compromise, arrangement, adjustment or composition affecting
the Securities or, if applicable, the Guarantee or the rights of any Holder
thereof or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding; provided, however, that the Trustee may, on
behalf of the Holders, vote for the election of a trustee in bankruptcy or
similar official and be a member of a creditors' or other similar committee.

Section 5.5.      Trustee May Enforce Claims Without Possession of Securities.

         All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.

Section 5.6.      Application of Money Collected.

         Any money collected by the Trustee pursuant to this Article Five shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal or any
premium or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:

                  FIRST: To the payment of all amounts due the Trustee under
         Section 6.7;

                                       36

<PAGE>

                  SECOND: Subject to Article Fifteen, to the payment of the
         amounts then due and unpaid for principal of and any premium and
         interest on the Securities in respect of which or for the benefit of
         which such money has been collected, ratably, without preference or
         priority of any kind, according to the amounts due and payable on such
         Securities for principal and any premium and interest, respectively;
         and

                  THIRD: The balance, if any, to the Company.

Section 5.7.      Limitation on Suits.

         No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture
(including, if applicable, the Guarantee), or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless:

                  (1)      such Holder has previously given written notice to
         the Trustee of a continuing Event of Default with respect to the
         Securities of that series;

                  (2)      the Holders of not less than 25% in principal amount
         of the Outstanding Securities of that series shall have made written
         request to the Trustee to institute proceedings in respect of such
         Event of Default in its own name as Trustee hereunder;

                  (3)      such Holder or Holders have offered to the Trustee
         reasonable indemnity against the costs, expenses and liabilities to be
         incurred in compliance with such request;

                  (4)      the Trustee for 60 days after its receipt of such
         notice, request and offer of indemnity has failed to institute any such
         proceeding; and

                  (5)      no direction inconsistent with such written request
         has been given to the Trustee during such 60-day period by the Holders
         of a majority in principal amount of the Outstanding Securities of that
         series;

it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all such
Holders.

Section 5.8.      Unconditional Right of Holders to Receive Principal, Premium
                  and Interest.

         Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of and any premium and (subject to Sections 3.5
and 3.7) interest on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.

Section 5.9.      Restoration of Rights and Remedies.

         If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any

                                       37

<PAGE>

determination in such proceeding, the Company, the Guarantors, the Trustee and
the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.

Section 5.10.     Rights and Remedies Cumulative.

         Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

Section 5.11.     Delay or Omission Not Waiver.

         To fullest extent permitted by applicable law, no delay or omission of
the Trustee or of any Holder of any Securities to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Five or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.

Section 5.12.     Control by Holders.

         The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, with respect
to the Securities of such series; provided, however, that:

                  (1)      such direction shall not be in conflict with any rule
         of law or with this Indenture;

                  (2)      the Trustee may take any other action deemed proper
         by the Trustee which is not inconsistent with such direction; and

                  (3)      subject to the provisions of Section 6.1, the Trustee
         shall have the right to decline to follow any such direction if the
         Trustee in good faith shall determine that the proceeding so directed
         would involve the Trustee in personal liability.

Section 5.13.     Waiver of Past Defaults.

         The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except:

                  (1)      a continuing default in the payment of the principal
         of or any premium or interest on any Security of such series, or

                  (2)      a default in respect of a covenant or provision
         hereof which under Article Nine cannot be modified or amended without
         the consent of the Holder of each Outstanding Security of such series
         affected.

                                       38

<PAGE>

Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture, but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.

Section 5.14.     Undertaking for Costs.

         All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant, other
than the Trustee, in such suit of an undertaking to pay the costs of such suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; but (1) the provisions of this Section 5.14 shall not apply to any
suit instituted by the Company, to any suit instituted by the Trustee, to any
suit instituted by any Holder, or group of Holders, holding in the aggregate
more than 10% in principal amount of the Outstanding Securities of any series,
or to any suit instituted by any Holder for the enforcement of the payment of
the principal of (or premium, if any) or interest on any Security on or after
the Stated Maturity or Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).

Section 5.15.     Waiver of Stay or Extension Laws.

         Each of the Company and the Guarantors covenants (to the extent that it
may lawfully do so) that it will not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and each of the
Company and the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.

                                   ARTICLE SIX
                                   THE TRUSTEE

Section 6.1.      Certain Duties and Responsibilities.

                           (a)      Except during the continuance of an Event of
                  Default,

                                   (1)      the Trustee undertakes to perform
                           such duties and only such duties as are specifically
                           set forth in this Indenture and as are provided by
                           the Trust Indenture Act, and, except for implied
                           covenants or obligations under the Trust Indenture
                           Act, no implied covenants or obligations shall be
                           read into this Indenture against the Trustee; and

                                   (2)      in the absence of bad faith on its
                           part, the Trustee may conclusively rely, as to the
                           truth of the statements and the correctness of the
                           opinions expressed therein, upon certificates or
                           opinions furnished to the Trustee and conforming to
                           the requirements of this Indenture; but in the case
                           of any such certificates or opinions which by any
                           provision hereof are specifically required to be
                           furnished to the Trustee, the Trustee shall be under
                           a duty to examine the same to determine whether or
                           not they conform to the requirements of this
                           Indenture.

                                       39

<PAGE>

                           (b)      In case an Event of Default has occurred and
                  is continuing, the Trustee shall exercise such of the rights
                  and powers vested in it by this Indenture, and use the same
                  degree of care and skill in their exercise, as a prudent man
                  would exercise or use under the circumstances in the conduct
                  of his own affairs.

                           (c)      No provision of this Indenture shall be
                  construed to relieve the Trustee from liability for its own
                  negligent action, its own negligent failure to act, or its own
                  willful misconduct, except that

                                    (1)      this Subsection shall not be
                           construed to limit the effect of Subsection (a) of
                           this Section;

                                    (2)      the Trustee shall not be liable for
                           any error of judgment made in good faith by a
                           Responsible Officer, unless it shall be proved that
                           the Trustee was negligent in ascertaining the
                           pertinent facts;

                                    (3)      the Trustee shall not be liable
                           with respect to any action taken or omitted to be
                           taken by it in good faith in accordance with the
                           direction of the Holders of a majority in principal
                           amount of the Outstanding Securities of any series,
                           given pursuant to Section 5.12, relating to the time,
                           method and place of conducting any proceeding for any
                           remedy available to the Trustee, or exercising any
                           trust or power conferred upon the Trustee, under this
                           Indenture with respect to the Securities of such
                           series; and

                                    (4)      no provision of this Indenture
                           shall require the Trustee to expend or risk its own
                           funds or otherwise incur any financial liability in
                           the performance of any of its duties hereunder, or in
                           the exercise of any of its rights or powers, if it
                           shall have reasonable grounds for believing that
                           repayment of such funds or adequate indemnity against
                           such risk or liability is not reasonably assured to
                           it.

                           (d)      Whether or not therein expressly so
                  provided, every provision of this Indenture relating to the
                  conduct or affecting the liability of or affording protection
                  to the Trustee shall be subject to the provisions of this
                  Section.

Section 6.2.      Notice of Defaults.

         Within 90 days after the occurrence of any Default hereunder with
respect to the Securities of any series, the Trustee shall transmit by mail to
all Holders of Securities of such series, as their names and addresses appear in
the Security Register, notice of such Default hereunder known to the Trustee,
unless such Default shall have been cured or waived; provided, however, that,
except in the case of a Default in the payment of the principal of or any
premium or interest on any Security of such series or in the payment of any
sinking fund installment with respect to Securities of such series, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that the withholding
of such notice is in the interest of the Holders of Securities of such series;
and, provided, further, that in the case of any Default of the character
specified in Section 5.1(3) with respect to Securities of such series, no such
notice to Holders shall be given until at least 90 days after the occurrence
thereof and that in the case of any Default of the character specified in
Section 5.1(4) with respect to Securities of such series, no such notice to
Holders shall be given until at least 180 days after the occurrence thereof.

                                       40

<PAGE>

Section 6.3.      Certain Rights of Trustee.

Subject to the provisions of Section 6.1:

                           (a)      the Trustee may conclusively rely and shall
                  be fully protected in acting or refraining from acting upon
                  any resolution, certificate, statement, instrument, opinion,
                  report, notice, request, direction, consent, order, bond,
                  debenture, note, other evidence of indebtedness or other paper
                  or document believed by it to be genuine and to have been
                  signed or presented by the proper party or parties;

                           (b)      any request or direction of the Company or a
                  Guarantor mentioned herein shall be sufficiently evidenced by
                  a Company Request or Company Order (other than delivery of any
                  Security to the Trustee for authentication and delivery
                  pursuant to Section 3.3, which shall be sufficiently evidenced
                  as provided therein) and any resolution of the Board of
                  Directors may be sufficiently evidenced by a Board Resolution;

                           (c)      whenever in the administration of this
                  Indenture the Trustee shall deem it desirable that a matter be
                  proved or established prior to taking, suffering or omitting
                  any action hereunder, the Trustee (unless other evidence be
                  herein specifically prescribed) shall be entitled to receive
                  and may, in the absence of bad faith on its part, rely upon an
                  Officer's Certificate;

                           (d)      the Trustee may consult with counsel and the
                  advice of such counsel or any Opinion of Counsel shall be full
                  and complete authorization and protection in respect of any
                  action taken, suffered or omitted by it hereunder in good
                  faith and in reliance thereon;

                           (e)      the Trustee shall be under no obligation to
                  exercise any of the rights or powers vested in it by this
                  Indenture at the request or direction of any of the Holders
                  pursuant to this Indenture, unless such Holders shall have
                  offered to the Trustee reasonable security or indemnity
                  against the costs, expenses and liabilities which might be
                  incurred by it in compliance with such request or direction;

                           (f)      the Trustee shall not be bound to make any
                  investigation into the facts or matters stated in any
                  resolution, certificate, statement, instrument, opinion,
                  report, notice, request, direction, consent, order, bond,
                  debenture, note, other evidence of indebtedness or other paper
                  or document, but the Trustee, in its discretion, may make such
                  further inquiry or investigation into such facts or matters as
                  it may see fit, and, if the Trustee shall determine to make
                  such further inquiry or investigation, it shall be entitled to
                  examine the books, records and premises of the Company,
                  personally or by agent or attorney;

                           (g)      the Trustee may execute any of the trusts or
                  powers hereunder or perform any duties hereunder either
                  directly or by or through agents or attorneys and the Trustee
                  shall not be responsible for any misconduct or negligence on
                  the part of any agent or attorney appointed with due care by
                  it hereunder and shall not be responsible for the supervision
                  of officers and employees of such agents or attorneys;

                           (h)      the Trustee may request that the Company
                  and, if applicable, the Guarantors deliver an Officer's
                  Certificate setting forth the names of individuals and/or
                  titles of officers authorized at such time to take specified
                  actions pursuant to this

                                       41

<PAGE>

                  Indenture, which Officer's Certificate may be signed by any
                  person authorized to sign an Officer's Certificate, including
                  any person specified as so authorized in any such certificate
                  previously delivered and not superseded; and

                           (i)      the Trustee shall be entitled to the rights
                  and protections afforded to the Trustee pursuant to this
                  Article Six in acting as a Paying Agent or Security Registrar
                  hereunder.

Section 6.4.      Not Responsible for Recitals or Issuance of Securities.

         The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company or, if applicable, the Guarantors, and the Trustee or any
Authenticating Agent assumes no responsibility for their correctness. Neither
the Trustee nor any Authenticating Agent makes any representations as to the
validity or sufficiency of this Indenture or of the Securities. The Trustee or
any Authenticating Agent shall not be accountable for the use or application by
the Company of Securities or the proceeds thereof.

Section 6.5.      May Hold Securities.

         The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company or, if applicable, any Guarantor, in
its individual or any other capacity, may become the owner or pledgee of
Securities and, subject to Sections 310(b) and 311 of the Trust Indenture Act
and Sections 6.8, 6.9 and 6.13, may otherwise deal with the Company or, if
applicable, the Guarantors with the same rights it would have if it were not
Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other
agent.

Section 6.6.      Money Held in Trust.

         Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company or, if applicable, one or more of
the Guarantors.

Section 6.7.      Compensation and Reimbursement.

         The Company agrees:

                  (1)      to pay to the Trustee from time to time reasonable
         compensation for all services rendered by it hereunder (which
         compensation shall not be limited by any provision of law in regard to
         the compensation of a trustee of an express trust);

                  (2)      except as otherwise expressly provided herein, to
         reimburse the Trustee upon its request for all reasonable expenses,
         disbursements and advances incurred or made by the Trustee in
         accordance with any provision of this Indenture (including the
         reasonable compensation and the expenses and disbursements of its
         agents and counsel), except any such expense, disbursement or advance
         as may be attributable to its negligence or bad faith; and

                  (3)      to indemnify each of the Trustee and its officers,
         directors, agents and employees for, and to hold it harmless against,
         any loss, liability or expense incurred without negligence or willful
         misconduct on its part, arising out of or in connection with the
         acceptance or administration of the trust or trusts hereunder,
         including the costs and expenses of defending itself

                                       42

<PAGE>

         against any claim or liability in connection with the exercise or
         performance of any of its powers or duties hereunder.

         As security for the performance of the obligations of the Company under
this Section the Trustee shall have a lien prior to the Securities upon all
property and funds held or collected by the Trustee as such, except funds held
in trust for the payment of principal of (and premium, if any) or interest on
particular Securities.

         Without limiting any rights available to the Trustee under applicable
law, when the Trustee incurs expenses or renders services in connection with an
Event of Default specified in Section 5.1(5) or Section 5.1(6), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services of the Trustee are intended to constitute expenses
of administration under any applicable Bankruptcy Law.

         The provisions of this Section 6.7 shall survive the satisfaction and
discharge of this Indenture and the defeasance of the Securities.

Section 6.8.      Disqualification; Conflicting Interests.

         Reference is made to Section 310(b) of the Trust Indenture Act. There
shall be excluded from the operation of Section 310(b)(1) of the Trust Indenture
Act this Indenture with respect to the Securities of more than one series.

Section 6.9.      Corporate Trustee Required; Eligibility.

         There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
required by the Trust Indenture Act, subject to supervision or examination by
Federal or State authority. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. The
Trustee shall not be an obligor upon the Securities or an Affiliate thereof. If
at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article Six.

Section 6.10.     Resignation and Removal; Appointment of Successor.

                           (a)      No resignation or removal of the Trustee and
                  no appointment of a successor Trustee pursuant to this Article
                  shall become effective until the acceptance of appointment by
                  the successor Trustee in accordance with the applicable
                  requirements of Section 6.11.

                           (b)      The Trustee may resign at any time with
                  respect to the Securities of one or more series by giving
                  written notice thereof to the Company. If the instrument of
                  acceptance by a successor Trustee required by Section 6.11
                  shall not have been delivered to the Trustee within 30 days
                  after the giving of such notice of resignation, the resigning
                  Trustee may petition any court of competent jurisdiction for
                  the appointment of a successor Trustee with respect to the
                  Securities of such series.

                                       43

<PAGE>

                           (c)      The Trustee may be removed at any time with
                  respect to the Securities of any series by Act of the Holders
                  of a majority in principal amount of the Outstanding
                  Securities of such series, delivered to the Trustee and to the
                  Company.

                           (d)      If at any time:

                                    (1)      the Trustee shall fail to comply
                           with Section 310(b) of the Trust Indenture Act after
                           written request therefor by the Company or by any
                           Holder who has been a bona fide Holder of a Security
                           for at least six months, or

                                    (2)      the Trustee shall cease to be
                           eligible under Section 6.9 and shall fail to resign
                           after written request therefor by the Company or by
                           any such Holder, or

                                    (3)      the Trustee shall become incapable
                           of acting or shall be adjudged a bankrupt or
                           insolvent or a receiver of the Trustee or of its
                           property shall be appointed or any public officer
                           shall take charge or control of the Trustee or of its
                           property or affairs for the purpose of
                           rehabilitation, conservation or liquidation, then, in
                           any such case, (i) the Company by a Board Resolution
                           may remove the Trustee with respect to all
                           Securities, or (ii) subject to Section 5.14, any
                           Holder who has been a bona fide Holder of a Security
                           for at least six months may, on behalf of himself and
                           all others similarly situated, petition any court of
                           competent jurisdiction for the removal of the Trustee
                           with respect to all Securities and the appointment of
                           a successor Trustee or Trustees.

                           (e)      If the Trustee shall resign, be removed or
                  become incapable of acting, or if a vacancy shall occur in the
                  office of Trustee for any cause, with respect to the
                  Securities of one or more series, the Company, by a Board
                  Resolution, shall promptly appoint a successor Trustee or
                  Trustees with respect to the Securities of that or those
                  series (it being understood that any such successor Trustee
                  may be appointed with respect to the Securities of one or more
                  or all of such series and that at any time there shall be only
                  one Trustee with respect to the Securities of any particular
                  series) and shall comply with the applicable requirements of
                  Section 6.11. If, within one year after such resignation,
                  removal or incapability, or the occurrence of such vacancy, a
                  successor Trustee with respect to the Securities of any series
                  shall be appointed by Act of the Holders of a majority in
                  principal amount of the Outstanding Securities of such series
                  delivered to the Company and the retiring Trustee, the
                  successor Trustee so appointed shall, forthwith upon its
                  acceptance of such appointment in accordance with the
                  applicable requirements of Section 6.11, become the successor
                  Trustee with respect to the Securities of such series and to
                  that extent supersede the successor Trustee appointed by the
                  Company. If no successor Trustee with respect to the
                  Securities of any series shall have been so appointed by the
                  Company or the Holders and accepted appointment in the manner
                  required by Section 6.11, any Holder who has been a bona fide
                  Holder of a Security of such series for at least six months
                  may, on behalf of himself and all others similarly situated,
                  petition any court of competent jurisdiction for the
                  appointment of a successor Trustee with respect to the
                  Securities of such series.

                           (f)      The Company shall give notice of each
                  resignation and each removal of the Trustee with respect to
                  the Securities of any series and each appointment of a
                  successor Trustee with respect to the Securities of any series
                  to all Holders of Securities of such series in the manner
                  provided in Section 1.7. Each notice shall include the name

                                       44

<PAGE>

                  of the successor Trustee with respect to the Securities of
                  such series and the address of its Corporate Trust Office.

Section 6.11.     Acceptance of Appointment by Successor.

                           (a)      In case of the appointment hereunder of a
                  successor Trustee with respect to all Securities, every such
                  successor Trustee so appointed shall execute, acknowledge and
                  deliver to the Company, the Guarantors (if applicable) and to
                  the retiring Trustee an instrument accepting such appointment,
                  and thereupon the resignation or removal of the retiring
                  Trustee shall become effective and such successor Trustee,
                  without any further act, deed or conveyance, shall become
                  vested with all the rights, powers, trusts and duties of the
                  retiring Trustee; but, on the request of the Company or, if
                  applicable, any Guarantor or the successor Trustee, such
                  retiring Trustee shall, upon payment of its charges, execute
                  and deliver an instrument transferring to such successor
                  Trustee all the rights, powers and trusts of the retiring
                  Trustee and shall duly assign, transfer and deliver to such
                  successor Trustee all property and money held by such retiring
                  Trustee hereunder.

                           (b)      In case of the appointment hereunder of a
                  successor Trustee with respect to the Securities of one or
                  more (but not all) series, the Company, the Guarantors (if
                  applicable), the retiring Trustee and each successor Trustee
                  with respect to the Securities of one or more series shall
                  execute and deliver an indenture supplemental hereto wherein
                  each successor Trustee shall accept such appointment and which
                  (1) shall contain such provisions as shall be necessary or
                  desirable to transfer and confirm to, and to vest in, each
                  successor Trustee all the rights, powers, trusts and duties of
                  the retiring Trustee with respect to the Securities of that or
                  those series to which the appointment of such successor
                  Trustee relates, (2) if the retiring Trustee is not retiring
                  with respect to all Securities, shall contain such provisions
                  as shall be deemed necessary or desirable to confirm that all
                  the rights, powers, trusts and duties of the retiring Trustee
                  with respect to the Securities of that or those series as to
                  which the retiring Trustee is not retiring shall continue to
                  be vested in the retiring Trustee, and (3) shall add to or
                  change any of the provisions of this Indenture as shall be
                  necessary to provide for or facilitate the administration of
                  the trusts hereunder by more than one Trustee, it being
                  understood that nothing herein or in such supplemental
                  indenture shall constitute such Trustees co-trustees of the
                  same trust and that each such Trustee shall be trustee of a
                  trust or trusts hereunder separate and apart from any trust or
                  trusts hereunder administered by any other such Trustee; and
                  upon the execution and delivery of such supplemental indenture
                  the resignation or removal of the retiring Trustee shall
                  become effective to the extent provided therein and each such
                  successor Trustee, without any further act, deed or
                  conveyance, shall become vested with all the rights, powers,
                  trusts and duties of the retiring Trustee with respect to the
                  Securities of that or those series to which the appointment of
                  such successor Trustee relates; but, on request of the
                  Company, any Guarantor (if applicable) or any successor
                  Trustee, such retiring Trustee shall duly assign, transfer and
                  deliver to such successor Trustee all property and money held
                  by such retiring Trustee hereunder with respect to the
                  Securities of that or those series to which the appointment of
                  such successor Trustee relates.

                           (c)      Upon request of any such successor Trustee,
                  the Company and, if applicable, the Guarantors shall execute
                  any and all instruments for more fully and certainly vesting
                  in and confirming to such successor Trustee all such rights,
                  powers and trusts referred to in paragraph (a) or (b) of this
                  Section, as the case may be.

                                       45

<PAGE>

                           (d)      No successor Trustee shall accept its
                  appointment unless at the time of such acceptance such
                  successor Trustee shall be qualified and eligible under this
                  Article and the Trust Indenture Act.

Section 6.12.     Merger, Conversion, Consolidation or Succession to Business.

         Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article Six,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.

Section 6.13.     Preferential Collection of Claims Against Company.

         Reference is made to Section 311 of the Trust Indenture Act. For
purposes of Section 311(b) of the Trust Indenture Act,

                  (1)      the term "cash transaction" means any transaction in
         which full payment for goods or securities sold is made within seven
         days after delivery of the goods or securities in currency or in checks
         or other orders drawn upon banks or bankers and payable upon demand;

                  (2)      the term "self-liquidating paper" means any draft,
         bill of exchange, acceptance or obligation which is made, drawn,
         negotiated or incurred by the Company or, if applicable, any Guarantor
         for the purpose of financing the purchase, processing, manufacturing,
         shipment, storage or sale of goods, wares or merchandise and which is
         secured by documents evidencing title to, possession of, or a lien
         upon, the goods, wares or merchandise or the receivables or proceeds
         arising from the sale of the goods, wares or merchandise previously
         constituting the security, provided the security is received by the
         Trustee simultaneously with the creation of the creditor relationship
         with the Company or, if applicable, such Guarantor arising from the
         making, drawing, negotiating or incurring of the draft, bill of
         exchange, acceptance or obligation.

Section 6.14.     Appointment of Authenticating Agent.

         The Trustee may appoint an Authenticating Agent or Agents with respect
to one or more series of Securities which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series issued upon exchange,
registration of transfer or partial redemption thereof or pursuant to Section
3.6, and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $100,000,000 and subject
to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining

                                       46

<PAGE>

authority, then for the purposes of this Section, the combined capital and
surplus of such Authenticating Agent shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published. If
at any time an Authenticating Agent shall cease to be eligible in accordance
with the provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section.

         Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate agency or corporate trust business of an Authenticating Agent,
shall continue to be an Authenticating Agent, provided such corporation shall be
otherwise eligible under this Section, without the execution or filing of any
paper or any further act on the part of the Trustee or the Authenticating Agent.

         An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company and, if applicable, the Guarantors.
The Trustee may at any time terminate the agency of an Authenticating Agent by
giving written notice thereof to such Authenticating Agent and to the Company
and, if applicable, the Guarantors. Upon receiving such a notice of resignation
or upon such a termination, or in case at any time such Authenticating Agent
shall cease to be eligible in accordance with the provisions of this Section,
the Trustee may appoint a successor Authenticating Agent which shall be
acceptable to the Company and, if applicable, the Guarantors and shall mail
written notice of such appointment by first-class mail, postage prepaid, to all
Holders of Securities of the series with respect to which such Authenticating
Agent will serve, as their names and addresses appear in the Security Register.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.

         Except with respect to an Authenticating Agent appointed at the request
of the Company or, if applicable, the Guarantors, the Trustee agrees to pay to
each Authenticating Agent from time to time reasonable compensation for its
services under this Section 6.14, and the Trustee shall be entitled to be
reimbursed by the Company or, if applicable, the Guarantors for such payments,
subject to the provisions of Section 6.7.

         If an appointment with respect to one or more series is made pursuant
to this Section 6.14, the Securities of such series may have endorsed thereon,
in addition to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form:

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

                                         [                        ],
                                         As Trustee

                                         By: ___________________________________
                                             As Authenticating Agent

                                         By: ___________________________________
                                             Authorized Officer

                                       47

<PAGE>

                                  ARTICLE SEVEN
                HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

Section 7.1.      Company to Furnish Trustee Names and Addresses of Holders.

         The Company will furnish or cause to be furnished to the Trustee:

                           (a)      semi-annually, not more than 15 days after
                  each Regular Record Date for a series of Securities, a list
                  for such series of Securities, in such form as the Trustee may
                  reasonably require, of the names and addresses of the Holders
                  of Securities of such series as of such Regular Record Date,
                  and

                           (b)      at such other times as the Trustee may
                  request in writing, within 30 days after the receipt by the
                  Company of any such request, a list of similar form and
                  content as of a date not more than 15 days prior to the time
                  such list is furnished; provided, however, that if and so long
                  as the Trustee shall be the Security Registrar, no such list
                  need be furnished with respect to such series of Securities.

Section 7.2.      Preservation of Information; Communications to Holders.

                           (a)      The Trustee shall preserve, in as current a
                  form as is reasonably practicable, the names and addresses of
                  Holders contained in the most recent list furnished to the
                  Trustee as provided in Section 7.1 and the names and addresses
                  of Holders received by the Trustee in its capacity as Security
                  Registrar. The Trustee may destroy any list furnished to it as
                  provided in Section 7.1 upon receipt of a new list so
                  furnished.

                           (b)      If three or more Holders (herein referred to
                  as "applicants") apply in writing to the Trustee, and furnish
                  to the Trustee reasonable proof that each such applicant has
                  owned a Security for a period of at least six months preceding
                  the date of such application, and such application states that
                  the applicants desire to communicate with other Holders with
                  respect to their rights under this Indenture or under the
                  Securities and is accompanied by a copy of the form of proxy
                  or other communication which such applicants propose to
                  transmit, then the Trustee shall, within five business days
                  after the receipt of such application, at its election, either

                                    (i)      afford such applicants access to
                           the information preserved at the time by the Trustee
                           in accordance with Section 7.2(a), or

                                    (ii)     inform such applicants as to the
                           approximate number of Holders whose names and
                           addresses appear in the information preserved at the
                           time by the Trustee in accordance with Section 7.2(a)
                           , and as to the approximate cost of mailing to such
                           Holders the form of proxy or other communication, if
                           any, specified in such application.

                           If the Trustee shall elect not to afford such
                  applicants access to such information, the Trustee shall, upon
                  the written request of such applicants, mail to each Holder
                  whose name and address appear in the information preserved at
                  the time by the Trustee in accordance with Section 7.2(a) a
                  copy of the form of proxy or other communication which is
                  specified in such request, with reasonable promptness after a
                  tender to the Trustee of the material to be mailed and of
                  payment, or provision for the payment, of the

                                       48

<PAGE>

                  reasonable expenses of mailing, unless within five days after
                  such tender the Trustee shall mail to such applicants and file
                  with the Commission, together with a copy of the material to
                  be mailed, a written statement to the effect that, in the
                  opinion of the Trustee, such mailing would be contrary to the
                  best interest of the Holders or would be in violation of
                  applicable law. Such written statement shall specify the basis
                  of such opinion. If the Commission, after opportunity for a
                  hearing upon the objections specified in the written statement
                  so filed, shall enter an order refusing to sustain any of such
                  objections or if, after the entry of an order sustaining one
                  or more of such objections, the Commission shall find, after
                  notice and opportunity for hearing, that all the objections so
                  sustained have been met and shall enter an order so declaring,
                  the Trustee shall mail copies of such material to all such
                  Holders with reasonable promptness after the entry of such
                  order and the renewal of such tender; otherwise the Trustee
                  shall be relieved of any obligation or duty to such applicants
                  respecting their application.

                           (c)      Every Holder of Securities, by receiving and
                  holding the same, agrees with the Company, the Guarantors (if
                  applicable) and the Trustee that none of the Company, the
                  Guarantors (if applicable) nor the Trustee nor any agent of
                  any of them shall be held accountable by reason of the
                  disclosure of any such information as to the names and
                  addresses of the Holders in accordance with Section 7.2(b),
                  regardless of the source from which such information was
                  derived, and that the Trustee shall not be held accountable by
                  reason of mailing any material pursuant to a request made
                  under Section 7.2(b).

Section 7.3.      Reports by Trustee.

         Any Trustee's report required pursuant to Section 313(a) of the Trust
Indenture Act shall be dated as of May 15, and shall be transmitted within 60
days after May 15 of each year (but in all events at intervals of not more than
12 months), commencing with the year 2003, by mail to all Holders, as their
names and addresses appear in the Security Register. A copy of each such report
shall, at the time of such transmission to Holders, be filed by the Trustee with
each stock exchange upon which any Securities are listed, with the Commission
and with the Company. The Company will notify the Trustee when any Securities
are listed on any stock exchange.

Section 7.4.      Reports by Company.

         The Company shall:

                           (a)      file with the Trustee, within 15 days after
                  the Company is required to file the same with the Commission,
                  copies of the annual reports and of the information, documents
                  and other reports (or copies of such portions of any of the
                  foregoing as the Commission may from time to time by rules and
                  regulations prescribe) which the Company may be required to
                  file with the Commission pursuant to Section 13 or Section
                  15(d) of the Exchange Act; or, if the Company is not required
                  to file information, documents or reports pursuant to either
                  of said Sections, then it shall file with the Trustee and the
                  Commission, in accordance with rules and regulations
                  prescribed from time to time by the Commission, such of the
                  supplementary and periodic information, documents and reports
                  which may be required pursuant to Section 13 of the Exchange
                  Act in respect of a security listed and registered on a
                  national securities exchange as may be prescribed from time to
                  time in such rules and regulations;

                                       49

<PAGE>

                           (b)      file with the Trustee and the Commission, in
                  accordance with rules and regulations prescribed from time to
                  time by the Commission, such additional information, documents
                  and reports with respect to compliance by the Company with the
                  conditions and covenants of this Indenture as may be required
                  from time to time by such rules and regulations; and

                           (c)      transmit by mail to all Holders, as their
                  names and addresses appear in the Security Register, within 30
                  days after the filing thereof with the Trustee, such summaries
                  of any information, documents and reports required to be filed
                  by the Company pursuant to clauses (a) and (b) of this Section
                  as may be required by rules and regulations prescribed from
                  time to time by the Commission.

                                  ARTICLE EIGHT
                  CONSOLIDATION, AMALGAMATION, MERGER AND SALE

Section 8.1.      Company May Consolidate, Etc., Only on Certain Terms.

         The Company shall not consolidate or merge with or into any other
Person or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of the properties and assets of the Company and, if
applicable, the Guarantors on a consolidated basis to any other Person unless:

                  (1)      the Person formed by such consolidation or merger (if
         other than the Company) or the Person which acquires by sale,
         conveyance, transfer or other disposition, or which leases, such
         properties and assets shall be a corporation and shall expressly
         assume, by an indenture supplemental hereto, executed and delivered to
         the Trustee, in form satisfactory to the Trustee, the due and punctual
         payment of the principal of and any premium and interest on all the
         Securities and the performance or observance of every other covenant of
         this Indenture on the part of the Company to be performed or observed
         and shall have expressly provided for conversion rights in respect of
         any series of Outstanding Securities with conversion rights;

                  (2)      immediately after giving effect to such transaction,
         no Event of Default, and no event which, after notice or lapse of time
         or both, would become an Event of Default, shall have occurred and be
         continuing; and

                  (3)      the Company has delivered to the Trustee an Officer's
         Certificate and an Opinion of Counsel, each stating that such
         consolidation, amalgamation, merger, conveyance, sale, transfer or
         lease and such supplemental indenture, if any, comply with this Article
         Eight and that all conditions precedent herein provided for relating to
         such transaction have been complied with.

Section 8.2.      Successor Substituted.

         Upon any consolidation or merger of the Company with or into any other
Person or any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company and, if
applicable, the Guarantors on a consolidated basis in accordance with Section
8.1, the successor or resulting Person formed by or resulting upon such
consolidation or merger (if other than the Company) or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein, and thereafter, except in the case of a lease, the
predecessor Company and each of the Guarantors shall be relieved of all
obligations and covenants under this Indenture and the Securities.

                                       50

<PAGE>

                                  ARTICLE NINE
                             SUPPLEMENTAL INDENTURES

Section 9.1.      Supplemental Indentures Without Consent of Holders.

         Without the consent of any Holders, the Company, when authorized by a
Board Resolution, the Guarantors and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:

                  (1)      to evidence the succession of another Person to the
         Company and the assumption by any such successor of the covenants of
         the Company herein and in the Securities; or

                  (2)      to evidence the succession of another Person to the
         Guarantor and the assumption by any such successor of the Guarantee of
         the Guarantor herein and, to the extent applicable, endorsed upon any
         Securities; or

                  (3)      to add to the covenants of the Company such further
         covenants, restrictions, conditions or provisions as the Company shall
         consider to be appropriate for the benefit of the Holders of all or any
         series of Securities (and if such covenants, restrictions, conditions
         or provisions are to be for the benefit of less than all series of
         Securities, stating that such covenants are expressly being included
         solely for the benefit of such series) or to surrender any right or
         power herein conferred upon the Company and to make the occurrence, or
         the occurrence and continuance, of a Default in any such additional
         covenants, restrictions, conditions or provisions an Event of Default
         permitting the enforcement of all or any of the several remedies
         provided in this Indenture as herein set forth; provided, that in
         respect of any such additional covenant, restriction, condition or
         provision such supplemental indenture may provide for a particular
         period of grace after default (which period may be shorter or longer
         than that allowed in the case of other defaults) or may provide for an
         immediate enforcement upon such an Event of Default or may limit the
         remedies available to the Trustee upon such an Event of Default or may
         limit the right of the Holders of a majority in aggregate principal
         amount of the Securities of such series to waive such an Event of
         Default; or

                  (4)      to add any additional Defaults or Events of Default
         in respect of all or any series of Securities; or

                  (5)      to add to, change or eliminate any of the provisions
         of this Indenture to such extent as shall be necessary to permit or
         facilitate the issuance of Securities in bearer form, registrable or
         not registrable as to principal, and with or without interest coupons;
         or

                  (6)      to change or eliminate any of the provisions of this
         Indenture, provided that any such change or elimination shall become
         effective only when there is no Security Outstanding of any series
         created prior to the execution of such supplemental indenture which is
         entitled to the benefit of such provision; or

                  (7)      to secure the Securities of any series; or

                  (8)      to establish the form or terms of Securities of any
         series as permitted by Sections 2.1 and 3.1, including to reopen any
         series of any Securities as permitted under Section 3.1; or

                                       51

<PAGE>

                  (9)      to evidence and provide for the acceptance of
         appointment hereunder by a successor Trustee with respect to the
         Securities of one or more series and to add to or change any of the
         provisions of this Indenture as shall be necessary to provide for or
         facilitate the administration of the trusts hereunder by more than one
         Trustee, pursuant to the requirements of Section 6.11(b); or

                  (10)     to cure any ambiguity, to correct or supplement any
         provision herein which may be inconsistent with any other provision
         herein, to comply with any applicable mandatory provision of law or to
         make any other provisions with respect to matters or questions arising
         under this Indenture which shall not adversely affect the interests of
         the Holders of Securities of any series in any material respect; or

                  (11)     to modify, eliminate or add to the provisions of this
         Indenture to such extent as shall be necessary to effect the
         qualification of this Indenture under the Trust Indenture Act or under
         any similar federal statute subsequently enacted, and to add to this
         Indenture such other provisions as may be expressly required under the
         Trust Indenture Act.

         The Trustee is hereby authorized to join with the Company and any
Guarantor in the execution of any such supplemental indenture, to make any
further appropriate agreements and stipulations which may be therein contained
and to accept the conveyance, transfer, assignment, mortgage, charge or pledge
of any property thereunder, but the Trustee shall not be obligated to enter into
any such supplemental indenture which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.

Section 9.2.      Supplemental Indentures with Consent of Holders.

         With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities of all series affected
by such supplemental indenture, by Act of said Holders delivered to the Company,
the Guarantors and the Trustee, the Company, when authorized by a Board
Resolution, the Guarantor and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
of modifying in any manner the rights of the Holders of Securities of such
series under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby,

                  (1)      change the Stated Maturity of the principal of, or
         any installment of principal of or interest on, any Security, or reduce
         the principal amount thereof or the rate of interest thereon or any
         premium payable upon the redemption thereof, or reduce the amount of
         the principal of an Original Issue Discount Security that would be due
         and payable upon a declaration of acceleration of the Maturity thereof
         pursuant to Section 5.2, or change any Place of Payment where, or the
         coin or currency in which, any Security or any premium or the interest
         thereon is payable, or impair the right to institute suit for the
         enforcement of any such payment on or after the Stated Maturity thereof
         (or, in the case of redemption, on or after the Redemption Date), or

                  (2)      reduce the percentage in principal amount of the
         Outstanding Securities of any series, the consent of whose Holders is
         required for any such supplemental indenture, or the consent of whose
         Holders is required for any waiver (of compliance with certain
         provisions of this Indenture or certain defaults hereunder and their
         consequences) provided for in this Indenture, or

                  (3)      modify any of the provisions of this Section 9.2,
         Section 5.13 or Section 10.6, except to increase any such percentage or
         to provide that certain other provisions of this Indenture

                                       52

<PAGE>

         cannot be modified or waived without the consent of the Holder of each
         Outstanding Security affected thereby, provided, however, that this
         clause (3) shall not be deemed to require the consent of any Holder
         with respect to changes in the references to "the Trustee" and
         concomitant changes in this Section, or the deletion of this proviso,
         in accordance with the requirements of Sections 6.11(b) and 9.1(9).

         A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.

         It shall not be necessary for any Act of Holders under this Section 9.2
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.

Section 9.3.      Execution of Supplemental Indentures.

         In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 6.1) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.

Section 9.4.      Effect of Supplemental Indentures.

         Upon the execution of any supplemental indenture under this Article
Nine, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.

Section 9.5.      Conformity with Trust Indenture Act.

         Every supplemental indenture executed pursuant to this Article Nine
shall conform to the requirements of the Trust Indenture Act as then in effect.

Section 9.6.      Reference in Securities to Supplemental Indentures.

         Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article Nine may, and
shall if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Securities of any series so modified as to
conform, in the opinion of the Trustee and the Company, to any such supplemental
indenture may be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities of such series.

                                       53

<PAGE>

                                   ARTICLE TEN
                                    COVENANTS

Section 10.1.     Payment of Principal, Premium and Interest.

         The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any premium
and interest on the Securities of that series in accordance with the terms of
the Securities and this Indenture.

Section 10.2.     Maintenance of Office or Agency.

         The Company will maintain an office or agency where Securities of that
series may be presented or surrendered for payment, where Securities of that
series may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Securities of that
series and this Indenture may be served. The Company will give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee.

         The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations. The Company will give prompt written notice to the Trustee of
any such designation or rescission and of any change in the location of any such
other office or agency.

         Except as otherwise specified with respect to a series of Securities as
contemplated by Section 301, the Company hereby initially designates as the
Place of Payment for each series of Securities The City and State of New York,
and initially appoints the Trustee at its Corporate Trust Office as the
Company's office or agency for each such purpose in such city.

Section 10.3.     Money for Securities Payments to Be Held in Trust.

         If the Company shall at any time act as its own Paying Agent, with
respect to any series of Securities, it will, on or before each due date of the
principal of and any premium or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal and any premium and interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and will promptly notify the Trustee of its action or
failure so to act.

         Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of and
any premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay the principal and any premium or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of its action or
failure so to act. For purposes of this Section 10.3, should a due date for
principal of and any premium or interest on, or sinking fund payment with
respect to any series of Securities not be on a Business Day, such payment shall
be due on the next Business Day without any interest for the period from the due
date until such Business Day.

                                       54

<PAGE>

         The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will:

                  (1)      hold all sums held by it for the payment of the
         principal of and any premium or interest on Securities of that series
         in trust for the benefit of the Persons entitled thereto until such
         sums shall be paid to such Persons or otherwise disposed of as herein
         provided;

                  (2)      give the Trustee notice of any Default by the Company
         (or any other obligor upon the Securities of that series) in the making
         of any payment of principal and any premium or interest on the
         Securities of that series; and

                  (3)      at any time during the continuance of any such
         Default, upon the written request of the Trustee, forthwith pay to the
         Trustee all sums so held in trust by such Paying Agent.

         The Company and, if applicable, the Guarantors may at any time, for the
purpose of obtaining the satisfaction and discharge of this Indenture or for any
other purpose, pay, or by Company Order direct any Paying Agent to pay, to the
Trustee all sums held in trust by the Company or such Paying Agent, such sums to
be held by the Trustee upon the same trusts as those upon which such sums were
held by the Company or such Paying Agent; and, upon such payment by any Paying
Agent to the Trustee, such Paying Agent shall be released from all further
liability with respect to such money.

         Subject to any applicable escheat or abandoned property laws, any money
deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of and any premium or interest on any
Security of any series and remaining unclaimed for one year after such principal
and any premium or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.

Section 10.4.     Existence.

         Subject to Article Eight, the Company and, if any Securities of a
series to which Article Fourteen has been made applicable are Outstanding, each
Guarantor will do or cause to be done all things necessary to preserve and keep
in full force and effect its existence, rights (charter and statutory) and
franchises; provided, however, that the Company and, if applicable, each
Guarantor shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company or such Guarantor, as
the case may be.

Section 10.5.     Statement by Officers as to Default.

         Annually, within 150 days after the close of each fiscal year beginning
with the first fiscal year during which one or more series of Securities are
Outstanding, the Company and, if any Securities of a

                                       55

<PAGE>

series to which Article Fourteen has been made applicable are Outstanding, each
Guarantor will deliver to the Trustee a brief certificate (which need not
include the statements set forth in Section 1.3) from the principal executive
officer, principal financial officer or principal accounting officer of the
Company and, if applicable, such Guarantor as to his or her knowledge of the
Company's or such Guarantor's, as the case may be, compliance (without regard to
any period of grace or requirement of notice provided herein) with all
conditions and covenants under the Indenture and, if the Company or such
Guarantor, as the case may be, shall be in Default, specifying all such Defaults
and the nature and status thereof of which such officer has knowledge.

Section 10.6.     Waiver of Certain Covenants.

         The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Section 10.4 with respect to the
Securities of any series if before the time for such compliance the Holders of
at least a majority in aggregate principal amount of the Outstanding Securities
of all affected series (voting as one class) shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance with
such term, provision or condition, but no such waiver shall extend to or affect
such term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.

         A waiver which changes or eliminates any term, provision or condition
of this Indenture which has expressly been included solely for the benefit of
one or more particular series of Securities, or which modifies the rights of the
Holders of Securities of such series with respect to such term, provision or
condition, shall be deemed not to affect the rights under this Indenture of the
Holders of Securities of any other series.

Section 10.7.     Additional Amounts.

         If the Securities of a series provide for the payment of additional
amounts (as provided in Section 3.1(15)), at least 10 days prior to the first
Interest Payment Date with respect to that series of Securities and at least 10
days prior to each date of payment of principal of, premium, if any, or interest
on the Securities of that series if there has been a change with respect to the
matters set forth in the below-mentioned Officer's Certificate, the Company
shall furnish to the Trustee and the principal Paying Agent, if other than the
Trustee, an Officer's Certificate instructing the Trustee and such Paying Agent
whether such payment of principal of, premium, if any, or interest on the
Securities of that series shall be made to holders of the Securities of that
series without withholding or deduction for or on account of any tax, assessment
or other governmental charge described in the Securities of that series. If any
such withholding or deduction shall be required, then such Officer's Certificate
shall specify by country the amount, if any, required to be withheld or deducted
on such payments to such holders and shall certify the fact that additional
amounts will be payable and the amounts so payable to each holder, and the
Company shall pay to the Trustee or such Paying Agent the additional amounts
required to be paid by this Section. The Company covenants to indemnify the
Trustee and any Paying Agent for, and to hold them harmless against, any loss,
liability or expense reasonably incurred without negligence or bad faith on
their part arising out of or in connection with actions taken or omitted by any
of them in reliance on any Officer's Certificate furnished pursuant to this
Section 10.7.

         Whenever in this Indenture there is mentioned, in any context, the
payment of the principal of or any premium, interest or any other amounts on, or
in respect of, any Securities of any series, such mention shall be deemed to
include mention of the payment of additional amounts provided by the terms of
such series established hereby or pursuant hereto to the extent that, in such
context, additional amounts are, were or would be payable in respect thereof
pursuant to such terms, and express mention of the payment

                                       56

<PAGE>
of additional amounts (if applicable) in any provision hereof shall not be
construed as excluding the payment of additional amounts in those provisions
hereof where such express mention is not made.

                                 ARTICLE ELEVEN
                            REDEMPTION OF SECURITIES

Section 11.1.     Applicability of Article.

         Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 3.1 for Securities of any series)
in accordance with this Article Eleven.

Section 11.2.     Election to Redeem; Notice to Trustee.

         The election of the Company to redeem any Securities shall be evidenced
by a Board Resolution. In case of any redemption at the election of the Company
of less than all the Securities of any series, the Company shall, at least 15
days prior to the last date for the giving of notice of such redemption (unless
a shorter notice shall be satisfactory to the Trustee), notify the Trustee of
such Redemption Date and of the principal amount of Securities of such series to
be redeemed and, if applicable, of the tenor of the Securities to be redeemed.
In the case of any redemption of Securities (a) prior to the expiration of any
restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture or (b) pursuant to an election of the Company that
is subject to a condition specified in the terms of the Securities of the series
to be redeemed, the Company shall furnish the Trustee with an Officer's
Certificate evidencing compliance with such restriction or condition.

Section 11.3.     Selection by Trustee of Securities to Be Redeemed.

         If less than all the Securities of any series are to be redeemed
(unless all of the Securities of such series and of a specified tenor are to be
redeemed), the particular Securities to be redeemed shall be selected not more
than 45 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series not previously called for redemption, by such method
as the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to the minimum authorized
denomination for Securities of that series or any integral multiple thereof) of
the principal amount of Securities of such series of a denomination larger than
the minimum authorized denomination for Securities of that series.

         The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed. If the
Securities of any series to be redeemed consist of Securities having different
dates on which the principal is payable or different rates of interest, or
different methods by which interest may be determined or have any other
different tenor or terms, then the Company may, by written notice to the
Trustee, direct that the Securities of such series to be redeemed shall be
selected from among the groups of such Securities having specified tenor or
terms and the Trustee shall thereafter select the particular Securities to be
redeemed in the manner set forth in the preceding paragraph from among the group
of such Securities so specified.

         For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.

                                       57

<PAGE>

Section 11.4.     Notice of Redemption.

         Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.

         All notices of redemption shall state:

                  (1)      the Redemption Date,

                  (2)      the Redemption Price, or if not then ascertainable,
         the manner of calculation thereof,

                  (3)      if less than all the Outstanding Securities of any
         series are to be redeemed, the identification (and, in the case of
         partial redemption, the principal amounts) of the particular Securities
         to be redeemed,

                  (4)      that on the Redemption Date the Redemption Price will
         become due and payable upon each such Security to be redeemed and, if
         applicable, that interest thereon will cease to accrue on and after
         said date,

                  (5)      the place or places where such Securities are to be
         surrendered for payment of the Redemption Price, and

                  (6)      that the redemption is for a sinking fund, if such is
         the case.

Notice of redemption of Securities to be redeemed at the election of the Company
shall be given by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company.

Section 11.5.     Deposit of Redemption Price.

         Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 10.3) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.

Section 11.6.     Securities Payable on Redemption Date.

         Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that unless otherwise specified with
respect to Securities of any series as contemplated in Section 3.1, installments
of interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 3.7.

                                       58

<PAGE>

         If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.

Section 11.7.     Securities Redeemed in Part.

         Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and tenor, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.

                                 ARTICLE TWELVE
                                  SINKING FUNDS

Section 12.1.     Applicability of Article.

         The provisions of this Article Twelve shall be applicable to any
sinking fund for the retirement of Securities of a series except as otherwise
specified as contemplated by Section 3.1 for Securities of such series.

         The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment", and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "optional
sinking fund payment." If provided for by the terms of Securities of any series,
the cash amount of any sinking fund payment may be subject to reduction as
provided in Section 12.2. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series.

Section 12.2.     Satisfaction of Sinking Fund Payments with Securities.

         The Company (a) may deliver Outstanding Securities of a series (other
than any previously called for redemption) and (b) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series; provided that such Securities have not been previously so credited. Such
Securities shall be received and credited for such purpose by the Trustee at the
Redemption Price specified in such Securities for redemption through operation
of the sinking fund and the amount of such sinking fund payment shall be reduced
accordingly.

Section 12.3.     Redemption of Securities for Sinking Fund.

         Not less than 45 days prior to each sinking fund payment date for any
series of Securities (unless a shorter period shall be satisfactory to the
Trustee), the Company will deliver to the Trustee an Officer's Certificate
specifying the amount of the next ensuing sinking fund payment for that series
pursuant to the terms of that series, the portion thereof, if any, which is to
be satisfied by payment of cash and the portion

                                       59

<PAGE>

thereof, if any, which is to be satisfied by delivering and crediting Securities
of that series pursuant to Section 12.2 and stating the basis for such credit
and that such Securities have not been previously so credited, and will also
deliver to the Trustee any Securities to be so delivered. Not less than 30 days
before each such sinking fund payment date the Trustee shall select the
Securities to be redeemed upon such sinking fund payment date in the manner
specified in Section 11.3 and cause notice of the redemption thereof to be given
in the name of and at the expense of the Company in the manner provided in
Section 11.4. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Sections
11.6 and 11.7.

                                ARTICLE THIRTEEN
                                   DEFEASANCE

Section 13.1.     Applicability of Article.

         The provisions of this Article shall be applicable to each series of
Securities except as otherwise specified as contemplated by Section 3.1 for
Securities of such series.

Section 13.2.     Legal Defeasance.

         In addition to discharge of the Indenture pursuant to Section 4.1, the
Company shall be deemed to have paid and discharged the entire indebtedness on
all the Securities of such a series on the 91st day after the date of the
deposit referred to in clause (1) below (and the Trustee, at the expense of the
Company, shall upon a Company Request execute proper instruments acknowledging
same), and the provisions of this Indenture with respect to the Securities of
such series shall no longer be in effect, except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of Outstanding Securities of such series to receive, solely from the
trust fund described in Section 13.4 and as more fully set forth in such
Section, payments in respect of the principal of and any premium and interest on
such Securities when such payments are due, (B) the Company's obligations with
respect to such Securities under Sections 3.4, 3.5, 3.6, 10.2 and 10.3, (C) the
rights, powers, trusts, duties, and immunities of the Trustee hereunder and (D)
this Article Thirteen, if the conditions set forth below are satisfied
(hereinafter, "defeasance"):

                  (1)      The Company has irrevocably deposited or caused to be
         deposited with the Trustee (or another trustee satisfying the
         requirements of Section 6.9 who shall agree to comply with the
         provisions of this Article Thirteen applicable to it) as trust funds in
         trust for the purposes of making the following payments, specifically
         pledged as security for, and dedicated solely to, the benefit of the
         Holders of the Securities of such series (i) cash in an amount, or (ii)
         in the case of any series of Securities the payments on which may only
         be made in legal coin or currency of the United States, U.S. Government
         Obligations which through the scheduled payment of principal and
         interest in respect thereof in accordance with their terms will
         provide, not later than one day before the due date of any payment,
         cash in an amount, or (iii) a combination thereof, sufficient, in the
         opinion of a nationally recognized firm of independent public
         accountants expressed in a written certification thereof delivered to
         the Trustee, to pay and discharge (a) the principal of and any premium
         and interest on and each installment of principal of and any premium
         and interest on the Outstanding Securities of such series on the Stated
         Maturity of such principal or installment of principal or interest, as
         the case may be, or on any Redemption Date established pursuant to
         clause (3) below, and (b) any mandatory sinking fund or analogous
         payments on the dates on which such payments are due and payable in
         accordance with the terms of the Indenture and the Securities of such
         series;

                                       60

<PAGE>

                  (2)      The Company has delivered to the Trustee an Opinion
         of Counsel based on the fact that (a) the Company has received from, or
         there has been published by, the Internal Revenue Service a ruling, or
         (b) since the date hereof, there has been a change in the applicable
         federal income tax law, in either case to the effect that, and such
         opinion shall confirm that, the holders of the Securities of such
         series will not recognize income, gain or loss for federal income tax
         purposes as a result of such deposit and defeasance and will be subject
         to federal income tax on the same amount and in the same manner and at
         the same times, as would have been the case if such deposit and
         defeasance had not occurred;

                  (3)      If the Securities are to be redeemed prior to Stated
         Maturity (other than from mandatory sinking fund payments or analogous
         payments), notice of such redemption shall have been duly given
         pursuant to this Indenture or provision therefor satisfactory to the
         Trustee shall have been made;

                  (4)      No Default or Event of Default shall have occurred
         and be continuing on the date of such deposit;

                  (5)      Such defeasance shall be effected in compliance with
         any additional terms, conditions or limitations which may be imposed on
         the Company in connection therewith pursuant to Section 3.1; and

                  (6)      The Company has delivered to the Trustee an Officer's
         Certificate and an Opinion of Counsel, each stating that all conditions
         precedent provided for relating to the defeasance contemplated by this
         provision have been complied with.

For this purpose, such defeasance means that the Company, the Guarantors (if
applicable) and any other obligor upon the Securities of such series shall be
deemed to have paid and discharged the entire debt represented by the Securities
of such series, which shall thereafter be deemed to be "Outstanding" only for
the purposes of Section 13.4 and the rights and obligations referred to in
clauses (A) through (D), inclusive, of the first paragraph of this Section 13.2,
and to have satisfied all its other obligations under the Securities of such
series and this Indenture insofar as the Securities of such series are
concerned.

         Notwithstanding the foregoing, if an Event of Default specified in
Subsection 5.1(5) or 5.1(6), or an event which with lapse of time would become
such an Event of Default, shall occur during the period ending on the 91st day
after the date of the deposit referred to in clause (1) or, if longer, ending on
the day following the expiration of the longest preference period applicable to
the Company in respect of such deposit, then, effective upon such occurrence,
the defeasance pursuant to this Section 13.2 and such deposit shall be rescinded
and annulled, and the Company, the Guarantors (if applicable), the Trustee and
the Holders of the Securities of such series shall be restored to their former
positions.

Section 13.3.     Covenant Defeasance.

         The Company, the Guarantors (if applicable) and any other obligor, if
any, shall be released from their respective obligations under Sections 7.4, 8.1
and 10.4 with respect to the Securities of any series on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant defeasance"),
and the Securities of such series shall thereafter be deemed to be not
"Outstanding" for the purposes of any request, demand, authorization, direction,
notice, waiver, consent or declaration or other action or Act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed Outstanding for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the Securities of
such series, the Company may omit to comply with and shall have no liability in
respect of

                                       61

<PAGE>

any term, condition or limitation set forth in any such Section, whether
directly or indirectly by reason of any reference elsewhere herein to such
Section or by reason of any reference in such Section to any other provision
herein or in any other document and such omission to comply shall not constitute
a Default or an Event of Default under Section 5.1, but, except as specified
above, the remainder of this Indenture and the Securities of such series shall
be unaffected thereby. The following shall be the conditions to application of
this Section 13.3;

                  (1)      The Company has irrevocably deposited or caused to be
         deposited with the Trustee (or another trustee satisfying the
         requirements of Section 6.9 who shall agree to comply with the
         provisions of this Article Thirteen applicable to it) as trust funds in
         trust for the purpose of making the following payments, specifically
         pledged as security for, and dedicated solely to, the benefit of the
         Holders of the Securities of such series (i) cash in an amount, or (ii)
         in the case of any series of Securities the payments on which may only
         be made in legal coin or currency of the United States, U.S. Government
         Obligations which through the scheduled payment of principal and
         interest in respect thereof in accordance with their terms will
         provide, not later than one day before the due date of any payment,
         cash in an amount, or (iii) a combination thereof, sufficient, in the
         opinion of a nationally recognized firm of independent public accounts
         expressed in a written certification thereof delivered to the Trustee,
         to pay and discharge (a) the principal of and any premium and interest
         on and each installment of principal of and any premium and interest on
         the Outstanding Securities of such series on the Stated Maturity of
         such principal or installment of principal or interest, as the case may
         be, or on any Redemption Date established pursuant to clause (2) below,
         and (b) any mandatory sinking fund payments on the date on which such
         payments are due and payable in accordance with the terms of the
         Indenture and the Securities of such series;

                  (2)      If the Securities are to be redeemed prior to Stated
         Maturity (other than from mandatory sinking fund payments or analogous
         payments), notice of such redemption shall have been duly given
         pursuant to this Indenture or provision therefor satisfactory to the
         Trustee shall have been made;

                  (3)      No Event of Default, or an event which with notice or
         lapse of time or both would become such an Event of Default, shall have
         occurred and be continuing on the date of such deposit;

                  (4)      Such defeasance shall be effected in compliance with
         any additional terms, conditions or limitations which may be imposed on
         the Company in connection therewith pursuant to Section 3.1; and

                  (5)      The Company shall have delivered to the Trustee an
         Officer's Certificate and an Opinion of Counsel stating that all
         conditions precedent provided for relating to the covenant defeasance
         contemplated by this provision have been complied with.

Notwithstanding the foregoing, if an Event of Default specified in Subsection
5.1(5) or 5.1(6), or an event which with lapse of time would become such an
Event of Default, shall occur during the period ending on the 181st day after
the date of the deposit referred to in clause (1) or, if longer, ending on the
day following the expiration of the longest preference period applicable to the
Company in respect of such deposit, then, effective upon such occurrence, the
defeasance pursuant to this Section 13.3 and such deposit shall be rescinded and
annulled, and the Company, the Guarantors (if applicable), the Trustee and the
Holders of the Securities of such series shall be restored to their former
positions.

                                       62

<PAGE>

Section 13.4.     Deposited Money and U.S. Government Obligations to be Held in
                  Trust.

         Subject to the provisions of the last paragraph of Section 10.3, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee - collectively, for purposes of
this Section 13.4, the "Trustee") pursuant to Section 13.2 or 13.3 in respect of
the Outstanding Securities of such series shall be held in trust and applied by
the Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent), to the Holders of such
Securities, of all sums due and to become due thereon in respect of principal
and any premium and interest, but such money need not be segregated from other
funds except to the extent required by law.

         The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 13.2 or 13.3 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Securities of such
series.

Section 13.5.     Repayment to Company; Qualifying Trustee.

         The Trustee and any Paying Agent promptly shall pay or return to the
Company upon Company Request any money and U.S. Government Obligations held by
them at any time that, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the same certification given at the time
of the deposit pursuant to Section 13.2 or 13.3, as applicable), are not
required for the payment of the principal of and any interest on the Securities
of any series for which money or U.S. Government Obligations have been deposited
pursuant to Section 13.2 or 13.3.

         The provisions of the last paragraph of Section 10.3 shall apply to any
money held by the Trustee or any Paying Agent under this Article Thirteen that
remains unclaimed for one year after the Maturity of any series of Securities
for which money or U.S. Government obligations have been deposited pursuant to
Section 13.2 or 13.3.

         Any trustee appointed pursuant to Section 13.2 or 13.3 for the purpose
of holding trust funds deposited pursuant to that Section shall be appointed
under an agreement in form acceptable to the Trustee and shall provide to the
Trustee a certificate of such trustee, upon which certificate the Trustee shall
be entitled to conclusively rely, that all conditions precedent provided for
herein to the related defeasance or covenant defeasance have been complied with.
In no event shall the Trustee be liable for any acts or omissions of said
trustee.

                                ARTICLE FOURTEEN
                             GUARANTEE OF SECURITIES

Section 14.1.     Unconditional Guarantee.

         For value received, each of the Guarantors hereby fully, irrevocably,
unconditionally and absolutely guarantees to the Holders of Securities of each
series to which this Article Fourteen has been made applicable as provided in
Section 3.1(20) and to the Trustee the due and punctual payment of the principal
of, and premium, if any, and interest on such Securities, and all other amounts
due and payable under this Indenture and such Securities by the Company to the
Trustee or such Holders (including, without limitation, all costs and expenses
(including reasonable legal fees and disbursements) incurred by the Trustee or
such Holders in connection with the enforcement of this Indenture and the
Guarantee) (collectively, the "Indenture Obligations"), when and as such
principal, premium, if any, interest, if any,

                                       63

<PAGE>

and other amounts shall become due and payable, whether at the Stated Maturity,
upon redemption or by declaration of acceleration or otherwise, according to the
terms of such Securities and this Indenture. The guarantees by the Guarantors
set forth in this Article Fourteen are referred to herein as the "Guarantee."
Without limiting the generality of the foregoing, each Guarantor's liability
shall extend to all amounts that constitute part of the Indenture Obligations
and would be owed by the Company to the Trustee or such Holders under this
Indenture and such Securities but for the fact that they are unenforceable,
reduced, limited, impaired, suspended or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Company.

         Failing payment when due of any amount guaranteed pursuant to the
Guarantee, for whatever reason, each Guarantor will be obligated (to the fullest
extent permitted by applicable law) to pay the same immediately to the Trustee,
without set-off or counterclaim or other reduction whatsoever (whether for
taxes, withholding or otherwise). The Guarantee hereunder is intended to be a
general, unsecured, subordinated obligation of each Guarantor and will be
subordinated in right of payment to all Guarantor Senior Debt. Each Guarantor
hereby agrees that, to the fullest extent permitted by applicable law, its
obligations hereunder shall be full, irrevocable, unconditional and absolute,
irrespective of the validity, regularity or enforceability of such Securities,
the Guarantee or this Indenture, the absence of any action to enforce the same,
any waiver or consent by any such Holder with respect to any provisions hereof
or thereof, the recovery of any judgment against the Company, any action to
enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of such Guarantor. Each Guarantor hereby
agrees that in the event of a default in payment of the principal of, or
premium, if any, or interest on such Securities, or any other amounts payable
under this Indenture and such Securities by the Company to the Trustee or the
Holders thereof, whether at the Stated Maturity, upon redemption or by
declaration of acceleration or otherwise, legal proceedings may be instituted by
the Trustee on behalf of such Holders or, subject to Section 5.7 hereof, by such
Holders, on the terms and conditions set forth in this Indenture, directly
against such Guarantor to enforce the Guarantee without first proceeding against
the Company.

         To the fullest extent permitted by applicable law, the obligations of
each Guarantor under this Article Fourteen shall be as aforesaid full,
irrevocable, unconditional and absolute and shall not be impaired, modified,
discharged, released or limited by any occurrence or condition whatsoever,
including, without limitation, (i) any compromise, settlement, release, waiver,
renewal, extension, indulgence or modification of, or any change in, any of the
obligations and liabilities of the Company or any Guarantor contained in any of
such Securities or this Indenture, (ii) any impairment, modification, release or
limitation of the liability of the Company, any Guarantor or any of their
estates in bankruptcy, or any remedy for the enforcement thereof, resulting from
the operation of any present or future provision of any applicable Bankruptcy
Law, as amended, or other statute or from the decision of any court, (iii) the
assertion or exercise by the Trustee or any such Holder of any rights or
remedies under any of such Securities or this Indenture or their delay in or
failure to assert or exercise any such rights or remedies, (iv) the assignment
or the purported assignment of any property as security for any of such
Securities, including all or any part of the rights of the Company or any
Guarantor under this Indenture, (v) the extension of the time for payment by the
Company or any Guarantor of any payments or other sums or any part thereof owing
or payable under any of the terms and provisions of any of such Securities or
this Indenture or of the time for performance by the Company or any Guarantor of
any other obligations under or arising out of any such terms and provisions or
the extension or the renewal of any thereof, (vi) the modification or amendment
(whether material or otherwise) of any duty, agreement or obligation of the
Company or any Guarantor set forth in this Indenture, (vii) the voluntary or
involuntary liquidation, dissolution, sale or other disposition of all or
substantially all of the assets, marshaling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment, rehabilitation or
relief of, or other similar proceeding affecting, the Company or any Guarantor
or any of their respective assets, or the disaffirmance of any of

                                       64

<PAGE>

such Securities, the Guarantee or this Indenture in any such proceeding, (viii)
the release or discharge of the Company or any Guarantor from the performance or
observance of any agreement, covenant, term or condition contained in any of
such instruments by operation of law, (ix) the unenforceability of any of such
Securities, the Guarantee or this Indenture, (x) any change in the name,
business, capital structure, corporate existence, or ownership of the Company or
any Guarantor, or (xi) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, a surety or any
Guarantor.

         To the fullest extent permitted by applicable law, each Guarantor
hereby (i) waives diligence, presentment, demand of payment, notice of
acceptance, filing of claims with a court in the event of the merger, insolvency
or bankruptcy of the Company or such Guarantor, and all demands and notices
whatsoever, (ii) acknowledges that any agreement, instrument or document
evidencing the Guarantee may be transferred and that the benefit of its
obligations hereunder shall extend to each holder of any agreement, instrument
or document evidencing the Guarantee without notice to them and (iii) covenants
that its Guarantee will not be discharged except by complete performance of the
Guarantee. To the fullest extent permitted by applicable law, each Guarantor
further agrees that if at any time all or any part of any payment theretofore
applied by any Person to any Guarantee is, or must be, rescinded or returned for
any reason whatsoever, including without limitation, the insolvency, bankruptcy
or reorganization of any Guarantor, such Guarantee shall, to the extent that
such payment is or must be rescinded or returned, be deemed to have continued in
existence notwithstanding such application, and the Guarantee shall continue to
be effective or be reinstated, as the case may be, as though such application
had not been made.

         Each Guarantor shall be subrogated to all rights of the Holders and the
Trustee against the Company in respect of any amounts paid by such Guarantor
pursuant to the provisions of this Indenture; provided, however, that such
Guarantor shall not be entitled to enforce or to receive any payments arising
out of, or based upon, such right of subrogation with respect to any of such
Securities until all of such Securities and the Guarantee shall have been
indefeasibly paid in full or discharged.

         A director, officer, employee or stockholder, as such, of a Guarantor
shall not have any liability for any obligations of the Guarantor under this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation.

         To the fullest extent permitted by applicable law, no failure to
exercise and no delay in exercising, on the part of the Trustee or the Holders,
any right, power, privilege or remedy under this Article Fourteen and the
Guarantee shall operate as a waiver thereof, nor shall any single or partial
exercise of any rights, power, privilege or remedy preclude any other or further
exercise thereof, or the exercise of any other rights, powers, privileges or
remedies. The rights and remedies herein provided for are cumulative and not
exclusive of any rights or remedies provided in law or equity. Nothing contained
in this Article Fourteen shall limit the right of the Trustee or the Holders to
take any action to accelerate the maturity of such Securities pursuant to
Article Five or to pursue any rights or remedies hereunder or under applicable
law.

Section 14.2.     Execution and Delivery of Notation of Guarantee

                                       65

<PAGE>

         To further evidence the Guarantee, each Guarantor hereby agrees that a
notation of such Guarantee may be endorsed on each Security of a series to which
this Article Fourteen has been made applicable authenticated and delivered by
the Trustee and executed by either manual or facsimile signature of an officer
of such Guarantor.

         Each Guarantor hereby agrees that its Guarantee of Securities of a
series to which this Article Fourteen has been made applicable shall remain in
full force and effect notwithstanding any failure to endorse on any such
Security a notation relating to the Guarantee thereof.

         If an officer of any Guarantor whose signature is on this Indenture or
a Security no longer holds that office at the time the Trustee authenticates
such Security or at any time thereafter, such Guarantor's Guarantee of such
Security shall be valid nevertheless.

         The delivery by the Trustee of any Security of a series to which this
Article Fourteen has been made applicable, after the authentication thereof
under this Indenture, shall constitute due delivery of the Guarantee set forth
in this Indenture on behalf of each Guarantor.

Section 14.3.     Reports by Guarantor.

         In addition to the certificates delivered to the Trustee pursuant to
Section 10.5, each Guarantor shall file with the Trustee and the Commission, and
transmit to Holders of Outstanding Securities of each series to which this
Article Fourteen has been made applicable, such information, documents and other
reports, and such summaries thereof, as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto; provided
that any such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, shall be filed with the Trustee within 15 days after the same
is so required to be filed with the Commission.

Section 14.4.     Subordination of Guarantees.

         The obligations of each Guarantor under the Guarantee pursuant to this
Article Fourteen shall be junior and subordinated to the prior payment in full
in cash of all Guarantor Senior Debt (including interest after the commencement
of any proceeding of the type described in Section 14.1 with respect to such
Guarantor at the rate specified in the applicable Guarantor Senior Debt, whether
or not such interest would be an allowed claim in such proceeding) of such
Guarantor, in each case on the same basis as the Securities are junior and
subordinated to Senior Debt, as set forth in Article Fifteen mutatis mutandis.
For the purposes of the foregoing sentence, the Trustee and the Holders shall
have the right to receive and/or retain payments by a Guarantor only at such
times as they may receive and/or retain payments and distributions in respect of
the Securities pursuant to this Indenture, including Article Fifteen hereof.

                                 ARTICLE FIFTEEN
                           SUBORDINATION OF SECURITIES

Section 15.1.     Securities Subordinated to Senior Debt.

                  (1)      The Company, for itself, its successors and assigns,
         covenants and agrees, and each Holder of Securities, by his acceptance
         thereof, likewise covenants and agrees, that the payment of the
         principal of and premium, if any, and interest on each and all of the
         Securities is hereby expressly subordinated, to the extent and in the
         manner hereinafter set forth, in right of payment to the prior payment
         in full of all Senior Debt of the Company.

                                       66

<PAGE>

                  (2)      If (A) the Company shall default in the payment of
         any principal of, premium, if any, or interest, if any, on any Senior
         Debt of the Company when the same becomes due and payable, whether at
         maturity or at a date fixed for prepayment or by declaration of
         acceleration or otherwise, or (B) any other default shall occur with
         respect to Senior Debt of the Company and the maturity of such Senior
         Debt has been accelerated in accordance with its terms, then, upon
         written notice of such default to the Company and the Trustee by the
         holders of Senior Debt of the Company or any trustee therefor, unless
         and until, in either case, the default has been cured or waived or has
         ceased to exist, or, any such acceleration has been rescinded or such
         Senior Debt has been paid in full, no direct or indirect payment (in
         cash, property, securities, by set-off or otherwise) shall be made or
         agreed to be made on account of the principal of, premium, if any, or
         interest, if any, on any of the Securities, or in respect of any
         redemption, retirement, purchase or other acquisition of any of the
         Securities other than those made in capital stock of the Company (or
         cash in lieu of fractional shares thereof).

                  (3)      If any default occurs (other than a default described
         in paragraph (2) of this Section 15.1) under the Senior Debt of the
         Company, pursuant to which the maturity thereof may be accelerated
         immediately without further notice (except such notice as may be
         required to effect such acceleration) or at the expiration of any
         applicable grace periods (a "Senior Nonmonetary Default"), then, upon
         the receipt by the Company and the Trustee of written notice thereof (a
         "Payment Blockage Notice") from or on behalf of holders of such Senior
         Debt of the Company specifying an election to prohibit such payment and
         other action by the Company in accordance with the following provisions
         of this paragraph (3), the Company may not make any payment or take any
         other action that would be prohibited by paragraph (2) of this Section
         15.1 during the period (the "Payment Blockage Period") commencing on
         the date of receipt of such Payment Blockage Notice and ending on the
         earlier of (A) the date, if any, on which the holders of such Senior
         Debt or their representative notifies the Trustee that such Senior
         Nonmonetary Default is cured or waived or ceases to exist or the Senior
         Debt to which such Senior Nonmonetary Default relates is discharged or
         (B) the 179th day after the date of receipt of such Payment Blockage
         Notice. Notwithstanding the provisions described in the immediately
         preceding sentence, the Company may resume payments on the Securities
         following such Payment Blockage Period.

Section 15.2.     Distribution on Dissolution, Liquidation and Reorganization;
                  Subrogation of Securities.

         Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization of the Company, whether in bankruptcy,
insolvency, reorganization or receivership proceedings or upon an assignment for
the benefit of creditors or any other marshalling of the assets and liabilities
of the Company or otherwise (subject to the power of a court of competent
jurisdiction to make other equitable provision reflecting the rights conferred
in this Indenture upon the Senior Debt of the Company and the holders thereof
with respect to the Securities and the Holders thereof by a lawful plan or
reorganization under applicable bankruptcy law),

                  (1)      the holders of all Senior Debt of the Company shall
         be entitled to receive payment in full of the principal thereof,
         premium, if any, interest, and any interest thereon, due thereon before
         the Holders of the Securities are entitled to receive any payment upon
         the principal, premium, interest of or on the Securities or interest on
         overdue amounts thereof;

                  (2)      any payment or distribution of assets of the Company,
         a Guarantor (if applicable) or any other obligor upon the Securities of
         any kind or character, whether in cash, property or securities, to
         which the Holders of the Securities or the Trustee (on behalf of the
         Holders) would be entitled except for the provisions of this Article
         Fifteen shall be paid by the liquidating trustee or agent or other
         person making such payment or distribution, whether a trustee in
         bankruptcy, a

                                       67

<PAGE>

         receiver or liquidating trustee or otherwise, directly to the holders
         of Senior Debt of the Company or their representative or
         representatives or to the trustee or trustees under any indenture under
         which any instruments evidencing any of such Senior Debt may have been
         issued, ratably according to the aggregate amounts remaining unpaid on
         account of the principal of, premium, if any, interest, and any
         interest thereon, on the Senior Debt of the Company held or represented
         by each, to the extent necessary to make payment in full of all Senior
         Debt of the Company remaining unpaid, after giving effect to any
         concurrent payment or distribution to the holders of such Senior Debt;
         and

                  (3)      in the event that, notwithstanding the foregoing, any
         payment or distribution of assets of the Company, a Guarantor (if
         applicable) or any other obligor upon the Securities of any kind or
         character, whether in cash, property or securities, shall be received
         by the Trustee (on behalf of the Holders) or the Holders of the
         Securities before all Senior Debt of the Company is paid in full, such
         payment or distribution shall be paid over to the holders of such
         Senior Debt or their representative or representatives or to the
         trustee or trustees under any indenture under which any instruments
         evidencing any of such Senior Debt may have been issued, ratably as
         aforesaid, for application to the payment of all Senior Debt remaining
         unpaid until all such Senior Debt shall have been paid in full, after
         giving effect to any concurrent payment or distribution to the holders
         of such Senior Debt.

         Subject to the payment in full of all Senior Debt of the Company, the
Holders of the Securities shall be subrogated to the rights of the holders of
such Senior Debt to receive payments or distributions of cash, property or
securities of the Company applicable to Senior Debt of the Company until the
principal, premium, interest, and any interest thereon, of or on the Securities
shall be paid in full and no such payments or distributions to the Holders of
the Securities of cash, property or securities otherwise distributable to the
Senior Debt of the Company shall, as between the Company, its creditors other
than the holders of Senior Debt of the Company, and the Holders of the
Securities, be deemed to be a payment by the Company to or on account of the
Securities. It is understood that the provisions of this Article Fifteen are and
are intended solely for the purpose of defining the relative rights of the
Holders of the Securities, on the one hand, and the holders of Senior Debt of
the Company, on the other hand. Nothing contained in this Article Fifteen or
elsewhere in this Indenture or in the Securities is intended to or shall impair,
as between the Company, its creditors other than the holders of Senior Debt of
the Company, and the Holders of the Securities, the obligation of the Company,
which is unconditional and absolute, to pay to the Holders of the Securities the
principal, premium, interest, and any interest thereon, of or on the Securities
as and when the same shall become due and payable in accordance with their
terms, or to affect the relative rights of the Holders of the Securities and
creditors of the Company other than the holders of Senior Debt of the Company,
nor shall anything herein or in the Securities prevent the Trustee or the Holder
of any Security from exercising all remedies otherwise permitted by applicable
law upon default under this Indenture, subject to the rights, if any, under this
Article Fifteen of the holders of such Senior Debt in respect of cash, property
or securities of the Company received upon the exercise of any such remedy. Upon
any payment or distribution of assets of the Company referred to in this Article
Fifteen, the Trustee shall be entitled to conclusively rely upon a certificate
of the liquidating trustee or agent or other person making any distribution to
the Trustee for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of Senior Debt of the Company and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon, and all other facts pertinent thereto or
to this Article Fifteen.

         The Trustee, however, shall not be deemed to owe any fiduciary duty to
the holders of Senior Debt of the Company. The Trustee shall not be liable to
any such holder if it shall pay over or distribute to or on behalf of Holders of
Securities or the Company moneys or assets to which any holder of Senior

                                       68

<PAGE>

Debt of the Company shall be entitled by virtue of this Article Fifteen. The
rights and claims of the Trustee under Section 6.7 shall not be subject to the
provisions of this Article Fifteen.

         If the Trustee or any Holder of Securities does not file a proper claim
or proof of debt in the form required in any proceeding referred to above prior
to 30 days before the expiration of the time to file such claim in such
proceeding, then the holder of any Senior Debt of the Company is hereby
authorized, and has the right, to file an appropriate claim or claims for or on
behalf of such Holder of Securities.

Section 15.3.     Payments on Securities Permitted.

         Nothing contained in this Indenture or in any of the Securities shall
(1) affect the obligation of the Company to make, or prevent the Company from
making, at any time except as provided in Sections 15.1 and 15.2, payments of
principal, premium, interest, and any interest thereon, of or on the Securities
or (2) prevent the application by the Trustee of any moneys deposited with it
hereunder to the payment of or on account of the principal, premium, interest or
other amounts, and any interest thereon, of or on the Securities unless the
Trustee shall have received at its Corporate Trust Office written notice of any
event prohibiting the making of such payment two Business Days (A) prior to the
date fixed for such payment, (B) prior to the execution of an instrument to
satisfy and discharge this Indenture based upon the deposit of funds under
Section 4.1(1)(b), (C) prior to the execution of an instrument acknowledging the
defeasance of such Securities pursuant to Section 13.2 or (D) prior to any
deposit pursuant to clause (1) of Section 13.3 with respect to such Securities.

Section 15.4.     Authorization of Holders of Securities to Trustee to Effect
                  Subordination.

         Each Holder of Securities by his acceptance thereof, whether upon
original issue or upon transfer or assignment, authorizes and directs the
Trustee on his behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article Fifteen and appoints
the Trustee his attorney-in-fact for any and all such purposes.

Section 15.5.     Notices to Trustee.

         The Company shall give prompt written notice to a responsible officer
of the Trustee located at the Corporate Trust Office of the Trustee of any fact
known to the Company which would prevent the making of any payment to or by the
Trustee in respect of the Securities. Notwithstanding the provisions of this
Article Fifteen or any other provisions of this Indenture, neither the Trustee
nor any Paying Agent (other than the Company) shall be charged with knowledge of
the existence of any Senior Debt of the Company or of any event which would
prohibit the making of any payment of moneys to or by the Trustee or such Paying
Agent, unless and until the Trustee or such Paying Agent shall have received (in
the case of the Trustee, at its Corporate Trust Office) written notice thereof
from the Company or from the holder of any Senior Debt of the Company or from
the trustee for or representative of any Senior Debt of the Company together
with proof satisfactory to the Trustee of such holding of such Senior Debt or of
the authority of such trustee or representative; provided, however, that if at
least two Business Days prior to the date upon which by the terms hereof any
such moneys may become payable for any purpose (including, without limitation,
the payment of the principal, premium, interest, of or on any Security, or any
interest thereon) or the date on which the Trustee shall execute an instrument
acknowledging satisfaction and discharge of this Indenture or the defeasance of
Securities pursuant to Section 13.2 or the date on which a deposit pursuant to
clause (1) of Section 13.3 is made, the Trustee shall not have received with
respect to such moneys or the moneys deposited with it as a condition to such
satisfaction and discharge or defeasance the notice provided for in this Section
15.5, then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to receive such moneys and to apply
the same to the purpose for which they were received, and shall not be affected
by any notice to the

                                       69

<PAGE>

contrary, which may be received by it on or after such two Business Days prior
to such date. The Trustee shall be entitled to conclusively rely on the delivery
to it of a written notice by a person representing himself to be a holder of
Senior Debt of the Company (or a trustee or representative on behalf of such
holder) to establish that such a notice has been given by a holder of Senior
Debt of the Company or a trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior Debt of
the Company to participate in any payment or distribution pursuant to this
Article Fifteen, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt of the
Company held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article Fifteen and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.

Section 15.6.     Trustee as Holder of Senior Debt.

         The Trustee shall be entitled to all the rights set forth in this
Article Fifteen in respect of any Senior Debt of the Company at any time held by
it to the same extent as any other holder of Senior Debt of the Company and
nothing in this Indenture shall be construed to deprive the Trustee of any of
its rights as such holder.

Section 15.7.     Modification of Terms of Senior Debt.

         Any renewal or extension of the time of payment of any Senior Debt of
the Company or the exercise by the holders of Senior Debt of the Company of any
of their rights under any instrument creating or evidencing such Senior Debt,
including without limitation the waiver of default thereunder, may be made or
done all without notice to or assent from Holders of the Securities or the
Trustee.

         No compromise, alteration, amendment, modification, extension, renewal
or other change of, or waiver, consent or other action in respect of, any
liability or obligation under or in respect of, or of any of the terms,
covenants or conditions of any indenture or other instrument under which any
Senior Debt of the Company is outstanding or of such Senior Debt, whether or not
such release is in accordance with the provisions of any applicable document,
shall in any way alter or affect any of the provisions of this Article Fifteen
or of the Securities relating to the subordination thereof.

                                      * * *

This instrument may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.

                                       70

<PAGE>
                                             KCS ENERGY, INC.

                                             ___________________________________
                                             Name: _____________________________
                                             Title: ____________________________

                                             KCS RESOURCES, INC.

                                             By: _______________________________
                                             Name: _____________________________
                                             Title: ____________________________

                                             MEDALLION CALIFORNIA RESOURCES
                                             COMPANY

                                             By: _______________________________
                                             Name: _____________________________
                                             Title: ____________________________

                                       71<PAGE>
                                                                  EXECUTION COPY

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

                AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

                           FLEET RETAIL FINANCE INC.,
                           AS ADMINISTRATIVE AGENT AND
               COLLATERAL AGENT FOR THE LENDERS REFERENCED HEREIN,

                              FLEET NATIONAL BANK,
                                   AS ISSUER,

                              SHOPKO STORES, INC.,
                                AS LEAD BORROWER

                                      FOR:

                               SHOPKO STORES, INC.
                                  PAMIDA, INC.,
                                  AS BORROWERS,

                                       AND

                EACH OF THE SUBSIDIARIES OF SHOPKO STORES, INC.,
                                  NAMED HEREIN,
                               EACH AS A GUARANTOR

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

                             FLEET SECURITIES, INC.,

                                   AS ARRANGER

                      GENERAL ELECTRIC CAPITAL CORPORATION

                              AS SYNDICATION AGENT

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

                           DATED AS OF AUGUST 19, 2003

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

<PAGE>

                                                                  EXECUTION COPY

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                    Page
<S>                                                                                                                 <C>
SECTION 1 DEFINITIONS............................................................................................     9

SECTION 2 THE REVOLVING CREDIT...................................................................................    35

         2.1        Establishment Of Revolving Credit............................................................    35
         2.2        Advances In Excess Of Borrowing Base (OverLoans).............................................    36
         2.3        Risks Of Value Of Collateral.................................................................    37
         2.4        Commitment To Make Revolving Credit Loans And Support Letters Of Credit......................    37
         2.5        Loan Requests................................................................................    37
         2.6        Making Of Revolving Credit Loans.............................................................    39
         2.7        Swing Line Loans.............................................................................    39
         2.8        [Intentionally Omitted] .....................................................................    40
         2.9        The Loan Account.............................................................................    40
         2.10       The Notes....................................................................................    41
         2.11       Payment Of The Loan Account..................................................................    41
         2.12       Interest On Loans............................................................................    43
         2.13       Voluntary Reduction Of Commitment And Revolving Credit Ceiling...............................    43
         2.14       Renewal Fee..................................................................................    44
         2.15       Administrative Agent's Fee...................................................................    44
         2.16       Unused Fee...................................................................................    44
         2.17       Early Termination Fee........................................................................    44
         2.18       Procedures For Issuance Of L/Cs..............................................................    45
         2.19       Fees For L/Cs................................................................................    45
         2.20       Concerning L/Cs..............................................................................    47
         2.21       Changed Circumstances........................................................................    48
         2.22       Designation Of Lead Borrower As Borrowers' Agent.............................................    49
         2.23       Lenders' Commitments.........................................................................    50
         2.24       Replacement Of  Lender.......................................................................    51

SECTION 3 CONDITIONS PRECEDENT...................................................................................    52

         3.1        Corporate Due Diligence......................................................................    52
         3.2        Legal Opinions...............................................................................    53
         3.3        Documents....................................................................................    53
         3.4        Officers' Certificates.......................................................................    53
         3.5        Representations And Warranties...............................................................    53
         3.6        All Fees And Expenses Paid...................................................................    53
         3.7        No Default...................................................................................    53
         3.8        No Adverse Change............................................................................    53
         3.9        Perfection Of Encumbrances...................................................................    53
         3.10       [Intentionally Omitted]......................................................................    53
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                                  <C>
         3.11       Consents And Approvals.......................................................................    53
         3.12       No Defaults Under Applicable Law Or Material Agreements......................................    54
         3.13       No Litigation................................................................................    54
         3.14       No Negative Impact On Syndication............................................................    54
         3.15       No Change In Governmental Regulations........................................................    54
         3.16       Excess Availability..........................................................................    54
         3.17       [Intentionally Omitted]......................................................................    54
         3.18       [Intentionally Omitted]......................................................................    54
         3.19       [Intentionally Omitted]......................................................................    54
         3.20       [Intentionally Omitted]......................................................................    54
         3.21       Benefit of Conditions Precedent..............................................................    54

SECTION 4 GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS......................................................    55

         4.1        Payment And Performance Of Liabilities.......................................................    55
         4.2        Due Organization; Authorization; No Conflicts................................................    55
         4.3        Trade Names..................................................................................    56
         4.4        Intellectual Property........................................................................    57
         4.5        Locations....................................................................................    57
         4.6        Title To Assets; Liens; Limitations on Liens.................................................    58
         4.7        Indebtedness.................................................................................    60
         4.8        Insurance....................................................................................    60
         4.9        Licenses.....................................................................................    61
         4.10       Leases.......................................................................................    61
         4.11       Requirements Of Law..........................................................................    62
         4.12       Labor Relations..............................................................................    62
         4.13       Maintain Collateral..........................................................................    63
         4.14       Taxes........................................................................................    63
         4.15       No Margin Stock; Investment Company..........................................................    65
         4.16       ERISA........................................................................................    65
         4.17       Hazardous Materials..........................................................................    65
         4.18       Litigation...................................................................................    66
         4.19       Dividends; Investments; Corporate Action.....................................................    66
         4.20       Loans........................................................................................    67
         4.21       Protection Of Assets.........................................................................    68
         4.22       Lines of Business............................................................................    68
         4.23       Affiliate Transactions.......................................................................    68
         4.24       Further Assurances...........................................................................    68
         4.25       Adequacy Of Disclosure.......................................................................    69
         4.26       No Restrictions On Liabilities...............................................................    69
         4.27       Permitted Refinancing of Certain Indebtedness; Amendments....................................    70
         4.28       Limitations on Capital Expenditures..........................................................    70
         4.29       Store Closings...............................................................................    70
         4.30       Certain Proceeds.............................................................................    70
         4.31       Post Closing Matters.........................................................................    71
         4.32       Other Covenants..............................................................................    71
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                                  <C>
SECTION 5 FINANCIAL REPORTING AND PERFORMANCE COVENANTS..........................................................    71

         5.1        Maintain Records.............................................................................    71
         5.2        Access To Records............................................................................    72
         5.3        Immediate Notice To Administrative Agent.....................................................    72
         5.4        Borrowing Base Certificate...................................................................    74
         5.5        Monthly Reports..............................................................................    74
         5.6        Quarterly Reports............................................................................    74
         5.7        Annual Reports...............................................................................    75
         5.8        Officers' Certificates.......................................................................    75
         5.9        Inventories, Appraisals, And Audits..........................................................    76
         5.10       Additional Financial Information.............................................................    77
         5.11       Financial Performance Covenants..............................................................    77

SECTION 6 USE OF COLLATERAL......................................................................................    78

         6.1        Use Of Inventory Collateral..................................................................    78
         6.2        Inventory Quality............................................................................    78
         6.3        Adjustments and Allowances...................................................................    78
         6.4        Validity of Accounts.........................................................................    78
         6.5        Notification to Account Debtors..............................................................    79

SECTION 7 CASH MANAGEMENT; PAYMENT OF LIABILITIES................................................................    79

         7.1        Depository Accounts..........................................................................    79
         7.2        Credit Card Receipts.........................................................................    80
         7.3        The Concentration, Blocked, and Operating Accounts...........................................    80
         7.4        Proceeds and Collections.....................................................................    81
         7.5        Payment of Liabilities.......................................................................    82

SECTION 8 GRANT OF SECURITY INTEREST.............................................................................    82

         8.1        Grant of Security Interest...................................................................    82
         8.2        Extent and Duration of Security Interest.....................................................    84

SECTION 9 ADMINISTRATIVE AGENT AS CREDIT PARTIES' ATTORNEY-IN-FACT...............................................    84

         9.1        Appointment as Attorney-In-Fact..............................................................    84
         9.2        No Obligation to Act.........................................................................    85

SECTION 10 EVENTS OF DEFAULT.....................................................................................    85

         10.1       Failure to Pay Loans.........................................................................    85
         10.2       Failure to Make Other Payments...............................................................    85
         10.3       Failure to Perform Covenant Or Liability (No Grace Period)...................................    86
         10.4       Failure to Perform Covenant or Liability (Grace Period)......................................    86
         10.5       Misrepresentation............................................................................    86
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                                  <C>
         10.6       Acceleration of Other Debt; Breach of Lease..................................................    86
         10.7       Uninsured Casualty Loss......................................................................    86
         10.8       Attachment; Judgment; Restraint of Business..................................................    86
         10.9       Business Failure.............................................................................    87
         10.10      Bankruptcy...................................................................................    87
         10.11      Indictment - Forfeiture......................................................................    87
         10.12      Challenge to Loan Documents..................................................................    87
         10.13      Change in Control............................................................................    88

SECTION 11 RIGHTS AND REMEDIES UPON DEFAULT......................................................................    88

         11.1       Acceleration.................................................................................    88
         11.2       Rights of Enforcement........................................................................    88
         11.3       Sale of Collateral...........................................................................    89
         11.4       Occupation of Business Location..............................................................    89
         11.5       Grant of Nonexclusive License................................................................    90
         11.6       Assembly of Collateral.......................................................................    90
         11.7       Rights and Remedies..........................................................................    90

SECTION 12 FUNDINGS AND DISTRIBUTIONS............................................................................    91

         12.1       Funding Procedures...........................................................................    91
         12.2       Swing Line Loans.............................................................................    91
         12.3       Administrative Agent's Covering of Funding...................................................    92
         12.4       Ordinary Course Distributions................................................................    94

SECTION 13 ACCELERATION AND LIQUIDATION..........................................................................    95

         13.1       Acceleration Notices.........................................................................    95
         13.2       Acceleration.................................................................................    95
         13.3       Initiation of Liquidation....................................................................    95
         13.4       Actions at and Following Initiation of Liquidation...........................................    95
         13.5       Administrative Agent's Conduct of Liquidation................................................    96
         13.6       Distribution of Liquidation Proceeds.........................................................    96
         13.7       Relative Priorities to Proceeds of Liquidation...............................................    97

SECTION 14 THE ADMINISTRATIVE AGENT..............................................................................    98

         14.1       Appointment of the Administrative Agent......................................................    98
         14.2       Responsibilities of Administrative Agent; Other Agents.......................................    98
         14.3       Concerning Distributions by the Administrative Agent.........................................    99
         14.4       Dispute Resolution...........................................................................   100
         14.5       Distributions of Notices and of Documents....................................................   100
         14.6       Confidential Information.....................................................................   100
         14.7       Reliance By Administrative Agent.............................................................   101
         14.8       Non-Reliance on Administrative Agent and Other Lenders.......................................   101
         14.9       Indemnification..............................................................................   102
         14.10      Resignation of Administrative Agent..........................................................   102
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                                 <C>
SECTION 15 ACTION BY ADMINISTRATIVE AGENT - CONSENTS - AMENDMENTS - WAIVERS......................................   103

         15.1       Administration of Credit Facilities..........................................................   103
         15.2       Actions Requiring or on Direction of Majority Lenders........................................   103
         15.3       Actions Requiring or on Direction Of Supermajority Revolving Credit Lenders..................   103
         15.4       Actions Requiring or Directed by Unanimous Consent...........................................   104
         15.5       Actions Requiring Swing Line Lender Consent..................................................   105
         15.6       Actions Requiring Issuer Consent.............................................................   105
         15.7       Actions Requiring Administrative Agent's Consent.............................................   105
         15.8       Miscellaneous Actions........................................................................   106
         15.9       Actions Requiring Lead Borrower's Consent....................................................   106
         15.10      NonConsenting Lender.........................................................................   107

SECTION 16 ASSIGNMENTS BY LENDERS................................................................................   108

         16.1       Assignments and Assumptions..................................................................   108
         16.2       Assignment Procedures........................................................................   109
         16.3       Effect of Assignment.........................................................................   109

SECTION 17 NOTICES...............................................................................................   110

         17.1       Notice Addresses.............................................................................   110
         17.2       Notice Given.................................................................................   111

SECTION 18 TERMINATION...........................................................................................   112

         18.1       Termination of Revolving Credit..............................................................   112
         18.2       Actions on Termination.......................................................................   112

SECTION 19 GUARANTY..............................................................................................   113

         19.1       Guaranty.....................................................................................   113
         19.2       No Impairment of Guaranty....................................................................   114
         19.3       Subrogation..................................................................................   114
         19.4       Credit Agreement.............................................................................   114
         19.5       Maximum Guaranteed Amount....................................................................   114

SECTION 20 MISCELLANEOUS.........................................................................................   115

         20.1       Protection of Collateral.....................................................................   115
         20.2       Publicity....................................................................................   115
         20.3       Successors and Assigns.......................................................................   115
         20.4       Severability.................................................................................   115
         20.5       Amendments; Course of Dealing................................................................   115
         20.6       Power of Attorney............................................................................   116
         20.7       Application of Proceeds......................................................................   116
         20.8       Increased Costs..............................................................................   117
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                                 <C>
         20.9       Costs and Expenses of the Administrative Agent...............................................   117
         20.10      Copies and Facsimiles........................................................................   118
         20.11      Governing Law................................................................................   118
         20.12      Consent to Jurisdiction......................................................................   118
         20.13      Indemnification..............................................................................   119
         20.14      Rules of Construction........................................................................   119
         20.15      Intent.......................................................................................   121
         20.16      Participations...............................................................................   122
         20.17      Right of Set-Off.............................................................................   122
         20.18      Pledges......................................................................................   122
         20.19      Maximum Interest Rate........................................................................   122
         20.20      Waivers......................................................................................   123
         20.21      Additional Waivers...........................................................................   123
         20.22      Confidentiality..............................................................................   125
</TABLE>

<PAGE>

                                    EXHIBITS

Exhibit A                  Form of Swing Line Note
Exhibit B-1                Form of Revolving Credit Note
Exhibit C                  Restatement Documents List
Exhibit D                  Form of Borrowing Base Certificate
Exhibit E                  Form of Assignment and Acceptance
Exhibit F                  Form of Blocked Account Agreement
Exhibit G                  Form of DDA Notification
Exhibit H                  Form of Credit Card Notification

                                    SCHEDULES

Schedule 1.1(a)            Payables
Schedule 2.23              Commitments and Percentages
Schedule 4.2(b)            Corporate Information
Schedule 4.2(d)            Corporate Structure
Schedule 4.2(e)            Affiliates
Schedule 4.3               Trade Names
Schedule 4.5               Locations and Landlords
Schedule 4.6(a)            Encumbrances
Schedule 4.6(b)            Consigned Property
Schedule 4.7               Existing Indebtedness
Schedule 4.8               Insurance Policies
Schedule 4.10              Leases
Schedule 4.12              Employee Matters
Schedule 4.14              Taxes
Schedule 4.18              Litigation
Schedule 4.19              Existing Investments
Schedule 4.23              Affiliate Transactions
Schedule 5.5               Financial Reporting Requirements
Schedule 7.1               Deposit Accounts
Schedule 7.2               Credit Card Arrangements
Schedule 7.3               Blocked Account Banks

<PAGE>

                   THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated
as of August 19, 2003, is made by and among Fleet Retail Finance Inc., as
Administrative Agent and Collateral Agent (in any such capacity, herein the
"Administrative Agent"), a Delaware corporation with offices at 40 Broad Street,
Boston, Massachusetts 02109, as agent for the ratable benefit of the Issuer (as
defined below) and the "Lenders", who are, at present, those financial
institutions identified on the signature pages of this Agreement and who in the
future are those Persons (if any) who become "Lenders" in accordance with the
provisions of Section 2.23, below; Fleet National Bank ("Fleet"), a bank
organized under the laws of the United States of America, having an office at
100 Federal Street, Boston, Massachusetts 02210, as issuing bank (in such
capacity, the "Issuer"); ShopKo Stores, Inc. (in such capacity, the "Lead
Borrower"), a Wisconsin corporation with its principal executive offices at 700
Pilgrim Way, Green Bay, Wisconsin, 54304, as agent for ShopKo Stores, Inc. and
Pamida, Inc., a Delaware corporation with its principal executive offices at
8800 F Street, Omaha, Nebraska 68127, (each, a "Borrower" and collectively with
the Lead Borrower, the "Borrowers") and each of the guarantors listed in
Schedule 4.2(b) (each a "Guarantor" and collectively, "Guarantors"), and AMENDS
AND RESTATES IN FULL the Loan and Security Agreement, dated as of March 9, 2001,
by and among the Borrowers, each of the Guarantors, the lenders and financial
institutions party thereto (the "Original Lenders"), the Administrative Agent
and the Issuer (the "Original Loan and Security Agreement"); this amendment and
restatement of the Original Loan and Security Agreement, as amended,
supplemented, restated or otherwise modified from time to time, is hereinafter
referred to as this "Agreement").

                              W I T N E S S E T H:

                  WHEREAS, the Borrowers, the Guarantors and certain of the
Lenders are parties to the Original Loan and Security Agreement; and

                  WHEREAS, the Lead Borrower has requested that the
Administrative Agent arrange for the amendment and restatement of the Original
Loan and Security Agreement to restructure the obligations of the Borrowers
thereunder (the "Refinancing"), including provision for the purchase of the
Loans and Revolving Credit Commitments of the Original Lenders by the Lenders;
and

                  WHEREAS, it is the intent of the Borrowers, the Guarantors,
the Lenders, the Administrative Agent and the Issuer that this Agreement amend
and restate in its entirety the Original Loan and Security Agreement and that,
from and after the Restatement Effective Date, the Original Loan and Security
Agreement shall be of no force and effect except to evidence the terms and
conditions under which the Borrowers incurred obligations and liabilities prior
to the Restatement Effective Date (as evidenced by the Original Loan and
Security Agreement and the Administrative Agent's books and records); and

                  WHEREAS, the Lenders are willing to amend and restate the
Original Loan and Security Agreement and continue to extend credit to the
Borrowers upon and subject to the terms and conditions hereinafter set forth.

<PAGE>

NOW, THEREFORE, in consideration of the premises and the agreements hereinafter
set forth, the parties hereto hereby agree as follows:

                                    SECTION 1
                                   DEFINITIONS

                  As used herein, the following terms have the following
meanings or are defined in the section of this Agreement so indicated:

                  "Account Advance Rate": 85%.

                  "Accounts" and "Accounts Receivable": include, without
limitation, "accounts" as defined in the Uniform Commercial Code in effect in
the State of New York on the date hereof and also all: accounts, accounts
receivable, health-care-insurance receivables, Receivables and rights to payment
(whether or not earned by performance) (i) for property that has been or is to
be sold, leased, assigned, or otherwise disposed of; (ii) for services rendered
or to be rendered; (iii) for a policy of insurance issued or to be issued
insuring Accounts or Inventory; and (iv) arising out of the use of a credit or
charge card or information contained on or used with such card; and also all
reclaimed, returned, rejected or repossessed Inventory (if any), the sale of
which gave rise to any Account.

                  "ACH": Automated clearing house.

                  "Acquisition": The purchase or acquisition of all or
substantially all of the assets of any Person, the purchase of a controlling
equity interest in any Person, or the merger or consolidation of any Person with
any other Person, in any transaction or group of transactions which are part of
a common plan.

                  "Administrative Agent": As defined in the Preamble hereto.

                  "Administrative Agent's Cover": As defined in Section
12.3(c)(i).

                  "Administrative Agent's Rights and Remedies": As defined in
Section 11.7.

                  "Affiliate": The following:

                           (a)      With respect to any two Persons, a
                  relationship in which (i) one such Person holds, directly or
                  indirectly, not less than twenty five percent (25%) of the
                  capital stock, beneficial interests, partnership interests, or
                  other equity interests of the other Person; or (ii) one such
                  Person has, directly or indirectly, the right, under ordinary
                  circumstances, to vote for the election of a majority of the
                  directors (or other body or Person who has those powers
                  customarily vested in a board of directors of a corporation)
                  of the other Person; or (iii) not less than twenty five
                  percent (25%) of their respective ownership is directly or
                  indirectly held by the same third Person.

<PAGE>

                           (b)      Any Person which: is a parent,
                  brother-sister or Subsidiary, of any Credit Party; could have
                  its tax returns or financial statements consolidated with any
                  Credit Party's; could be a member of the same controlled group
                  of corporations (within the meaning of Section 1563(a)(1), (2)
                  and (3) of the Internal Revenue Code of 1986, as amended from
                  time to time) of which any Credit Party is a member; controls,
                  is controlled by or is under common control with any Credit
                  Party.

                  "Agent's Fee": As defined in Section 2.15.

                  "Agreement": As defined in the Preamble hereto.

                  "Applicable Law": As to any Person: (i) All statutes, rules,
regulations, orders, or other requirements having the force of law and (ii) all
court orders and injunctions, arbitrator's decisions, and/or similar rulings, in
each instance ((i) and (ii)) of or by any federal, state, municipal, and other
Governmental Authority, or court, tribunal, panel, or other body which has or
claims jurisdiction over such Person, or any property of such Person.

                  "Applicable Margin": The rates for Base Margin Loans and
Eurodollar Loans based upon the following criteria:

<PAGE>

<TABLE>
<CAPTION>
                                                     Base Margin        Eurodollar Loan
                                                   Loan Applicable         Applicable
Level               Average Availability               Margin                Margin
----------------------------------------------------------------------------------------
<S>                 <C>                            <C>                  <C>
  1                       >300,000,000.00                  0%               1.50%
----------------------------------------------------------------------------------------
  2                 < or = 300,000,000.00                  0%               1.75%
                     and >$100,000,000.00
----------------------------------------------------------------------------------------
  3                 < or = 100,000,000.00               0.25%               2.00%
----------------------------------------------------------------------------------------
</TABLE>

The Applicable Margin shall initially be established at the rates set forth in
Level 1 and shall remain at such Level until the first Change Date. Thereafter
the Applicable Margin shall be determined on a quarterly basis as of the first
day of each Fiscal quarter (the "Change Date"), based on the Average
Availability for the preceding Fiscal quarter; provided that the Applicable
Margin with respect to any Loan outstanding as of the Change Date shall change
effective as of the Interest Payment Date with respect to such Loan first
occurring on or after such Change Date. Notwithstanding the foregoing, from and
after the Restatement Effective Date, Level 3 shall be in effect for each day in
any month (as of the first day of such month) if Availability falls below
$45,000,000.00 during such month regardless of the then applicable Average
Availability. During the existence of an Event of Default, interest shall accrue
at the rate set forth in Section 2.12(f).

                  "Appraised Inventory Liquidation Value": The product of (a)
the Cost of Eligible Inventory (net of Inventory Reserves) multiplied by (b) a
percentage, determined from the then most recent appraisal of the Inventory
Credit Parties' Inventory undertaken at the request of the Administrative Agent
by an independent appraiser reasonably acceptable to the Administrative Agent,
that reflects the appraiser's opinion of the net recovery on the Inventory
Credit Parties' Inventory in the event of an in-store liquidation of such
Inventory. The appraisal referred to in clause (b) of the preceding sentence
shall include Prescription Lists, at a value to be reasonably determined by the
Administrative Agent, based on the low range value therefore, as determined by
such independent appraisal.

                  "Appraised Inventory Percentage": 85%.

                  "Assignee Lender": As defined in Section 16.1(a).

                  "Assigning Lender": As defined in Section 16.1(a).

                  "Assignment and Acceptance": As defined in Section 16.2.

                  "Availability": The lesser of (a) or (b), where:

                           (a)      is the result of ((i)- ((ii)+(iii)+(iv)),
                  where

                                    (i)      is the Revolving Credit Ceiling,

                                    (ii)     is the aggregate unpaid balance of
                           the Loan Account,

<PAGE>

                                    (iii)    is, without duplication, the
                           aggregate undrawn Stated Amount of all then
                           outstanding L/Cs, and

                                    (iv)     is the aggregate amount of any
                           unreimbursed drawings under any L/C

                           and

                           (b)      is the result of (i) - ((ii)+(iii)+(iv)),
                  where

                                    (i)      is the Borrowing Base,

                                    (ii)     is the aggregate unpaid balance of
                           the Loan Account,

                                    (iii)    is, without duplication, the
                           aggregate undrawn Stated Amount of all then
                           outstanding L/Cs, and

                                    (iv)     is the aggregate amount of any
                           unreimbursed drawings under any L/C.

                  "Availability Reserves": Such reserves as the Administrative
Agent from time to time determines (after consultation with the Lead Borrower
(whose consent to any Availability Reserve shall not be required)) in the
Administrative Agent's reasonable business judgment and in good faith as being
appropriate to reflect the impediments to the Administrative Agent's ability to
realize upon the Collateral. Without limiting the generality of the foregoing,
Availability Reserves may include (but are not limited to) reserves based on the
following:

                           (a)      Customer Credit Liabilities.

                           (b)      To the extent the Inventory or Accounts
                  subject to such taxes or other governmental charges or claims
                  are otherwise included in the Borrowing Base, taxes and other
                  governmental charges or claims, including, ad valorem,
                  personal property, and other taxes and claims for wages, in
                  each case, which have priority over the Collateral Interests
                  of the Administrative Agent in the Collateral.

                           (c)      Payables beyond normal terms, other than
                  payables described on Schedule 1.1(a); provided that the
                  amount of the payables so described are not increased.

                           (d)      Amounts payable to Payless for sales of
                  Payless Inventory pursuant to the Payless Agreement.

                  "Average Availability": As to any period, the average
Availability for each day in such period.

                  "Bankruptcy Code": Title 11, U.S.C., as amended from time to
time.

<PAGE>

                  "Base Rate": For any day, (a) the Base Rate announced from
time to time by Fleet (or any successor in interest to Fleet) as its "Base Rate"
or (b) if no such Base Rate is announced by Fleet, the Federal Funds Effective
Rate in effect on such day plus one-half of one percent (0.50%) per annum. Any
change in the Base Rate due to a change in Fleet's Base Rate or the Federal
Funds Effective Rate shall be effective on the effective date of such change in
Fleet's Base Rate or the Federal Funds Effective Rate, respectively.

                  "Base Margin Loan": Each Loan while bearing interest at the
Base Margin Rate.

                  "Base Margin Rate": The aggregate of Base Rate plus the
Applicable Margin for Base Margin Loans.

                  "Blocked Account": Any DDA into which the contents of any
other DDA is transferred and any account maintained by the Administrative Agent
to receive the proceeds of Capital Events and casualty insurance proceeds
related to Collateral.

                  "Blocked Account Agreement": An agreement in the form of
Exhibit F, with such changes as may be acceptable to the Administrative Agent.

                  "Borrower" and "Borrowers": As defined in the Preamble hereto.

                  "Borrowing Base": The aggregate of the following:

                  The aggregate of the face amount of Eligible Credit Card
Receivables and Eligible Pharmacy Accounts multiplied by the Account Advance
Rate

                           plus

                           the lesser of (a) the Cost of Eligible Inventory (net
                  of Inventory Reserves) multiplied by the Inventory Advance
                  Rate or (b) the Appraised Inventory Percentage of the
                  Appraised Inventory Liquidation Value

                           minus

                           the aggregate of the Availability Reserves.

                  "Borrowing Base Certificate": As defined in Section 5.4.

                  "Business Day": Any day other than (a) a Saturday or Sunday;
(b) any day on which banks in Boston, Massachusetts or Green Bay, Wisconsin, and
when involving any DDA or Blocked Account, the office of the financial
institution at which that DDA or Blocked Account, as the case may be, is
maintained, generally are not open to the general public for the purpose of
conducting commercial banking business; or (c) a day on which the principal
office of the Administrative Agent is not open to the general public to conduct
business.

                  "Capital Event": The issuance by any Credit Party on or after
the Restatement Effective Date (a) of Indebtedness for borrowed money (other
than Indebtedness permitted

<PAGE>

pursuant to Sections 4.7(f) and 4.7(g)) or (b) of any equity interest for cash,
excluding (i) any sale or issuance to management, employees or directors
pursuant to stock option or similar plans and (ii) the sale or issuance of
equity resulting in an aggregate amount of gross proceeds on and after the
Restatement Effective Date not to exceed $25,000,000.00. Nothing contained in
this definition or in any provision relating to Capital Events shall permit or
be deemed to permit any Credit Party to effectuate a Capital Event which is
otherwise prohibited hereunder.

                  "Capital Expenditures": The expenditure of funds or the
incurrence of liabilities which are capitalized in accordance with GAAP.

                  "Capital Lease": Any lease which is capitalized in accordance
with GAAP.

                  "Cash Control Event": Either (a) the occurrence and
continuance of any Event of Default, or (b) Availability at any time is less
than $60,000,000.00 for three consecutive Business Days or less than
$45,000,000.00 on any Business Day. For purposes hereof, the occurrence of a
Cash Control Event under clause (b) hereof shall be deemed continuing
notwithstanding that Availability may thereafter exceed the amounts set forth in
such clause unless and until Availability exceeds $85,000,000.00 for thirty
consecutive days, in which case a Cash Control Event shall no longer be deemed
to be continuing for purposes of clause (b) hereof (until a subsequent
occurrence of (b) above).

                  "Change in Control": The occurrence of any of the following:

                           (a)      The acquisition, by any group of persons
                  (within the meaning of the Securities Exchange Act of 1934, as
                  amended) or by any Person, of beneficial ownership (within the
                  meaning of Rule 13d-3 of the Securities and Exchange
                  Commission) of 33 1/3% or more of the issued and outstanding
                  capital stock of the Lead Borrower having the right, under
                  ordinary circumstances, to vote for the election of directors
                  of the Lead Borrower, other than (i) the Lead Borrower or (ii)
                  any trustee or other fiduciary holding securities under an
                  employee benefit plan of the Lead Borrower.

                           (b)      More than half of the persons who were
                  directors of the Lead 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 retirement, death
                  or disability, to be directors of the Lead Borrower, and their
                  respective replacements are not nominated or appointed by a
                  majority of the Persons who were directors on the first day of
                  such twelve (12) consecutive calendar months or who were
                  nominated or appointed by directors so nominated or appointed.

                           (c)      Any failure of the Lead Borrower to own,
                  beneficially and of record, 100% of the capital stock of all
                  other Credit Parties, either directly or indirectly through
                  one or more other Credit Parties.

<PAGE>

                  "Chattel Paper": As defined in the Uniform Commercial Code as
in effect in the State of New York on the date hereof.

                  "Collateral": As defined in Section 8.1.

                  "Collateral Interest": Any interest in property to secure an
obligation, including, without limitation, a security interest, lien, mortgage,
or deed of trust.

                  "Commitment": As to any Lender, the Revolving Credit
Commitment of such Lender.

                  "Concentration Account": As defined in Section 7.3.

                  "Consent": Actual consent given by the Lender from whom such
consent is sought; or the passage of seven (7) Business Days from receipt of
written notice to a Lender from the Administrative Agent of a proposed course of
action to be followed by the Administrative Agent without such Lender's giving
the Administrative Agent written notice of that Lender's objection to such
course of action, provided that the Administrative Agent may rely on such
passage of time as consent by a Lender only if such written notice states that
consent will be deemed effective if no objection is received within such time
period.

                  "Consolidated": When used to modify a financial term, test,
statement, or report, refers to the application or preparation of such term,
test, statement or report (as applicable) based upon the consolidation, in
accordance with GAAP, of the financial condition or operating results of the
Lead Borrower and its Subsidiaries.

                  "Cost": The lower of (a) or (b), where:

                           (a)      is the calculated cost of purchases, based
                  upon the accounting practices of the Credit Parties in effect
                  on the date on which this Agreement was executed, as such
                  calculated cost is determined from the Inventory Credit
                  Parties' perpetual inventory system.

                           (b)      is, the value of Inventory at market, as
                  determined in accordance with GAAP.

"Cost" does not include inventory capitalization costs or other non-purchase
price charges (such as freight) used in the Inventory Credit Parties'
calculation of cost of goods sold.

                  "Costs of Collection": Includes, without limitation, all
reasonable attorneys' fees and out-of-pocket expenses incurred by the
Administrative Agent, and all reasonable out-of-pocket costs incurred by the
Administrative Agent in the administration of the Liabilities and/or the Loan
Documents, including, without limitation, reasonable costs and expenses
associated with travel by or on behalf of the Administrative Agent, where such
costs and expenses are related to or in respect of the Administrative Agent's:
administration and management of the Liabilities; negotiation, documentation,
and amendment of any Loan Document; or efforts to preserve, protect, collect, or
enforce the Collateral, the Liabilities, and/or the Administrative

<PAGE>

Agent's Rights and Remedies and/or any of the rights and remedies of the
Administrative Agent against or in respect of any guarantor or other person
liable in respect of the Liabilities (whether or not suit is instituted in
connection with such efforts). "Costs of Collection" shall also include the
reasonable fees and expenses of Lenders' Special Counsel. The Costs of
Collection are Liabilities, and at the Administrative Agent's option may bear
interest at the then effective Base Margin Rate.

                  "Covenant Compliance Event": Availability at any time is less
than $45,000,000.00.

                  "Credit Parties": The Borrowers, the Guarantors and any other
Subsidiary of the Lead Borrower that becomes a party to any Loan Document.

                  "Customer Credit Liability": Gift certificates, merchandise
credits, layaway obligations, frequent shopping programs, and similar
liabilities of any Credit Party to its retail customers and prospective
customers.

                  "DDA": Any checking or other demand daily depository account
maintained by any Credit Party in which proceeds of any Credit Party's Inventory
or Accounts are deposited.

                  "Default": Any occurrence, circumstance, or state of facts
with respect to a Credit Party which (a) is an Event of Default; or (b) would
become an Event of Default if any requisite notice were given and/or any
requisite period of time were to run and such occurrence, circumstance, or state
of facts were not absolutely cured or waived in writing by the requisite Lenders
hereunder within any applicable grace period.

                  "Delinquent Lender": As defined in Section 12.3(c).

                  "Deposit Account": As defined in the Uniform Commercial Code
as in effect in the State of New York on the date hereof.

                  "Diversion Inventory": Inventory purchased and/or held by a
Credit Party for sale to a retailer, wholesaler, distributor or other
non-consumer who is not a Credit Party.

                  "Documentary L/Cs": L/Cs issued pursuant to this Agreement for
the account of any Borrower to support any Inventory Credit Party's purchases in
the ordinary course of business of Inventory for use in its retail store
business, the drawing under which requires the delivery of bills of lading,
airway bills or other similar types of documents of title.

                  "Documents": As defined in the Uniform Commercial Code in
effect in the State of New York on the date hereof.

                  "Early Termination Fee": As defined in Section 2.17.

                  "EBITDA": Consolidated earnings before interest, taxes,
depreciation, and amortization, each as determined in accordance with GAAP;
EBITDA shall be calculated to

<PAGE>

exclude the effect on earnings of any one-time non-cash charges related to store
closings permitted by Section 4.29.

                  "Eligible Assignee": A bank, insurance company, finance
company or other financial institution or fund engaged in the business of making
or investing in commercial loans in the ordinary course of its business having a
combined capital and surplus or assets under management in excess of
$300,000,000 or any Affiliate of any Lender, or any Person to whom a Lender
assigns its rights and obligations under this Agreement as part of a programmed
assignment and transfer of such Lender's rights in and to a material portion of
such Lender's portfolio of asset-based credit facilities.

                  "Eligible Credit Card Receivables": Accounts of any Inventory
Credit Party due on a non-recourse basis (other than any unasserted chargebacks)
from major credit card processors as arise in the ordinary course of business,
and as have been earned by performance. Unless otherwise approved in writing by
the Administrative Agent, none of the following shall be deemed to be Eligible
Credit Card Receivables:

                           (a)      Accounts that have been outstanding for more
                  than six (6) Business Days from the date of sale;

                           (b)      Accounts with respect to which a Credit
                  Party does not have good, valid and marketable title thereto,
                  free and clear of any Encumbrance (other than Encumbrances
                  granted to the Administrative Agent, for its benefit and the
                  ratable benefit of the other Lenders, pursuant to the Loan
                  Documents and unasserted claims pursuant to the merchant bank
                  agreement relating to the credit card account);

                           (c)      Accounts which are disputed, are with
                  recourse, or with respect to which a claim, counterclaim,
                  offset or chargeback has been asserted (to the extent of such
                  claim, counterclaim, offset or chargeback);

                           (d)      Accounts in which the Administrative Agent
                  does not have a perfected security interest which is prior and
                  superior to all other security interests, claims and
                  Encumbrances (other than unasserted claims pursuant to the
                  merchant bank agreement relating to the credit card); and

                           (e)      Accounts which the Administrative Agent
                  determines in its reasonable discretion and in good faith to
                  be uncertain of collection.

                  "Eligible Inventory": Inventory owned by any Inventory Credit
Party and maintained by an Inventory Credit Party at a warehouse or held for
sale in any of the Inventory Credit Parties' retail stores, in each case in the
United States of America (including its territories and possessions), which is
reflected in the perpetual inventory system of the Inventory Credit Parties, as
to which Inventory the Administrative Agent has a perfected security interest
which is prior and superior to all other security interests, claims, and
Encumbrances. "Eligible Inventory" also includes (a) Inventory ("Eligible L/C
Inventory") as to which a Documentary L/C has been

<PAGE>

issued with an expiry date within sixty (60) days of such date of determination
and which, if owned by and in the possession of the applicable Inventory Credit
Party, would be treated as Eligible Inventory hereunder (as determined by the
Administrative Agent in good faith and in its reasonable discretion), but only
if such Inventory has been consigned to the Issuer or the applicable Inventory
Credit Party (along with delivery to the Issuer or such Inventory Credit Party,
as applicable, of the documents of title with respect thereto) and is subject to
custom broker agreement in form and substance satisfactory to the Administrative
Agent and (b) Eligible Pharmacy Inventory. In no event, however, does "Eligible
Inventory" include: any inventory in transit to any Inventory Credit Party
(other than Eligible L/C Inventory), any inventory in foreign locations (other
than Eligible L/C Inventory), prescription optical inventory, samples,
non-merchandise inventory (such as labels, bags, and packaging materials);
damaged goods; return to vendor merchandise; packaways; Diversion Inventory or
consigned inventory (including, without limitation, the Payless Inventory).

                  "Eligible L/C Inventory": As defined in the definition of
Eligible Inventory.

                  "Eligible Pharmacy Accounts": Pharmacy Accounts other than
those Accounts listed below unless such Accounts have been approved in writing
by the Administrative Agent:

                           (a)      Pharmacy Accounts that have been outstanding
                  for more than sixty (60) days from invoice;

                           (b)      All Pharmacy Accounts of an account debtor
                  if 25% or more of such account debtor's Pharmacy Accounts have
                  been outstanding for more than sixty (60) days from invoice;

                           (c)      Pharmacy Accounts with respect to which a
                  Credit Party does not have good, valid and marketable title
                  thereto, free and clear of any Encumbrance (other than
                  Encumbrances granted to the Administrative Agent, for its
                  benefit and the ratable benefit of the other Secured Parties,
                  pursuant to the Loan Documents);

                           (d)      Pharmacy Accounts which are disputed, are
                  with recourse, or with respect to which a claim, counterclaim,
                  offset or chargeback has been asserted (to the extent of such
                  claim, counterclaim, offset or chargeback);

                           (e)      Pharmacy Accounts with respect to which the
                  Administrative Agent does not have a perfected security
                  interest which is prior and superior to all other security
                  interests, claims and Encumbrances; and

                           (f)      Pharmacy Accounts collected at the
                  store-level.

                  "Eligible Pharmacy Inventory": Eligible Inventory consisting
of prescription and pharmaceutical merchandise which is, under prevailing
industry standards, a covered medication under medical insurance and
prescription drug plans together with all diabetic supplies.

                  "Employee Benefit Plan": As defined in ERISA.

<PAGE>

                  "Encumbrance":  Each of the following:

                           (a)      A Collateral Interest or agreement to create
                  or grant a Collateral Interest; the interest of a lessor under
                  a Capital Lease; conditional sale or other title retention
                  agreement; a sale of accounts receivable or chattel paper; or
                  any other arrangement pursuant to which any Person is entitled
                  to any preference or priority with respect to the property or
                  assets of another Person or the income or profits of such
                  other Person; each of the foregoing whether consensual or
                  non-consensual and whether arising by way of agreement,
                  operation of law, legal process or otherwise.

                           (b)      The filing of any financing statement under
                  the UCC or comparable law of any jurisdiction.

                  "End Date": The date upon which all of the following shall
have occurred (a) all Liabilities (excluding any unmatured contingent
reimbursement and indemnification Liabilities) have been paid in full, (b) all
L/C's issued hereunder have been terminated or secured to the satisfaction of
the Administrative Agent (or cash collateralized in an amount equal to 103% of
the undrawn face amount thereof in a manner acceptable to the Administrative
Agent) and (c) all obligations of any Lender to make loans and advances and to
provide other financial accommodations to the Borrowers hereunder shall have
been irrevocably terminated.

                  "Environmental Laws":  All of the following:

                           (a)      Any Applicable Law which regulates or
                  relates to, or imposes any standard of conduct or liability on
                  account of or in respect to environmental protection matters,
                  including, without limitation, Hazardous Materials, as are now
                  or hereafter in effect.

                           (b)      The common law relating to damage to Persons
                  or property from Hazardous Materials.

                  "ERISA": The Employee Retirement Income Security Act of 1974,
as amended.

                  "ERISA Affiliate": Any Person which is under common control
with any Credit Party within the meaning of Section 4001 of ERISA or is part of
a group which includes any Credit Party and which would be treated as a single
employer under Section 414 of the Internal Revenue Code of 1986, as amended.

                  "Eurodollar Business Day": Any day which is both a Business
Day and a day on which the principal market in Eurodollars in which Fleet
participates is open for dealings in United States Dollar deposits.

                  "Eurodollar Loan": Any Loan which bears interest at a
Eurodollar Rate.

                  "Eurodollar Offer Rate": That rate of interest (rounded
upwards, if necessary, to the next 1/100 of 1%) determined by the Administrative
Agent to be the prevailing rate per

<PAGE>

annum at which deposits in U.S. Dollars are offered to Fleet, by first-class
banks in the Eurodollar market in which Fleet participates at or about 10:00 AM
(Boston) two (2) Eurodollar Business Days before the first day of the Interest
Period for the subject Eurodollar Loan, for a deposit approximately in the
amount of the subject loan for a period of time approximately equal to such
Interest Period.

                  "Eurodollar Rate": That per annum rate which is the aggregate
of the Eurodollar Offer Rate plus the Applicable Margin for Eurodollar Loans,
except that, in the event that the Administrative Agent determines that any
Lender may be subject to the Reserve Percentage, the "Eurodollar Rate" shall
mean, with respect to any Eurodollar Loans then outstanding (from the date on
which that Reserve Percentage first became applicable to such Eurodollar Loans),
and with respect to all Eurodollar Loans thereafter made (but only so long as a
Lender is subject to a Reserve Percentage), an interest rate per annum equal the
sum of (a) plus (b), where:

                           (a) is the decimal equivalent of the following
                  fraction:

                              Eurodollar Offer Rate
                              ---------------------
                           1 minus Reserve Percentage

                           (b) is the Applicable Margin for Eurodollar Loans.

                  "Events of Default": As defined in Article 10.

                  "Excluded Asset": All Operating Property of the Credit
Parties, all Subsidiary Stock and any other property of the Credit Parties which
is not Collateral hereunder.

                  "Exempt DDA": A depository account maintained by any Credit
Party, the only contents of which may be transfers from the Operating Account
which are used solely (i) for petty cash purposes; or (ii) for payroll.

                  "Existing Indentures":  Collectively, all of the following:

                           (a)      Indenture between the Lead Borrower and
                  First Trust National Association, as Trustee, dated as of
                  March 12, 1992, as supplemented May 22, 1998, with respect to
                  the Lead Borrower's 9.25% Senior Notes due March 15, 2022;

                           (b)      Indenture between the Lead Borrower and
                  First Trust National Association, as Trustee, dated as of July
                  15, 1993, as supplemented May 22, 1998 with respect to the
                  Lead Borrower's 9.00% Senior Notes due November 15, 2004.

                  "Federal Funds Effective Rate". For any day, a fluctuating
interest rate per annum equal to the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal fund brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day on such transactions received by
the

<PAGE>

Administrative Agent from three federal funds brokers of recognized standing
selected by the Administrative Agent.

                  "Fiscal": When followed by "month" or "quarter", the relevant
fiscal period based on the Lead Borrower's fiscal year and accounting
conventions.

                  "Fleet": As defined in the Preamble hereto.

                  "GAAP": Principles which are consistent with those promulgated
or adopted by the Financial Accounting Standards Board and its predecessors (or
successors) in effect and applicable to that accounting period in respect of
which reference to GAAP is being made, provided, however, in the event of a
Material Accounting Change, then unless otherwise specifically agreed to by the
Administrative Agent and the Lead Borrower, (a) the Credit Parties' compliance
with the financial performance covenants imposed pursuant to Section 5.11 shall
be determined as if such Material Accounting Change had not taken place and (b)
the Lead Borrower shall include, with its monthly, quarterly, and annual
financial statements a schedule, certified by the Lead Borrower's chief
financial officer, on which the effect of such Material Accounting Change on
that statement shall be described.

                  "General Intangible": As defined in the Uniform Commercial
Code in effect in the State of New York on the date hereof.

                  "Goods": As defined in the Uniform Commercial Code in effect
in the State of New York on the date hereof, and also includes all things that
are movable when a security interest therein attaches and also all computer
programs embedded in goods and any supporting information provided in connection
with a transaction relating to the program if (i) the program is associated with
the goods in such manner that it customarily is considered part of the goods or
(ii) by becoming the owner of the goods, a Person acquires a right to use the
program in connection with the goods.

                  "Governmental Authority": Any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

                  "Guarantors": As defined in the Preamble hereto and includes
all direct and indirect wholly owned domestic subsidiaries of the Lead Borrower
now in existence or hereafter acquired or created.

                  "Hazardous Materials": Any (a) substance which is defined or
regulated as a hazardous material in or under any Environmental Law and (b) oil
in any physical state.

                  "Hedge Agreements": All obligations of any Person in respect
of interest rate swap agreements, currency swap agreements and other similar
agreements designed to hedge against fluctuations in interest rates or foreign
exchange rates.

                  "Indebtedness": All indebtedness and obligations of or assumed
by any Person on account of or in respect to, without duplication, any of the
following: (a) in respect of money

<PAGE>

borrowed (including any indebtedness which is non-recourse to the credit of such
Person but which is secured by an Encumbrance on any asset of such Person)
whether or not evidenced by a promissory note, bond, debenture or other written
obligation to pay money; (b) in connection with any letter of credit or
acceptance transaction (including, without limitation, the face amount of all
letters of credit and acceptances issued for the account of such Person or
reimbursement on account of which such Person would be obligated); (c) in
connection with the sale or discount of accounts receivable or chattel paper of
such Person; (d) as lessee under Capital Leases; (e) on account of Hedge
Agreements; or (f) in connection with any sale and leaseback transaction.
"Indebtedness" also includes: (a) indebtedness of others secured by an
Encumbrance on any asset of such Person, whether or not such Indebtedness is
assumed by such Person; (b) any guaranty, endorsement, suretyship or other
undertaking pursuant to which that Person may be liable on account of any
obligation of any third party; or (c) the Indebtedness of a partnership or joint
venture for which such Person is liable as a general partner or joint venturer.

                  "Indemnified Person": As defined in Section 20.13.

                  "Information": As defined in Section 20.22.

                  "Intercompany Subordinated Demand Promissory Note" the
intercompany note required to be executed and delivered by the Credit Parties on
the Original Closing Date.

                  "Instruments": As defined in the Uniform Commercial Code in
effect in the State of New York on the date hereof.

                  "Interest Payment Date": With reference to (a) each Eurodollar
Loan: the last day of the Interest Period relating thereto (provided that if the
Interest Period is greater than three months in length, the Interest Payment
Date shall be the last day of the third month of such Interest Period and the
last day of the Interest Period); the Termination Date; and the End Date; and
(b) each Base Margin Loan: the first day of each month; the Termination Date;
and the End Date.

                  "Interest Period": The following:

                           (a)      With respect to each Eurodollar Loan:
                  Subject to Subsection (c), below, the period commencing on the
                  date of the making or continuation of, or conversion to, the
                  subject Eurodollar Loan and ending one, two, three, or six
                  months and, if available and agreed to by each Lender, two
                  weeks, thereafter, as the Lead Borrower may elect by notice
                  (pursuant to Section 2.5) to the Administrative Agent.

                           (b)      With respect to each Base Margin Loan:
                  Subject to Subsection (c), below, the period commencing on the
                  date of the making or continuation of or conversion to such
                  Base Margin Loan and ending on that date (i) as of which the
                  subject Base Margin Loan is converted to a Eurodollar Loan, as
                  the Lead Borrower may elect by notice (pursuant to Section
                  2.5) to the Administrative Agent, or (ii) on which the subject
                  Base Margin Loan is paid by the Borrowers.

<PAGE>

                           (c)      The setting of Interest Periods is in all
                  instances subject to the following:

                                    (i)      Any Interest Period for a Base
                           Margin Loan which would otherwise end on a day which
                           is not a Business Day shall be extended to the next
                           succeeding Business Day.

                                    (ii)     Any Interest Period for a
                           Eurodollar Loan which would otherwise end on a day
                           that is not a Business Day shall be extended to the
                           next succeeding Business Day, unless that succeeding
                           Business Day is in the next calendar month, in which
                           event such Interest Period shall end on the last
                           Business Day of the month during which the Interest
                           Period ends.

                                    (iii)    Subject to Subsection (iv) below,
                           any Interest Period applicable to a Eurodollar Loan,
                           which Interest Period begins on a day for which there
                           is no numerically corresponding day in the calendar
                           month during which such Interest Period ends, shall
                           end on the last Business Day of the month during
                           which that Interest Period ends.

                                    (iv)     Any Interest Period which would
                           otherwise end after the Termination Date shall end on
                           the Termination Date.

                                    (v)      The number of Interest Periods in
                           effect at any one time is subject to Section 2.12(d)
                           hereof.

                  "Inventory": Includes, without limitation, "inventory" as
defined in the Uniform Commercial Code in effect in the State of New York on the
date hereof and also all: (a) Goods which are leased by a Person as lessor; are
held by a Person for sale or lease or to be furnished under a contract of
service; are furnished by a Person under a contract of service; or consist of
raw materials, work in process, or materials used or consumed in a business; (b)
Goods of said description in transit; (c) Goods of said description which are
returned, repossessed and rejected; (d) packaging, advertising, and shipping
materials related to any of the foregoing; and (e) Documents which represent any
of the foregoing.

                  "Inventory Advance Rate":

                           (a)      As to Eligible Inventory owned by the ShopKo
                  Inventory Pool, 75% of the Cost of such Eligible Inventory
                  (from January 1 through July 31 of each year), 77% of the Cost
                  of such Eligible Inventory (from August 1 though September 30
                  of each year) and 83% of the Cost of such Eligible Inventory
                  (at all other times); and

                           (b)      as to Eligible Inventory owned by the Pamida
                  Inventory Pool, 70% of the Cost of such Eligible Inventory
                  (from January 1 through September 30 of each year) and 75% of
                  the Cost of such Eligible Inventory (at all other times).
<PAGE>

                  "Inventory Credit Party": Any Credit Party which is a member
of the ShopKo Inventory Pool or the Pamida Inventory Pool.

                  "Inventory Reserves": Such Reserves as may be established from
time to time by the Administrative Agent (after consultation with the Lead
Borrower (whose consent to any Inventory Reserve shall not be required)),
without duplication, in the Administrative Agent's reasonable business judgment
with respect to the determination of the saleability, at retail, of the Eligible
Inventory or which reflect such other factors as affect the market value of the
Eligible Inventory. Without limiting the generality of the foregoing, Inventory
Reserves may include (but are not limited to) reserves based on, without
duplication, the following:

                           (a)      Obsolescence (based upon Inventory on hand
                  beyond a given number of days);

                           (b)      seasonality;

                           (c)      shrinkage;

                           (d)      imbalance;

                           (e)      change in Inventory character;

                           (f)      change in Inventory composition;

                           (g)      change in Inventory mix;

                           (h)      markdowns (both permanent and point of
                  sale); and

                           (i)      retail markons and markups inconsistent with
                  prior period practice and performance; or advertising calendar
                  and planned advertising events.

                  "Investment Property": As defined in the Uniform Commercial
Code in effect in the State of New York on the date hereof.

                  "Issuer": The issuer of any L/C. The Issuer shall be Fleet or
such other Revolving Credit Lender (or Affiliate of a Revolving Credit Lender)
as the Administrative Agent may, in its discretion, select with the consent of
the Lead Borrower whose consent shall not be unreasonably delayed or withheld.

                  "L/C": Any letter of credit, the issuance of which is procured
by the Administrative Agent for the account of any Borrower and any acceptance
made on account of such letter of credit.

                  "Lead Borrower": As defined in the Preamble hereto.

                  "Lease": Any lease or other agreement, no matter how styled or
structured, pursuant to which a Credit Party is entitled to the use or occupancy
of any space.

<PAGE>

                  "Lenders": The Revolving Credit Lenders.

                  "Lenders' Special Counsel": A single counsel, selected by the
Majority Lenders during the existence of an Event of Default, to represent the
interests of the Lenders in connection with the enforcement, attempted
enforcement, or preservation of any rights and remedies under this, or any other
Loan Document, as well as in connection with any "workout", forbearance, or
restructuring of the credit facility contemplated hereby.

                  "Letter-of-Credit Right": Any right to payment or performance
under an L/C, whether or not the beneficiary has demanded or is at the time
entitled to demand payment or performance.

                  "Liabilities": Collectively, the following:

                           (a)      All and each of the following, whether now
                  existing or hereafter arising, under this Agreement or under
                  any of the other Loan Documents:

                                    (i)      Any and all direct and indirect
                           liabilities, debts, and obligations of each Credit
                           Party to the Secured Parties, each of every kind,
                           nature, and description.

                                    (ii)     Each obligation to repay any loan,
                           advance, indebtedness, note, obligation, overdraft,
                           or amount now or hereafter owing by any Credit Party
                           to the Secured Parties (including all future advances
                           whether or not made pursuant to a commitment by any
                           Secured Parties), whether or not any of such are
                           liquidated, unliquidated, primary, secondary,
                           secured, unsecured, direct, indirect, absolute,
                           contingent, or of any other type, nature, or
                           description, or by reason of any cause of action
                           which any Secured Party may hold against any Credit
                           Party.

                                    (iii)    All notes and other obligations of
                           each Credit Party now or hereafter assigned to or
                           held by any Secured Party, each of every kind,
                           nature, and description.

                                    (iv)     All interest, fees, charges,
                           expenses and other amounts which may be charged by
                           any Secured Party to any Credit Party and/or which
                           may be due from any Credit Party to any Secured Party
                           from time to time.

                                    (v)      All costs and expenses incurred or
                           paid by any Secured Party in respect of any agreement
                           between any Credit Party and such Secured Party or
                           instrument furnished by any Credit Party to any
                           Secured Party (including, without limitation, Costs
                           of Collection, attorneys' fees, and all reasonable
                           court and litigation costs and expenses).

                                    (vi)     Any and all covenants of each
                           Credit Party to or with any Secured Party and any and
                           all obligations of each Credit Party to act or to

<PAGE>

                           refrain from acting in accordance with any agreement
                           between that Credit Party and any Secured Party or
                           instrument furnished by that Credit Party to any
                           Secured Party.

                                    (vii)    Each of the foregoing as if each
                           reference to "any Secured Party" includes each
                           Affiliate of the Administrative Agent.

                           (b)      Any and all direct or indirect liabilities,
                  debts, and obligations of each Credit Party to the
                  Administrative Agent or any Affiliate of the Administrative
                  Agent, each of every kind, nature, and description owing on
                  account of any service or accommodation provided to, or for
                  the account of any Credit Party pursuant to this or any other
                  Loan Document, including cash management services and the
                  issuances of L/Cs.

                           (c)      All expenditures on behalf of any Credit
                  Party made by any Secured Party as permitted hereunder or
                  under any other Loan Document.

                  "Line Fee": A fee equal to 0.375% per annum of the average
difference, during the quarter just ended (or relevant period with respect to
the payment being made on the Termination Date) between the Revolving Credit
Ceiling and the sum of (a) the aggregate of the unpaid principal balance of the
Revolving Credit Loans (other than the Swing Line Loans) and (b) the undrawn
Stated Amount of L/Cs outstanding during the relevant period.

                  "Liquidation": The exercise, by the Administrative Agent of
those rights accorded to the Administrative Agent under the Loan Documents as a
creditor of the Credit Parties during the existence of an Event of Default
looking towards the realization on the Collateral. Derivations of the word
"Liquidation" (such as "Liquidate") are used with like meaning in this
Agreement.

                  "Loan Account": As defined in Section 2.9(a).

                  "Loan Documents": This Agreement, the Restatement Fee Letter,
the Notes, each instrument and document executed and/or delivered as
contemplated by Section 3, below, and each other instrument or document from
time to time executed and/or delivered in connection with the arrangements
contemplated hereby, including in connection with any transaction with the
Administrative Agent or any Affiliate of the Administrative Agent, including,
without limitation, any transaction which arises out of any cash management,
depository or letter of credit services provided by the Administrative Agent or
any Affiliate of the Administrative Agent (such Affiliates, the "Other
Transactions Counterparties") to any Credit Party, as each may be amended or
otherwise modified from time to time.

                  "Loans": The Revolving Credit Loans.

                  "Majority Lenders": at any time, Lenders (other than
Delinquent Lenders) holding more than 50% of the aggregate amount of Revolving
Credit Commitments (other than any Revolving Credit Commitments held by
Delinquent Lenders) then in effect, or, if the

<PAGE>

Revolving Credit Commitments have been terminated, the aggregate amount of
Revolving Credit Loans then outstanding (other than any Revolving Credit Loans
held by Delinquent Lenders).

                  "Material Accounting Change": Any change in GAAP applicable to
accounting periods subsequent to the Credit Parties' fiscal year most recently
completed prior to the execution of the Original Loan and Security Agreement,
which change has a material effect on the Credit Parties' Consolidated financial
condition or operating results, as reflected on financial statements and reports
prepared by or for the Credit Parties, when compared with such condition or
results as if such change had not taken place or where preparation of the Credit
Parties' statements and reports in compliance with such change results in the
breach of a financial performance covenant imposed pursuant to Section 5.11
where such a breach would not have occurred if such change had not taken place
or vice versa. The expensing of stock options shall be deemed to be a Material
Accounting Change.

                  "Material Adverse Effect": A material adverse effect on the
business, assets or condition (financial or otherwise) of the Credit Parties,
taken as a whole, or on the value of the Collateral taken as a whole.

                  "Maturity Date": August 19, 2007.

                  "Nominee": A business entity (such as a corporation or limited
partnership) formed by the Administrative Agent to own or manage any Post
Foreclosure Asset.

                  "NonConsenting Lender": As defined in Section 15.10.

                  "Notice of Acceleration": Written notice as follows:

                           (a)      From the Administrative Agent to the
                  Revolving Credit Lenders, as provided in Section 13.1(a).

                           (b)      From the Majority Lenders to the
                  Administrative Agent, as provided in Section 13.1(b).

                  "Notes": As defined in Section 2.10(b).

                  "Operating Account": As defined in Section 7.3.

                  "Operating Cash Flow": As to the Lead Borrower and its
Subsidiaries, for any period, Consolidated EBITDA minus Capital Expenditures
incurred during such period, all as determined in accordance with GAAP.

                  "Operating Property": Any retail store, warehouse,
distribution center, office, land or other facility or real property owned or
used by the Lead Borrower or any of its Subsidiaries having an area (including
all floor area) in excess of 30,000 square feet in the aggregate; provided that
any parcel of land (including all facilities and improvements thereon) which is
owned by the Lead Borrower or any of its Subsidiaries and no part of which is
used by the Lead Borrower or any of its Subsidiaries and no part of which is
under construction or

<PAGE>

development for use by the Lead Borrower or any of its Subsidiaries shall not
constitute an Operating Property until such time as any such use, construction
or development begins.

                  "Original Closing Date": March 12, 2001.

                  "Original Lenders": As defined in the Preamble hereto.

                  "Original Loan and Security Agreement": As defined in the
Preamble hereto.

                  "Other Transactions Counterparties": As defined in the
definition of Loan Documents.

                  "OverLoan": A loan, advance, or providing of credit support
(such as the issuance of any L/C) to the extent that, immediately after its
having been made, Availability is less than zero.

                  "Pamida Inventory Pool": collectively, Pamida Inc. and P.M.
Place Stores Company.

                  "Participant": As defined in Section 20.16.

                  "Payless": Payless Shoe Source, Inc.

                  "Payless Agreement": The License Agreement dated July 23, 1999
(as in effect on such date) between Payless and ShopKo Stores, Inc.

                  "Payless Inventory": Inventory owned by Payless which is sold
through the Credit Parties' stores pursuant to the Payless Agreement.

                  "Payment Intangible": Any general intangible under which the
account debtor's principal obligation is a monetary obligation.

                  "Permissible OverLoans": Revolving Credit Loans which are
OverLoans, but as to which each of the following conditions is satisfied: (a)
the Revolving Credit Ceiling is not exceeded; and (b) when aggregated with all
other Permissible OverLoans, such Revolving Credit Loans do not aggregate more
than five percent (5%) of the aggregate of the Borrowing Base; (c) the
Permissible OverLoans shall not remain outstanding for more than forty-five (45)
consecutive days, and (d) such Revolving Credit Loans are made or undertaken in
the Administrative Agent's discretion to protect and preserve the interests of
the Revolving Credit Lenders.

                  "Permitted Acquisitions": An Acquisition in which each of the
following conditions are satisfied:

                           (a)      No Default or Event of Default then exists
                  or would arise from the consummation of such Acquisition.

<PAGE>

                           (b)      Such Acquisition shall have been approved by
                  the Board of Directors of the Person (if such Person is a
                  corporation) which is the subject or "target" of such
                  Acquisition and such Person shall not have announced that it
                  will oppose such Acquisition or shall not have commenced any
                  action which alleges that such Acquisition will violate
                  applicable law.

                           (c)      The Lead Borrower shall have furnished the
                  Administrative Agent with thirty (30) days prior notice of
                  such intended Acquisition and shall have furnished the
                  Administrative Agent with a business plan, a current draft of
                  the acquisition agreement, summary of any due diligence
                  undertaken by any Credit Party in connection with such
                  Acquisition, appropriate financial statements of the Person
                  which is the subject of such Acquisition, pro forma financial
                  statements for the twelve month period following such
                  Acquisition after giving effect to such Acquisition, and such
                  other information as the Administrative Agent may reasonably
                  require.

                           (d)      The structure of the Acquisition shall be
                  acceptable to the Administrative Agent in its reasonable
                  judgment, which acceptance shall not be unreasonably withheld
                  or delayed. After consummation of the Acquisition, a Credit
                  Party shall own directly or indirectly a majority of the
                  equity interests in the Person being acquired and shall
                  control a majority of any voting interests, and/or shall
                  otherwise control the governance of the Person being acquired.

                           (e)      If the Acquisition involves a merger,
                  consolidation or stock acquisition, the Person which is the
                  subject of such Acquisition shall be engaged in a line of
                  business reasonably related to that of the Lead Borrower.

                           (f)      If the Person which is the subject of such
                  Acquisition will be maintained as a Subsidiary of the Lead
                  Borrower, the Administrative Agent shall have received a
                  guaranty of the Liabilities from such Subsidiary and a
                  security interest in such Subsidiary's inventory, accounts and
                  other property of the same nature as constitutes Collateral in
                  order to secure the Liabilities.

                           (g)      After giving effect to the Acquisition,
                  Availability shall be at least $100,000,000.00 and
                  Availability is projected on a pro forma basis to be at least
                  $100,000,000.00 for the twelve months immediately following
                  such Acquisition.

provided that, Acquisitions of Prescription Lists and individual Acquisitions of
less than $3,000,000.00 and aggregating less than (x) $15,000,000.00 in any
Fiscal year and (y) $40,000,000.00 during the term of this Agreement shall be
permitted without the need to satisfy subsections (b) through (g), above.

                  "Permitted Encumbrances": Any of the following:

                           (a)      Encumbrances for taxes, assessments or
                  governmental charges not yet due or which are being contested
                  in good faith by appropriate proceedings,

<PAGE>

                  provided that adequate reserves with respect thereto are
                  maintained on the books of the Credit Parties in accordance
                  with GAAP, and provided further that no notice of tax or other
                  lien has been filed with respect thereto.

                           (b)      Carrier's, warehousemen's, mechanics',
                  materialmen's, repairmen's, landlord's, or similar
                  Encumbrances arising in the ordinary course of business which
                  are not overdue by more than thirty (30) days or that are
                  being contested in good faith by appropriate proceedings,
                  provided that adequate reserves with respect thereto are
                  maintained on the books of the Credit Parties in accordance
                  with GAAP.

                           (c)      Pledges or deposits in connection with
                  workers' compensation, unemployment insurance and other social
                  security legislation.

                           (d)      Deposits to secure customs, duties, the
                  performance of bids, trade contracts (other than for borrowed
                  money), leases, statutory obligations, surety and appeal
                  bonds, performance bonds and other obligations of a like
                  nature in the ordinary course of business.

                           (e)      Easements, rights of way, leases,
                  restrictions, minor title irregularities and other similar
                  encumbrances incurred in the ordinary course of business that
                  in the aggregate are not substantial in amount and which do
                  not in any case materially detract from the value of the real
                  estate subject thereto or materially interfere with the
                  conduct of the business of the Credit Parties.

                           (f)      Any interest or title of a lessor under any
                  lease entered into by any Credit Party in the ordinary course
                  of business but only with respect to the assets so leased.

The inclusion of the foregoing as "Permitted Encumbrances" shall not limit or
impair the right of the Administrative Agent to impose Reserves on account
thereof in accordance with the provisions of this Agreement.

                  "Permitted Investments": Each of the following:

                           (a)      direct obligations of, or obligations the
                  principal of and interest on which are unconditionally
                  guaranteed by, the United States of America (or by any agency
                  thereof to the extent such obligations are backed by the full
                  faith and credit of the United States of America), in each
                  case maturing not more than one year from the date of
                  acquisition thereof;

                           (b)      investments in commercial paper maturing not
                  more than one year from the date of acquisition thereof and
                  having, at such date of acquisition, the highest credit rating
                  obtainable from Standard & Poor's or from Moody's Investment
                  Services, Inc.;

<PAGE>

                           (c)      investments in certificates of deposit,
                  banker's acceptances and time deposits maturing not more than
                  one year from the date of acquisition thereof issued or
                  guaranteed by or placed with, and money market deposit
                  accounts issued or offered by, any domestic office of any
                  commercial bank organized under the laws of the United States
                  of America or any State thereof that has a combined capital
                  and surplus and undivided profits of not less than
                  $500,000,000.00;

                           (d)      fully collateralized repurchase agreements
                  with a term of not more than 30 days for securities described
                  in clause (a) above (without regard to the limitation on
                  maturity contained in such clause) and entered into with a
                  financial institution satisfying the criteria described in
                  clause (c) above;

                           (e)      marketable direct obligations issued by any
                  state of the United States of America or any political
                  subdivision of any such state or any public instrumentality
                  thereof maturing within one year from the date of acquisition
                  thereof and, at the time of acquisition, having one of the two
                  highest ratings obtainable from either Standard & Poor's or
                  from Moody's Investment Services, Inc.; and

                           (f)      investments in money market funds,
                  substantially all the assets of which are comprised of
                  securities of the types described in clauses (a) through (e)
                  above.

                  "Person": Any natural person, and any corporation, limited
liability company, trust, partnership, joint venture, or other enterprise or
entity.

                  "Pharmacy Accounts": All of the Inventory Credit Parties' now
owned or hereinafter acquired and arising rights to payment for services
rendered and/or goods sold or leased, in each case, in connection with
dispensing prescriptions, pharmaceuticals, medications and controlled
substances, whether or not earned by performance, and whether constituting
accounts, general intangibles, chattel paper, interests or claims in or under
insurance policies, or otherwise, and all rights to payment from insurance
companies, managed care organizations, pharmacy plans, governmental entities and
other third parties (or the pharmacy plan administrators of such companies,
organizations, plans, entities and other third parties) that support or secure
any of the foregoing in whole or in part, all proceeds and insurance proceeds of
the foregoing, and any contracts and records with respect to any of the
foregoing.

                  "Post Foreclosure Asset": All or any part of the Collateral,
ownership of which is acquired by the Administrative Agent or a Nominee on
account of the "bidding in" at a disposition as part of a Liquidation or by
reason of a "deed in lieu" type of transaction.

                  "Prescription Lists": Lists of customers for which specific
prescription information is regularly maintained in the ordinary course of
business.

<PAGE>

                  "Proceeds": Includes, without limitation, "Proceeds" as
defined in the Uniform Commercial Code in effect in the State of New York on the
date hereof and shall also include: (i) whatever is collected on, or distributed
on account of, Collateral; (ii) rights arising out of Collateral; (iii) to the
extent of the value of Collateral, claims arising out of the loss,
non-conformity, or interference with the use of, defects or infringement of
rights in, or damage to, Collateral; and (iv) to the extent of the value of
Collateral and to the extent payable to any Credit Party or Secured Party,
insurance payable by reason of the loss or nonconformity of, defects or
infringement of rights in, or damage to, Collateral.

                  "Realty Sale": Any sale, lease, conveyance, transfer,
financing, or other disposition by any Credit Party (including by way of merger,
consolidation or a sale-leaseback transaction) in any transaction or group of
transactions that are part of a common plan, of any real estate or any other
assets other than Accounts or Inventory.

                  "Receipts": All cash, cash equivalents, money, checks, credit
card slips, receipts and other proceeds from any sale of the Collateral.

                  "Receivable": Any right to payment for goods sold or leased or
for services rendered, whether or not such right is evidenced by an Instrument
or Chattel Paper and whether or not it has been earned by performance
(including, without limitation, any Account).

                  "Receivables Collateral": That portion of the Collateral which
consists of (a) Accounts, (b) instruments arising from, relating to, or
constituting proceeds of, the Credit Parties' Accounts, Inventory and Pharmacy
Accounts, (c) documents relating to the Credit Parties' Inventory, (d) Payment
Intangibles arising from, relating to, or constituting proceeds of, the Credit
Parties' Accounts, Inventory and Pharmacy Accounts and (e) Letter-of-Credit
Rights, bankers' acceptances, and all other rights to payment arising from, or
relating to, or constituting proceeds of, the Credit Parties' Accounts,
Inventory and Pharmacy Accounts.

                  "Register": As defined in Section 16.2(c).

                  "Related Entity": Any Person in which a Credit Party is a
partner, joint venturer, stockholder, or member or in which a Credit Party holds
an equity or other ownership interest, and which Person does not constitute a
Subsidiary of any Credit Party.

                  "Requirements of Law": As to any Person:

                           (a)      Applicable Law;

                           (b)      that Person's organizational documents; or

                           (c)      that Person's by-laws and/or other
                  instruments which deal with corporate or similar governance,
                  as applicable.

                  "Renewal Fee": As defined in Section 2.14.

<PAGE>

                  "Reserve Percentage": The decimal equivalent of that rate
applicable to a Lender under regulations issued from time to time by the Board
of Governors of the Federal Reserve System for determining the maximum reserve
requirement of that Lender with respect to "Eurocurrency liabilities" as defined
in such regulations. The Reserve Percentage applicable to a particular
Eurodollar Loan shall be based upon that in effect during the subject Interest
Period, with changes in the Reserve Percentage which take effect during such
Interest Period to take effect (and to consequently change any interest rate
determined with reference to the Reserve Percentage) if and when such change is
applicable to such loans.

                  "Reserves": The following: Availability Reserves and Inventory
Reserves. Notwithstanding any provisions of this Agreement to the contrary, (a)
the imposition of a new Reserve or a change to a then existing Reserve may be
made only with not less than five (5) Business Days prior notice to the Lead
Borrower, except that an increase or decrease in the amount of a then existing
Reserve, which increase or decrease is calculated in accordance with the same
methodology as was utilized to establish the existing Reserve and merely
reflects the results of mathematical computations of the items already in the
category to which such Reserve applies (such as a change in the aggregate of
Customer Credit Liabilities), may be made without such notice and (b) the
Administrative Agent shall impose a new Reserve or change a Reserve only
utilizing the same criteria as the Administrative Agent utilizes in imposing or
changing Reserves for other of its similar borrowers and in the exercise of good
faith.

                  "Restatement Documents List": As attached hereto as Exhibit C.

                  "Restatement Effective Date": The date upon which the
conditions precedent set forth in Section 3 hereof have been satisfied or
waived.

                  "Restatement Fee Letter": That letter dated August 19, 2003
between the Lead Borrower and the Administrative Agent, as such letter may from
time to time be amended or modified.

                  "Revolving Credit": As defined in Section 2.1.

                  "Revolving Credit Ceiling": $450,000,000.00.

                  "Revolving Credit Commitment": With respect to each Revolving
Credit Lender, that amount set forth on Schedule 2.23, (as such amounts may
change in accordance with the provisions of this Agreement).

                  "Revolving Credit Commitment Percentage": With respect to each
Revolving Credit Lender, that percentage set forth on Schedule 2.23, (as such
percentages may change in accordance with the provisions of this Agreement).

                  "Revolving Credit Lenders": Each Person who is or becomes a
"Revolving Credit Lender" in accordance with the provisions of this Agreement.

                  "Revolving Credit Loans": Loans made under the Revolving
Credit, except that where the term "Revolving Credit Loan" is used with
reference to available interest rates

<PAGE>

applicable to the loans under the Revolving Credit, it refers to so much of the
unpaid principal balance of the Loan Account as bears the same rate of interest
for the same Interest Period.

                  "Revolving Credit Note": As defined in Section 2.10.

                  "SEC": The United States Securities and Exchange Commission.

                  "Secured Parties": collectively, the Administrative Agent, the
Lenders, the Issuer and the Other Transactions Counterparties, and a "Secured
Party" shall mean any of the foregoing.

                  "ShopKo Inventory Pool": collectively, ShopKo Stores, Inc.,
ShopKo Properties, Inc., Penn-Daniels, Incorporated and SKO Holdings, Inc.

                  "Standby L/Cs": L/Cs issued pursuant to this Agreement, the
drawing under which does not require the delivery of bills of lading, airway
bills or other similar types of documents of title, or which are customarily
referred to as standby letters of credit.

                  "Stated Amount": The maximum amount for which an L/C may be
honored.

                  "Subsidiary": Any corporation, association, partnership,
limited liability company, trust, or other business entity of which the
designated parent shall at any time own directly or indirectly through a
Subsidiary or Subsidiaries at least a majority (by number of votes or
controlling interests) of the outstanding voting interests.

                  "Subsidiary Stock": All shares of capital stock of any
Subsidiary of the Lead Borrower.

                  "Supermajority Revolving Credit Lenders": Prior to termination
of the Revolving Credit Commitments, Revolving Credit Lenders (other than
Delinquent Lenders) holding 66 2/3% or more of the Revolving Credit Commitments
(other than any Revolving Credit Commitments held by Delinquent Lenders). After
termination of the Revolving Credit Commitments, Revolving Credit Lenders (other
than Delinquent Lenders) holding 66 2/3% or more of the Liabilities (other than
any Liabilities held by Delinquent Lenders).

                  "Supporting Obligation": A Letter-of-Credit Right or secondary
obligation which supports the payment or performance of an Account, Chattel
Paper, a Document, a General Intangible, an Instrument or Investment Property.

                  "Swing Line": The facility pursuant to which the Swing Line
Lender may advance Revolving Credit Loans aggregating up to the Swing Line Loan
Ceiling.

                  "Swing Line Lender": Fleet Retail Finance Inc.

                  "Swing Line Loan Ceiling": $40,000,000.00.

                  "Swing Line Loans": As defined in Section 2.7(a).

<PAGE>

                  "Swing Line Note" As defined in Section 2.7(c).

                  "Syndication Agent": General Electric Capital Corporation.

                  "Termination Date": The earliest of (a) the Maturity Date; or
(b) the occurrence of any event described in Section 10.10, below; or (c) the
Administrative Agent's notice to the Lead Borrower setting the Termination Date
on account of the occurrence of any Event of Default other than as described in
Section 10.10, below.

                  "Total Commitment Percentage": As to any Lender, the
percentage that such Lender's Commitment constitutes of the aggregate Commitment
of all Lenders.

                  "Transfer": Wire transfer pursuant to the wire transfer system
maintained by the Board of Governors of the Federal Reserve Board, or as
otherwise may be agreed to from time to time by the Administrative Agent making
such Transfer and the subject Revolving Credit Lender. Wire instructions may be
changed in the same manner that Notice Addresses may be changed (Section 17.1),
except that no change of the wire instructions for Transfers to any Revolving
Credit Lender shall be effective without the consent of the Administrative
Agent.

                  "UCC": The Uniform Commercial Code as in effect from time to
time in the State of New York.

                  "Unanimous Consent": Consent of Lenders (other than Delinquent
Lenders) holding 100% of (i) prior to termination of the Revolving Credit
Commitments, the Revolving Credit Commitments (other than Revolving Credit
Commitments held by Delinquent Lenders) or (ii) after termination of the
Revolving Credit Commitments, the aggregate unpaid principal amount of the
Revolving Credit Loans then outstanding (other than Revolving Credit Loans held
by Delinquent Lenders).

                  "Unused Fee": A fee equal to 0.375% per annum of the average
difference, during the quarter just ended (or relevant period with respect to
the payment being made on the Termination Date) between the Revolving Credit
Ceiling and the sum of (a) the aggregate of the unpaid principal balance of the
Revolving Credit Loans (including the Swing Line Loans) and (b) the undrawn
Stated Amount of L/Cs outstanding during the relevant period.

                                   SECTION 2
                              THE REVOLVING CREDIT

                  2.1      Establishment Of Revolving Credit. (a) The Revolving
Credit Lenders have established a revolving line of credit (the "Revolving
Credit") in the Borrowers' favor pursuant to which each Revolving Credit Lender,
subject to, and in accordance with, this Agreement, acting through the
Administrative Agent, shall make loans and advances and otherwise provide
financial accommodations to and for the account of the Borrowers as provided
herein.

<PAGE>

                  (b)      Loans, advances, and financial accommodations under
the Revolving Credit shall be made with reference to the Borrowing Base and
shall be subject to Availability. The Borrowing Base and Availability shall be
determined by the Administrative Agent by reference to Borrowing Base
Certificates furnished as provided in Section 5.4, below. Such determination
shall take into account those Reserves as may be applicable thereto. The
Reserves as of the Restatement Effective Date are the following:

                           (i)      Customer Credit Liabilities (an Availability
                  Reserve): An amount equal to 50% of the outstanding Customer
                  Credit Liabilities from time to time.

                           (ii)     Shrinkage (an Inventory Reserve): As to the
                  Lead Borrower, $10,000,000.00, and as to Pamida,
                  $5,000,000.00.

                           (iii)    Damaged Goods (an Inventory Reserve): An
                  amount equal to the value of damaged and return to vendors
                  Inventory as reflected in the Credit Parties' books and
                  records.

                           (iv)     Rent (an Availability Reserve): An amount
                  equal to all past due rent and warehouse charges for any of
                  the Credit Parties' locations where Collateral is located and
                  where such charges have priority over the Collateral Interests
                  of the Administrative Agent in the Collateral.

                           (v)      L/C Landing Costs Reserve (an Inventory
                  Reserve): An amount equal to the historical amount that the
                  Credit Parties are required to pay for customs, duties and
                  other similar charges incurred in connection with Inventory
                  purchases.

                  (c)      The commitment of each Revolving Credit Lender to
provide such loans, advances, and financial accommodations is subject to Section
2.23.

                  (d)      The proceeds of borrowings under the Revolving Credit
shall be used solely to refinance Indebtedness under the Existing Indentures as
they mature (subject to Section 4.27), and for general corporate purposes of the
Borrowers, including, without limitation, to fund certain stock and bond
repurchases (subject to Section 4.27), to finance the issuance of Standby and
Documentary L/Cs, purchases of Inventory by the Inventory Credit Parties and to
provide for the Credit Parties' other working capital and Capital Expenditures
needs, all solely to the extent permitted by this Agreement.

                  2.2      Advances In Excess Of Borrowing Base (OverLoans). (a)
No Revolving Credit Lender has any obligation to make any Revolving Credit Loan,
or otherwise to provide any credit to or for the benefit of the Borrowers where
the result of such Revolving Credit Loan or credit is an OverLoan; provided that
the Administrative Agent is permitted (but not obligated) to make Permissible
OverLoans and to be reimbursed therefor by the Revolving Credit Lenders pursuant
to Section 12.3.

<PAGE>

                  (b)      The Revolving Credit Lenders' obligations, among
themselves, are subject to Section 12.3(a) (which relates to each Revolving
Credit Lender's making amounts available to the Administrative Agent).

                  (c)      The Revolving Credit Lenders' providing of an
OverLoan on any one occasion does not affect the obligations of each Borrower
hereunder (including each Borrower's obligation to immediately repay any amount
which otherwise constitutes an OverLoan) nor obligate the Revolving Credit
Lenders to do so on any other occasion.

                  2.3      Risks Of Value Of Collateral. The Administrative
Agent's reference to a given asset in connection with the making of Revolving
Credit Loans and the providing of financial accommodations under the Revolving
Credit and/or the monitoring of compliance with the provisions hereof shall not
be deemed a determination by the Administrative Agent or any Revolving Credit
Lender relative to the actual value of the asset in question. All risks
concerning the value of the Collateral are and remain upon the Credit Parties.
All Collateral secures the prompt, punctual, and faithful performance of the
Liabilities whether or not relied upon by the Administrative Agent in connection
with the making of Revolving Credit Loans and the providing of financial
accommodations under the Revolving Credit.

                  2.4      Commitment To Make Revolving Credit Loans And Support
Letters Of Credit. Subject to the provisions of this Agreement (including with
respect to the making of Permissible OverLoans), the Revolving Credit Lenders
shall make a loan or advance under the Revolving Credit and the Issuer shall
issue an L/C for the account of any Borrower, in each instance if duly and
timely requested by the Lead Borrower as provided herein provided that:

                           (a)      Availability will not be exceeded.

                           (b)      no Default has occurred and is continuing.

                  2.5      Loan Requests. (a) Requests for Revolving Credit
Loans or for the continuance or conversion of an interest rate applicable to a
Loan may be requested by the Lead Borrower in such manner as may from time to
time be reasonably acceptable to the Administrative Agent.

                  (b)      Subject to the provisions of this Agreement, the Lead
Borrower may request a Revolving Credit Loan and elect an interest rate and
Interest Period to be applicable to a Loan or continue or convert an interest
rate applicable to existing Loans by giving notice to the Administrative Agent
by no later than the following:

                           (i)      If such Loan is to be, or is to be converted
                  to, a Base Margin Loan: By 1:00 PM Boston time one (1)
                  Business Day before the date on which the subject Loan is to
                  be made or is to be so converted. Base Margin Loans requested
                  by the Lead Borrower, other than those resulting from the
                  conversion of a Eurodollar Loan, shall not be less than
                  $500,000.00.

<PAGE>

                           (ii)     If such Loan is to be, or is to be continued
                  as, or converted to, a Eurodollar Loan: By 1:00 PM Boston time
                  three (3) Eurodollar Business Days before the commencement of
                  any new Interest Period or the end of the then applicable
                  Interest Period. Eurodollar Loans and conversions to
                  Eurodollar Loans shall each be not less than $1,000,000.00 and
                  in increments of $1,000,000.00 in excess of such minimum.

                           (iii)    Any Eurodollar Loan which matures while an
                  Event of Default exists shall be converted, at the option of
                  the Administrative Agent, to a Base Margin Loan
                  notwithstanding any notice from the Lead Borrower that such
                  Loan is to be continued as a Eurodollar Loan.

                  (c)      Any request for a Revolving Credit Loan or for the
continuance or conversion of an interest rate applicable to a Loan which is made
after the applicable deadline therefor, as set forth above, shall be deemed to
have been made at the opening of business on the then next Business Day or
Eurodollar Business Day, as applicable.

                  (d)      The Lead Borrower may request that the Administrative
Agent cause the issuance by the Issuer of L/Cs for the account of the Borrowers
as provided in Section 2.18.

                  (e)      The Administrative Agent may rely on any request for
a Loan or other financial accommodation under the Revolving Credit which the
Administrative Agent, in good faith, believes to have been made by a Person duly
authorized to act on behalf of the Lead Borrower and may decline to make any
such requested loan or advance, or issuance, or to provide any such financial
accommodation pending the Administrative Agent's being furnished with such
documentation concerning that Person's authority to act as may be satisfactory
to the Administrative Agent.

                  (f)      A request by the Lead Borrower for a loan or advance,
or other financial accommodation under this Agreement shall be irrevocable and
shall constitute certification by each Credit Party that as of the date of such
request, each of the following is true and correct:

                           (i)      Each representation which is made herein or
                  in any of the Loan Documents is then true and complete in all
                  material respects as of and as if made on the date of such
                  request (except for representations that relate to an earlier
                  date, in which case that representation shall have been true
                  on such earlier date).

                           (ii)     No Default then exists.

                  (g)      If, at any time or from time to time, any Default
exists:

                           (i)      The Administrative Agent may, or at the
                  request of the Majority Lenders shall, suspend the Revolving
                  Credit immediately.

                           (ii)     Neither the Administrative Agent nor any
                  Revolving Credit Lender shall be obligated, during such
                  suspension, to make any Revolving Credit Loans or to provide
                  any financial accommodation hereunder nor shall the
                  Administrative

<PAGE>

                  Agent, any Revolving Credit Lender or the Issuer be obligated,
                  during such suspension, to issue, or cause to be issued, any
                  L/C.

                           (iii)    The Administrative Agent may suspend the
                  right of the Lead Borrower to request any Eurodollar Loan or
                  to convert any Base Margin Loan to a Eurodollar Loan.

                  2.6      Making Of Revolving Credit Loans. (a) A Loan shall be
made by the transfer of the proceeds of such Loan to the Operating Account or as
otherwise instructed by the Lead Borrower.

                  (b)      A Loan shall be deemed to have been made under this
Agreement (and the Borrowers shall be indebted to the Administrative Agent and
the Lenders for the amount thereof immediately) at the following:

                           (i)      The Administrative Agent's initiation of the
                  transfer of the proceeds of such Loan in accordance with the
                  Lead Borrower's instructions (if such Loan is of funds
                  requested by the Lead Borrower).

                           (ii)     The charging of the amount of such Loan to
                  the Loan Account (in all other circumstances).

                  (c)      There shall not be any recourse to or liability of
the Administrative Agent or any Lender, on account of:

                           (i)      Any delay in the making of any Loan
                  requested under this Agreement.

                           (ii)     Any delay by any bank or other depository
                  institution in treating the proceeds of any such Loan as
                  collected funds.

                           (iii)    Any delay in the receipt, and/or any loss,
                  of funds which constitute a Loan under this Agreement, the
                  wire transfer of which was properly initiated by the
                  Administrative Agent in accordance with wire instructions
                  provided to the Administrative Agent by the Lead Borrower.

                  2.7      Swing Line Loans. (a) For ease of administration,
Base Margin Loans may be made by the Swing Line Lender (in the aggregate, the
"Swing Line Loans") in accordance with the procedures set forth in this
Agreement for the making of loans and advances under the Revolving Credit,
except that the Lead Borrower may request a Swing Line Loan by giving notice to
the Administrative Agent by no later than 1:00 PM on the Business Day on which
the subject Swing Line Loan is to be made. The unpaid principal balance of the
Swing Line Loans shall not at any one time be in excess of the Swing Line Loan
Ceiling.

                  (b)      The aggregate unpaid principal balance of Swing Line
Loans shall bear interest at the rate applicable to Base Margin Loans and shall
be repayable as a loan under the Revolving Credit.

<PAGE>

                  (c)      The Borrowers' obligation to repay Swing Line Loans
shall be evidenced by a Note in the form of Exhibit A (the "Swing Line Note"),
executed by the Borrowers, and payable to the Swing Line Lender. Neither the
original nor a copy of that Note shall be required, however, to establish or
prove any Liability. Upon the Swing Line Lender's request, the Borrowers shall
execute a replacement of any Swing Line Note which has been lost, mutilated, or
destroyed thereof and deliver such replacement to the Swing Line Lender.

                  (d)      For all purposes of this Loan Agreement, the Swing
Line Loans and the Borrowers' obligations to the Swing Line Lender constitute
Revolving Credit Loans and are secured as "Liabilities".

                  (e)      Swing Line Loans may be subject to periodic
settlement with the Revolving Credit Lenders as provided in this Agreement.

                  2.8      [Intentionally Omitted]

                  2.9      The Loan Account.

                  (a)      An account ("Loan Account") shall be opened on the
books of the Administrative Agent in which a record shall be kept of all Loans
made and L/Cs issued under this Agreement.

                  (b)      The Administrative Agent shall also keep a record
(either in the Loan Account or elsewhere, as the Administrative Agent may from
time to time elect) of all interest, fees, service charges, costs, expenses and
other debits owed to the Administrative Agent and each Lender on account of the
Liabilities and of all credits against such amounts so owed.

                  (c)      All credits against the Liabilities shall be
conditional upon final payment to the Administrative Agent for the account of
each Lender of the items giving rise to such credits. The amount of any item
credited against the Liabilities which is charged back against the
Administrative Agent or any Lender for any reason or is not so paid shall be a
Liability and shall be added to the Loan Account, whether or not the item so
charged back or not so paid is returned.

                  (d)      Except as otherwise provided herein, all fees,
service charges, costs, and expenses for which any Borrower is obligated
hereunder are payable on demand. In the determination of Availability, the
Administrative Agent may deem fees, service charges, accrued interest, and other
payments which are due and payable as having been advanced under the Revolving
Credit when such amounts are due and payable.

                  (e)      The Administrative Agent, without the request of the
Lead Borrower, may advance under the Revolving Credit any interest, fee, service
charge, expense or other payment to which the Administrative Agent or any Lender
is entitled from any Borrower pursuant hereto and may charge the same to the
Loan Account notwithstanding that such amount so advanced may result in the
Borrowing Base being exceeded. Such action on the part of the Administrative
Agent shall not constitute a waiver of the Administrative Agent's rights and
each Borrower's

<PAGE>

obligations under Section 2.11(b). Any amount which is added to the principal
balance of the Loan Account as provided in this Section 2.9(e) shall bear
interest at the interest rate then and thereafter applicable to Base Margin
Loans.

                  (f)      Any statement rendered by the Administrative Agent or
any Lender to the Lead Borrower concerning the Liabilities shall be considered
correct and accepted by each Borrower and shall be conclusively binding upon
each Borrower unless the Lead Borrower provides the Administrative Agent with
written objection thereto within one hundred twenty (120) days from the mailing
of such statement, which written objection shall indicate, with particularity,
the reason for such objection. The Loan Account and the Administrative Agent's
books and records concerning the loan arrangement contemplated herein and the
Liabilities shall be prima facie evidence and proof of the items described
therein.

                  2.10     The Notes.

                  (a)      The Borrowers' obligation to repay loans and advances
under the Revolving Credit, with interest as provided herein, shall be evidenced
by notes (each, a "Revolving Credit Note") in the form of Exhibit B-1, executed
by each Borrower, one payable to each Revolving Credit Lender.

                  (b)      [Intentionally Omitted]

                  (c)      Neither the original nor a copy of any Note shall be
required, however, to establish or prove any Liability. Upon a Lender's request
and, if applicable, the delivery of an appropriate lost instrument indemnity,
each Borrower shall execute a replacement thereof and deliver such replacement
to the Administrative Agent in the event that any Revolving Credit Note or Term
Note is ever lost, mutilated, or destroyed.

                  2.11     Payment Of The Loan Account. (a) Subject to Section
2.17, the Borrowers may repay all or any portion of the principal balance of the
Loan Account from time to time until the Termination Date.

                  (b)      The Borrowers, without notice or demand from the
Administrative Agent or any Lender, shall pay the Administrative Agent that
amount, from time to time, which is necessary so that there is no OverLoan
outstanding.

                  (c)      During the continuance of a Cash Control Event, the
Borrowers shall repay, first, the Revolving Credit and, second, all other
Liabilities:

                           (i)      in an amount equal to the proceeds realized
                  from the sale or other disposition of, or realization upon,
                  any Collateral;

                           (ii)     in an amount equal to the proceeds realized
                  from any Capital Event and/or casualty insurance proceeds
                  relating to Collateral received by any Borrower to the extent
                  that such proceeds are not reinvested in replacement assets
                  within 180 days after the date of receipt of such proceeds;
                  and

<PAGE>

                           (iii)    in accordance with the provisions of Article
                  7 hereof;

provided that if no Revolving Loans or other Liabilities are outstanding all
such amounts described in clauses (c)(i), (ii) and (iii) shall be held pending
such application in the Concentration Account or a cash collateral account
established with the Administrative Agent on terms and conditions satisfactory
to the Administrative Agent (and each of the Credit Parties hereby grants to the
Administrative Agent a continuing security interest in all amounts at any time
on deposit in such cash collateral account to secure the Liabilities).

All amounts prepaid under this Section 2.11(c) on account of the Revolving
Credit may be reborrowed under the Revolving Credit, subject to and in
accordance with, the terms of this Agreement.

                  (d)      Subject to Section 2.17, the Borrowers shall repay
the then entire unpaid balance of the Loan Account and all other Liabilities on
the Termination Date.

                  (e)      No payment of Eurodollar Loans shall be permitted
hereunder other than on the last day of an Interest Period applicable thereto,
unless the Borrowers simultaneously reimburse the Lenders for all amounts
described in Section 2.11(f) below associated therewith. In order to avoid
payment of the amounts described in Section 2.11(f) below, as long as no Event
of Default has occurred and is continuing, at the request of the Lead Borrower,
the Administrative Agent shall hold all amounts required to be applied to
Eurodollar Loans in a non-interest bearing cash collateral account and will
apply such funds to the applicable Eurodollar Loans at the end of the then
pending Interest Period therefor (provided that the foregoing shall in no way
limit or restrict the Administrative Agent's rights upon the subsequent
occurrence of an Event of Default).

                  (f)      The Borrowers shall indemnify the Administrative
Agent and each Lender and hold the Administrative Agent and each Lender harmless
from and against any actual loss, cost or expense (including loss of anticipated
profits and amounts payable by the Administrative Agent or such Lender on
account of "breakage fees" (so-called)) which the Administrative Agent or such
Lender actually sustains or incurs, in each case, as calculated in a
commercially reasonable manner by the Administrative Agent (including, without
limitation, by virtue of acceleration after the occurrence of any Event of
Default) as a consequence of the following:

                           (i)      Default by any Borrower in payment of the
                  principal amount of or any interest on any Eurodollar Loan as
                  and when due and payable, including any such loss or expense
                  arising from interest or fees payable by such Lender in order
                  to maintain its Eurodollar Loans.

                           (ii)     Default by any Borrower in making a
                  borrowing or conversion after the Lead Borrower has given (or
                  is deemed to have given) a request for a Loan or a request to
                  convert a Loan from one applicable interest rate to another.

<PAGE>

                           (iii)    The making of any payment on a Eurodollar
                  Loan or the making of any conversion of any such Loan to a
                  Base Margin Loan on a day that is not the last day of the
                  applicable Interest Period with respect thereto.

                  2.12     Interest On Loans. (a) Each Loan shall bear interest
at the Base Margin Rate unless timely notice is given (as provided in Section
2.5) that the subject Loan (or a portion thereof) is, or is to be converted to,
a Eurodollar Loan.

                  (b)      Each Loan which consists of a Eurodollar Loan shall
bear interest at the applicable Eurodollar Rate.

                  (c)      Subject to, and in accordance with, the provisions of
this Agreement, the Lead Borrower may cause all or a part of the unpaid
principal balance of the Loan Account to bear interest at the Base Margin Rate
or the Eurodollar Rate as specified from time to time by the Lead Borrower.

                  (d)      The Lead Borrower shall not select, renew, or convert
any interest rate for a Loan such that, in addition to interest at the Base
Margin Rate, there are more than nine (9) Eurodollar Rates applicable to the
Loans at any one time.

                  (e)      The Borrowers shall pay accrued and unpaid interest
on each Loan in arrears as follows:

                           (i)      on each Interest Payment Date for that Loan;
                  and

                           (ii)     during the existence of any Event of
                  Default, with such frequency as may be determined by the
                  Administrative Agent.

                  (f)      During the existence of any Event of Default (and
whether or not the Administrative Agent exercises the Administrative Agent's
rights on account thereof), all Loans shall bear interest, at the option of the
Administrative Agent or at the instruction of the Majority Lenders at a rate
which is the rate then in effect plus two percent (2%) per annum.

                  (g)      Interest shall be calculated (i) with respect to Base
Margin Loans, on the basis of a 365 day year and for actual days elapsed, and
(ii) with respect to Eurodollar Loans, on the basis of a 360 day year and for
actual days elapsed. L/C Fees, the Line Fee and Unused Fees shall be calculated
on the basis of a 365 day year and for actual days elapsed.

                  2.13     Voluntary Reduction Of Commitment And Revolving
Credit Ceiling. The Lead Borrower may reduce, or terminate the Revolving Credit
Commitments and the Revolving Credit Ceiling, in whole or in part from time to
time, by furnishing three (3) Business Days' written notice to the
Administrative Agent, whereupon the Commitments of the applicable Lenders shall
be reduced pro rata in accordance with their Revolving Credit Commitment
Percentages. Upon the effective date of any such reduction or termination, (i)
the Borrowers shall pay to the Administrative Agent for the benefit of the
applicable Lenders a pro rata portion of any Early Termination Fee that would be
payable under Section 2.17 as a result of such reduction or termination (based
upon the amount by which the amount so reduced or terminated

<PAGE>

exceeds $75,000,000.00 in any 12-month period), (ii) the Borrowers shall pay to
the Administrative Agent for the benefit of the Revolving Credit Lenders the
accrued Unused Fee as of the date of such reduction or termination, and (iii)
the Borrowers shall pay to the Administrative Agent for the benefit of the
Lenders any amounts required under Section 2.11(b) and Section 2.11(f) hereof.
No reduction or termination of the Revolving Credit Commitments or the Revolving
Credit Ceiling may be reinstated.

                  2.14     Renewal Fee. In consideration of the agreement of the
Agent and the Lenders to amend and restate the Original Loan and Security
Agreement, there has been earned and the Borrowers shall pay the "Renewal Fee"
(so referred to herein) in the amount and payable as provided in the Restatement
Fee Letter.

                  2.15     Administrative Agent's Fee. In addition to any other
fee or expense to be paid by the Borrowers on account of the Revolving Credit,
the Borrowers shall pay the Administrative Agent the "Agent's Fee" at the times
and in the amounts as set forth in the Restatement Fee Letter.

                  2.16     Unused Fee. In addition to any other fee to be paid
by the Borrowers on account of the Revolving Credit, each Revolving Credit
Lender shall be paid the Line Fee by the Administrative Agent at the times and
in the manner set forth below. The Borrowers shall pay to the Administrative
Agent for the account of the Revolving Credit Lenders, the Unused Fee. If the
Unused Fee actually paid by the Borrowers is insufficient to pay an amount equal
to the Line Fee to the Revolving Credit Lenders, the deficiency shall be paid to
the Revolving Credit Lenders by the Swing Line Lender from its own funds (and
the Borrowers shall have no liability with respect thereto). The Administrative
Agent shall pay the Line Fee (and any amounts payable by the Swing Line Lender
hereunder) to the Revolving Credit Lenders based upon their pro rata share of an
amount equal to the aggregate Line Fee due to all Revolving Credit Lenders;
provided that, for purposes of calculating the pro rata share of any Person
which is both the Swing Line Lender and a Revolving Credit Lender, such Person's
share shall be equal to the difference between (i) the sum of such Person's
Revolving Credit Commitment, and (ii) the sum of (A) such Person's Revolving
Credit Commitment Percentage of the principal amount of the Revolving Loans then
outstanding (including the principal amount of Swing Line Loans then
outstanding), and (B) such Person's Revolving Credit Commitment Percentage of
the then undrawn Stated Amount of outstanding L/Cs. The Unused Fee shall be paid
in arrears, on the first day of each quarter after the execution of this
Agreement and on the Termination Date.

                  2.17     Early Termination Fee. In the event that (i) the
Termination Date occurs, for any reason, prior to the second anniversary of the
Restatement Effective Date (other than by virtue of the Borrowers' refinancing
of the Liabilities with the Administrative Agent or any of its Affiliates) or
(ii) the Lead Borrower voluntarily reduces the Commitments pursuant to Section
2.13, the Borrowers shall pay to the Administrative Agent for the benefit of the
Lenders whose Commitments are terminated or reduced, an "Early Termination Fee"
(so referred to herein) in an amount equal to (a) one-half of one percent
(0.50%) of the aggregate amount of the Commitments so terminated or reduced, if
the Termination Date or reduction occurs before the first anniversary after the
Restatement Effective Date, or (b) one quarter of one percent (0.25%) of the
aggregate amount of the Commitments so terminated or reduced, if the Termination
Date

<PAGE>

or reduction occurs on or after the first anniversary after the Restatement
Effective Date and on or before the second anniversary of the Restatement
Effective Date.

                  2.18     Procedures For Issuance Of L/Cs. (a) The Lead
Borrower may request that the Administrative Agent cause the issuance by the
Issuer of L/Cs for the account of any Borrower. Each such request shall be in
such manner as may from time to time be acceptable to the Administrative Agent.

                  (b)      The Issuer shall issue any L/C so requested by the
Lead Borrower, provided that, at the time that the request is made, the
Revolving Credit has not been suspended as provided in Section 2.5(g) and if so
issued:

                           (i)      the aggregate Stated Amount of all L/Cs then
                  outstanding, does not exceed $200,000,000.00; and

                           (ii)     the expiry of the L/C is not later than the
                  earlier of thirty (30) days prior to the Maturity Date or the
                  following:

                                    (A)      Standby's: One (1) year from
                           initial issuance, or

                                    (B)      Documentary's: One hundred eighty
                           (180) days from issuance.

                           (iii)    an OverLoan will not result from the
                  issuance of the subject L/C.

                  (c)      Each Borrower shall execute such documentation to
apply for and support the issuance of an L/C as may be reasonably required by
the Issuer.

                  (d)      There shall not be any recourse to, nor liability of,
the Administrative Agent or any Revolving Credit Lender on account of

                           (i)      any delay or refusal by an Issuer to issue

                  an L/C;

                           (ii)     any action or inaction of an Issuer on
                  account of or in respect to, any L/C.

                  (e)      The Borrowers shall reimburse the Issuer for the
amount of any honoring of a drawing under an L/C on the same day on which such
honoring takes place. The Administrative Agent, without the request of any
Borrower, may advance under the Revolving Credit (and charge to the Loan
Account) the amount of any honoring of any L/C and other amount for which any
Borrower, the Issuer, or the Revolving Credit Lenders become obligated on
account of, or in respect to, any L/C. Such advance shall be made whether or not
any Default exists or such advance would result in an OverLoan. Such action
shall not constitute a waiver of the Administrative Agent's rights under Section
2.11(b) hereof.

                  2.19     Fees For L/Cs. (a) The Borrowers shall pay to the
Administrative Agent (for the benefit of the Revolving Credit Lenders) a fee, on
account of L/Cs, the issuance of which

<PAGE>

had been procured by the Administrative Agent, quarterly in arrears, and on the
Termination Date and on the End Date, equal to the following:

                           (i)      with respect to all Standby L/Cs: At a rate
                  per annum equal to the Applicable Margin for Eurodollar Loans
                  at the time of calculation of such fees multiplied by the
                  weighted average Stated Amount of all such Standby L/Cs
                  outstanding during the period in respect of which such fee is
                  being paid; and

                           (ii)     with respect to all Documentary L/Cs: At a
                  rate per annum equal to 1.00% multiplied by the weighted
                  average Stated Amount of all such Documentary L/Cs outstanding
                  during the period in respect of which such fee is being paid;

provided that, during the existence of any Event of Default, such fees shall be
increased by two percent (2%) per annum.

                  (b)      In addition to the fees to be paid as provided in
Subsection 2.19(a), above, the Borrowers shall pay to the Administrative Agent
(or to the Issuer, if so requested by Administrative Agent), on demand, all
issuance, processing, negotiation, amendment, and administrative fees and other
amounts customarily charged by the Issuer on account of, or in respect to, any
L/C.

                  (c)      If any change in Applicable Law shall either:

                           (i)      impose, modify or deem applicable any
                  reserve, special deposit or similar requirements against
                  letters of credit heretofore or hereafter issued by any Issuer
                  or with respect to which any Revolving Credit Lender or any
                  Issuer has an obligation to lend to fund drawings under any
                  L/C; or

                           (ii)     impose on any Issuer any other condition or
                  requirements relating to any such letters of credit;

and the result of any event referred to in Section 2.19(c)(i) or 2.19(c)(ii),
above, shall be to increase the cost to any Revolving Credit Lender or to any
Issuer of issuing or maintaining any L/C (which increase in cost shall be the
result of such Issuer's reasonable allocation among that Revolving Credit
Lender's or Issuer's letter of credit customers of the aggregate of such cost
increases resulting from such events), then, upon demand by the Administrative
Agent and delivery by the Administrative Agent to the Lead Borrower of a
certificate of an officer of the subject Revolving Credit Lender or the subject
Issuer describing such change in law, executive order, regulation, directive, or
interpretation thereof, its effect on such Revolving Credit Lender or such
Issuer, and the basis for determining such increased costs and their allocation,
the Borrowers shall, within thirty (30) days after demand therefor, pay to the
Administrative Agent, from time to time as specified by the Administrative
Agent, such amounts as shall be sufficient to compensate the subject Revolving
Credit Lender or the subject Issuer for such increased cost. Any Revolving
Credit Lender's or any Issuer's determination of costs incurred under Section
2.19(c)(i) or 2.19(c)(ii), above, and the allocation, if any, of such costs
among the

<PAGE>

Borrowers and other letter of credit customers of such Revolving Credit Lender
or such Issuer, if done in good faith and made on an equitable basis and in
accordance with such officer's certificate, shall be conclusive and binding on
the Borrowers.

                  2.20     Concerning L/Cs. (a) None of the Issuer, the Issuer's
correspondents, any Revolving Credit Lender, the Administrative Agent or any
advising, negotiating, or paying bank with respect to any L/C shall be
responsible in any way for:

                           (i)      The performance by any beneficiary under any
                  L/C of that beneficiary's obligations to any Borrower.

                           (ii)     The form, sufficiency, correctness,
                  genuineness, authority of any person signing; falsification;
                  or the legal effect of; any documents called for under any L/C
                  if (with respect to the foregoing) such documents on their
                  face appear to be in order.

                  (b)      The Issuer may honor, as complying with the terms of
any L/C and of any drawing thereunder, any drafts or other documents otherwise
in order, but signed or issued by an administrator, executor, conservator,
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, liquidator, receiver, or other legal representative of the party
authorized under such L/C to draw or issue such drafts or other documents.

                  (c)      Unless otherwise agreed to, in the particular
instance, each Borrower hereby authorizes any Issuer to:

                           (i)      Select an advising bank, if any.

                           (ii)     Select a paying bank, if any.

                           (iii)    Select a negotiating bank.

                  (d)      All directions, correspondence, and funds transfers
relating to any L/C are at the risk of the Borrowers. The Issuer shall have
discharged the Issuer's obligations under any L/C which, or the drawing under
which, includes payment instructions, by the initiation of the method of payment
called for in, and in accordance with, such instructions (or by any other
commercially reasonable and comparable method). None of the Administrative
Agent, any Revolving Credit Lender, or the Issuer shall have any responsibility
for any inaccuracy, interruption, error, or delay in transmission or delivery by
post, facsimile, telegraph or cable, or for any inaccuracy of translation.

                  (e)      The Administrative Agent's, each Revolving Credit
Lender's, and the Issuer's rights, powers, privileges and immunities specified
in or arising under this Agreement are in addition to any heretofore or at any
time hereafter otherwise created or arising, whether by statute or rule of law
or contract.

                  (f)      Except to the extent otherwise expressly provided
hereunder or agreed to in writing by the Issuer and the Lead Borrower,
documentary L/Cs will be governed by the

<PAGE>

Uniform Customs and Practice for Documentary Credits, International Chamber of
Commerce, Publication No. 500, and standby L/Cs will be governed by
International Standby Practices ISP98 (adopted by the International Chamber of
Commerce on April 6, 1998) and any respective subsequent revisions thereof.

                  (g)      The obligations of the Borrowers under this Agreement
with respect to L/Cs are absolute, unconditional, and irrevocable and shall be
performed strictly in accordance with the terms hereof under all circumstances,
whatsoever including, without limitation, the following:

                           (i)      Any lack of validity or enforceability or
                  restriction, restraint, or stay in the enforcement of this
                  Agreement, any L/C, or any other agreement or instrument
                  relating thereto.

                           (ii)     Any Borrower's consent to any amendment or
                  waiver of, or consent to the departure from, any L/C.

                           (iii)    The existence of any claim, set-off,
                  defense, or other right which any Borrower may have at any
                  time against the beneficiary of any L/C.

                           (iv)     Absent the gross negligence or willful
                  misconduct of the Issuer, any honoring of a drawing under any
                  L/C, which drawing possibly could have been dishonored due to
                  a non-material technicality based upon a strict construction
                  of the terms of the L/C.

                  2.21     Changed Circumstances. (a) The Administrative Agent
may advise the Lead Borrower that the Administrative Agent has made the good
faith determination (which determination shall be final and conclusive) of any
of the following:

                           (i)      Adequate and fair means do not exist for
                  ascertaining the rate for Eurodollar Loans;

                           (ii)     The continuation of or conversion of any
                  Loan to a Eurodollar Loan has been made impracticable or
                  unlawful by the occurrence of a contingency that materially
                  and adversely affects the applicable market or the compliance
                  by the Administrative Agent or any Lender in good faith with
                  any Applicable Law; or

                           (iii)    The indices on which the interest rates for
                  Eurodollar Loans are based shall no longer represent the
                  effective cost to the Administrative Agent or any Lender for
                  U.S. dollar deposits in the interbank market for deposits in
                  which it regularly participates.

                  (b)      In the event that the Administrative Agent advises
the Lead Borrower of an occurrence described in Section 2.21(a), then, until the
Administrative Agent notifies the Lead Borrower that the circumstances giving
rise to such notice no longer apply:

<PAGE>

                           (i)      the obligation of the Administrative Agent
                  or each Lender to make loans of the type affected by such
                  changed circumstances or to permit the Lead Borrower to select
                  the affected interest rate as otherwise applicable to any
                  Loans shall be suspended; and

                           (ii)     any notice which the Lead Borrower had given
                  the Administrative Agent with respect to any Eurodollar Loan,
                  the time for action with respect to which has not occurred
                  prior to the Administrative Agent's having given notice
                  pursuant to Section 2.21(a), shall be deemed at the option of
                  the Administrative Agent to not have been given.

                  2.22     Designation Of Lead Borrower As Borrowers' Agent. (a)
Each Borrower hereby irrevocably designates and appoints the Lead Borrower as
that Borrower's agent to obtain Loans and L/Cs under this Agreement, the
proceeds of which shall be available to each Borrower for those uses as those
set forth in Section 2.1(d). As the disclosed principal for its agent, each
Borrower shall be obligated to the Administrative Agent and each Lender on
account of Loans so made and L/Cs so issued under this Agreement as if made
directly by the Lenders to that Borrower, notwithstanding the manner by which
such Loans and L/Cs are recorded on the books and records of the Lead Borrower
and of any Borrower.

                  (b)      Each Borrower recognizes that credit available to it
under this Agreement is in excess of and on better terms than it otherwise could
obtain on and for its own account and that one of the reasons therefor is its
joining in the credit facility contemplated herein with all other Borrowers.
Consequently, each Borrower hereby assumes and agrees to discharge all
Liabilities of all other Borrowers as if the Borrower so assuming were each
other Borrower.

                  (c)      The Lead Borrower shall act as a conduit for each
Borrower (including itself, as a Borrower) on whose behalf the Lead Borrower has
requested a Loan.

                  (d)      The proceeds of each loan and advance provided under
this Agreement which is requested by the Lead Borrower shall be deposited into
the Operating Account or as otherwise indicated by the Lead Borrower. The Lead
Borrower shall cause the transfer of the proceeds thereof to the (those)
Borrower(s) on whose behalf such loan and advance was obtained. Neither the
Administrative Agent nor any Lender shall have any obligation to see to the
application of such proceeds.

                  (e)      If, for any reason, and at any time during the term
of this Agreement,

                           (i)      any Borrower, including the Lead Borrower,
                  as agent for the Borrowers, shall be unable to, or prohibited
                  from carrying out the terms and conditions of this Agreement
                  (as determined by the Administrative Agent in the
                  Administrative Agent's sole and absolute discretion); or

                           (ii)     the Administrative Agent deems it
                  inexpedient (in the Administrative Agent's sole and absolute
                  discretion) to continue making Revolving Credit Loans and
                  issue L/Cs to or for the account of any particular

<PAGE>

                  Borrower, or to channel such Revolving Credit Loans and L/Cs
                  through the Lead Borrower,

then the Revolving Credit Lenders may make Revolving Credit Loans directly to,
and issue L/Cs directly for the account of such of the Borrowers as the
Administrative Agent determines to be expedient, which loans or advances may be
made without regard to the procedures otherwise included herein.

                  (f)      In the event that the Administrative Agent determines
to forgo the procedures included herein pursuant to which Revolving Credit Loans
and L/Cs are to be channeled through the Lead Borrower, then the Administrative
Agent may designate one or more of the Borrowers to fulfill the financial and
other reporting requirements otherwise imposed herein upon the Lead Borrower.

                  (g)      Each of the Borrowers shall remain liable to the
Administrative Agent and the Lenders for the payment and performance of all
Liabilities (which payment and performance shall continue to be secured by all
Collateral granted by each of the Borrowers) notwithstanding any determination
by the Administrative Agent to cease making Revolving Credit Loans or L/Cs to or
for the benefit of any Borrower.

                  (h)      The authority of the Lead Borrower to request loans
on behalf of, and to bind, the Borrowers, shall continue unless and until the
Administrative Agent acts as provided in Section 2.22(e), above, or the
Administrative Agent actually receives

                           (i)      written notice of: (A) the termination of
                  such authority, and (B) the subsequent appointment of a
                  successor Lead Borrower, which notice is signed by the
                  respective Presidents of each Borrower (other than the
                  President of the Lead Borrower being replaced) then eligible
                  for borrowing under this Agreement; and

                           (ii)     written notice from such successive Lead
                  Borrower (A) accepting such appointment; (B) acknowledging
                  that such removal and appointment has been effected by the
                  respective Presidents of such Borrowers eligible for borrowing
                  under this Agreement; and (C) acknowledging that from and
                  after the date of such appointment, the newly appointed Lead
                  Borrower shall be bound by the terms hereof, and that as used
                  herein, the term "Lead Borrower" shall mean and include the
                  newly appointed Lead Borrower.

                  2.23     Lenders' Commitments. (a) Subject to Section 16.1
(which provides for assignments and assumptions of Commitments), each Revolving
Credit Lender's "Revolving Credit Commitment Percentage", and "Revolving Credit
Commitment" (respectively so referred to herein) is set forth on Schedule 2.23.

                  (b)      The obligations of each Revolving Credit Lender are
several and not joint. No Revolving Credit Lender shall have any obligation to
make any loan or advance under this Agreement in excess of the lesser of the
following:

<PAGE>

                           (i)      that Revolving Credit Lender's Revolving
                  Credit Commitment Percentage of the subject loan or advance or
                  of Availability; or

                           (ii)     that Revolving Credit Lender's Commitment.

                  (c)      [Intentionally Omitted]

                  (d)      No Lender shall have any liability to the Credit
Parties on account of the failure of any other Lender to provide any loan or
advance under the nor any obligation to make up any shortfall which may be
created by such failure.

                  (e)      The Commitments, Revolving Credit Commitment
Percentages, and identities of the Lenders may be changed, from time to time by
the reallocation or assignment of Commitments and Revolving Credit Commitment
Percentages amongst the Lenders or with other Persons who determine to become
"Lenders" in accordance with the provisions of Article 16 hereof.

                  (f)      Upon written notice given the Lead Borrower from time
to time by the Administrative Agent, of any assignment or allocation referenced
in Section 2.23(e):

                           (i)      Each Borrower shall execute one or more
                  replacement Notes to reflect such changed Commitments,
                  Revolving Credit Commitment Percentages, and identities and
                  shall deliver such replacement Notes to the Administrative
                  Agent (which promptly thereafter shall deliver to the Lead
                  Borrower the Notes so replaced) provided however, in the event
                  that a Note is to be exchanged following its acceleration or
                  the entry of an order for relief under the Bankruptcy Code
                  with respect to any Borrower, the Administrative Agent, in
                  lieu of causing the Borrowers to execute one or more new
                  Notes, may issue the Administrative Agent's Certificate
                  confirming the resulting Commitments and Revolving Credit
                  Commitment Percentages.

                           (ii)     Such change shall be effective from the
                  effective date specified in such written notice and any Person
                  added as a Lender shall have all rights and privileges of a
                  Lender hereunder thereafter as if such Person had been a
                  signatory to this Agreement and any other Loan Document to
                  which a Lender is a signatory and any Person removed as a
                  Lender shall be relieved of any obligations or
                  responsibilities of a Lender hereunder thereafter.

                  2.24     Replacement Of Lender. (a) If any Lender requests
compensation under Sections 2.19(c) or 20.8, then such Lender shall use its
reasonable best efforts to designate a different lending office for funding or
booking L/Cs hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Sections 2.19(c) or 20.8, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. The

<PAGE>

Borrowers hereby agree to pay all reasonable costs and expenses incurred by any
Lender in connection with any such designation or assignment.

                  (b)      If any Lender requests compensation under Sections
2.19(c) or 20.8, then the Borrowers may, at their sole expense and effort, upon
notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in Article 16), all its interests, rights and obligations
under this Agreement to an assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment), provided
that (i) if such assignee is not an existing Lender, the Borrowers shall have
received the prior written consent of the Administrative Agent, the Issuers and
Swing Line Lender, which consent shall not unreasonably be delayed or withheld,
(ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in unreimbursed drawings
under L/Cs and Swing Line Loans, accrued interest thereon, accrued fees and all
other amounts payable to it hereunder, from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrowers (in the
case of all other amounts) and (iii) such assignment will result in a reduction
in such compensation, payments or costs. A Lender shall not be required to make
any such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrowers to require
such assignment and delegation cease to apply.

                                   SECTION 3
                              CONDITIONS PRECEDENT

                  As a condition to the effectiveness of this Agreement, each of
the documents respectively described in Sections 3.1 through and including 3.4,
(each in form and substance satisfactory to the Administrative Agent) shall have
been delivered to the Administrative Agent, and the conditions respectively
described in Sections 3.5 through and including 3.19, shall have been satisfied:

                  3.1      Corporate Due Diligence. (a) Certificates of
corporate good standing for each Credit Party, respectively issued by the
Secretary of State for the state in which that Credit Party is incorporated.

                  (b)      Certificates of due qualification, in good standing,
issued by the Secretary(ies) of State of each State in which the nature of the
business conducted by the Credit Parties, or assets owned by any Credit Party,
requires such qualification and the failure to so qualify would have a Material
Adverse Effect.

                  (c)      Certificates of each Credit Party's Secretary (or, if
such Credit Party has no Secretary, its Assistant Secretary) of the due
adoption, continued effectiveness, and setting forth the texts of, each
corporate resolution adopted in connection with the establishment of the loan
arrangement contemplated by the Loan Documents and attesting to the true
signatures of each Person authorized as a signatory to any of the Loan
Documents.

<PAGE>

                  3.2      Legal Opinions. Opinions of counsel to the Credit
Parties in form and substance reasonably satisfactory to the Administrative
Agent.

                  3.3      Documents. Originals of this Agreement duly executed
by each of the parties hereto, the documents and instruments listed on the
Restatement Documents List, in each case, duly executed by each of the parties
thereto, and such additional instruments and documents as the Administrative
Agent or its counsel may reasonably require or request.

                  3.4      Officers' Certificates. Certificates executed by the
President or the Chief Financial Officer of each Credit Party and stating that
the representations and warranties made by the Credit Parties to the
Administrative Agent, the Issuer and the Lenders in the Loan Documents are true
and complete in all material respects as of the date of such Certificate, and
that no event has occurred which is or which, solely with the giving of notice
or passage of time (or both) would be an Event of Default.

                  3.5      Representations And Warranties. Each of the
representations made by or on behalf of each Credit Party in this Agreement or
in any of the other Loan Documents or in any other report, statement, document,
or paper provided by or on behalf of each Credit Party shall be true and
complete in all material respects as of the date as of which such representation
or warranty was made.

                  3.6      All Fees And Expenses Paid. All fees currently due
and all costs and expenses incurred by the Administrative Agent in connection
with the administration or amendment and restatement of this credit facility
(including the fees and expenses of counsel to the Administrative Agent) shall
have been paid in full.

                  3.7      No Default. No Default shall then exist.

                  3.8      No Adverse Change. No event shall have occurred or
failed to occur, which occurrence or failure has had or could reasonably be
expected to have a materially adverse effect upon any Credit Party's assets,
operations, business, condition (financial or otherwise) or income when compared
with such at the Fiscal quarter ending on or about May 3, 2003.

                  3.9      Perfection Of Encumbrances. The Administrative Agent
shall have received all documents and instruments, including Uniform Commercial
Code financing statements, required by law or reasonably requested by the
Administrative Agent to be filed, registered or recorded to create or perfect
the first priority Encumbrances intended to be created under the Loan Documents
and all such documents and instruments shall have been so filed, registered or
recorded to the satisfaction of the Administrative Agent.

                  3.10     [Intentionally Omitted]

                  3.11     Consents And Approvals. All necessary consents and
approvals to the transactions contemplated hereby shall have been obtained and
shall be reasonably satisfactory to the Administrative Agent.

<PAGE>

                  3.12     No Defaults Under Applicable Law Or Material
Agreements. The consummation of the transactions contemplated hereby shall not
(a) violate any Requirement of Law or (b) conflict with, or result in a default
or event of default under, any material agreement of any Credit Party,
including, without limitation, the Existing Indentures. No event shall exist
which is, or solely with the passage of time, the giving of notice or both,
would be a default under the Existing Indentures or any other material agreement
of any Credit Party.

                  3.13     No Litigation. Except as set forth in Schedule 4.18,
there shall not exist any litigation or other proceedings the result of which
could have a Material Adverse Effect.

                  3.14     No Negative Impact On Syndication. There shall not
have occurred any disruption or material adverse change in the financial or
capital markets in general that would, in the reasonable opinion of the
Administrative Agent, have a material adverse effect on the markets for loan
syndications or equity securities in particular, or adversely affect the
syndication of the Loans.

                  3.15     No Change In Governmental Regulations. No material
changes shall have occurred in governmental regulations or policies affecting
the Credit Parties, the Administrative Agent, the Issuer, or the Lenders prior
to the Restatement Effective Date.

                  3.16     Excess Availability. After giving effect to all Loans
made and L/Cs issued on the Restatement Effective Date, Availability on the
Restatement Effective Date shall be at least $100,000,000.00.

                  3.17     [Intentionally Omitted]

                  3.18     [Intentionally Omitted]

                  3.19     [Intentionally Omitted]

                  3.20     [Intentionally Omitted]

                  3.21     Benefit Of Conditions Precedent. The conditions set
forth in this Article 3 are for the sole benefit of the Administrative Agent,
the Issuer and each Lender and may be waived by the Administrative Agent in
whole or in part without prejudice to the Administrative Agent, the Issuer or
any Lender.

                  No document shall be deemed delivered to the Administrative
Agent or any Lender until received and accepted by the Administrative Agent at
its offices in Boston, Massachusetts. Under no circumstances shall this
Agreement take effect until executed and accepted by the Administrative Agent at
said offices.

<PAGE>

                                   SECTION 4
                GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS

                  To induce each Lender and the Issuer to establish the credit
facility contemplated herein and to induce the Lenders to provide Loans and the
Issuer to issue L/Cs under the Revolving Credit (each of which Loans shall be
deemed to have been made, and L/Cs to have been issued, in reliance thereupon)
the Credit Parties, in addition to all other representations, warranties, and
covenants made by any Credit Party in any other Loan Document, make those
representations, warranties, and covenants included in this Agreement:

                  4.1      Payment And Performance Of Liabilities. The Credit
Parties shall pay each of their respective payment Liabilities when due (or when
demanded, if payable on demand) and shall promptly, punctually, and faithfully
perform each other Liability.

                  4.2      Due Organization; Authorization; No Conflicts. (a)
Each Credit Party presently is and hereafter shall remain in good standing as a
corporation under the laws of the State in which it is organized, and is and
shall hereafter remain duly qualified and in good standing in every other State
in which, by reason of the nature or location of each Credit Party's assets or
operation of each Credit Party's business, such qualification may be necessary,
except where the failure to so qualify would not have a Material Adverse Effect.

                  (b)      As of the Restatement Effective Date, each Credit
Party's respective organizational identification number assigned to it by the
State of its incorporation and its respective federal employer identification
number is stated on Schedule 4.2(b). A mailing address at which each of the
Credit Parties may be contacted is 700 Pilgrim Way, Green Bay, Wisconsin 54304.

                  (c)      No Credit Party shall change its State of
organization; any organizational identification number assigned to that Credit
Party by that State; or that Credit Party's federal taxpayer identification
number, except with the prior written consent of the Administrative Agent (such
consent not to be unreasonably withheld).

                  (d)      The corporate ownership structure of the Lead
Borrower and each of its Subsidiaries is set forth on Schedule 4.2(d). Each
Credit Party (other than the Lead Borrower) is a wholly-owned direct or indirect
Subsidiary of the Lead Borrower. Each direct and indirect Subsidiary of the Lead
Borrower is a Credit Party hereunder. Pamida Foundation does not own and shall
not obtain any material assets, has no and shall not incur any material
liabilities, does not and shall not conduct any operations and is and shall
maintain its status as a tax-exempt foundation under Section 501(c)(3) of the
Internal Revenue Code. None of ShopKo Holdings, Pamida One LLC, Pamida Two LLC,
Pamida Three LLC, Pamida Four LLC, Pamida Five LLC, Pamida Six LLC or Pamida
Seven LLC is a Subsidiary or Affiliate of any Credit Party.

                  (e)      Each Affiliate, as of the Restatement Effective Date,
is listed on Schedule 4.2(e). The Lead Borrower shall provide the Administrative
Agent with prior written notice of any entity's becoming or ceasing to be an
Affiliate.

<PAGE>

                  (f)      Each Credit Party has all requisite corporate power
and authority to execute and deliver all Loan Documents to which that Credit
Party is a party and has and will hereafter retain all requisite corporate power
to perform all Liabilities.

                  (g)      The execution and delivery by each Credit Party of
each Loan Document to which it is a party; each Credit Party's consummation of
the transactions contemplated by such Loan Documents (including, without
limitation, the creation of Collateral Interests by that Credit Party to secure
the Liabilities); each Credit Party's performance under those of the Loan
Documents to which it is a party; the borrowings hereunder; and the use of the
proceeds thereof:

                           (i)      have been duly authorized by all necessary
                  corporate action;

                           (ii)     do not, and will not, contravene in any
                  material respect any provision of any Requirement of Law, any
                  Existing Indenture or any other material obligation of that
                  Credit Party; and

                           (iii)    will not result in the creation or
                  imposition of, or the obligation to create or impose, any
                  Encumbrance upon any assets of that Credit Party pursuant to
                  any Requirement of Law or obligation, except pursuant to the
                  Loan Documents;

                  (h)      The Loan Documents have been duly executed and
delivered by each Credit Party and are the legal, valid and binding obligations
of each Credit Party, enforceable against each Credit Party in accordance with
their respective terms, except as enforceability is limited by bankruptcy,
insolvency, or other laws relating to or affecting generally the enforcement of
creditors' rights and except to the extent that the availability of the remedy
of specific performance or injunctive relief is subject to the discretion of the
court before which any proceeding therefor may be brought.

                  4.3      Trade Names. (a) Schedule 4.3 is a listing, as of the
Restatement Effective Date, of:

                           (i)      all names under which any Credit Party ever
                  conducted its business during the preceding five (5) years
                  other than names associated exclusively with the ProVantage
                  Health Services business that have not been used in at least
                  the six months immediately preceding the Restatement Effective
                  Date; and

                           (ii)     all Persons with whom any Credit Party ever
                  consolidated or merged, or from whom any Credit Party ever
                  acquired in a single transaction or in a series of related
                  transactions substantially all of such Person's assets, in
                  each case within the preceding five (5) years, other than
                  acquisitions of, and consolidations and mergers with, single
                  store local retail pharmacy businesses occurring more than six
                  months prior to the Restatement Effective Date.

<PAGE>

                  (b)      The Lead Borrower will provide the Administrative
Agent with not less than twenty-one (21) days prior written notice (with
reasonable particularity) of any change to any Credit Party's name from that
under which that Credit Party is conducting its business at the Restatement
Effective Date and will not effect such change unless each Credit Party is then
in compliance with all provisions of this Agreement.

                  4.4      Intellectual Property. (a) Each Credit Party owns and
possesses, or has the right to use (and will hereafter own, possess, or have
such right to use) all patents, industrial designs, trademarks, trade names,
trade styles, brand names, service marks, logos, copyrights, trade secrets,
know-how, confidential information, and other intellectual or proprietary
property of any third Person reasonably necessary for that Credit Party's
conduct of that Credit Party's business, except where the failure to so own,
possess or have the right to use would not have a Material Adverse Effect.

                  (b)      The conduct by each Credit Party of that Credit
Party's business does not presently infringe (nor will any Credit Party conduct
its business in the future so as to infringe) the patents, industrial designs,
trademarks, trade names, trade styles, brand names, service marks, logos,
copyrights, trade secrets, know-how, confidential information, or other
intellectual or proprietary property of any third Person in any manner that
would have a Material Adverse Effect.

                  4.5      Locations. (a) The Collateral, and the books,
records, and papers of the Credit Parties pertaining thereto, are kept and
maintained solely at the following locations:

                           (i)      the Lead Borrower's chief executive offices
                  which, as of the Restatement Effective Date, are at 700
                  Pilgrim Way, Green Bay, Wisconsin, 54304; and

                           (ii)     those locations which are listed on Schedule
                  4.5 which Schedule includes, as of the Restatement Effective
                  Date, with respect to each such location, the name of the
                  Credit Party that uses such premises, the name of the Credit
                  Party that owns the Inventory located at such premises, the
                  name and address of the landlord on the Lease which covers
                  such location (or an indication that a Credit Party owns the
                  subject location) and of all service bureaus with which any
                  such records are maintained and the names and addresses of
                  each of the Credit Parties' landlords.

                  (b)      No Credit Party shall remove any of the Collateral
from said chief executive office or those locations listed with respect to such
Credit Party on Schedule 4.5 or any location with respect to such Credit Party
opened in accordance with Section 4.5(c) or transfer, sell or otherwise convey
title to such Collateral to another Credit Party except for the following
purposes:

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

                           (ii)     to move Inventory from one such location to
                  another such location;

<PAGE>

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

                           (iv)     to dispose of Inventory that is not Eligible
                  Inventory; or

                           (v)      to open or close stores or to move the chief
                  executive office.

unless the Administrative Agent, to the extent required by the Administrative
Agent, shall have received and filed additional UCC financing statements with
respect to such removed or transferred Collateral.

                  (c)      The Credit Parties will not open any new locations at
which any Credit Party maintains, offers for sale or stores any of the
Collateral unless, to the extent required by the Administrative Agent, the
Administrative Agent shall have received and filed additional UCC financing
statements with respect to Collateral at such new location if required by any
Requirement of Law then in effect (as determined by the Administrative Agent).
The Lead Borrower will promptly notify the Administrative Agent in writing of
any new location at which any Credit Party maintains, offers for sale, or stores
any of the Collateral. The Credit Parties will not enter into any leases for any
new locations at any time an Event of Default exists.

                  (d)      Except as otherwise disclosed pursuant to this
Section 4.5 or as hereafter disclosed to the Administrative Agent, no Inventory
of the Credit Parties with an aggregate Cost greater than $5,000,000.00 is in
the care or custody of any third party or stored or entrusted with a bailee or
other third party and Inventory with an aggregate Cost greater than
$5,000,000.00 shall not hereafter be placed under such care, custody, storage,
or entrustment unless a warehouseman's or bailee's agreement reasonably
acceptable to the Administrative Agent has been provided to the Administrative
Agent in respect thereof.

                  4.6      Title To Assets; Liens; Limitations on Liens. (a) The
Credit Parties are, and shall hereafter remain, the owners of all Collateral, in
each case free and clear of all Encumbrances with the exception of the
following:

                           (i)      Encumbrances in favor of the Administrative
                  Agent, or, with respect to L/Cs issued hereunder, the Issuer;

                           (ii)     those Encumbrances (if any) listed on
                  Schedule 4.6(a) and any renewals or refinancings thereof that
                  do not increase the amount of Indebtedness secured thereby or
                  extend such Encumbrances to other property of the Credit
                  Parties;

                           (iii)    Permitted Encumbrances;

                           (iv)     Encumbrances granted to secure Indebtedness
                  incurred to finance the acquisition of fixed or capital
                  assets, provided that (1) any such Encumbrance shall attach
                  only to the assets so acquired by the Borrowers with the
                  proceeds of such Indebtedness and shall not extend to any
                  other assets of the Borrowers and (2) that the amount of
                  Indebtedness secured thereby is not increased;

<PAGE>

                           (v)      Encumbrances granted to secure Indebtedness
                  permitted pursuant to Section 4.7(f) hereof, provided that any
                  such Encumbrance shall attach only to the real estate, and
                  improvements thereto, so financed by the Borrowers with the
                  proceeds of such Indebtedness and shall not extend to any
                  other assets of the Borrowers, and further provided that if
                  there is located on such real estate any Inventory of the
                  Borrowers or any other Collateral or any books and records
                  relating thereto, the mortgagee obtaining such Encumbrance
                  shall have furnished the Administrative Agent with an
                  agreement permitting the Administrative Agent reasonable
                  access to the real estate on which the mortgagee holds such
                  Encumbrance for the purpose of repossessing and/or disposing
                  of any Collateral located therein and waiving any rights in
                  and to all Collateral, all on terms reasonably acceptable to
                  the Administrative Agent;

                           (vi)     Judgment liens with respect to judgments
                  that do not constitute an Event of Default under Section 10.8
                  hereof;

                           (vii)    Encumbrances upon any property or assets
                  (other than Collateral) of any Person existing immediately
                  prior to the time of any Permitted Acquisition of such Person
                  or such Person's property or assets by a Borrower, provided
                  that such Encumbrances were not granted in contemplation of,
                  or in connection with, such Permitted Acquisition;

                           (viii)   Encumbrances in favor of Payless to secure
                  the Lead Borrower's obligations for sales of Payless Inventory
                  pursuant to the Payless Agreement and consisting solely of
                  liens on receivables and proceeds arising directly from sales
                  of Payless Inventory; and

                           (ix)     Encumbrances consisting of (1) unasserted
                  claims and (2) asserted claims not to exceed $25,000.00 at any
                  time unpaid and outstanding for more than five Business Days,
                  in each case related to credit card receivables pursuant to
                  merchant bank agreements related thereto.

                  (b)      Except as disclosed on Schedule 4.6(b), no Credit
Party has, and none shall have, possession of any property on consignment to
that Credit Party in excess of $30,000,000.00 unless (i) the Lead Borrower has
furnished the Administrative Agent with ten (10) days prior written notice of
its intent to acquire such property on consignment, and (ii) if the
Administrative Agent so requests, an intercreditor agreement with the consignor
on terms reasonably acceptable to the Administrative Agent has been delivered to
the Administrative Agent, and (iii) the aggregate amount of property consigned
to the Credit Parties shall not exceed ten percent of the Cost of the Credit
Parties' Inventory at any time.

                  (c)      No Credit Party will, or will allow any of its
Subsidiaries to, directly or indirectly, create, incur, assume of suffer to
exist any Lien (other than a Lien of the type described in clauses (a)(ii),
(iii), (vi) and (viii) of this Section 4.6) of any kind on any now owned or
hereafter acquired Excluded Asset securing any Indebtedness (other than Liens
permitted to secure Indebtedness permitted to be incurred under Sections 4.7(f)
and (g)) unless such Credit

<PAGE>

Party secures or causes such Subsidiary to secure the Liabilities equally and
ratably with such Indebtedness for so long as such Indebtedness is so secured;
provided however, that if any of the Liens permitted above cause any of the
Existing Indentures to be secured by the assets subject to such Lien, the Credit
Parties will cause the Liabilities to become secured by such assets equally and
ratably with such Existing Indentures.

                  4.7      Indebtedness. The Credit Parties do not and shall not
hereafter have any Indebtedness with the exceptions of the following:

                           (a)      any Indebtedness on account of the Revolving
                  Credit or the L/Cs;

                           (b)      the Indebtedness (if any) listed on Schedule
                  4.7, and any renewals or refinancings thereof that does not
                  increase the principal amount thereof;

                           (c)      unsecured Indebtedness due to any Credit
                  Party by any other Credit Party that is subordinated to the
                  Liabilities in a manner satisfactory to the Administrative
                  Agent;

                           (d)      Indebtedness not otherwise permitted in this
                  Section, not to exceed $50,000,000.00 in the aggregate at any
                  time outstanding;

                           (e)      Indebtedness on account of Hedge Agreements
                  on terms and in such amounts as may be reasonably acceptable
                  to the Administrative Agent;

                           (f)      Indebtedness secured by Operating Properties
                  not to exceed $300,000,000.00 in aggregate principal amount
                  outstanding at any time to the extent such Indebtedness is
                  permitted to be so incurred and secured under the Existing
                  Indentures and would not require or result in the granting of
                  an Encumbrance on any Operating Property in favor of the
                  holders of the notes issued under any such Existing Indenture;

                           (g)      Indebtedness not to exceed $50,000,000.00 in
                  the aggregate at any time outstanding secured by Encumbrances
                  permitted by Section 4.6(a)(iv); and

                           (h)      Indebtedness of the Borrowers consisting of
                  a guaranty of obligations of a Credit Party otherwise
                  permitted hereunder.

                  4.8      Insurance. (a) Schedule 4.8 is a schedule of all
insurance policies owned by the Credit Parties or under which any Credit Party
is the named insured as of the Restatement Effective Date. Each of such material
policies is in full force and effect. Neither the issuer of any such policy nor
any Credit Party is in default or violation of any such policy in any material
respect.

                  (b)      The Credit Parties shall have and maintain at all
times insurance covering such risks, in such amounts, containing such terms, in
such form, for such periods, and written by such companies as is customarily
maintained by prudent companies in the Credit Parties' industry (including such
levels of self-insurance as are deemed prudent by the Lead Borrower).

<PAGE>

The Credit Parties shall also have and maintain at all times insurance covering
the Collateral, in such amounts, containing such terms, in such form, for such
periods, and written by such companies as may be reasonably satisfactory to the
Administrative Agent.

                  (c)      All property insurance related to the Collateral and
liability insurance carried by the Credit Parties shall provide for a minimum of
thirty (30) days' written notice of cancellation to the Administrative Agent and
all such liability insurance and insurance which covers the Collateral shall
include an endorsement in favor of the Administrative Agent (and the Issuer and
the Lenders, in the case of liability insurance), which endorsement shall
provide that the insurance, to the extent of the Administrative Agent's interest
therein, shall not be impaired or invalidated, in whole or in part, by reason of
any act or neglect of any Credit Party or by the failure of any Credit Party to
comply with any warranty or condition of the policy.

                  (d)      The Lead Borrower shall furnish the Administrative
Agent from time to time with certificates or other evidence satisfactory to the
Administrative Agent regarding compliance by the Credit Parties with the
foregoing requirements.

                  (e)      In the event of the failure by the Credit Parties to
maintain insurance as required herein, the Administrative Agent, at its option,
may obtain such insurance, provided, however, the Administrative Agent's
obtaining of such insurance shall not constitute a cure or waiver of any Event
of Default occasioned by the Credit Parties' failure to have maintained such
insurance.

                  4.9      Licenses. Each material license, distributorship,
franchise, and similar agreement issued to any Credit Party, or to which any
Credit Party is a party, is in full force and effect, except where the failure
to be in full force and effect would not have a Material Adverse Effect. No
party to any such license or agreement is in default or violation thereof, where
such default or violation would have a Material Adverse Effect. As of the
Restatement Effective Date, no Credit Party has received any notice or threat of
cancellation of any such license or agreement. The Lead Borrower shall promptly
furnish the Administrative Agent with copies of any notice or threat of
cancellation of any such license or agreement which would have a Material
Adverse Effect.

                  4.10     Leases. Schedule 4.10 is a schedule of all effective
Leases and Capital Leases in an amount greater than $1,000,000.00 as of the
Restatement Effective Date, except locations where no Inventory is located. Each
of such Leases and Capital Leases is in full force and effect, except where the
failure to be in full force and effect would not have a Material Adverse Effect.
No party to any such Lease or Capital Lease is in default or violation of any
such Lease or Capital Lease where such default or violation would have a
Material Adverse Effect. As of the Restatement Effective Date, no Credit Party
has received any notice or threat of cancellation of any such Lease or Capital
Lease, except for cancellations which would not have a Material Adverse Effect.
Each Credit Party hereby authorizes the Administrative Agent at any time and
from time to time during the existence of an Event of Default to contact any of
the Credit Parties' respective landlords in order to confirm the Credit Parties'
continued compliance with the terms and conditions of the Lease(s) between the
subject Credit Party and

<PAGE>

that landlord and to discuss such issues, concerning the subject Credit Party's
occupancy under such Lease(s), as the Administrative Agent may determine.

                  4.11     Requirements Of Law. Each Credit Party is in
compliance with, and shall hereafter comply with and use its assets in
compliance with, all Requirements of Law except where the failure of such
compliance will not have a Material Adverse Effect. No Credit Party has received
any notice of any violation of any Requirement of Law (other than of a violation
which would not have a Material Adverse Effect), which violation has not been
cured or otherwise remedied.

                  4.12     Labor Relations. (a) As of the Restatement Effective
Date, no Credit Party is a party to any collective bargaining or other labor
contract.

                  (b)      There is not presently pending and, to any Credit
Party's knowledge, there is not threatened any of the following which would have
a Material Adverse Effect:

                           (i)      any strike, slowdown, picketing, work
                  stoppage, or employee grievance process;

                           (ii)     any proceeding against or affecting any
                  Credit Party relating to the alleged violation of any
                  Applicable Law pertaining to labor relations or before the
                  National Labor Relations Board, the Equal Employment
                  Opportunity Commission, or any comparable governmental body,
                  organizational activity, or other labor or employment dispute
                  against or affecting any Credit Party;

                           (iii)    any lockout of any employees by any Credit
                  Party (and no such action is contemplated by any Credit
                  Party); or

                           (iv)     any application for the certification of a
                  collective bargaining agent.

                  (c)      No event has occurred or circumstance exists which
would provide the basis for any work stoppage or other labor dispute that would
have a Material Adverse Effect.

                  (d)      Except as set forth on Schedule 4.12, each Credit
Party:

                           (i)      has complied and will comply with all
                  Applicable Laws relating to employment, equal employment
                  opportunity, nondiscrimination, immigration, wages, hours,
                  benefits, collective bargaining, the payment of social
                  security and similar taxes, occupational safety and health,
                  and plant closing, except where the failure to so comply would
                  not have a Material Adverse Effect; and

                           (ii)     is not and will not become liable for the
                  payment of more than any amount of compensation, damages,
                  taxes, fines, penalties, or other amounts, however designated,
                  for that Credit Party's failure to comply with any Applicable
                  Law referenced in Section 4.12(d)(i), which would have a
                  Material Adverse

<PAGE>

                  Effect or would result in a claim in excess of $1,000,000.00
                  on any Collateral with priority over the Encumbrances of the
                  Administrative Agent therein.

                  (e)      The Lead Borrower shall furnish prompt notice to the
Administrative Agent of the occurrence of any event described in subparagraphs
4.12(a) through and including 4.12(d) which would have been disclosed to the
Administrative Agent had such occurrence existed as of the Restatement Effective
Date.

                  4.13     Maintain Collateral. The Credit Parties shall:

                           (a)      keep the Collateral in good order and repair
                  (ordinary wear and tear and insured casualty excepted);

                           (b)      not suffer or cause the waste or destruction
                  of any material part of the Collateral;

                           (c)      not use any of the Collateral in violation
                  in any material respect of any policy of insurance thereon;

                           (d)      maintain a system to ensure that, with
                  respect to sales of pharmacy Inventory (such as prescriptions,
                  pharmaceuticals, medications and controlled substances) giving
                  rise to rights to payment from any third-party payor insurance
                  companies, managed care organizations, government entities,
                  pharmacy plans (or the pharmacy plan administrators of such
                  companies, organizations or entities), which are Pharmacy
                  Accounts and with whom the Credit Parties do not have an
                  existing contractual relationship, (i) each purchaser of
                  pharmacy Inventory executes an assignment of benefits form
                  (assigning reimbursement rights to the Lead Borrower) and (ii)
                  copies of such assignments are sent to all such third-party
                  payors, it being understood that the term "third-party payor"
                  in this clause (d) shall not include any retail purchaser of
                  such pharmacy Inventory.

                           (e)      not sell, lease, or otherwise dispose of any
                  of the Collateral, other than the following:

                           (i)      the sale of Inventory in the ordinary course
                  of business or in compliance with this Agreement; and

                           (ii)     the turning over to the Administrative Agent
                  of all Receipts during the existence of a Cash Control Event
                  as provided herein.

                  4.14     Taxes. (a) With respect to the Credit Parties'
federal, state, and local tax liability and obligations:

                           (i)      The Lead Borrower, in material compliance
                  with all Applicable Law, has properly filed all returns due to
                  be filed up to the Restatement Effective Date.

<PAGE>

                           (ii)     As of the Restatement Effective Date, except
                  as described on Schedule 4.14:

                                    (A)      At no time has any Credit Party
                           received from any taxing authority any request to
                           perform any examination of or with respect to any
                           Credit Party nor any other written or verbal notice
                           in any way relating to any claimed failure by any
                           Credit Party to comply with all Applicable Law
                           concerning payment of any taxes or other amounts in
                           the nature of taxes.

                                    (B)      No agreement exists which waives or
                           extends any statute of limitations applicable to the
                           right of any taxing authority to assert a deficiency
                           or make any other claim for or in respect of federal
                           income taxes.

                                    (C)      No issue has been raised in any tax
                           examination of any Credit Party which, by application
                           of similar principles, reasonably would be expected
                           to result in the assertion of a deficiency for any
                           fiscal year open for examination, assessment, or
                           claim by any taxing authority which would have a
                           Material Adverse Effect.

                  (b)      The Credit Parties have, and hereafter shall: pay, as
they become due and payable, all taxes and unemployment contributions and other
charges of any kind or nature levied, assessed or claimed against any Credit
Party or the Collateral by any person or entity whose claim could result in an
Encumbrance upon any asset of any Credit Party or by any Governmental Authority
(provided that the Credit Party shall not be required to pay any such taxes or
claims as long as such tax or claim is being disputed by the Credit Parties in
good faith, the Credit Parties have established adequate reserves therefor in
accordance with GAAP, and no notice of tax lien has been filed with respect
thereto); properly exercise any trust responsibilities imposed upon any Credit
Party by reason of withholding from employees' pay or by reason of any Credit
Party's receipt of sales tax or other funds for the account of any third party;
timely make all contributions and other payments as may be required pursuant to
any Employee Benefit Plan now or hereafter established by any Credit Party; and
timely file all tax and other returns and other reports with each Governmental
Authority to whom any Credit Party is obligated to so file.

                  (c)      During the existence of any Event of Default, at its
option, the Administrative Agent may, but shall not be obligated to, pay any
such taxes, unemployment contributions, and any and all other charges levied or
assessed upon any Credit Party or the Collateral by any Person or Governmental
Authority, and make any contributions or other payments on account of the Credit
Parties' Employee Benefit Plan as the Administrative Agent, in the
Administrative Agent's discretion, may deem necessary or desirable, to protect,
maintain, preserve, collect, or realize upon any or all of the Collateral or the
value thereof or any right or remedy pertaining thereto, provided, however, the
Administrative Agent's making of any such payment shall not constitute a cure or
waiver of any Event of Default occasioned by the Credit Parties' failure to have
made such payment.

<PAGE>

                  4.15     No Margin Stock; Investment Company. No Credit Party
is engaged in the business of extending credit for the purpose of purchasing or
carrying any margin stock (within the meaning of Regulations U, T, and X of the
Board of Governors of the Federal Reserve System of the United States). No part
of the proceeds of any borrowing hereunder will be used at any time to purchase
or carry any such margin stock or to extend credit to others for the purpose of
purchasing or carrying any such margin stock. No Credit Party is (i) an
investment company or a company controlled by an investment company within the
meaning of the Investment Company Act of 1940, as amended, or (ii) subject to
any other law which purports to regulate or restrict its ability to borrow money
or to consummate the transactions contemplated by this Agreement or the other
Loan Documents or to perform its obligations hereunder or thereunder (other than
Regulation X of the Board).

                  4.16     ERISA. (a) Neither any Credit Party nor any ERISA
Affiliate has ever taken any of the following actions that would have a Material
Adverse Effect:

                           (i)      violated or failed to be in compliance with
                  any Credit Party's Employee Benefit Plan;

                           (ii)     failed timely to file all reports and
                  filings required by ERISA to be filed by any Credit Party;

                           (iii)    engaged in any nonexempt "prohibited
                  transactions" or "reportable events" (respectively as
                  described in ERISA);

                           (iv)     engaged in, or committed, any act such that
                  a tax or penalty reasonably could be imposed upon any Credit
                  Party on account thereof pursuant to ERISA;

                           (v)      accumulated any material cumulative funding
                  deficiency within the meaning of ERISA;

                           (vi)     terminated any Employee Benefit Plan such
                  that a lien could be asserted against any assets of any Credit
                  Party on account thereof pursuant to ERISA; or

                           (vii)    have any obligation under any Employee
                  Benefit Plan which is a multiemployer plan within the meaning
                  of Section 4001(a) of ERISA for withdrawal liability.

                  (b)      Neither any Credit Party nor any ERISA Affiliate
shall ever engage in any action of the type described in Section 4.16(a) to the
extent that any of the foregoing would have a Material Adverse Effect.

                  4.17     Hazardous Materials. (a) No Credit Party has ever:
(i) been legally responsible for any release or threat of release of any
Hazardous Material or (ii) received notification of the incurrence of any
expense in connection with the assessment, containment, or removal of any
Hazardous Material for which that Credit Party would be responsible, except

<PAGE>

where such release or threat of release or incurrence of such expense would not
have a Material Adverse Effect.

                  (b)      Each Credit Party shall: (i) dispose of any Hazardous
Material only in compliance with all Environmental Laws and (ii) have possession
of any Hazardous Material only in the ordinary course of that Credit Party's
business and in compliance with all Environmental Laws, except, in each case,
where the failure to do so would not have a Material Adverse Effect.

                  4.18     Litigation. As of the Restatement Effective Date,
except as described in Schedule 4.18, there is not presently pending or
threatened by or against any Credit Party any suit, action, proceeding, or
investigation which, if determined adversely to any Credit Party, could have a
Material Adverse Effect.

                  4.19     Dividends; Investments; Corporate Action. No Credit
Party shall:

                           (a)      pay any cash dividend or make any other
                  distribution in respect of any class of that Credit Party's
                  capital stock, except (i) the Subsidiaries of the Lead
                  Borrower may pay such dividends or make such distributions to
                  the Lead Borrower and (ii) the Lead Borrower may pay such
                  dividends or make such distributions to its shareholders so
                  long as prior to and after giving effect to such dividend or
                  distribution Availability is at least $100,000,000.00 and
                  Availability is projected on a pro forma basis to be at least
                  $100,000,000.00 for the twelve month period immediately
                  following such dividend or distribution.

                           (b)      redeem, retire, purchase, or acquire any of
                  the Lead Borrower's capital stock, provided that, as long as
                  no Default exists or would arise therefrom, the Lead Borrower
                  may redeem, purchase, retire or acquire its capital stock so
                  long as prior to and after giving effect to such repurchase
                  Availability is at least $100,000,000.00 and Availability is
                  projected on a pro forma basis to be at least $100,000,000.00
                  for the twelve month period immediately following such
                  redemption, purchase, retirement or acquisition.

                           (c)      Invest in or purchase any stock or
                  securities or rights to purchase any such stock or securities,
                  of any Person, except (i) investments described in Schedule
                  4.19, (ii) investments and purchases of equity by the Lead
                  Borrower in any other Borrower, (iii) Permitted Investments,
                  (iv) investments representing stock or obligations issued to a
                  Credit Party in settlement of claims against any other Person
                  by reason of a composition or adjustment of debt or a
                  reorganization of any debtor of a Credit Party, (v) Permitted
                  Acquisitions, as long as no Default exists or would arise
                  therefrom, (vi) as permitted in Section 4.20, (vii) warrants
                  or other similar rights received for no additional
                  consideration in connection with a transaction otherwise
                  permitted pursuant to this Agreement, and (viii) other
                  investments so long as prior to and after giving effect to
                  such investment Availability is at least $100,000,000.00 and
                  Availability is projected on a pro

<PAGE>

                  forma basis to be at least $100,000,000.00 for the twelve
                  month period immediately following such investment.

                           (d)      Merge or consolidate or be merged or
                  consolidated with or into any other Person, except that (i)
                  any Subsidiary of a Credit Party may merge with or into the
                  Lead Borrower or any other wholly owned Subsidiary of the Lead
                  Borrower, and (ii) Permitted Acquisitions, as long as no
                  Default exists or would arise therefrom.

                           (e)      Consolidate any of that Credit Party's
                  operations with those of any other Person, except that any
                  Subsidiary of a Credit Party may consolidate its operations
                  with or into the Lead Borrower or any other wholly owned
                  Subsidiary of the Lead Borrower.

                           (f)      Organize or create any Affiliate or Related
                  Entity to the extent that the Credit Parties' investment in
                  all such Affiliates and Related Entities after the Restatement
                  Effective Date (whether as equity, intercompany loan or
                  otherwise and whether such Affiliate or Related Entity is
                  organized or created after the Restatement Effective Date)
                  exceeds $1,000,000.00 in the aggregate, provided that no such
                  investment shall be made during the existence of a Cash
                  Control Event and provided, further, that, if any such
                  Affiliate or Related Party becomes a subsidiary of the Lead
                  Borrower it shall become a Guarantor hereunder in a manner
                  satisfactory to the Administrative Agent.

                           (g)      Subordinate any other material debts or
                  other material obligations owed to that Credit Party by any
                  third party to any other debts owed by such third party to any
                  other Person.

                           (h)      Acquire any assets other than in the
                  ordinary course and conduct of that Credit Party's business as
                  conducted at the execution of this Agreement, except for
                  Permitted Acquisitions, as long as no Default exists or would
                  arise therefrom.

                  4.20     Loans. No Credit Party shall make or suffer to exist
any loans or advances to, nor acquire the Indebtedness of, any Person, provided,
however, the foregoing does not prohibit any of the following:

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

                           (b)      advances to that Credit 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 Credit Party, which
                  expenses are properly substantiated by the person seeking such
                  advance and properly reimbursable by that Credit Party;

<PAGE>

                           (c)      unsecured intercompany loans amongst the
                  Credit Parties that are subordinated to the Liabilities in a
                  manner satisfactory to the Administrative Agent;

                           (d)      in addition to any loans permitted by
                  clauses (b) and (e) of this Section 4.20, loans to Affiliates
                  and Related Entities of the Credit Parties (other than Credit
                  Parties) provided that the Credit Parties' investment in all
                  such Affiliates and Related Entities after the Restatement
                  Effective Date (whether as equity, intercompany loans or
                  otherwise and whether such Affiliate or Related Entity is
                  organized or created after the Restatement Effective Date)
                  shall not exceed $1,000,000.00 in the aggregate provided that
                  no loans permitted solely by this Section 4.20(d) shall be
                  made during the existence of a Cash Control Event;

                           (e)      loans made after the Restatement Effective
                  Date to employees, officers and salespersons of the Credit
                  Parties consistent with past practices provided that (i) any
                  loans to any individual shall not exceed $500,000.00 in the
                  aggregate outstanding at any time, and (ii) all such loans to
                  employees, officers and salespersons of the Credit Parties
                  shall not exceed $2,500,000.00 in the aggregate outstanding at
                  any time.

                  4.21     Protection Of Assets. The Administrative Agent, in
the Administrative Agent's reasonable discretion, and from time to time during
the existence of an Event of Default, may discharge any tax or Encumbrance on
any of the Collateral, or take any other action which the Administrative Agent
may deem necessary or desirable to repair, insure, maintain, preserve, collect,
or realize upon any of the Collateral. The Administrative Agent shall not have
any obligation to undertake any of the foregoing and shall have no liability on
account of any action so undertaken except where there is a specific finding in
a judicial proceeding (in which the Administrative Agent has had an opportunity
to be heard), from which finding no further appeal is available, that the
Administrative Agent had acted in actual bad faith or in a grossly negligent
manner. The Credit Parties shall pay to the Administrative Agent, on demand, or
the Administrative Agent, in its discretion, may add to the Loan Account, all
amounts paid or incurred by the Administrative Agent pursuant to this Section
4.21.

                  4.22     Lines of Business. No Credit Party shall engage in
any business other than the business in which it is currently engaged or a
business reasonably related thereto.

                  4.23     Affiliate Transactions. Except as described on
Schedule 4.23 or as otherwise permitted under this Agreement, no Credit Party
shall make any payment, nor give any value, to any Affiliate that is not a
Credit Party except for goods and services actually purchased by that Credit
Party from, or sold by that Credit Party to, such Affiliate for a price and on
terms which shall be no less favorable to that Credit Party than those which
would have been charged and imposed in an arms length transaction.

                  4.24     Further Assurances. (a) Each Credit Party shall
execute and deliver to the Administrative Agent such instruments, documents, and
papers, and shall do all such things from time to time hereafter as the
Administrative Agent may reasonably request to carry into effect the

<PAGE>

provisions and intent of this Agreement; to protect and perfect the
Administrative Agent's Collateral Interests in the Collateral; and to comply in
all material respects with all applicable statutes and laws, and facilitate the
collection of the Receivables Collateral. Each Credit Party shall execute all
such instruments as may be reasonably required by the Administrative Agent with
respect to the recordation and/or perfection of the Collateral Interests created
or contemplated herein.

                  (b)      Each Credit Party hereby designates the
Administrative Agent as that Credit Party's true and lawful attorney, with full
power of substitution, to sign and file any financing statements and other
documents and instruments in order to perfect or protect the Administrative
Agent's Collateral Interests in the Collateral.

                  (c)      A carbon, photographic, or other reproduction of this
Agreement or of any financing statement or other instrument executed pursuant to
this Section 4.24 shall be sufficient for filing to perfect the security
interests granted herein.

                  4.25     Adequacy Of Disclosure.

                  (a)      All financial statements furnished to the
Administrative Agent and to each Lender by each Credit Party have been prepared
in accordance with GAAP consistently applied and present fairly in all material
respects the condition of the Credit Parties at the date(s) thereof and the
results of operations and cash flows for the period(s) covered (provided,
however, that unaudited financial statements are subject to normal year end
adjustments and to the absence of footnotes). There has been no change in the
Consolidated financial condition, results of operations, or cash flows of the
Credit Parties since the date(s) of such financial statements, other than
changes in the ordinary course of business, and changes which have not had a
Material Adverse Effect.

                  (b)      As of the Restatement Effective Date, no Credit Party
has any material contingent obligations or obligation under any Lease, excluding
synthetic leases not reported under GAAP, or Capital Lease which is not noted in
the Credit Parties' Consolidated financial statements furnished to the
Administrative Agent and to each Lender prior to the execution of this
Agreement.

                  (c)      No document, instrument, agreement, or paper now or
hereafter given to the Administrative Agent or to any Lender by or on behalf of
each Credit Party in connection with the execution or amendment of this
Agreement by the Administrative Agent and each Lender (other than projections
and forecasts, which are and will be made in good faith using reasonable
assumptions) contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements therein not misleading. There is no fact known to any Credit Party
which has, or which, in the foreseeable future would likely have, a Material
Adverse Effect which has not been disclosed in writing to the Administrative
Agent and to each Lender.

                  4.26     No Restrictions On Liabilities. Except for agreements
in existence on the Original Closing Date as disclosed in Schedule 4.7, no
Credit Party shall enter into or directly or

<PAGE>

indirectly become subject to any agreement which prohibits or restricts, in any
manner, any Credit Party's:

                           (a)      creation of, and granting of Collateral
                  Interests in favor of the Administrative Agent; and

                           (b)      incurrence of Liabilities.

                  4.27     Permitted Refinancing of Certain Indebtedness;
Amendments. No Borrower shall (1) incur Indebtedness under this Agreement for
the purpose of (a) making a payment on the Indebtedness outstanding under the
Existing Indentures at the maturity date thereof unless, both before and
immediately after giving effect to any such payment, (i) no Default or Event of
Default exists and (ii) Availability as projected by the Lead Borrower (to the
reasonable satisfaction of the Administrative Agent) equals or exceeds
$45,000,000.00 at all times during the twelve month period immediately following
such payment or (b) making any optional prepayment on or redemption or purchase
of any Indebtedness (other than Indebtedness in respect of Capital Leases and
purchase money Indebtedness and other similar Indebtedness permitted under
Section 4.7(g)), other than on the maturity date thereof, unless, both before
and immediately after giving effect to any such prepayment, redemption or
purchase, (i) no Default or Event of Default exists and (ii) Availability as
projected by the Lead Borrower (to the reasonable satisfaction of the
Administrative Agent) equals or exceeds $100,000,000.00 at all times during the
twelve month period immediately following such prepayment, redemption or
purchase or (2) make any payment with respect to any Indebtedness owing to any
other Credit Party that is not a Borrower. No Credit Party shall amend or modify
the terms of the Existing Indentures in a manner adverse to the Lenders (in the
reasonable judgment of the Administrative Agent) or amend, terminate, replace or
otherwise modify the Intercompany Subordinated Demand Promissory Note.

                  4.28     Limitations on Capital Expenditures. If Availability
is less than $100,000,000.00 for 14 consecutive days during a Fiscal year, then
the Credit Parties shall not make or commit to make any Capital Expenditures in
excess of $120,000,000.00 in such Fiscal year.

                  4.29     Store Closings. The Credit Parties shall not close or
announce the closure of any store locations unless (a) the Cost of all Inventory
located in such closed stores does not exceed, in the aggregate over the term of
this Agreement, thirty percent (30%) of the Cost of the Credit Parties'
Inventory existing as of the Restatement Effective Date and (b) the Cost of all
Inventory located in such closed stores in any Fiscal year does not exceed, in
the aggregate, twenty percent (20%) of the Cost of the Credit Parties' Inventory
existing as of the first Business day of such Fiscal year. In addition, the
Credit Parties shall not close substantially contemporaneously more than ten
Shopko store locations or twenty-five Pamida store locations unless the Lead
Borrower has engaged a professional liquidator reasonably acceptable to the
Administrative Agent to manage such store location closings.

                  4.30     Certain Proceeds. (a) During the continuance of a
Cash Control Event, the Credit Parties shall deposit all proceeds from Capital
Events and casualty insurance proceeds

<PAGE>

relating to Collateral into a Blocked Account maintained by the Administrative
Agent solely to hold such proceeds.

                  (b)      The Credit Parties shall maintain a system to track
proceeds received with respect to Payless Inventory and shall transmit all such
proceeds within ten (10) days of the receipt thereof to Payless or an account
maintained by the Credit Parties solely for the deposit of such proceeds.

                  4.31     Maturities of Indebtedness under the Existing
Indentures. At all times during the period beginning thirty (30) days prior to
any scheduled maturity of any Indebtedness under any Existing Indenture through
the date of such scheduled maturity, the Credit Parties shall (a) cause
Availability to be at least $45,000,000.00 (after giving effect to the repayment
in full of such Indebtedness) and (b) have, either through additional
Availability (in excess of $45,000,000.00) or cash (not subject to any Lien,
other than Permitted Encumbrances) in a segregated account (or a combination
thereof) funds available to repay such maturing Indebtedness in its entirety.

                  4.32     Other Covenants. No Credit Party shall indirectly do
or cause to be done any act which, if done directly by that Credit Party, would
breach any covenant contained in this Agreement.

                                   SECTION 5
                  FINANCIAL REPORTING AND PERFORMANCE COVENANTS

                  5.1      Maintain Records. The Credit Parties shall:

                           (a)      at all times, keep proper books of account,
                  in which full, true, and accurate entries shall be made in all
                  material respects of all of the Credit Parties' financial
                  transactions, all in accordance with GAAP applied consistently
                  with prior periods to fairly reflect the Consolidated
                  financial condition of the Credit Parties at the close of, and
                  its results of operations for, the periods in question;

                           (b)      timely provide the Administrative Agent with
                  those financial reports, statements, and schedules required by
                  this Article 5 or otherwise, each of which reports, statements
                  and schedules shall be prepared, to the extent applicable, in
                  accordance with GAAP applied consistently with prior periods
                  to fairly reflect in all material respects the Consolidated
                  financial condition of the Credit Parties at the close of, and
                  the results of operations for, the period(s) covered therein;

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

<PAGE>

                           (d)      at all times, retain independent certified
                  public accountants who are reasonably satisfactory to the
                  Administrative Agent (Deloitte & Touche LLP or any other
                  nationally recognized accounting firm being acceptable) and
                  instruct such accountants to fully cooperate with, and be
                  available to, the Administrative Agent to discuss the Credit
                  Parties' financial performance, financial condition, operating
                  results, controls, and such other matters, within the scope of
                  the retention of such accountants, as may be raised by the
                  Administrative Agent.

                           (e)      not change any Credit Party's fiscal year
                  without furnishing the Administrative Agent with at least
                  ninety (90) days prior written notice thereof.

                  5.2      Access To Records. (a) Each Credit Party shall accord
the Administrative Agent with access from time to time during normal business
hours and, as long as no Event of Default exists, upon reasonable prior notice,
as the Administrative Agent may reasonably require to all properties owned by or
over which any Credit Party has control. Subject to the provisions of Section
5.9(d) hereof, the Administrative Agent shall have the right (as long as no
Event of Default exists, upon reasonable prior notice), and each Credit Party
will permit the Administrative Agent from time to time as Administrative Agent
may reasonably request, to examine, inspect, copy, and make extracts from any
and all of the Credit Parties' books, records, electronically stored data,
papers, and files relating to the financial condition of such Credit Party or to
the Collateral and in connection therewith, each Credit Party shall make all of
that Credit Party's copying facilities available to the Administrative Agent.

                  (b)      Subject to the provisions of Section 5.2(a), each
Credit Party hereby authorizes the Administrative 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 the financial condition of such Credit
                  Party or to the Collateral, or any service bureau, contractor,
                  accountant, or other person, and directs any such service
                  bureau, contractor, accountant, or other person fully to
                  cooperate with the Administrative Agent with respect thereto;
                  and

                           (ii)     during the existence of a Cash Control
                  Event, verify at any time the Collateral or any portion
                  thereof, including verification with account debtors, and/or
                  with each Credit Party's computer billing companies,
                  collection agencies, and accountants and to sign the name of
                  each Credit Party on any notice to each Credit Party's account
                  debtors or verification of the Collateral.

                  (c)      The Administrative Agent from time to time may
designate one or more representatives to exercise the Administrative Agent's
rights under this Section 5.2 as fully as if the Administrative Agent were doing
so.

                  5.3      Immediate Notice To Administrative Agent. (a) The
Lead Borrower shall provide the Administrative Agent with written notice
promptly upon the occurrence of any of the

<PAGE>

following events, which written notice shall be with reasonable particularity as
to the facts and circumstances in respect of which such notice is being given:

                           (i)      any change in any Credit Party's President,
                  chief executive officer, chief operating officer, and chief
                  financial officer (without regard to the title(s) actually
                  given to the Persons discharging the duties customarily
                  discharged by officers with those titles);

                           (ii)     any cessation of any Credit Party's making
                  of payment, in the ordinary course, to any of its creditors
                  (other than its cessation of making of such payments on
                  account of a dispute with such creditor), which would have a
                  Material Adverse Effect;

                           (iii)    any failure by any Credit Party to pay rent
                  at any of that Credit Party's locations, which failure
                  continues for more than three (3) days following the last day
                  on which such rent was payable and which failure is likely to
                  have a Material Adverse Effect, unless such rent is being
                  disputed by the Credit Parties in good faith and the Credit
                  Parties have established adequate reserves therefor in
                  accordance with GAAP;

                           (iv)     any event which the Lead Borrower determines
                  to have a Material Adverse Effect;

                           (v)      the occurrence of any Default;

                           (vi)     any intention on the part of any Credit
                  Party to discharge that Credit Party's present independent
                  accountants or any withdrawal or resignation by such
                  independent accountants from their acting in such capacity (as
                  to which, see Subsection 5.1(d)); and

                           (vii)    any litigation which, if determined
                  adversely to any Credit Party, would have a Material Adverse
                  Effect.

                  (b)      The Lead Borrower shall:

                           (i)      provide the Administrative Agent, when so
                  distributed, with copies of any materials distributed to the
                  shareholders of the Lead Borrower;

                           (ii)     provide the Administrative Agent:

                                    (A)      when filed, copies of all filings
                           with the SEC; and

                                    (B)      when received, copies of all
                           correspondence from the SEC, other than routine
                           non-substantive general communications from the SEC.

                           (iii)    add the Administrative Agent as an addressee
                  on all investor mailing lists maintained by each Credit Party;
                  and
<PAGE>

                           (iv)     provide the Administrative Agent, when
                  received by any Credit Party, with a copy of any management
                  letter or similar communications from any accountant of any
                  Credit Party.

                  5.4      Borrowing Base Certificate. The Lead Borrower shall
provide the Administrative Agent with a Borrowing Base Certificate (in the form
of Exhibit D, as such form may be revised from time to time by the
Administrative Agent)(a "Borrowing Base Certificate") (a) if after the
Restatement Effective Date Availability has been equal to or greater than
$100,000,000.00 or, if Availability has been equal to or greater than
$100,000,000.00 for a period of 30 consecutive days since the date of the most
recent Borrowing Base Certificate delivered to the Administrative Agent pursuant
to this clause (a), monthly within 15 days from the Fiscal month end as of the
close of business at such Fiscal month end (or more frequently at the election
of the Borrower) or (b) if Availability has been less than $100,000,000.00 at
any time after the Restatement Effective Date (and Availability has not been
equal to or greater than $100,000,000.00 for a period of 30 consecutive days
since the date of the most recent monthly Borrowing Base Certificate delivered
to the Administrative Agent pursuant to clause (a) above), weekly on Wednesday
of each week (or if not a Business Day, the next succeeding Business Day) as of
the close of business on the immediately preceding Saturday. Such Certificate
may be sent to the Administrative Agent by facsimile transmission, provided that
the original thereof is forwarded to the Administrative Agent on the date of
such transmission.

                  5.5      Monthly Reports. Monthly, the Lead Borrower shall
provide the Administrative Agent with original counterparts of the following
(each in such form as the Administrative Agent from time to time may reasonably
specify):

                           (a)      those reports described in Schedule 5.5, at
                  the times set forth in such Schedule;

                           (b)      within thirty (30) days following the end of
                  each fiscal month (except for any month which corresponds to
                  the end of a fiscal quarter of the Credit Parties), an
                  internally prepared financial statement of the Credit Parties'
                  Consolidated financial condition and the results of its
                  operations for, the period ending with the end of the subject
                  month, which financial statement shall include, at a minimum,
                  a balance sheet, income statement, cash flow and comparison of
                  same store sales for the corresponding month of the then
                  immediately previous year, as well as to the Credit Parties'
                  business plan or most recent forecast.

                  5.6      Quarterly Reports. Quarterly, within forty-five (45)
days following the end of each of the Credit Parties' fiscal quarters, the Lead
Borrower shall provide the Administrative Agent with the following:

                           (a)      an original counterpart of a management
                  prepared financial statement of the Credit Parties for the
                  period from the beginning of the Credit Parties' then current
                  fiscal year through the end of the subject fiscal quarter,
                  with comparative information for the same period of the
                  previous fiscal year, which statement shall include, at a
                  minimum, a balance sheet, income statement,

<PAGE>

                  statement of changes in shareholders' equity, and cash flows
                  and comparisons for the corresponding fiscal quarter of the
                  then immediately previous fiscal year, as well as to the
                  Credit Parties' business plan or most recent forecast;

                           (b)      the officer's compliance certificate
                  described in Section 5.8; and

                           (c)      the Credit Parties' 10Q report filed with
                  the SEC.

                  5.7      Annual Reports. Annually, within ninety (90) days
following the end of the Credit Parties' fiscal year, the Lead Borrower shall
furnish the Administrative Agent with the following:

                           (a)      an original signed counterpart of the Credit
                  Parties' Consolidated annual financial statement, which
                  statement shall have been prepared by, and bear the
                  unqualified opinion of, the Lead Borrower's independent
                  certified public accountants reasonably acceptable to the
                  Administrative Agent (Deloitte & Touche LLP or another
                  nationally recognized accounting firm being acceptable) (i.e.,
                  said statement shall be "certified" by such accountants) and
                  shall include, at a minimum (with comparative information for
                  the then prior fiscal year) a balance sheet, income statement,
                  statement of changes in shareholders' equity, cash flows, and
                  schedules of consolidation; and

                           (b)      the Credit Parties' 10K report filed with
                  the SEC.

                  5.8      Officers' Certificates. The Lead Borrower shall cause
either the Lead Borrower's President or its Chief Financial Officer, in each
instance, to provide such Person's Certificate with those monthly, quarterly,
and annual statements to be furnished pursuant to this Agreement, which
Certificate shall:

                           (a)      indicate that the subject statement was
                  prepared in accordance with GAAP consistently applied and
                  presents fairly in all material respects the Consolidated
                  financial condition of the Credit Parties at the close of, and
                  the results of the Credit Parties' operations and cash flows
                  for, the period(s) covered, subject, however to the following:

                           (i)      usual year end adjustments and the absence
                  of footnotes (this exception shall not be included in the
                  Certificate which accompanies such annual statement); and

                           (ii)     Material Accounting Changes (in which event,
                  such Certificate shall include a schedule (in reasonable
                  detail) of the effect of each such Material Accounting Change)
                  not previously specifically taken into account in the
                  determination of the financial performance covenant imposed
                  pursuant to Section 5.11;

<PAGE>

                           (b)      indicate either that (i) no Default exists,
                  or (ii) if such an event has occurred, its nature (in
                  reasonable detail) and the steps (if any) being taken or
                  contemplated by the Credit Parties to be taken on account
                  thereof.

                           (c)      include calculations concerning the Credit
                  Parties' compliance (or failure to comply) at the date of the
                  subject statement with the financial performance covenant
                  included in Section 5.11 (whether or not a Covenant Compliance
                  Event then exists).

                  5.9      Inventories, Appraisals, And Audits. (a) The
Administrative Agent, at the reasonable expense of the Credit Party, may
participate in and/or observe each physical count and/or inventory of so much of
the Collateral as consists of Inventory which is undertaken on behalf of any
Credit Party.

                  (b)      The Credit Parties, at their own expense, shall cause
not less than one (1) physical inventory of each of their locations to be
undertaken in each twelve (12) month period during which this Agreement is in
effect and shall cause cycle counts to be undertaken in a manner consistent with
their practices in effect on the Restatement Effective Date (or such other
procedures as may be reasonably satisfactory to the Administrative Agent).

                           (i)      The Lead Borrower, within forty-five (45)
                  days following the completion of such physical inventory,
                  shall provide the Administrative Agent with a reconciliation
                  of the results of each such physical inventory or cycle count
                  and shall post such results to the Credit Parties' perpetual
                  inventory system and, as applicable to the Credit Parties'
                  other financial books and records.

                           (ii)     The Administrative Agent, in its reasonable
                  discretion, if any Event of Default exists, may cause such
                  additional inventories to be taken as the Administrative Agent
                  reasonably determines (each, at the expense of the Credit
                  Parties).

                  (c)      The Administrative Agent may obtain appraisals of the
Collateral, from time to time conducted by such appraisers as are reasonably
satisfactory to the Administrative Agent. If Availability is equal to or greater
than $100,000,000.00 at all times in any Fiscal year (and no Event of Default
has occurred and is continuing), the first such appraisal conducted during such
Fiscal year (plus any such appraisals conducted during the continuance of an
Event of Default) shall be at the Credit Parties' expense. If Availability is
less than $100,000,000.00 at any time in any Fiscal year, the second such
appraisal conducted during such Fiscal year shall also be at the Credit Parties'
expense.

                  (d)      The Administrative Agent may conduct commercial
finance field examinations of the Credit Parties' books and records from time to
time. If Availability is equal to or greater than $100,000,000.00 at all times
in any Fiscal year (and no Event of Default has occurred and is continuing), the
first such field examination conducted during such Fiscal year (plus any such
field examinations conducted during the continuance of an Event of Default)
shall be at the Credit Parties' expense. If Availability is less than
$100,000,000.00 at any time in any

<PAGE>

Fiscal year, the second such field examination conducted during such Fiscal year
shall also be at the Credit Parties' expense.

                  5.10     Additional Financial Information. (a) In addition
to all other information required to be provided pursuant to this Article 5, the
Lead Borrower promptly shall provide the Administrative Agent with such other
and additional information concerning the Credit Parties, the Collateral, the
operation of the Credit Parties' business, and the Credit Parties' financial
condition, including original counterparts of financial reports and statements,
as the Administrative Agent may from time to time reasonably request from the
Lead Borrower.

                  (b)      The Lead Borrower may provide the Administrative
Agent, from time to time hereafter, with updated forecasts of the Credit
Parties' anticipated performance and operating results.

                  (c)      In all events, the Lead Borrower, no later than
thirty (30) days after the end of each of the Credit Parties' fiscal years,
shall provide the Administrative Agent with an updated and extended forecast
which shall go out at least through the end of that fiscal year and shall
include an income statement, balance sheet, and statement of cash flow, by
month, each Consolidated (with consolidating schedules) and each prepared in
conformity with GAAP and consistent with the Credit Parties' then current
practices.

                  (d)      Each Credit Party recognizes that all inventories,
analysis, financial information, and other materials which the Administrative
Agent may obtain, develop, or receive with respect to the Credit Parties are
confidential to the Administrative Agent and that, except as otherwise provided
herein, no Credit Party is entitled to receipt of any of such inventories,
analysis, financial information, and other materials, nor copies or extracts
thereof or therefrom. Notwithstanding the foregoing, as long as no Event of
Default exists, the Administrative Agent shall furnish the Lead Borrower with a
copy of each appraisal obtained by the Administrative Agent.

                  5.11     Financial Performance Covenants. (a) If a Covenant
Compliance Event exists, the Credit Parties shall not permit their Operating
Cash Flow for the trailing twelve-month period (commencing with the Fiscal month
ending immediately prior to the date of the Covenant Compliance Event for which
a financial statement has been delivered to the Administrative Agent pursuant to
Section 5.5(b)) as determined from the Lead Borrower's most recently delivered
financial statements with respect to such period, as of the last day of each
Fiscal month, to be less than $115,000,000.00.

                  (b)      Compliance with such financial performance covenant
shall be made as if no Material Accounting Changes had been made (other than any
Material Accounting Changes specifically taken into account in the setting of
such covenants). The Administrative Agent may determine the Credit Parties'
compliance with such covenants based upon financial reports and statements
provided by the Lead Borrower to the Administrative Agent as well as by
reference to interim financial information provided to the Administrative Agent.

<PAGE>

                                    SECTION 6
                                USE OF COLLATERAL

                  6.1      Use Of Inventory Collateral. (a) No Credit Party
shall engage in:

                           (i)      any sale of the Inventory other than for
                  fair consideration in the conduct of the Credit Parties'
                  business in the ordinary course or as permitted under this
                  Agreement;

                           (ii)     sales or other dispositions in bulk other
                  than in connection with any store closings and sales of
                  Diversion Inventory, provided that in no event shall Inventory
                  sold in bulk as a result of store closings after the
                  Restatement Effective Date, exceed the limitations set forth
                  in Section 4.29; and

                           (iii)    sales of any Collateral in breach of any
                  provision of this Agreement.

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

                  6.2      Inventory Quality. All Inventory now owned or
hereafter acquired by each Credit Party and at the time included in the
Borrowing Base is and will be of good and merchantable quality and free from
defects (other than defects within customary trade tolerances).

                  6.3      Adjustments and Allowances. Each Credit Party may
grant such allowances or other adjustments to that Credit Party's account
debtors (exclusive of extending the time for payment of any Account, which shall
not be done without first obtaining the Administrative Agent's prior written
consent in each instance, which consent shall not be unreasonably delayed or
withheld) as that Credit Party may reasonably deem to accord with sound business
practice, provided, however, the authority granted the Credit Parties pursuant
to this Section 6.3 may be limited or terminated by the Administrative Agent at
any time during the existence of an Event of Default in the Administrative
Agent's reasonable discretion.

                  6.4      Validity of Accounts.

                  (a)      The amount of each Account shown on the books,
records, and invoices of the Credit Parties represented as owing by each account
debtor is and will be the correct amount actually owing by such account debtor
and shall have been fully earned by performance by the Credit Parties.

                  (b)      No Credit Party has any knowledge of any impairment
of the validity or collectibility of any of the Accounts included in the
Borrowing Base. The Lead Borrower shall

<PAGE>

notify the Administrative Agent of any such impairment immediately after any
Credit Party becomes aware of any such impairment.

                  (c)      Except for Permitted Encumbrances and Standby L/Cs
permitted hereunder, no Credit Party shall post any bond to secure any Credit
Party's performance under any agreement to which any Credit Party is a party nor
cause any surety, guarantor, or other third party obligee to become liable to
perform any obligation of any Credit Party (other than to the Administrative
Agent) in the event of any Credit Party's failure so to perform.

                  6.5      Notification to Account Debtors. The Administrative
Agent shall have the right, during the existence of a Cash Control Event or an
Event of Default, to notify any of the Credit Parties' account debtors to make
payment directly to the Administrative Agent and to collect all amounts due on
account of the Collateral.

                                    SECTION 7
                     CASH MANAGEMENT; PAYMENT OF LIABILITIES

                  7.1      Depository Accounts.

                  (a)      Schedule 7.1 lists all present DDA's as of the
Restatement Effective Date and includes, with respect to each depository (i) the
name and address of that depository; (ii) the account number(s) of the
account(s) maintained with such depository; and (iii) a contact person (with
telephone and facsimile number) at such depository.

                  (b)      The Lead Borrower shall deliver the following to the
Administrative Agent, as a condition to the effectiveness of this Agreement:

                           (i)      Notification, executed on behalf of each
                  Credit Party, to each depository institution with which any
                  DDA is maintained (other than any Exempt DDA and any Blocked
                  Account), in the form of Exhibit G, with such changes as are
                  acceptable to the Administrative Agent.

                           (ii)     A Blocked Account Agreement with any
                  depository institution at which a Blocked Account is required
                  to be maintained;

                  (c)      No Credit Party will establish any DDA hereafter
(other than an Exempt DDA) unless, contemporaneous with such establishment, the
Lead Borrower delivers the following to the Administrative Agent:

                           (i)      Notification to the depository at which such
                  DDA is established if the same would have been required
                  pursuant to Section 7.1(b)(i) if the subject DDA were open at
                  the execution of this Agreement.

                           (ii)     A Blocked Account Agreement executed on
                  behalf of the depository at which such DDA is established if
                  the same would have been

<PAGE>

                  required pursuant to Section 7.1(b)(ii) if the subject DDA
                  were open at the execution of this Agreement.

                  7.2      Credit Card Receipts.

                  (a)      Schedule 7.2 describes all arrangements to which any
Credit Party is a party as of the Restatement Effective Date with respect to the
payment to that Credit Party of the proceeds of credit card charges for sales by
that Credit Party.

                  (b)      The Lead Borrower shall deliver to the Administrative
Agent, as a condition to the effectiveness of this Agreement, notifications,
executed on behalf of each Credit Party, to each of each Credit Party's credit
card clearinghouses and processors (in the form of Exhibit H, with such changes
as are acceptable to the Administrative Agent), which notice provides that
payment of all credit card charges submitted by that Credit Party to that
clearinghouse or other processor and any other amount payable to that Credit
Party by such clearinghouse or other processor shall, during the existence of a
Cash Control Event, be directed to the Blocked Accounts, the Concentration
Account or as otherwise designated from time to time by the Administrative
Agent. No Credit Party shall change such direction or designation except upon
and with the prior written consent of the Administrative Agent.

                  7.3      The Concentration, Blocked, and Operating Accounts.

                  (a)      The following checking accounts have been (and are so
referred to herein):

                           (i)      The "Concentration Account" (so referred to
                  herein): Established by the Administrative Agent with Fleet.

                           (ii)     The "Blocked Accounts" (so referred to
                  herein): Established by the Lead Borrower with those financial
                  institutions described on Schedule 7.3.

                           (iii)    The "Operating Account" (so referred to
                  herein): Established by the Lead Borrower with Fleet (Account
                  No. 9428400778).

                  (b)      The contents of each DDA and of the Blocked Accounts
constitutes Collateral and Proceeds of Collateral and amounts realized from
Capital Events and/or casualty insurance proceeds relating to Collateral payable
to the Administrative Agent pursuant to Section 2.11(c)(ii). The contents of the
Concentration Account constitutes the Administrative Agent's property and shall
be applied to the Liabilities in accordance with the provisions of Section 7.5
hereof.

                  (c)      The Credit Parties shall pay all fees and charges of,
and maintain such impressed balances as may be required by the depository in
which any account is opened as required hereby (even if such account is opened
by and/or is the property of the Administrative Agent).

<PAGE>

                  7.4      Proceeds and Collections.

                  (a)      All Receipts and all cash proceeds of any sale or
other disposition of Inventory and Accounts of each Credit Party:

                           (i)      Constitute Collateral and proceeds of
                  Collateral.

                           (ii)     During the existence of a Cash Control
                  Event, shall be held in trust by the Credit Parties for the
                  Administrative Agent.

                           (iii)    During the existence of a Cash Control
                  Event, shall not be commingled with any of any Credit Party's
                  other funds.

                           (iv)     During the existence of a Cash Control
                  Event, shall be deposited and/or transferred only to the
                  Blocked Accounts or the Concentration Account.

                  (b)      During the existence of a Cash Control Event, the
Lead Borrower shall cause the ACH or wire transfer to the Blocked Accounts or
the Concentration Account, no less frequently than daily (and whether or not
there is then an outstanding balance in the Loan Account) of the following:

                           (i)      The then collected funds in each DDA (other
                  than any Blocked Account or any Exempt DDA), each such
                  transfer to be net of any minimum balance, not to exceed
                  $10,000.00, as may be required to be maintained in the subject
                  DDA by the bank at which such DDA is maintained).

                           (ii)     The proceeds of all credit card charges not
                  otherwise provided for pursuant hereto.

Telephone advice (confirmed by written notice) shall be provided to the
Administrative Agent on each Business Day on which any such transfer is made.

                  (c)      Whether or not any Liabilities are then outstanding,
during the existence of a Cash Control Event, the Lead Borrower shall cause the
ACH or wire transfer to the Concentration Account, no less frequently than daily
on each Business Day, of all collected funds in each Blocked Account, net of
such minimum balance, not to exceed $250,000.00, as may be required to be
maintained in the Blocked Account by the depository which the Blocked Account is
maintained.

                  (d)      In the event that, notwithstanding the provisions of
this Section 7.4, during the existence of a Cash Control Event, any Credit Party
receives or otherwise has dominion and control of any Receipts, or any proceeds
or collections of any Collateral or proceeds from Capital Events and/or casualty
insurance proceeds relating to Collateral, such Receipts, proceeds, and
collections shall be held in trust by that Credit Party for the Administrative
Agent and shall not be commingled with any of that Credit Party's other funds or
deposited in any account of any Credit Party other than as instructed by the
Administrative Agent.

<PAGE>

                  7.5      Payment of Liabilities.

                  (a)      During the existence of a Cash Control Event (or, at
other times, as the Lead Borrower may direct), on each Business Day, the
Administrative Agent shall apply the then collected balance of the Concentration
Account (net of fees charged, and of such impressed balances as may be required
by the bank at which the Concentration Account is maintained), as of the day of
receipt of such collected funds, first, towards the Swing Line Loans and second,
towards the unpaid balance of the Loan Account and all other Liabilities, in the
order specified in Section 2.11(c) and subject to the provisions of Section
2.11(e).

                  (b)      All deposits to the Concentration Account and other
payments to the Administrative Agent are subject to clearance and collection.

                  (c)      The Administrative Agent shall transfer to the
Operating Account any surplus in the Concentration Account remaining after the
application towards the Liabilities referred to in Section 7.5(a), above (less
those amount which are to be netted out, as provided therein) provided, however,
in the event that

                           (i)      any Event of Default exists; and

                           (ii)     one or more L/Cs are then outstanding,

then the Administrative Agent may establish a funded reserve of up to 103% of
the aggregate Stated Amounts of such L/Cs. Such funded reserve shall either be
(i) returned to the Lead Borrower provided that no Default exists or (ii)
applied towards the Liabilities during the existence of any Event of Default
described in Section 10.10 or acceleration during the existence of any other
Event of Default.

                                    SECTION 8
                           GRANT OF SECURITY INTEREST

                  8.1      Grant of Security Interest. To secure their prompt,
punctual, and faithful performance of all and each of the Liabilities, each
Credit Party hereby grants to the Administrative Agent, for its benefit and the
ratable benefit of the other Secured Parties, a continuing security interest in
and to, and assigns to the Administrative Agent, for its benefit and the ratable
benefit of the other Secured Parties, and reconfirms its grant set forth in the
Original Loan and Security Agreement, all of such Credit Party's right, title
and interest (whether now owned or hereafter acquired or arising) in and to the
following (all of which, together with any other property in which the
Administrative Agent may in the future be granted a security interest, is
referred to herein as the "Collateral"):

                  (a)      all Accounts;

                  (b)      all Inventory;

<PAGE>

                  (c)      all Letter-of-Credit Rights arising from or relating
to the Credit Parties' Accounts or Inventory;

                  (d)      all Payment Intangibles arising from, relating to, or
constituting proceeds of the Credit Parties' Accounts or Inventory;

                  (e)      all Supporting Obligations arising from, relating to,
or constituting proceeds of the Credit Parties' Accounts or Inventory;

                  (f)      all Instruments arising from, relating to, or
constituting proceeds of the Credit Parties' Accounts or Inventory;

                  (g)      all Documents relating to the Credit Parties'
Inventory;

                  (h)      the Operating Account, the Concentration Account,
each Blocked Account and all other Deposit Accounts in which any monies
deposited therein arise from, relate to or constitute proceeds of the Credit
Parties' Accounts or Inventory;

                  (i)      money, cash, and policies and certificates of
insurance, in each case, arising from, relating to, or constituting proceeds of
the Credit Parties' Accounts or Inventory;

                  (j)      all insurance proceeds, refunds, and premium rebates,
including, without limitation, proceeds of fire and credit insurance,
constituting proceeds of the Credit Parties' Inventory and Accounts;

                  (k)      all Prescription Lists;

                  (l)      all Pharmacy Accounts;

                  (m)      all liens, guaranties, rights, remedies, and
privileges relating or pertaining to any Credit Parties' Inventory or Accounts,
including the right of stoppage in transit; and

                  (n)      all cash Proceeds of or substitutions to any of the
foregoing.

<PAGE>

                  8.2      Extent and Duration of Security Interest. The
security interest created and granted herein is in addition to, and supplemental
of, any security interest previously granted by any Credit Party to the
Administrative Agent and shall continue in full force and effect applicable to
all Liabilities until both (a) all Liabilities have been paid and/or satisfied
in full and (b) the security interest created herein is specifically terminated
in writing by a duly authorized officer of the Administrative Agent; provided,
however, that the Administrative Agent shall release the security interest
granted in Inventory and Prescription Lists which are sold or otherwise disposed
of by the Credit Parties in connection with store closings expressly permitted
hereunder and consistent with the Credit Parties' business plan provided to the
Administrative Agent that do not otherwise cause a Default under Sections 4.29
or 6.1(iii). The Administrative Agent will terminate the security interest
created hereunder promptly upon payment in full, in cash, of all the Liabilities
and the termination and release of the Secured Parties' obligations hereunder
and under the other Loan Documents.

                                    SECTION 9
            ADMINISTRATIVE AGENT AS CREDIT PARTIES' ATTORNEY-IN-FACT

                  9.1      Appointment as Attorney-In-Fact. Each Credit Party
hereby irrevocably constitutes and appoints the Administrative Agent (acting
through any of its officers) as that Credit Party's true and lawful attorney,
with full power of substitution, during the existence of an Event of Default, to
convert the Collateral into cash at the sole risk, cost, and expense of that
Credit Party, but for the sole benefit of the Secured Parties. The rights and
powers granted the Administrative 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 Credit Party's mail is to be sent to such address as the
Administrative Agent shall designate; receive and open each Credit Party's mail;
remove any Receivables Collateral and Proceeds of Collateral therefrom and turn
over the balance of such mail either to the Lead Borrower or to any trustee in
bankruptcy or receiver of the Lead Borrower, or other legal representative of a
Credit Party whom the Administrative Agent determines to be the appropriate
person to whom to so turn over such mail.

                  (c)      Endorse the name of the relevant Credit Party in
favor of the Administrative Agent upon any and all checks, drafts, notes,
acceptances, or other items or instruments which are proceeds of Accounts and
Inventory; sign and endorse the name of the relevant Credit 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.

                  (d)      Sign the name of the relevant Credit Party on any
notice to that Credit Party's account debtors or verification of the Receivables
Collateral; sign the relevant Credit Party's name on any Proof of Claim in
Bankruptcy against account debtors, and on notices of

<PAGE>

lien, claims of mechanic's liens, or assignments or releases of mechanic's liens
securing the Accounts.

                  (e)      Take all such action as may be necessary to obtain
the payment of any letter of credit and/or banker's acceptance relating to
Accounts and Inventory of which any Credit Party is a beneficiary.

                  (f)      Repair, manufacture, assemble, complete, package,
deliver, alter or supply Inventory, if necessary to fulfill in whole or in part
the purchase order of any customer of each Credit Party.

                  9.2      No Obligation to Act. The Administrative Agent shall
not be obligated to do any of the acts or to exercise any of the powers
authorized by Section 9.1 herein, but if the Administrative 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 Credit Party 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 Administrative 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.

                                   SECTION 10
                                EVENTS OF DEFAULT

                  The occurrence of any event described in this Article 10
respectively shall constitute an "Event of Default" herein. Upon the occurrence
of any Event of Default described in Section 10.10, any and all Liabilities
shall become due and payable without any further act on the part of the
Administrative Agent. During the existence of any other Event of Default, the
Administrative Agent may, and on the instruction of the Majority Lenders as
provided in Section 13.1(b) shall, declare any and all Liabilities to be
immediately due and payable. The existence of any Event of Default shall also
constitute, without notice or demand, a default under all other agreements
between any Secured Party and any Credit Party and instruments and papers
heretofore, now, or hereafter given to any Secured Party by any Credit Party.

                  Events of Default:

                  10.1     Failure to Pay Loans. The failure by any Credit Party
to pay when due any principal of the Revolving Credit (including, without
limitation, any reimbursement for any drawing under any L/C).

                  10.2     Failure to Make Other Payments. The failure by any
Credit Party to pay within two (2) Business Days when due (or upon demand, if
payable on demand) any interest on, or fees in respect of, the Revolving Credit
(including, without limitation, L/C fees), or any other payment Liability (other
than any payment liability on account of the principal of the Loans).

<PAGE>

                  10.3     Failure to Perform Covenant Or Liability (No Grace
Period). The failure by any Credit Party to promptly, punctually, faithfully and
timely perform, discharge, or comply with any covenant or Liability included in
Sections 4.6, 4.7, 4.8, 4.11, 4.13, 4.19, 4.20, 4.27, 4.28, 4.29, 4.30, 4.31,
4.32, 5.11, 6.1 or 7.4 hereof.

                  10.4     Failure to Perform Covenant or Liability (Grace
Period). The failure by the Credit Parties to promptly, punctually, faithfully
and timely perform, discharge, or comply with any covenants under any Loan
Document or any other Liabilities in each case not described in Sections 10.1,
10.2 or 10.3, which failure continues for thirty (30) days after (i) the Lead
Borrower's receipt of written notice from the Administrative Agent or (ii) the
breach of any such covenant or Liabilities.

                  10.5     Misrepresentation. The determination by the
Administrative Agent that any representation or warranty at any time made by any
Credit Party to the Administrative Agent or any Lender was not true or complete
in all material respects when given or deemed given.

                  10.6     Acceleration of Other Debt; Breach of Lease.

                  (a)      The occurrence of any event such that any
Indebtedness of any Credit Party in excess of $10,000,000.00 (other than
Indebtedness under this Agreement) could be accelerated (whether or not the
subject creditor takes any action on account of such occurrence).

                  (b)      The termination of any Lease as the result of a
default thereunder, which termination individually or in the aggregate with all
other Lease terminations after the date hereof could reasonably be expected to
have a Material Adverse Effect.

                  10.7     Uninsured Casualty Loss. The occurrence of any
cumulative uninsured loss, theft, damage, or destruction of or to any material
portion of the Collateral in excess of $5,000,000.00 in any fiscal year of the
Credit Parties.

                  10.8     Attachment; Judgment; Restraint of Business.

                  (a)      The service of process upon any Secured Party or any
Participant seeking to attach, by trustee or other process, funds in excess of
$2,000,000.00 of any Credit Party on deposit with, or assets of any Credit Party
in the possession of, the Secured Party or such Participant unless contested in
good faith by the Credit Party in appropriate proceedings.

                  (b)      The entry of any judgment against any Credit Party,
which, when aggregated with all other such judgments against all Credit Parties
exceeds $2,000,000.00 (unless adequately insured by a solvent unaffiliated
insurance company that has acknowledged coverage), and which judgment is not
satisfied (if a money judgment), bonded, or appealed from (with execution or
similar process stayed) within thirty (30) days of its entry.

                  (c)      The entry of any order or the imposition of any other
process having the force of law, the effect of which is to restrain in any
material way the conduct by any Credit Party of its business in the ordinary
course and which has a Material Adverse Effect.

<PAGE>

                  10.9     Business Failure. Any act by, against, or relating to
any Credit Party, or its property or assets, which act constitutes the
determination, by any Credit Party, to initiate a program of substantial or
total self-liquidation; application for, consent to, or sufferance of the
appointment of a receiver, trustee, or other person, pursuant to court action or
otherwise, over all, or any part of any Credit Party's property; the granting of
any trust mortgage or execution of an assignment for the benefit of the
creditors of any Credit Party, or the occurrence of any other voluntary or
involuntary liquidation or extension of debt agreement for any Credit Party; the
offering by or entering into by any Credit Party of any composition, extension,
or any other arrangement seeking relief from or extension of the debts of any
Credit Party; or the initiation of any judicial or non-judicial proceeding or
agreement by, against, or including any Credit Party which seeks or intends to
accomplish a reorganization or arrangement with creditors; and/or the initiation
by or on behalf of any Credit Party of the liquidation or winding up of all or
any substantial part of any Credit Party's business or operations; provided that
if any of the foregoing is commenced against a Credit Party, no Event of Default
shall be deemed to have arisen hereunder if such action is timely contested in
good faith by that Credit Party by appropriate proceedings and is terminated or
dismissed within sixty (60) days of when commenced.

                  10.10    Bankruptcy. The failure by any Credit Party to
generally pay the debts of that Credit Party as they mature; adjudication of
bankruptcy or insolvency relative to any Credit Party; the entry of an order for
relief or similar order with respect to any Credit Party in any proceeding
pursuant to the Bankruptcy Code or any other federal bankruptcy law; the filing
of any complaint, application, or petition by any Credit Party initiating any
matter in which any Credit Party is or may be granted any relief from the debts
of that Credit Party pursuant to the Bankruptcy Code or any other insolvency
statute or procedure; the filing of any complaint, application, or petition
against any Credit Party initiating any matter in which that Credit Party is or
may be granted any relief from the debts of that Credit Party pursuant to the
Bankruptcy Code or any other insolvency statute or procedure, which complaint,
application, or petition is not timely contested in good faith by that Credit
Party by appropriate proceedings or, if so contested, is not dismissed within
sixty (60) days of when filed.

                  10.11    Indictment - Forfeiture. The indictment of, or
institution of any legal process or proceeding against, any Credit Party, under
any Applicable Law where the relief, penalties, or remedies sought or available
include the forfeiture of any property of any Credit Party and/or the imposition
of any stay or other order, the effect of which would reasonably be expected to
have a Material Adverse Effect.

                  10.12    Challenge to Loan Documents.

                  (a)      Any challenge by or on behalf of any Credit 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 material
terms or which seeks to void, avoid, limit, or otherwise adversely affect any
security interest created by, in or under any Loan Document or any payment made
pursuant thereto.

                  (b)      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

<PAGE>

Document's material terms or which voids, avoids, limits, or otherwise adversely
affects any security interest created by any Loan Document or any payment made
pursuant thereto.

                  10.13    Change in Control. Any Change in Control.

                                   SECTION 11
                        RIGHTS AND REMEDIES UPON DEFAULT

                  11.1     Acceleration. During the existence of any Event of
Default as described in Section 10.10, the Commitments shall be terminated and
all Liabilities of the Credit Parties to the Secured Parties shall be
immediately due and payable. During the existence of any Event of Default other
than as described in Section 10.10, the Administrative Agent may (and on the
issuance of Notice(s) of Acceleration, the Administrative Agent shall) terminate
the Commitments and declare all Liabilities of the Credit Parties to the Secured
Parties to be immediately due and payable, and may exercise all of the
Administrative Agent's Rights and Remedies as the Administrative Agent from time
to time thereafter determines as appropriate.

                  11.2     Rights of Enforcement. During the existence of any
Event of Default, the Administrative Agent shall have all of the rights and
remedies of a secured party upon default under the UCC, in addition to which the
Administrative Agent shall have all and each of the following rights and
remedies:

                  (a)      To give notice to any bank at which any DDA or
Blocked Account is maintained and in which Proceeds of Collateral are deposited,
to turn over such Proceeds directly to the Administrative Agent.

                  (b)      To collect the Receivables Collateral with or without
the taking of possession of any of the Collateral.

                  (c)      To take possession of all or any portion of the
Collateral.

                  (d)      To sell, lease, or otherwise dispose of any or all of
the Collateral, in its then condition or following such preparation or
processing as the Administrative Agent deems advisable and with or without the
taking of possession of any of the Collateral.

                  (e)      To conduct one or more going out of business sales
which include the sale or other disposition of the Collateral, subject to the
rights of lessors under any Leases and applicable law.

                  (f)      To apply the Proceeds of the Collateral in reduction
of the Liabilities.

                  (g)      To exercise all or any of the rights, remedies,
powers, privileges, and discretions under all or any of the Loan Documents.

<PAGE>

                  11.3     Sale of Collateral.

                  (a)      Any sale or other disposition of the Collateral may
be at public or private sale upon such terms and in such manner as the
Administrative Agent deems advisable, having due regard to compliance with any
statute or regulation which might affect, limit, or apply to the Administrative
Agent's disposition of the Collateral.

                  (b)      The Administrative Agent, in the exercise of the
Administrative Agent's Rights and Remedies during the existence of an Event of
Default, may conduct one or more going out of business sales, in the
Administrative Agent's own right or by one or more agents and contractors. Such
sale(s) may be conducted upon any premises owned, leased, or occupied by any
Credit Party, subject to the rights of lessors under any Leases and applicable
law.

                  (c)      Unless the Collateral is perishable or threatens to
decline speedily in value, or is of a type customarily sold on a recognized
market (in which event the Administrative Agent shall provide the Lead Borrower
with such notice as may be practicable under the circumstances), the
Administrative Agent shall give the Lead Borrower at least ten (10) days prior
written notice of the date, time, and place of any proposed public sale, and of
the date after which any private sale or other disposition of the Collateral may
be made. Each Credit Party agrees that such written notice shall satisfy all
requirements for notice to that Credit Party which are imposed under the UCC or
other applicable law with respect to the exercise of the Administrative Agent's
rights and remedies upon default.

                  (d)      The Administrative Agent and any Lender may purchase
the Collateral, or any portion of it at any sale held under this Article.

                  (e)      If any of the Collateral is sold, leased, or
otherwise disposed of by the Administrative Agent on credit, the Liabilities
shall not be deemed to have been reduced as a result thereof unless and until
payment is finally received thereon by the Administrative Agent.

                  (f)      The Administrative Agent shall apply the proceeds of
the Administrative Agent's exercise of its rights and remedies upon default
pursuant to this Article 11 in accordance with Sections 13.6 and 13.7.

                  11.4     Occupation of Business Location. In connection with
the Administrative Agent's exercise of the Administrative Agent's rights under
this Article 11, during the existence of an Event of Default, the Administrative
Agent may enter upon, occupy, and use any premises owned or occupied by any
Credit Party, subject to the rights of lessors under any Leases existing on the
Restatement Effective Date and applicable law, and may exclude each Credit Party
from such premises or portion thereof as may have been so entered upon,
occupied, or used by the Administrative Agent. The Administrative Agent shall
not be required to remove any of the Collateral from any such premises upon the
Administrative Agent's taking possession thereof, and may render any Collateral
unusable to the Credit Parties. In no event shall the Administrative Agent be
liable to any Credit Party for use or occupancy by the Administrative Agent of
any premises pursuant to this Article 11, nor for any charge (such as wages for
any Credit Party's employees and utilities) incurred in connection with the
Administrative Agent's

<PAGE>

exercise of the Administrative Agent's Rights and Remedies. To the extent any
Credit Party enters into after the Original Closing Date any Lease or financing
of any owned or leased real property, (i) if such property is to be used as a
warehouse, such Credit Party will ensure that the lessor or mortgagee thereunder
agrees in writing for the benefit of the Administrative Agent to allow the
Administrative Agent (or its designees) to access such property in the exercise
of its rights under this Section 11 and, (ii) if such property is to be used as
a store location or a warehouse, in either case holding Inventory valued in
excess of $5,000,000.00, such Credit Party will use good faith efforts such that
the lessor or mortgagee thereunder agrees in writing for the benefit of the
Administrative Agent not to interfere with the Administrative Agent's exercise
of its rights under this Section 11 to the extent that such lessor or mortgagee
has rights to the Inventory which have priority over the Collateral Interests of
the Administrative Agent in the Collateral.

                  11.5     Grant of Nonexclusive License. Each Credit Party
hereby grants to the Administrative Agent a royalty free nonexclusive
irrevocable license during the existence of an Event of Default and subject to
the rights of any third Person (including, without limitation, any lessor under
a Lease) and Applicable Law (a) to use, apply, and affix any trademark, trade
name, logo, or the like in which any Credit Party now or hereafter has rights,
such license being with respect to the Administrative Agent's exercise of the
rights hereunder including, without limitation, in connection with any
completion of the sale or other disposition of Inventory, and (b) to use any or
all furniture, fixtures and equipment located at any of the stores or other
leased facilities of the Credit Parties in connection with any completion of the
sale or other disposition of Inventory, and (c) to use any or all intellectual
property, general intangibles (including, without limitation, the Credit
Parties' trade names), books, records, and information relating to the
Collateral and/or to the operation of each Credit Party's business, and all
rights of access to such books, records, and information, and all property in
which such books, records, and information are stored, recorded, and maintained,
and other assets of each Credit Party.

                  11.6     Assembly of Collateral. The Administrative Agent may
require any Borrower to assemble the Collateral and make it available to the
Administrative Agent at the Credit Parties' sole risk and expense at a place or
places which are reasonably convenient to both the Administrative Agent and the
Lead Borrower.

                  11.7     Rights and Remedies. The rights, remedies, powers,
privileges, and discretions of the Administrative Agent under this Agreement
(herein, the "Administrative Agent's Rights and Remedies") shall be cumulative
and not exclusive of any rights or remedies which it would otherwise have. No
delay or omission by the Administrative Agent in exercising or enforcing any of
the Administrative Agent's Rights and Remedies shall operate as, or constitute,
a waiver thereof. No waiver by the Administrative Agent of any Event of Default
or of any default under any other agreement shall operate as a waiver of any
other default hereunder or under any other agreement. No single or partial
exercise of any of the Administrative Agent's Rights or Remedies, and no express
or implied agreement or transaction of whatever nature entered into between the
Administrative Agent and any person, at any time, shall preclude the other or
further exercise of the Administrative Agent's Rights and Remedies. No waiver by
the Administrative Agent of any of the Administrative Agent's Rights and
Remedies on any one occasion shall be deemed a waiver on any subsequent
occasion, nor shall it be deemed a

<PAGE>

continuing waiver. The Administrative Agent's Rights and Remedies may be
exercised at such time or times and in such order of preference as the
Administrative Agent may determine. The Administrative Agent's Rights and
Remedies may be exercised without resort or regard to any other source of
satisfaction of the Liabilities.

                                   SECTION 12
                           FUNDINGS AND DISTRIBUTIONS

                  12.1     Funding Procedures. Subject to Section 12.2:

                  (a)      The Administrative Agent shall advise each Revolving
Credit Lender, no later than 1:30 PM Boston time on a date on which any
Revolving Credit Loan (other than a Swing Line Loan) is to be made on that date.
Such advice, in each instance, may be by telephone or facsimile transmission,
provided that if such advice is by telephone, it shall be confirmed in writing.
Advice of a Revolving Credit Loan shall include the amount of and interest rate
applicable to the subject Revolving Credit Loan.

                  (b)      Subject to that Revolving Credit Lender's Revolving
Credit Commitment, each Revolving Credit Lender, by no later than the end of
business on the day on which the subject Revolving Credit Loan (including any
Permissible OverLoan) is to be made, shall Transfer that Revolving Credit
Lender's Revolving Credit Commitment Percentage of the subject Revolving Credit
Loan to the Administrative Agent.

                  12.2     Swing Line Loans.

                  (a)      In the event that, when a Revolving Credit Loan is
requested, the aggregate unpaid balance of the Swing Line Loan is less than the
Swing Line Loan Ceiling, then the Swing Line Lender may advise the
Administrative Agent that the Swing Line Lender has determined to include up to
the amount of the requested Revolving Credit Loan as part of the Swing Line
Loan. In such event, the Swing Line Lender shall Transfer the amount of the
requested Revolving Credit Loan to the Administrative Agent.

                  (b)      The Swing Line Loan shall be converted to a Revolving
Credit Loan in which all Revolving Credit Lenders participate as follows:

                           (i)      At any time and from time to time, the Swing
                  Line Lender may advise the Administrative Agent that all, or
                  any part of the Swing Line Loan is to be converted to a
                  Revolving Credit Loan in which all Revolving Credit Lenders
                  participate.

                           (ii)     At the initiation of a Liquidation, the then
                  entire unpaid principal balance of the Swing Line Loan shall
                  be converted to a Revolving Credit Loan in which all Revolving
                  Credit Lenders participate.

<PAGE>

In either such event, the Administrative Agent shall advise each Revolving
Credit Lender of such conversion as if, and with the same effect as if such
conversion were the making of a Revolving Credit Loan as provided in Section
12.1.

                  (c)      The Swing Line Lender, in separate capacities, may
also be the Administrative Agent and a Revolving Credit Lender.

                  (d)      The Swing Line Lender, in its capacity as Swing Line
Lender, is not a Revolving Credit Lender for any of the following purposes:

                           (i)      Except as otherwise specifically provided in
                  the relevant Section, any distribution pursuant to Section
                  13.6.

                           (ii)     Determination of whether the requisite
                  Revolving Credit Commitments have Consented to action
                  requiring such Consent.

                  12.3     Administrative Agent's Covering of Funding.

                  (a)      Each Lender shall make available to the
Administrative Agent, as provided herein, that Lender's Revolving Credit
Commitment Percentage of the following:

                           (i)      Each Revolving Credit Loan (including any
                  Permissible OverLoan), up to the maximum amount of that
                  Revolving Credit Lender's Revolving Credit Commitment.

                           (ii)     Up to the maximum amount of that Revolving
                  Credit Lender's Revolving Credit Commitment of each L/C
                  Drawing (to the extent that such L/C Drawing is not "covered"
                  by a Revolving Credit Loan as provided herein).

                  (b)      In all circumstances, the Administrative Agent may:

                           (i)      Assume that each Revolving Credit Lender,
                  subject to Sections 2.5 and 12.3(a), timely shall make
                  available to the Administrative Agent that Revolving Credit
                  Lender's Revolving Credit Commitment Percentage of each
                  Revolving Credit Loan (including any Permissible OverLoan),
                  notice of which is provided pursuant to Section 12.1.

                           (ii)     [Intentionally Omitted]

                           (iii)    In reliance upon such assumption, make
                  available the corresponding amount to the Borrowers.

                           (iv)     Assume that each Lender timely shall pay,
                  and shall make available, to the Administrative Agent all
                  other amounts which that Lender is obligated to so pay and/or
                  make available hereunder or under any of the Loan Documents.

<PAGE>

                  (c)      In the event that, in reliance upon any of such
assumptions, the Administrative Agent makes available a Revolving Credit
Lender's Revolving Credit Commitment Percentage of one or more Revolving Credit
Loans (including any permissible OverLoan), or any other amount to be made
available hereunder or under any of the Loan Documents, which amount a Lender (a
"Delinquent Lender") fails to provide to the Administrative Agent within one (1)
Business Day of written notice of such failure, then:

                           (i)      The amount which had been made available by
                  the Administrative Agent is an "Administrative Agent's Cover"
                  (and is so referred to herein).

                           (ii)     All interest paid by the Borrowers on
                  account of the Loan or coverage of the subject L/C Drawing
                  which consist of the Administrative Agent's Cover shall be
                  retained by the Administrative Agent until the Administrative
                  Agent's Cover, with interest, has been paid.

                           (iii)    The Delinquent Lender shall pay to the
                  Administrative Agent, on demand, interest at a rate equal to
                  the prevailing federal funds rate on any Administrative
                  Agent's Cover in respect of that Delinquent Lender.

                           (iv)     The Administrative Agent shall have
                  succeeded to all rights to payment to which the Delinquent
                  Lender otherwise would have been entitled hereunder in respect
                  of those amounts paid by or in respect of the Borrowers on
                  account of the Administrative Agent's Cover together with
                  interest until it is repaid. Such payments shall be deemed
                  made first towards the amounts in respect of which the
                  Administrative Agent's Cover was provided and only then
                  towards amounts in which the Delinquent Lender is then
                  participating. For purposes of distributions to be made
                  pursuant to Section 12.4(a) (which relates to ordinary course
                  distributions) or Section 13.6 (which relates to distributions
                  of proceeds of a Liquidation) below, amounts shall be deemed
                  distributable to a Delinquent Lender (and consequently, to the
                  Administrative Agent to the extent to which the Administrative
                  Agent is then entitled) at the highest level of distribution
                  (if applicable) at which the Delinquent Lender would otherwise
                  have been entitled to a distribution.

                           (v)      Subject to Subsection 12.3(c)(iv), the
                  Delinquent Lender shall be entitled to receive any payments
                  from the Borrowers to which the Delinquent Lender is then
                  entitled, provided however there shall be deducted from such
                  amount and retained by the Administrative Agent any interest
                  to which the Administrative Agent is then entitled on account
                  of Section 12.3(c)(ii), above.

                  (d)      A Delinquent Lender shall not be relieved of any
obligation of such Delinquent Lender hereunder (all and each of which shall
constitute continuing obligations on the part of any Delinquent Lender).

                  (e)      A Delinquent Lender may cure its status as a
Delinquent Lender by paying the Administrative Agent the aggregate of the
following:

<PAGE>

                           (i)      The Administrative Agent's Cover (to the
                  extent not previously repaid by the Borrowers and retained by
                  the Administrative Agent in accordance with Subsection
                  12.3(c)(iv), above) with respect to that Delinquent Lender.

                  Plus

                           (ii)     The aggregate of the amount payable under
                  Subsection 12.3(c)(iii), above (which relates to interest to
                  be paid by that Delinquent Lender).

                  Plus

                           (iii)    All such costs and expenses as may be
                  incurred by the Administrative Agent in the enforcement of the
                  Administrative Agent's rights against such Delinquent Lender.

                  12.4     Ordinary Course Distributions. (This Section 12.4
applies, and sets forth rights and obligations amongst the Lenders only, unless
the provisions of Section 13.6 (which relates to distributions in the event of a
Liquidation) become operative).

                  (a)      Weekly, on such day as may be set from time to time
by the Administrative Agent (or more frequently at the Administrative Agent's
option) the Administrative Agent and each Lender shall settle up on amounts
advanced under the Revolving Credit and collected funds received in the
Concentration Account or otherwise paid by the Borrowers.

                  (b)      The Administrative Agent shall distribute to the
Swing Line Lender and to each Lender, such Person's respective pro rata share of
interest payments on the Loans when actually received and collected by the
Administrative Agent. For purposes of calculating interest due to a Lender, that
Lender shall be entitled to receive interest on the actual amount contributed by
that Lender towards the principal balance of the Loans outstanding during the
applicable period covered by the interest payment made by the Borrowers. Any net
principal reductions to the Loans received by the Administrative Agent in
accordance with the Loan Documents during such period shall not reduce such
actual amount so contributed, for purposes of calculation of interest due to
that Lender, until the Administrative Agent has distributed to that Lender its
pro rata share thereof.

                  (c)      The Administrative Agent shall distribute (i) Early
Termination Fees to the applicable Lenders pro rata based upon their Revolving
Credit Commitment Percentage and (ii) L/C fees and, except as otherwise provided
in Section 2.16, Line Fees paid on account of the Revolving Credit to the
Revolving Credit Lenders pro rata based upon their Revolving Credit Commitment
Percentages.

                  (d)      No Lender shall have any interest in, or right to
receive any part of, the Renewal Fee or the Agent's Fee to be paid by the
Borrowers to the Administrative Agent pursuant to this Agreement. Each Lender
shall be paid such fees upon becoming a Lender hereunder as may be agreed
between such Lender and the Arranger.

<PAGE>

                  (e)      Any amount received by the Administrative Agent as
reimbursement for any cost or expense (including without limitation, attorneys'
reasonable fees) shall be distributed by the Administrative Agent to that Person
which is entitled to such reimbursement as provided in this Agreement (and if
such Person(s) is (are) the Lenders, pro rata based upon their respective
Revolving Credit Commitment Percentages at the date on which the expense, in
respect of which such reimbursement is being made, was incurred).

                  (f)      Each distribution pursuant to this Section 12.4 is
subject to Section 12.3(c), above.

                                   SECTION 13
                          ACCELERATION AND LIQUIDATION

                  13.1     Acceleration Notices.

                  (a)      The Administrative Agent may give the Lenders a
Notice of Acceleration at any time during the existence of an Event of Default.

                  (b)      The Majority Lenders may give the Administrative
Agent a Notice of Acceleration at any time during the existence of an Event of
Default. Such notice may be by multiple counterparts.

                  13.2     Acceleration. Unless stayed by judicial or statutory
process, the Administrative Agent shall accelerate the time for payment of the
Liabilities and declare the Liabilities immediately due and payable in full
within a commercially reasonable time following:

                  (a)      The Administrative Agent's giving of a Notice of
Acceleration to the Lenders as provided in Section 13.1(a).

                  (b)      The Administrative Agent's receipt of a Notice of
Acceleration from the Majority Lenders, in compliance with Section 13.1(b).

                  13.3     Initiation of Liquidation. Unless stayed by judicial
or statutory process, a Liquidation shall be initiated by the Administrative
Agent within a commercially reasonable time following acceleration of the
Liabilities.

                  13.4     Actions at and Following Initiation of Liquidation.

                  (a)      At the initiation of a Liquidation:

                           (i)      The unpaid principal balance of the Swing
                  Line Loan (if any) shall be converted, pursuant to Section
                  12.2(b)(ii), to a Revolving Credit Loan in which all Revolving
                  Credit Lenders participate.

                           (ii)     The Administrative Agent and the Revolving
                  Credit Lenders shall "net out" each Revolving Credit Lender's
                  respective contributions towards the

<PAGE>

                  Revolving Credit Loans, so that each Revolving Credit Lender
                  holds that Revolving Credit Lender's Revolving Credit
                  Commitment Percentage of the Revolving Credit Loans and
                  advances.

                           (b)      Following the initiation of a Liquidation,
                  each Revolving Credit Lender shall contribute, towards any L/C
                  thereafter honored and not immediately reimbursed by the
                  Borrowers, that Revolving Credit Lender's Revolving Credit
                  Commitment Percentage of such honoring.

                  13.5     Administrative Agent's Conduct of Liquidation.

                  (a)      Any Liquidation shall be conducted by the
Administrative Agent, with the advice and assistance of the Lenders.

                  (b)      The Administrative Agent may establish one or more
Nominees to "bid in" or otherwise acquire ownership to any Post Foreclosure
Asset, provided that the Administrative Agent may "bid in" for any such assets
only at such prices as may be directed by the Majority Lenders.

                  (c)      The Administrative Agent shall manage the Nominee and
manage and dispose of any Post Foreclosure Assets with a view towards the
realization of the economic benefits of the ownership of the Post Foreclosure
Assets and in such regard, the Administrative Agent and/or the Nominee may
operate, repair, manage, maintain, develop, and dispose of any Post Foreclosure
Asset in such manner as the Administrative Agent determines as appropriate under
the circumstances.

                  (d)      The Administrative Agent may decline to undertake or
to continue taking a course of action or to execute an action plan (whether
proposed by the Administrative Agent or any Lender) unless indemnified to the
Administrative Agent's satisfaction by the Lenders against any and all liability
and expense which may be incurred by the Administrative Agent by reason of
taking or continuing to take that course of action or action plan.

                  (e)      Each Secured Party shall execute all such instruments
and documents not inconsistent with the provisions of this Agreement as the
Administrative Agent and/or the Nominee reasonably may request with respect to
the creation and governance of any Nominee, the conduct of the Liquidation, and
the management and disposition of any Post Foreclosure Asset.

                  13.6     Distribution of Liquidation Proceeds. (a) During the
existence of an Event of Default, the Administrative Agent may establish one or
more reasonably funded reserve accounts into which proceeds of the conduct of
any Liquidation may be deposited in anticipation of future expenses which may be
incurred by the Administrative Agent in the exercise of rights as a secured
creditor of the Credit Parties and prior claims which the Administrative Agent
reasonably anticipates may need to be paid.

<PAGE>

                  (b)      The Administrative Agent shall distribute the net
proceeds of Liquidation in accordance with the relative priorities set forth in
Section 13.7.

                  (c)      Each Lender, on the written request of the
Administrative Agent and/or any Nominee, not more frequently than once each
month, shall reimburse the Administrative Agent and/or any Nominee, pro rata,
for any cost or expense reasonably incurred by the Administrative Agent and/or
the Nominee in the conduct of a Liquidation, which amount is not covered out of
current proceeds of the Liquidation, which reimbursement shall be paid over to
and distributed by the Administrative Agent.

                  13.7     Relative Priorities to Proceeds of Liquidation. The
relative priorities to the proceeds of a Liquidation are as follows:

                  (a)      To the Administrative Agent as reimbursement for all
reasonable third party costs and expenses incurred by the Administrative Agent
and to Lenders' Special Counsel and to any funded reserve established pursuant
to Section 13.6(a); and then

                  (b)      To the Swing Line Lender, on account of any Swing
Line Loans not converted to Revolving Credit Loans pursuant to Section
13.4(a)(i); and then

                  (c)      To the Lenders (other than any Delinquent Lender),
pro rata, to the unpaid principal balance of the Revolving Credit Loans; and
then

                  (d)      To the Lenders (other than any Delinquent Lender),
pro rata, to accrued interest on the Revolving Credit Loans; and then

                  (e)      To the Lenders (other than any Delinquent Lender),
pro rata, to those fees distributable hereunder to the Lenders; and then

                  (f)      To any Delinquent Lenders, pro rata to amounts to
which such Revolving Credit Lenders otherwise would have been entitled pursuant
to Sections 13.7(c), 13.7(d) or 13.7(e); and then

                  (g)      To any applicable Lenders, pro rata, to the extent of
the Early Termination Fee; and then

                  (h)      To any other Liabilities then outstanding (including,
without limitation on account of any claims then threatened or asserted against
any Secured Party for which the Credit Parties are obligated to provide an
indemnity).

                  (i)      To the Lead Borrower or whoever may be lawfully
entitled thereto.

<PAGE>

                                   SECTION 14
                            THE ADMINISTRATIVE AGENT

                  14.1     Appointment of the Administrative Agent.

                  (a)      Each of the Lenders and the Issuer appoints and
designates Fleet Retail Finance Inc. as the "Administrative Agent" hereunder and
under the Loan Documents.

                  (b)      Each of the Lenders and the Issuer authorizes the
Administrative Agent:

                           (i)      To execute those of the Loan Documents and
                  all other instruments relating thereto to which the
                  Administrative Agent is a party.

                           (ii)     To take such action on behalf of the Lenders
                  and the Issuer and to exercise all such powers as are
                  expressly delegated to the Administrative Agent hereunder and
                  in the Loan Documents and all related documents, together with
                  such other powers as are reasonably incident thereto.

                  14.2     Responsibilities of Administrative Agent; Other
Agents.

                  (a)      The Administrative Agent shall not have any duties or
responsibilities to, or any fiduciary relationship with, any Secured Party
except for those expressly set forth in this Agreement.

                  (b)      Neither the Administrative Agent nor any of its
Affiliates shall be responsible to any Secured Party for any of the following:

                           (i)      Any recitals, statements, representations or
                  warranties made by any Credit Party or any other Person.

                           (ii)     Any appraisals or other assessments of the
                  assets of any Credit Party or of any other Person responsible
                  for or on account of the Liabilities.

                           (iii)    The value, validity, effectiveness,
                  genuineness, enforceability, or sufficiency of this Agreement,
                  the other Loan Documents or any other document referred to or
                  provided for therein.

                           (iv)     Any failure by any Credit Party or any other
                  Person (other than the Administrative Agent) to perform its
                  obligations under the Loan Documents.

                  (c)      The Administrative Agent may employ attorneys,
accountants, and other professionals and agents and attorneys-in-fact and shall
not be responsible for the negligence or misconduct of any such attorneys,
accountants, and other professionals or agents or attorneys-in-fact selected by
the Administrative Agent with reasonable care. No such attorney, accountant,
other professional, agent, or attorney-in-fact shall be responsible for any
action taken or omitted to be taken by any other such Person.

<PAGE>

                  (d)      Neither the Administrative Agent, nor any of its
directors, officers, or employees shall be responsible for any action taken or
omitted to be taken by any other of them in connection herewith in reliance upon
advice of its counsel nor, in any other event except for any action taken or
omitted to be taken as to which a final judicial determination has been or is
made (in a proceeding in which such Person has had an opportunity to be heard)
that such Person had acted in a grossly negligent manner, in actual bad faith,
or in willful misconduct.

                  (e)      The Administrative Agent shall not have any
responsibility in any event for more funds than the Administrative Agent
actually receives and collects.

                  (f)      The Administrative Agent, in its separate capacity as
a Lender, shall have the same rights and powers hereunder as any other Lender.

                  (g)      The Arranger and the Syndication Agent, in their
respective capacities as such, shall have no duties or responsibilities, and
shall incur no liability, under this Agreement and the other Loan Documents.

                  14.3     Concerning Distributions by the Administrative Agent.

                  (a)      The Administrative Agent in the Administrative
Agent's reasonable discretion based upon the Administrative Agent's
determination of the likelihood that additional payments will be received,
expenses incurred, and/or claims made by third parties to all or a portion of
such proceeds, may delay the distribution of any payment received on account of
the Liabilities.

                  (b)      The Administrative Agent may disburse funds prior to
determining that the sums which the Administrative Agent expects to receive have
been finally and unconditionally paid to the Administrative Agent. If and to the
extent that the Administrative Agent does disburse funds and it later becomes
apparent that the Administrative Agent did not then receive a payment in an
amount equal to the sum paid out, then any Lender to whom the Administrative
Agent made the funds available, on demand from the Administrative Agent, shall
refund to the Administrative Agent the sum paid to that person.

                  (c)      If, in the opinion of the Administrative Agent, the
distribution of any amount received by the Administrative Agent might involve
the Administrative Agent in liability, or might be prohibited hereby, or might
be questioned by any Person, then the Administrative Agent may refrain from
making distribution until the Administrative Agent's right to make distribution
has been adjudicated by a court of competent jurisdiction.

                  (d)      The proceeds of any Lenders exercise of any right of,
or in the nature of, set-off shall be deemed, First, to the extent that a Lender
is entitled to any distribution hereunder, to constitute such distribution and
Second, shall be shared with the other Lenders as if distributed pursuant to
(and shall be deemed as distributions under) Section 13.7.

                  (e)      Each Lender recognizes that the crediting of the
Borrowers with the "proceeds" of any transaction in which a Post Foreclosure
Asset is acquired is a non-cash

<PAGE>

transaction and that, in consequence, no distribution of such "proceeds" will be
made by the Administrative Agent to any Lender.

                  (f)      In the event that (x) a court of competent
jurisdiction shall adjudge that any amount received and distributed to the
Lenders by the Administrative Agent is to be repaid or disgorged or (y) the
Majority Lenders determine to effect such repayment or disgorgement, then each
Lender to which any such distribution shall have been made shall repay, to the
Administrative Agent which had made such distribution, that Lender's pro rata
share of the amount so adjudged or determined to be repaid or disgorged.

                  14.4     Dispute Resolution. Any dispute among the Lenders,
the Issuer, the Administrative Agent and/or any other Secured Party concerning
the interpretation, administration, or enforcement of the financing arrangements
contemplated by this or any other Loan Document or the interpretation or
administration of this or any other Loan Document which cannot be resolved
amicably shall be resolved in the United States District Court for the District
of New York, sitting in New York or in the Supreme Court of New York County, New
York, to the jurisdiction of which courts each of the Lenders and the Issuer
hereby submits.

                  14.5     Distributions of Notices and of Documents. The
Administrative Agent will forward to each Lender, promptly after the
Administrative Agent's receipt thereof, a copy of each notice or other document
furnished to the Administrative Agent pursuant to this Agreement, including
monthly, quarterly, and annual financial statements received from the Lead
Borrower pursuant to Article 5 of this Agreement, other than any of the
following:

                  (a)      Routine communications associated with requests for
Revolving Credit Loans and/or the issuance of L/Cs.

                  (b)      Routine or nonmaterial communications.

                  (c)      Any notice or document of which the Administrative
Agent has knowledge that such notice or document had been forwarded to the
Lenders other than by the Administrative Agent.

                  14.6     Confidential Information.

                  (a)      Each Lender will maintain, as confidential, all of
the following:

                           (i)      Proprietary approaches, techniques, and
                  methods of analysis which are applied by the Administrative
                  Agent in the administration of the credit facility
                  contemplated by this Agreement.

                           (ii)     Proprietary forms and formats utilized by
                  the Administrative Agent in providing reports to the Lenders
                  pursuant hereto, which forms or formats are not of general
                  currency.

<PAGE>

                  (b)      Nothing included herein shall prohibit the disclosure
of any such information as may be required to be provided by judicial process or
by regulatory authorities having jurisdiction over any party to this Agreement.

                  14.7     Reliance By Administrative Agent. The Administrative
Agent shall be entitled to rely upon any certificate, notice or other document
(including any cable, telegram, telex, or facsimile) reasonably believed by the
Administrative Agent to be genuine and correct and to have been signed or sent
by or on behalf of the proper person or persons, and upon advice and statements
of attorneys, accountants and other experts selected by the Administrative
Agent. As to any matters not expressly provided for in this Agreement, any Loan
Document, or in any other document referred to therein, the Administrative Agent
shall in all events be fully protected in acting, or in refraining from acting,
in accordance with the applicable Consent required by this Agreement.
Instructions given with the requisite Consent shall be binding on all Lenders.

                  14.8     Non-Reliance on Administrative Agent and Other
Lenders.

                  (a)      Each Lender represents to all other Lenders and to
the Administrative Agent that such Lender:

                           (i)      Independently and without reliance on any
                  representation or act by Administrative Agent or by any other
                  Lender, and based on such documents and information as that
                  Lender has deemed appropriate, has made such Lender's own
                  appraisal of the financial condition and affairs of the Credit
                  Parties and decision to enter into this Agreement.

                           (ii)     Has relied upon that Lender's review of the
                  Loan Documents by that Lender and by counsel to that Lender as
                  that Lender deemed appropriate under the circumstances.

                  (b)      Each Lender agrees that such Lender, independently
and without reliance upon Administrative Agent or any other Lender, and based
upon such documents and information as such Lender shall deem appropriate at the
time, will continue to make such Lender's own appraisals of the financial
condition and affairs of the Credit Parties when determining whether to take or
not to take any discretionary action under this Agreement.

                  (c)      The Administrative Agent, in the discharge of that
Administrative Agent's duties hereunder, shall not be required to make inquiry
of, or to inspect the properties or books of, any Person.

                  (d)      Except for notices, reports, and other documents and
information expressly required to be furnished to the Lenders by the
Administrative Agent hereunder (as to which, see Section 14.5), the
Administrative Agent shall not have any affirmative duty or responsibility to
provide any Secured Party with any credit or other information concerning any
Person, which information may come into the possession of Administrative Agent
or any Affiliate of the Administrative Agent.

<PAGE>

                  (e)      Each Lender, at such Lender's request, shall have
reasonable access to all nonprivileged documents in the possession of the
Administrative Agent, which documents relate to the Administrative Agent's
performance of its duties hereunder.

                  (f)      Each Lender understands that Latham & Watkins LLP is
acting as legal counsel to Fleet National Bank, Fleet Retail Finance and Fleet
Securities, Inc. in this transaction in their respective capacities hereunder.

                  14.9     Indemnification. Without limiting the liabilities of
the Credit Parties under this Agreement or any of the other Loan Documents, each
Lender shall indemnify the Administrative Agent, pro rata based upon their
respective Total Commitment Percentages for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever (including reasonable
attorneys' fees and expenses and other out-of-pocket expenditures) which may at
any time be imposed on, incurred by, or asserted against the Administrative
Agent and in any way relating to or arising out of this Agreement or any other
Loan Document or any documents contemplated by or referred to therein or the
transactions contemplated thereby or the enforcement of any of terms hereof or
thereof or of any such other documents, provided, however, no Lender shall be
liable for any of the foregoing to the extent that any of the foregoing arises
from any action taken or omitted to be taken by the Administrative Agent as to
which a final judicial determination has been or is made (in a proceeding in
which the Administrative Agent has had an opportunity to be heard) that the
Administrative Agent had acted in a grossly negligent manner, in actual bad
faith, or in willful misconduct.

                  14.10    Resignation of Administrative Agent.

                  (a)      The Administrative Agent may resign at any time by
giving sixty (60) days prior written notice thereof to the Lenders. Upon receipt
of any such notice of resignation, the Majority Lenders shall have the right to
appoint a successor to such Administrative Agent, which shall be a Lender (and
if no Event of Default has occurred, with the consent of the Lead Borrower, not
to be unreasonably withheld and, in any event, deemed given by the Lead Borrower
if no written objection is provided by the Lead Borrower to the (resigning)
Administrative Agent within seven (7) Business Days notice of such proposed
appointment). If a successor Administrative Agent shall not have been so
appointed and accepted such appointment within thirty (30) days after the giving
of notice by the resigning Administrative Agent, then the resigning
Administrative Agent may appoint a successor Administrative Agent, which shall
be a bank or finance company where the making or administration of commercial
loans is a significant part of the ordinary course of its business and which has
a combined capital and surplus in excess of $300,000,000.00. The consent of the
Lead Borrower otherwise required by this Section 14.10(a) shall not be required
if an Event of Default has occurred.

                  (b)      Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor shall thereupon succeed to, and become vested with, all the rights,
powers, privileges, and duties of the (resigning) Administrative Agent so
replaced, and the (resigning) Administrative Agent shall be discharged from the
(resigning) Administrative Agent's duties and obligations hereunder, other than
on

<PAGE>

account of any responsibility for any action taken or omitted to be taken by the
(resigning) Administrative Agent as to which a final judicial determination has
been or is made (in a proceeding in which the (resigning) Person has had an
opportunity to be heard) that such Person had acted in a grossly negligent
manner or in bad faith.

                  (c)      After any retiring Administrative Agent's
resignation, the provisions of this Agreement and of all other Loan Documents
shall continue in effect for the retiring Person's benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Administrative
Agent.

                                   SECTION 15
        ACTION BY ADMINISTRATIVE AGENT - CONSENTS - AMENDMENTS - WAIVERS

                  15.1     Administration of Credit Facilities.

                  (a)      Except as otherwise specifically provided in this
Agreement, the Administrative Agent may take any action with respect to the
credit facility contemplated by the Loan Documents as the Administrative Agent
determines to be appropriate, provided, however, the Administrative Agent is not
under any affirmative obligation to take any action which it is not required by
this Agreement or the Loan Documents specifically to so take.

                  (b)      Except as specifically provided in the following
Sections of this Agreement, whenever a Loan Document or this Agreement provides
that action may be taken or omitted to be taken in an Administrative Agent's
discretion, the Administrative Agent shall have the sole right to take, or
refrain from taking, such action without, and notwithstanding, any vote of the
Lenders:

<TABLE>
<CAPTION>
Action Described in Section               Type of Consent Required
---------------------------               ------------------------
<S>                                 <C>
           15.2                     Majority Lenders
           15.3                     Supermajority Revolving Credit Lenders
           15.4                     Unanimous Consent
           15.5                     Swing Line Lender Consent
           15.6                     Consent of Issuer
           15.7                     Consent of the Administrative Agent
</TABLE>

                  (c)      The rights granted to the Lenders in those sections
referenced in Section 15.1(b) shall not otherwise limit or impair the
Administrative Agent's exercise of its discretion under the Loan Documents.

                  15.2     Actions Requiring or on Direction of Majority
Lenders. Except as otherwise provided in this Agreement, the Consent or
direction of the Majority Lenders is required for any amendment, waiver, or
modification of any Loan Document.

                  15.3     Actions Requiring or on Direction Of Supermajority
Revolving Credit Lenders. The Swing Line Loan Ceiling may not be increased to an
amount in excess of

<PAGE>

$40,000,000.00 (or such greater amount to which such Swing Line Loan Ceiling has
been previously increased in accordance with the provisions of this Section 15.3
without the Consent of the Supermajority Revolving Credit Lenders.

                  15.4     Actions Requiring or Directed by Unanimous Consent.
None of the following may take place except with the Consent of each Lender
directly adversely affected thereby or with Unanimous Consent (as set forth
below):

                  (a)      Any increase in any Lender's Commitment or Revolving
Credit Commitment Percentage (other than by reason of the application of Section
15.10 (which deals with NonConsenting Lenders) or Section 16.1 (which deals with
assignments and participations)) requires the consent of the Majority Lenders
and each Lender whose Commitment and/or Revolving Credit Commitment Percentage
is being so increased.

                  (b)      Any decrease in any interest rate or fee payable to
the Lenders on account of the Loans requires Unanimous Consent.

                  (c)      Any extension of the Maturity Date requires Unanimous
Consent.

                  (d)      Any permanent forgiveness of all or any portion of
any payment Liability requires the consent of the Majority Lenders and each
Lender to whom such a forgiven payment Liability is owed.

                  (e)      Any decrease in any interest rate or fee payable
under any of the Loan Documents (other than any Agent's Fee (for which the
consent of the Administrative Agent shall also be required) and of any fee
provided for by the Restatement Fee Letter (which may be amended by written
agreement between the Lead Borrower on the one hand, and the Administrative
Agent on the other)) requires Unanimous Consent.

                  (f)      Any release of a material portion of the Collateral
(except as otherwise required or provided for in the Loan Documents or to
facilitate a Liquidation) requires Unanimous Consent.

                  (g)      Any amendment of the definition of the terms
"Borrowing Base" or of any definition of any component thereof, such that more
credit would be available to the Borrowers, based on the same assets, as would
have been available to the Borrowers immediately prior to such amendment
requires Unanimous Consent, it being understood, however, that:

                           (i)      The foregoing shall not limit the adjustment
                  by the Administrative Agent of any Reserve in the
                  Administrative Agent's administration of the Revolving Credit
                  as otherwise permitted by this Agreement.

                           (ii)     The foregoing shall not prevent the
                  Administrative Agent, in its administration of the Revolving
                  Credit, from restoring any component of the Borrowing Base
                  which had been lowered by the Administrative Agent back to the
                  value of such component, as stated in this Agreement or to an
                  intermediate value.

<PAGE>

                  (h)      Any release of any Person obligated on account of the
Liabilities requires Unanimous Consent.

                  (i)      The making of any Revolving Credit Loan which, when
made, exceeds Availability and is not a Permissible OverLoan requires Unanimous
Consent, provided, however,

                           (i)      no Consent shall be required in connection
                  with the making of any Revolving Credit Loan to "cover" any
                  honoring of a drawing under any L/C; and

                           (ii)     each Lender recognizes that subsequent to
                  the making of a Revolving Credit Loan which does not
                  constitute a Permissible OverLoan, the unpaid principal
                  balance of the Loan Account may exceed the Borrowing Base on
                  account of changed circumstances beyond the control of the
                  Administrative Agent (such as a drop in collateral value).

                  (j)      The waiver of the obligation of the Borrowers to
reduce the unpaid principal balance of Revolving Credit Loans under the
Revolving Credit to an amount which does not exceed a Permissible OverLoan or to
eliminate an OverLoan requires Unanimous Consent.

                  (k)      Any amendment of this Article 15 requires Unanimous
Consent.

                  (l)      Amendment of any of the following Definitions
requires Unanimous Consent:

                                    "Appraised Inventory Liquidation Value"

                                    "Appraised Inventory Percentage"

                                    "Majority Lenders"

                                    "Permissible OverLoan"

                                    "Supermajority Revolving Credit Lenders"

                                    "Unanimous Consent"

                  15.5     Actions Requiring Swing Line Lender Consent. No
action, amendment, or waiver of compliance with, any provision of the Loan
Documents or of this Agreement which directly affects the Swing Line Lender may
be undertaken without the Consent of the Swing Line Lender.

                  15.6     Actions Requiring Issuer Consent. No action,
amendment, or waiver of compliance with, any provision of the Loan Documents or
of this Agreement which directly affects the Issuer may be undertaken without
the Consent of the Issuer.

                  15.7     Actions Requiring Administrative Agent's Consent.

<PAGE>

                           (a)      No action, amendment, or waiver of
                  compliance with, any provision of the Loan Documents or of
                  this Agreement which affects the Administrative Agent in its
                  capacity as Administrative Agent may be undertaken without the
                  written consent of the Administrative Agent.

                           (b)      No action referenced herein which affects
                  the rights, duties, obligations, or liabilities of the
                  Administrative Agent shall be effective without the written
                  consent of the Administrative Agent.

                  15.8     Miscellaneous Actions.

                  (a)      Notwithstanding any other provision of this
Agreement, no single Lender independently may exercise any right of action or
enforcement against or with respect to any Credit Party.

                  (b)      The Administrative Agent shall be fully justified in
failing or refusing to take action under this Agreement or any Loan Document on
behalf of any Secured Party unless the Administrative Agent shall first

                           (i)      receive such clear, unambiguous, written
                  instructions as the Administrative Agent deems appropriate
                  from the required parties; and

                           (ii)     be indemnified to the Administrative Agent's
                  satisfaction by the Secured Parties against any and all
                  liability and expense which may be incurred by the
                  Administrative Agent by reason of taking or continuing to take
                  any such action, unless such action had been grossly
                  negligent, in willful misconduct, or in bad faith.

                  (c)      The Administrative Agent may establish reasonable
procedures for the providing of direction and instructions from the Lenders to
the Administrative Agent, including its reliance on multiple counterparts,
facsimile transmissions, and time limits within which such direction and
instructions must be received in order to be included in a determination of
whether the requisite percentage of Lenders has provided its direction, Consent,
or instructions.

                  15.9     Actions Requiring Lead Borrower's Consent.

                  (a)      The Lead Borrower's consent is required for any
amendment of this Agreement, except that each of the following Articles of this
Agreement may be amended without the consent of the Lead Borrower or any other
Credit Party:

<TABLE>
<CAPTION>
Section       Title of Section
-------       ----------------
<S>           <C>
12            Revolving Credit Fundings and Distributions to Lenders
14.1          The Administrative Agent
15            Action by Administrative Agent - Consents - Amendments - Waivers
              (other than 15.8(a), 15.8(b), 15.9 and 15.10)
</TABLE>

<PAGE>

                  (b)      Subject to Section 15.9(c), Section 15.4 (Unanimous
Consent) may not be amended without the consent of the Lead Borrower:

                  (c)      The Lead Borrower's consent to the amendment of those
provisions referenced in Section 15.9(b)

                           (i)      Shall be deemed given unless written
                  objection is made, within seven (7) Business Days following
                  the Administrative Agent's giving notice to the Lead Borrower
                  of the proposed amendment; and

                           (ii)     shall not be required during the existence
                  of any Event of Default.

                  15.10    NonConsenting Lender.

                  (a)      In the event that a Lender (in this Section 15.10, a
"NonConsenting Lender") does not provide its Consent to a proposal by the
Administrative Agent to take action which requires consent under this Article
15, then subject to the prior consent of the Administrative Agent, one or more
Lenders who provided Consent to such action may require the assignment, without
recourse and in accordance with the procedures outlined in Section 16.1, below,
of the NonConsenting Lender's commitment hereunder on fifteen (15) days written
notice to the Administrative Agent and to the NonConsenting Lender.

                  (b)      At the end of such fifteen (15) days, and provided
that the NonConsenting Lender delivers the Note held by the NonConsenting Lender
to the Administrative Agent, the Lenders who have given such written notice
shall Transfer the following to the NonConsenting Lender:

                           (i)      Such NonConsenting Lender's pro rata share
                  of the principal and interest of the Loans to the date of such
                  assignment.

                           (ii)     All fees distributable hereunder to the
                  NonConsenting Lender to the date of such assignment.

                           (iii)    Any out-of-pocket costs and expenses for
                  which the NonConsenting Lender is entitled to reimbursement
                  from the Borrowers.

                  (c)      In the event that the NonConsenting Lender fails to
deliver to the Administrative Agent the Note(s) held by the NonConsenting Lender
as provided in Section 15.10(b), then:

                           (i)      The amount otherwise to be Transferred to
                  the NonConsenting Lender shall be Transferred to the
                  Administrative Agent and held by the Administrative Agent,
                  without interest, to be turned over to the NonConsenting
                  Lender upon delivery of the Note(s) held by that NonConsenting
                  Lender.

                           (ii)     The Note(s) held by the NonConsenting Lender
                  shall have no force or effect whatsoever.

<PAGE>

                           (iii)    The NonConsenting Lender shall cease to be a
                  "Lender".

                           (iv)     The Lender(s) which have Transferred the
                  amount to the Administrative Agent as described above shall
                  have succeeded to all rights and become subject to all of the
                  obligations of the NonConsenting Lender as "Lender".

                  (d)      In the event that more than one (1) Lender wishes to
require such assignment, the NonConsenting Lender's commitment hereunder shall
be divided among such Lenders, pro rata based upon their Revolving Credit
Commitment Percentages with the Administrative Agent coordinating such
transaction.

                  (e)      The Administrative Agent shall coordinate the
retirement of the Note(s) held by the NonConsenting Lender and the issuance of
Notes to those Lenders which "take-out" such NonConsenting Lender, provided,
however, no processing fee otherwise to be paid as provided in Section 16.2(b)
shall be due under such circumstances.

                                   SECTION 16
                             ASSIGNMENTS BY LENDERS

                  16.1     Assignments and Assumptions.

                  (a)      Except as provided herein, each Lender (in this
Section 16.1(a), an "Assigning Lender") may assign to one or more Eligible
Assignees (in this Section 16.1(a), each an "Assignee Lender") all or a portion
of that Lender's interests, rights and obligations under this Agreement and the
Loan Documents (including all or a portion of its Commitment) and the same
portion of the Loans at the time owing to it, and of the Note held by the
Assigning Lender, provided that:

                           (i)      The Administrative Agent (and, if no Event
                  of Default then exists, the Lead Borrower) shall have given
                  its prior written consent to such assignment, which consent
                  shall not be unreasonably withheld, but may be withheld if the
                  proposed assignment would result in any resulting Lender's
                  having a Dollar Commitment of less than the "minimum hold"
                  amount specified in Section 16.1(a)(iii), provided that any
                  assignment complying with all other terms of this Section
                  16(a) to a Person then a Lender or an affiliate thereof shall
                  not be subject to the prior consent of the Lead Borrower.

                           (ii)     Each such assignment shall be of a constant,
                  and not a varying, percentage of all the Assigning Lender's
                  rights and obligations under this Agreement.

                           (iii)    Following the effectiveness of such
                  assignment, the Assigning Lender's Commitment (if not an
                  assignment of all of the Assigning Lender's Commitment) shall
                  not be less than $10,000,000.00.

<PAGE>

                  (b)      Notwithstanding the foregoing, at any time when no
Default or Event of Default exists, Fleet Retail Finance Inc. may not assign any
of its Commitment if, following the effectiveness of such assignment, the
Administrative Agent's Commitment is less than $60,000,000.00.

                  16.2     Assignment Procedures. (This Section 16.2 describes
the procedures to be followed in connection with an assignment effected pursuant
to this Article 16 and permitted by Section 16.1).

                  (a)      The parties to such an assignment shall execute and
deliver to the Administrative Agent, for recording in the Register, an
Assignment and Acceptance substantially in the form of Exhibit E, (an
"Assignment and Acceptance").

                  (b)      The Assigning Lender shall deliver to the
Administrative Agent, with such Assignment and Acceptance, the Note held by the
subject Assigning Lender and the Administrative Agent's processing fee of
$3,500.00, provided, however, no such processing fee shall be due where the
Assigning Lender is one of the Lenders (or an affiliate thereof) at the initial
execution of this Agreement.

                  (c)      The Administrative Agent shall maintain a copy of
each Assignment and Acceptance delivered to it and a register or similar list
(the "Register") for the recordation of the names and addresses of the Lenders
and of the Revolving Credit Commitment Percentage of each Lender. The Register
shall be available for inspection by the Lenders at any reasonable time and from
time to time upon reasonable prior notice. In the absence of manifest error, the
entries in the Register shall be conclusive and binding on all Lenders. The
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register as a "Lender" hereunder for all purposes of this
Agreement.

                  (d)      The Assigning Lender and Assignee Lender, directly
between themselves, shall make all appropriate adjustments in payments for
periods prior to the effective date of an Assignment and Assumption.

                  16.3     Effect of Assignment.

                  (a)      From and after the effective date specified in an
Assignment and Acceptance which has been executed, delivered, and recorded
(which effective date the Administrative Agent may delay by up to five (5)
Business Days after the delivery of such Assignment and Acceptance):

                           (i)      The Assignee Lender:

                                    (B)      Shall be a party to this Agreement
                           and the Loan Documents (and to any amendments
                           thereof) as fully as if the Assignee Lender had
                           executed each.

<PAGE>

                                    (C)      Shall have the rights of a Lender
                           hereunder to the extent of the Revolving Credit
                           Commitment Percentage assigned by such Assignment and
                           Acceptance.

                           (ii)     The Assigning Lender shall be released from
                  the Assigning Lender's obligations under this Agreement and
                  the Loan Documents to the extent of the Commitment assigned by
                  such Assignment and Acceptance.

                           (iii)    The Administrative Agent shall undertake to
                  obtain and distribute replacement Notes to the subject
                  Assigning Lender and Assignee Lender.

                  (b)      By executing and delivering an Assignment and
Acceptance, the parties thereto confirm to and agree with each other and with
all parties to this Agreement as to those matters which are set forth in the
subject Assignment and Acceptance.

                                   SECTION 17
                                     NOTICES

                  17.1     Notice Addresses. All notices, demands, and other
communications made in respect of any Loan Document (other than a request for a
loan or advance or other financial accommodation under the Revolving Credit)
shall be made to the following addresses, each of which may be changed upon
seven (7) days written notice to all others given by certified mail, return
receipt requested:

                  If to the Administrative Agent:

                                    Fleet Retail Finance Inc.
                                    40 Broad Street
                                    Boston, Massachusetts 02109
                                    Attention: James Ward
                                    Fax: (617) 434-4018

                  With a copy to:

                                    Latham & Watkins
                                    885 Third Avenue
                                    New York, New York 10022
                                    Attention: Christopher R. Plaut
                                    Fax: (212) 751-4864

                  If to the Lead Borrower
                  And All Credit Parties:

                                    ShopKo Stores, Inc.
                                    700 Pilgrim Way
                                    Green Bay, Wisconsin 54304

<PAGE>

                                    Attention: John Pindred
                                    Fax: (920) 429-7560

                  With a copy to:

                                    Godfrey & Kahn, S.C.
                                    780 North Water Street
                                    Milwaukee, Wisconsin 53202-3590
                                    Attention: Christopher Noyes
                                    Fax: (414) 273-5198

                                    and

                                    ShopKo Stores, Inc.
                                    700 Pilgrim Way
                                    Green Bay, Wisconsin 54304
                                    Attention: General Counsel
                                    Fax: (920) 429-7401

                  17.2     Notice Given.

                  (a)      Except as otherwise specifically provided herein,
notices shall be deemed made and correspondence received, as follows (all times
being local to the place of delivery or receipt):

                           (i)      By mail: the sooner of when actually
                  received or three (3) days following deposit in the United
                  States mail, postage prepaid.

                           (ii)     By recognized overnight express delivery:
                  the Business Day following the day when sent.

                           (iii)    By Hand: If delivered on a Business Day
                  after 9:00 AM and no later than 4:00 PM, when delivered.
                  Otherwise, at the opening of the then next Business Day.

                           (iv)     By Facsimile transmission (which must
                  include a header on which the party sending such transmission
                  is indicated): If sent on a Business Day after 9:00 AM and no
                  later than 4:00 PM, one (1) hour after being sent. Otherwise,
                  at the opening of the then next Business Day.

                  (b)      Rejection or refusal to accept delivery and inability
to deliver because of a changed address or facsimile number for which no due
notice was given shall each be deemed receipt of the notice sent.

<PAGE>

                                   SECTION 18
                                   TERMINATION

                  18.1     Termination of Revolving Credit. The Revolving Credit
shall remain in effect (subject to suspension as provided in Section 2.5(g)
hereof) until the Termination Date.

                  18.2     Actions on Termination.

                  (a)      On the Termination Date, the Borrowers shall pay the
Administrative Agent (whether or not then due), in immediately available funds,
all Liabilities then due and owing, including, without limitation: the
following:

                           (i)      The entire balance of the Loan Account
                  (including the unpaid principal balance of the Revolving
                  Credit Loans and the Swing Line Loan).

                           (ii)     Any then remaining installments of the
                  Agent's Fee.

                           (iii)    Any payments due on account of the
                  indemnification obligations included in Section 2.11(f).

                           (iv)     Any accrued and unpaid Unused Fee.

                           (v)      Any applicable portion of the Early
                  Termination Fee.

                           (vi)     All unreimbursed costs and expenses
                  (including legal expenses) of the Administrative Agent and of
                  Lenders' Special Counsel for which each Credit Party is
                  responsible.

                  (b)      On the Termination Date, the Borrowers shall also
shall make such arrangements concerning any L/Cs then outstanding as are
reasonably satisfactory to the Administrative Agent (such as cash
collateralizing such L/Cs in an amount equal to 103% of the undrawn face amount
thereof in a manner reasonably acceptable to the Administrative Agent).

                  (c)      Until such payment (Section 18.2(a)) and arrangements
concerning L/Cs (Section 18.2(b)), all provisions of this Agreement, other than
those included in Article 2 which place any obligation on the Administrative
Agent or any Revolving Credit Lender to make any loans or advances or to provide
any financial accommodations to any Borrower, shall remain in full force and
effect until all Liabilities shall have been paid in full.

                  (d)      The release by the Administrative Agent of the
Collateral Interests granted the Administrative Agent by the Credit Parties
hereunder may be upon such conditions and indemnifications as the Administrative
Agent may reasonably require.

<PAGE>

                                   SECTION 19
                                    GUARANTY

                  19.1     Guaranty.

                  (a)      Each of the Guarantors unconditionally and
irrevocably guarantees the due and punctual payment and performance by the
Borrowers of the Liabilities. Each of the Guarantors further agrees that the
Liabilities may be extended or renewed, in whole or in part, without notice to
or further assent from it, and it will remain bound upon this guaranty
notwithstanding any extension or renewal of any of the Liabilities. The
Liabilities of the Guarantors shall be joint and several.

                  (b)      Each of the Guarantors waives presentation to, demand
for payment from and protest to the Borrowers or any other Guarantor, and also
waives notice of protest for nonpayment. The obligations of the Guarantors
hereunder shall not be affected by (i) the failure of any Secured Party to
assert any claim or demand or to enforce any right or remedy against any
Borrower or any other Guarantor under the provisions of this Agreement or any
other Loan Document or otherwise; (ii) any extension or renewal of any provision
hereof or thereof; (iii) any rescission, waiver, compromise, acceleration,
amendment or modification of any of the terms or provisions of any of the Loan
Documents; (iv) the release, exchange, waiver or foreclosure of any security
held by any Secured Party; (v) the failure of any Secured Party to exercise any
right or remedy against any other Guarantor; (vi) the release or substitution of
any Guarantor or any other guarantor or (vii) any bankruptcy, insolvency,
reorganization, arrangement, adjustment, composition, liquidation or the like of
any Borrower or any Guarantor including, but not limited to, (x) any Secured
Party's election, in any proceeding instituted under the Bankruptcy Code, of the
application of Section 1111(b)(2) of the Bankruptcy Code, (y) any borrowing or
grant of an Encumbrance by the Borrower or any Guarantor as
debtor-in-possession, under Section 364 of the Bankruptcy Code, or (z) the
disallowance of all or any portion of any Secured Party's claim(s) for repayment
of the Liabilities under Section 502 of the Bankruptcy Code.

                  (c)      Each of the Guarantors further agrees that this
guaranty constitutes a guaranty of performance and of payment when due and not
just of collection, and waives any right to require that any resort be had by
any Secured Party to any security held for payment of the Liabilities or to any
balance of any deposit, account or credit on the books of any Secured Party in
favor of any Credit Party other than the Guarantor or any other Person.

                  (d)      Each of the Guarantors hereby waives any defense that
it might have based on a failure to remain informed of the financial condition
of any Borrower and of any other Guarantor and any circumstances affecting the
ability of any Borrower to perform under this Agreement.

                  (e)      Each Guarantor's guaranty shall not be affected by
the genuineness, validity, regularity or enforceability of the obligations, the
Notes or any other instrument evidencing any Liabilities, or by the existence,
validity, enforceability, perfection, or extent of any collateral therefor or by
any other circumstance relating to the obligations which might otherwise
constitute a defense to this Guaranty. None of the Secured Parties makes any

<PAGE>

representation or warranty in respect to any such circumstances or shall have
any duty or responsibility whatsoever to any Guarantor in respect of the
management and maintenance of the obligations.

                  (f)      Subject to the provisions of Article 10, upon the
Liabilities becoming due and payable (by acceleration or otherwise), the Secured
Parties shall be entitled to immediate payment of such Liabilities by the
Guarantors upon written demand by the Administrative Agent.

                  19.2     No Impairment of Guaranty. The obligations of the
Guarantors hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason, including, without limitation, any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense or set-off, counterclaim, recoupment, or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Liabilities. Without limiting the generality of the foregoing, the obligations
of the Guarantors hereunder shall not be discharged or impaired or otherwise
affected by the failure of any Secured Party to assert any claim or demand or to
enforce any remedy under this Agreement or any other agreement, by any waiver or
modification of any provision thereof, by any default, failure or delay, willful
or otherwise, in the performance of the Liabilities, or by any other act or
thing or omission or delay to do any other act or thing which may or might in
any manner or to any extent vary the risk of the Guarantors or would otherwise
operate as a discharge of the Guarantors as a matter of law, unless and until
the Liabilities are paid in full.

                  19.3     Subrogation. Upon payment by any Guarantor of any
sums to any Secured Party hereunder, all rights of such Guarantor against any
Borrower arising as a result thereof by way of right of subrogation or
otherwise, shall in all respects be subordinate and junior in right of payment
to the prior final and indefeasible payment in full of all the Liabilities. If
any amount shall be paid to such Guarantor for the account of any Borrower, such
amount shall be held in trust for the benefit of the Secured Parties and shall
forthwith be paid to the Administrative Agent to be credited and applied to the
Liabilities, whether matured or unmatured.

                  19.4     Credit Agreement. Each of the Guarantors acknowledges
that it has read the Loan Documents and agrees to perform and observe all of the
terms and provisions herein and therein applicable thereto.

                  19.5     Maximum Guaranteed Amount. Without in any way
limiting each Guarantor's obligations under this Agreement and the other Loan
Documents as a "Credit Party," the maximum dollar amount of any Guarantor's
payment obligation under this guaranty shall not exceed the greater of (i) the
actual dollar amount of the recovery by the Administrative Agent upon a
Liquidation of the Collateral owned by such Guarantor and (ii) the difference
between (a) the Cost value of the Collateral owned by such Guarantor on the date
on which a Default occurs under this Agreement which results in an uninterrupted
period of time from the time of occurrence of such Default to a Liquidation of
such Collateral during which one or more Defaults or Events of Default exist
unwaived and uncured continuously under this Agreement plus the Cost value of
any Collateral transferred (whether by sale, intercompany transfer or otherwise)
to such Guarantor after such date and (b) repayments of the Loans directly from
the

<PAGE>

Proceeds of Collateral owned by such Guarantor after the date of occurrence of
such Default. Moreover, notwithstanding any other provision of this Guaranty to
the contrary, if the obligations of any Guarantor hereunder would otherwise be
held or determined by a court of competent jurisdiction in any action or
proceeding involving any state corporate law or any state or Federal bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other law
affecting the rights of creditors generally, to be void, invalid or
unenforceable to any extent on account of the amount of such Guarantor's
liability under this Guaranty, then notwithstanding any other provision of this
Guaranty to the contrary, the amount of such liability shall, without any
further action by such Guarantor or any other Person, be automatically limited
and reduced to the highest amount which is valid and enforceable as determined
in such action or proceeding.

                                   SECTION 20
                                  MISCELLANEOUS

                  20.1     Protection of Collateral. The Administrative Agent
has no duty as to the collection or protection of the Collateral beyond the safe
custody of such of the Collateral as may come into the possession of the
Administrative Agent.

                  20.2     Publicity. The Administrative Agent may issue one
"tombstone" notice of the establishment of the credit facility contemplated by
this Agreement and may make reference to each Credit Party (and may utilize any
logo or other distinctive symbol associated with each Credit Party with the Lead
Borrower's consent, which will not be unreasonably withheld) in connection with
any advertising, promotion, or marketing undertaken by the Administrative Agent.

                  20.3     Successors and Assigns. This Agreement shall be
binding upon the Credit Parties and their respective representatives,
successors, and assigns and shall enure to the benefit of the Administrative
Agent, the Issuer and each Lender and their respective successors and permitted
assigns, provided, however, no trustee or other fiduciary appointed with respect
to any Credit Party shall have any rights hereunder, and provided further that
no Credit Party may assign or otherwise transfer any of its rights or
obligations hereunder. In the event that the Administrative Agent, the Issuer or
any Lender assigns or transfers its rights under this Agreement, the assignee
shall thereupon succeed to and become vested with all rights, powers,
privileges, and duties of such assignor hereunder and such assignor shall
thereupon be discharged and relieved from its duties and obligations hereunder.

                  20.4     Severability. Any determination that any provision of
this Agreement or any application thereof is invalid, illegal, or unenforceable
in any respect in any instance shall not affect the validity, legality, or
enforceability of such provision in any other instance, or the validity,
legality, or enforceability of any other provision of this Agreement.

                  20.5     Amendments; Course of Dealing.

                  (a)      This Agreement and the other Loan Documents
incorporate all discussions and negotiations between each Credit Party and the
Administrative Agent, the Issuer and each Lender, either express or implied,
concerning the matters included herein and in such other

<PAGE>

instruments, any custom, usage, or course of dealings to the contrary
notwithstanding. No such discussions, negotiations, custom, usage, or course of
dealings shall limit, modify, or otherwise affect the provisions thereof.
Notwithstanding the foregoing, Sections 2, 3 and 4 of the Commitment Letter,
dated as of January 24, 2001, among the Lead Borrower and the other parties
thereto, shall survive the execution and delivery of this Agreement and the
closing of the transactions contemplated hereby. No failure by the
Administrative Agent, the Issuer or any Lender to give notice to the Lead
Borrower of any Credit Party's having failed to observe and comply with any
warranty or covenant included in any Loan Document shall constitute a waiver of
such warranty or covenant or the amendment of the subject Loan Document.

                  (b)      Each Credit Party may undertake any action otherwise
prohibited hereby, and may omit to take any action otherwise required hereby,
upon and with the express prior written consent of the Administrative Agent.
Subject to Article 15, no consent, modification, amendment, or waiver of any
provision of any Loan Document shall be effective unless executed in writing by
or on behalf of the party to be charged with such modification, amendment, or
waiver (and if such party is the Administrative Agent then by a duly authorized
officer thereof). Any modification, amendment, or waiver provided by the
Administrative Agent shall be in reliance upon all representations and
warranties theretofore made to the Administrative Agent by or on behalf of the
Credit Parties (and any guarantor, endorser, or surety of the Liabilities) and
consequently may be rescinded in the event that any of such representations or
warranties was not true and complete in all material respects when given.

                  (c)      Each reference in the Loan Documents to the exercise
of discretion or the like by the Administrative Agent, the Issuer or any Lender
shall be to such Person's exercise of its judgment, in good faith, based upon
such Person's consideration of any such factors as the Administrative Agent, the
Issuer or that Lender, determines as having a material bearing on credit risks
associated with the providing of Loans and financial accommodations to the
Borrowers, taking into account information of which that Person then has actual
knowledge. The burden of establishing the failure of the Administrative Agent,
the Issuer or any Lender to have acted in a reasonable manner in such Person's
exercise of such discretion shall be the Borrowers'.

                  20.6     Power of Attorney. In connection with all powers of
attorney included in this Agreement, each Credit Party hereby grants unto the
Administrative Agent (acting through any of its officers) full power to do any
and all things necessary or appropriate during the existence of an Event of
Default in connection with the exercise of such powers as fully and effectually
as that Credit Party might or could do, hereby ratifying all that said attorney
shall do or cause to be done by virtue of this Agreement. No power of attorney
set forth in this Agreement shall be affected by any disability or incapacity
suffered by any Credit Party and each shall survive the same. All powers
conferred upon the Administrative Agent by this Agreement, being coupled with an
interest, shall be irrevocable until this Agreement is terminated by a written
instrument executed by a duly authorized officer of the Administrative Agent.

                  20.7     Application of Proceeds. The proceeds of any
collection, sale, or disposition of the Collateral, or of any other payments
received hereunder, shall be applied towards the Liabilities in such order and
manner as the Administrative Agent determines in its

<PAGE>

sole discretion, consistent, however, with Sections 13.6 and 13.7 and any other
applicable provisions of this Agreement. The Credit Parties shall remain liable
for any deficiency remaining following such application.

                  20.8     Increased Costs. If, as a result of any change in any
Requirement of Law, or of the interpretation or application thereof by any court
or by any governmental or other authority or entity charged with the
administration thereof, whether or not having the force of law, which:

                  (a)      subjects any Lender to any taxes or changes the basis
of taxation, or increases any existing taxes, on payments of principal, interest
or other amounts payable by any Borrower to the Administrative Agent, the Issuer
or any Lender under this Agreement (except for taxes on the Administrative
Agent, the Issuer or any Lender based on net income or capital imposed by the
jurisdictions in which the principal or lending offices of the Administrative
Agent, the Issuer or that Lender are located);

                  (b)      imposes, modifies or deems applicable any reserve,
cash margin, special deposit or similar requirements against assets held by, or
deposits in or for the account of or loans by or any other acquisition of funds
by the relevant funding office of any Lender;

                  (c)      imposes on the Issuer or any Lender any other
condition with respect to any Loan Document; or

                  (d)      imposes on the Issuer or any Lender a requirement to
maintain or allocate capital in relation to the Liabilities; and the result of
any of the foregoing, in the Issuer's or such Lender's reasonable opinion, is to
increase the cost to the Issuer or that Lender of making or maintaining any
loan, advance or financial accommodation or to reduce the income receivable by
the Issuer or that Lender in respect of any loan, advance or financial
accommodation by an amount which the Issuer or that Lender deems to be material,
then upon written notice from the Administrative Agent, from time to time, to
the Lead Borrower (such notice to set out in reasonable detail the facts giving
rise to and a summary calculation of such increased cost or reduced income and
such calculation to be consistent with the manner by which such increased costs
would be calculated for the Lender's similar customers), the Borrowers shall
forthwith pay to the Administrative Agent, for the benefit of the subject
Lender, within thirty (30) days after receipt of such notice, that amount which
shall compensate the Issuer or the subject Lender for such additional cost or
reduction in income.

                  20.9     Costs and Expenses of the Administrative Agent.

                  (a)      The Credit Parties shall pay from time to time on
demand all Costs of Collection and all reasonable costs, expenses, and
disbursements (including reasonable attorneys' fees and expenses) which are
incurred by the Administrative Agent in connection with the preparation,
negotiation, execution, delivery, administration, interpretation, amendment,
modification and enforcement of this Agreement and of any other Loan Documents,
and all other reasonable costs, expenses, and disbursements which may be
incurred connection with or in

<PAGE>

respect to the credit facility contemplated hereby or which otherwise are
incurred with respect to the Liabilities.

                  (b)      The Credit Parties shall pay from time to time on
demand all reasonable costs and expenses (including reasonable attorneys' fees
and expenses) incurred, during the existence of any Event of Default, by the
Administrative Agent and by the Lenders to Lenders' Special Counsel.

                  (c)      Each Credit Party authorizes the Administrative Agent
to pay all such fees and expenses set forth in (a) and (b) above and, in the
Administrative Agent's discretion, to add such fees and expenses to the Loan
Account.

                  (d)      The undertaking on the part of each Credit Party in
this Section 20.9 shall survive payment of the Liabilities and/or any
termination, release, or discharge executed by the Administrative Agent in favor
of any Credit Party, other than a termination, release, or discharge which makes
specific reference to this Section 20.9.

                  20.10    Copies and Facsimiles. Each Loan Document and all
documents and papers which relate thereto which have been or may be hereinafter
furnished to the Administrative Agent or any Lender may be reproduced by that
Lender or by the Administrative Agent by any photographic, microfilm,
xerographic, digital imaging, or other process, and such Person making such
reproduction may destroy any document so reproduced. Any such reproduction shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made in the regular course of business).
Any facsimile which bears proof of transmission shall be binding on the party
which or on whose behalf such transmission was initiated and likewise shall be
so admissible in evidence as if the original of such facsimile had been
delivered to the party which or on whose behalf such transmission was received.

                  20.11    Governing Law. This Agreement and all rights and
obligations hereunder, including matters of construction, validity, and
performance, shall be governed by the law of the State of New York.

                  20.12    Consent to Jurisdiction.

                  (a)      Each Credit Party agrees that any legal action,
proceeding, case, or controversy against any Credit Party with respect to any
Loan Document may be brought in the Supreme Court of New York in New York County
or in the United States District Court, District of New York, sitting in New
York, New York, as the Administrative Agent may elect in the Administrative
Agent's sole discretion. By execution and delivery of this Agreement, each
Credit Party, for itself and in respect of its property, accepts, submits, and
consents generally and unconditionally, to the jurisdiction of the aforesaid
courts.

                  (b)      Each Credit Party WAIVES personal service of any and
all process upon it, and irrevocably consents to the service of process out of
any of the aforementioned courts in any such action or proceeding by the mailing
of copies thereof by certified mail, postage prepaid,

<PAGE>

to the Lead Borrower at the Lead Borrower's address for notices as specified
herein, such service to become effective five (5) Business Days after such
mailing.

                  (c)      Each Credit Party WAIVES any objection based on forum
non conveniens and any objection to venue of any action or proceeding instituted
under any of the Loan Documents and consents to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.

                  (d)      Nothing herein shall affect the right of the
Administrative Agent to bring legal actions or proceedings in any other
competent jurisdiction.

                  (e)      Each Credit Party agrees that any action commenced by
any Credit Party asserting any claim arising under or in connection with this
Agreement or any other Loan Document shall be brought solely in the Supreme
Court of New York in New York County or in the United States District Court,
District of New York, sitting in New York, New York, and that such Courts shall
have exclusive jurisdiction with respect to any such action.

                  20.13    Indemnification. Each Credit Party shall indemnify,
defend, and hold the Administrative Agent, the Issuer, the Arranger, the
Syndication Agent and each Lender and any Participant and any of their
respective employees, officers, attorneys or agents (each, an "Indemnified
Person") harmless of and from any claim brought or threatened against any
Indemnified Person by any Credit Party, any guarantor or endorser of the
Liabilities, or any other Person (as well as from reasonable attorneys' fees,
expenses, and disbursements in connection therewith) on account of the Revolving
Credit, this Agreement or any other Loan Document, any transaction contemplated
hereby or thereby, or relationship of the Credit Parties or of any other
guarantor or endorser of the Liabilities, in each case including all costs,
expenses, liabilities, and damages as may be suffered by any Indemnified Person
in connection with (w) the administration or enforcement of the Loan Documents;
(x) the Collateral; (y) the occurrence of any Event of Default; or (z) the
exercise of any rights or remedies under any of the Loan Documents (each of
claims which may be defended, compromised, settled, or pursued by the
Indemnified Person with counsel of the Indemnified Person's selection, but at
the expense of the Credit Parties) other than any claim as to which a final
determination is made in a judicial proceeding (in which the Administrative
Agent and any other Indemnified Person has had an opportunity to be heard),
which determination includes a specific finding that the Indemnified Person
seeking indemnification had acted in a grossly negligent manner or in actual bad
faith. This indemnification shall survive payment of the Liabilities and/or any
termination, release, or discharge executed by the Administrative Agent in favor
of the Credit Parties, other than a termination, release, or discharge duly
executed on behalf of the Administrative Agent which makes specific reference to
this Section 20.13 as being released or terminated.

                  20.14    Rules of Construction. The following rules of
construction shall be applied in the interpretation, construction, and
enforcement of this Agreement and of the other Loan Documents:

                  (a)      Words in the singular include the plural and words in
the plural include the singular.

<PAGE>

                  (b)      Titles, headings (indicated by being underlined or
shown in SMALL CAPITALS) and any Table of Contents are solely for convenience of
reference, do not constitute a part of the instrument in which included, and do
not affect such instrument's meaning, construction, or effect.

                  (c)      The words "includes" and "including" are not
limiting.

                  (d)      Text which follows the words "including, without
limitation" (or similar words) is illustrative and not limitational.

                  (e)      Text which is shown in italics (except for
parenthesized italicized text), shown in bold, shown IN ALL CAPITAL LETTERS, or
in any combination of the foregoing, shall be deemed to be conspicuous.

                  (f)      The words "may not" are prohibitive and not
permissive.

                  (g)      Any reference to a Person's "knowledge" (or words of
similar import) are to such Person's knowledge assuming that such Person has
undertaken reasonable and diligent investigation with respect to the subject of
such "knowledge" (whether or not such investigation has actually been
undertaken).

                  (h)      Terms which are defined in one section of any Loan
Document are used with such definition throughout the instrument in which so
defined.

                  (i)      The symbol "$" refers to United States Dollars.

                  (j)      Unless limited by reference to a particular Section
or provision, any reference to "herein", "hereof", or "within" is to the entire
Loan Document in which such reference is made.

                  (k)      References to "this Agreement" or to any other Loan
Document is to the subject instrument as amended to the date on which
application of such reference is being made.

                  (l)      Except as otherwise specifically provided, all
references to time are to Boston time.

                  (m)      In the determination of any notice, grace, or other
period of time prescribed or allowed hereunder:

                           (i)      Unless otherwise provided (A) the day of the
                  act, event, or default from which the designated period of
                  time begins to run shall not be included and the last day of
                  the period so computed shall be included unless such last day
                  is not a Business Day, in which event the last day of the
                  relevant period shall be the then next Business Day and (B)
                  the period so computed shall end at 5:00 PM on the relevant
                  Business Day.

                           (ii)     The word "from" means "from and including".

<PAGE>

                           (iii)    The words "to" and "until" each mean "to,
                  but excluding".

                           (iv)     The word "through" means "to and including".

                  (n)      The Loan Documents shall be construed and interpreted
in a harmonious manner and in keeping with the intentions set forth in Section
20.15 hereof, provided, however, in the event of any inconsistency between the
provisions of this Agreement and any other Loan Document, the provisions of this
Agreement shall govern and control.

                  (o)      Interrelationship with Original Loan and Security
Agreement.

                           (i)      As stated in the preamble hereof, this
                  Agreement is intended to amend and restate the provisions of
                  the Original Loan and Security Agreement notwithstanding any
                  substitution of Notes as of the Restatement Effective Date.
                  Except as expressly modified herein, (x) all of the terms and
                  provisions of the Original Loan and Security Agreement shall
                  continue to apply for the period prior to the Restatement
                  Effective Date, including any determinations of payment dates,
                  interest rates, Events of Default or any amount that may be
                  payable to the Administrative Agent or the financial
                  institutions from time to time party to the Original Loan and
                  Security Agreement (or their assignees or replacements
                  hereunder), and (y) the obligations under the Original Loan
                  and Security Agreement shall continue to be paid or prepaid on
                  or prior to the Restatement Effective Date, and shall from and
                  after the Restatement Effective Date continue to be owing and
                  be subject to the terms of this Agreement. All references in
                  any Loan Documents to (i) the "Loan Agreement" shall be deemed
                  to include references to this Agreement and (ii) the "Lenders"
                  or a "Lender" or to the "Administrative Agent" shall mean such
                  terms as defined in this Agreement. As to all periods
                  occurring on or after the Restatement Effective Date, all of
                  the covenants set forth in the Original Loan and Security
                  Agreement shall be of no further force and effect, it being
                  understood that all obligations of the Borrowers under the
                  Original Loan and Security Agreement shall be governed by this
                  Agreement from and after the Restatement Effective Date.

                           (ii)     The Borrowers, the Administrative Agent and
                  the Lenders acknowledge and agree that all principal,
                  interest, fees, costs, reimbursable expenses and
                  indemnification obligations accruing or arising under or in
                  connection with the Original Loan and Security Agreement which
                  remain unpaid and outstanding as of the Restatement Effective
                  Date shall be and remain outstanding and payable as an
                  obligation under this Agreement and the other Loan Documents;
                  provided that no Lender hereunder which was not an Original
                  Lender shall be liable for any obligation or indemnification
                  of Lenders under the Original Loan and Security Agreement.

                  20.15    Intent. It is intended that:

<PAGE>

                  (a)      This Agreement take effect as a sealed instrument.

                  (b)      The scope of all Collateral Interests created by any
Credit Party to secure the Liabilities be broadly construed in favor of the
Administrative Agent.

                  (c)      All Collateral Interests created in favor of the
Administrative Agent at any time and from time to time by any Credit Party shall
secure all Liabilities, whether now existing or contemplated or hereafter
arising.

                  (d)      Unless otherwise explicitly provided herein, the
Administrative Agent's consent to any action of any Credit Party which is
prohibited unless such consent is given may be given or refused by the
Administrative Agent in its sole discretion.

                  20.16    Participations. Each Lender may sell participations
to one or more financial institutions (each, a "Participant") in that Lender's
interests herein provided that in no event shall any Participant under any such
participation have any right to participate in the approval by a requisite
number or proportion of the Lenders of any action including to make any
instruction following the happening of a Default or Event of Default such as to
issue a Notice of Acceleration or commence a Liquidation, or to approve any
amendment or waiver of any provision of any Loan Document except to the extent
that such amendment or waiver would reduce the principal of, or rate or interest
on, the Loans or any fees payable hereunder, or postpone the date of the final
maturity of the Loans. No such sale of a participation shall relieve a Lender
from that Lender's obligations hereunder nor obligate the Administrative Agent
to any Person other than a Lender.

                  20.17    Right of Set-Off. Any and all deposits or other sums
at any time credited by or due to any Credit Party from the Administrative
Agent, the Issuer or any Lender or any Participant or from any Affiliate of any
of the foregoing, and any cash, securities, instruments or other property of any
Credit Party in the possession of any of the foregoing, whether for safekeeping
or otherwise (regardless of the reason such Person had received the same) shall
at all times constitute security for all Liabilities and for any and all
obligations of each Credit Party to the Administrative Agent, the Issuer and
such Lender or any Participant or such Affiliate and may be applied or set off
against the Liabilities and against such obligations at any time an Event of
Default exists, whether or not such are then due and whether or not other
collateral is then available to the Administrative Agent, the Issuer or that
Lender.

                  20.18    Pledges. Nothing included in this Agreement shall
prevent or limit any Lender from pledging all or any portion of that Lender's
interest and rights under this Agreement, provided, however, neither such pledge
nor the enforcement thereof shall release the pledging Lender from any of its
obligations hereunder or under any of the other Loan Documents.

                  20.19    Maximum Interest Rate. Regardless of any provision of
any Loan Document, none of the Administrative Agent, the Issuer or any Lender
shall be entitled to contract for, charge, receive, collect, or apply as
interest on any Liability, any amount in excess of the maximum rate imposed by
Applicable Law. Any payment which is made which, if treated

<PAGE>

as interest on a Liability would result in such interest's exceeding such
maximum rate shall be held, to the extent of such excess, as additional
collateral for the Liabilities as if such excess were "Collateral."

                  20.20    Waivers.

                  (a)      The Credit Parties make each of the waivers included
in Section 20.20(b), below, knowingly, voluntarily, and intentionally, and
understands that the Administrative Agent, the Issuer and each Lender, in
establishing the facilities contemplated hereby and in providing loans and other
financial accommodations to or for the account of the Borrowers as provided
herein, whether not or in the future, is relying on such waivers.

                  (b)      EACH CREDIT PARTY RESPECTIVELY WAIVES THE FOLLOWING:

                           (i)      Except as otherwise specifically required
                  hereby, notice of non-payment, demand, presentment, protest
                  and all forms of demand and notice, both with respect to the
                  Liabilities and the Collateral.

                           (ii)     Except as otherwise specifically required
                  hereby, the right to notice and/or hearing prior to the
                  Administrative Agent's exercising of the Administrative
                  Agent's rights upon default.

                           (iii)    THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE
                  OR CONTROVERSY IN WHICH THE ADMINISTRATIVE AGENT, THE ISSUER
                  OR ANY LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR
                  CONTROVERSY IS INITIATED BY OR AGAINST THE ADMINISTRATIVE
                  AGENT, THE ISSUER OR ANY LENDER OR IN WHICH THE ADMINISTRATIVE
                  AGENT, THE ISSUER OR ANY LENDER IS JOINED AS A PARTY
                  LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN
                  RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN ANY CREDIT
                  PARTY OR ANY OTHER PERSON AND THE ADMINISTRATIVE AGENT, THE
                  ISSUER OR ANY LENDER (EACH OF WHOM LIKEWISE WAIVES THE RIGHT
                  TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).

                           (iv)     Any defense, counterclaim, set-off,
                  recoupment, or other basis on which the amount of any
                  Liability, as stated on the books and records of the
                  Administrative Agent, could be reduced or claimed to be paid
                  otherwise than in accordance with the tenor of and written
                  terms of such Liability.

                           (v)      Any claim to consequential, special, or
                  punitive damages.

                  20.21    Additional Waivers.

                  (a)      Except as otherwise provided in Section 19.5, the
Liabilities are the joint and several obligations of each Credit Party. To the
fullest extent permitted by applicable law,

<PAGE>

the obligations of each Credit Party hereunder shall not be affected by (i) the
failure of the Administrative Agent, the Issuer or any Lender to assert any
claim or demand or to enforce or exercise any right or remedy against any other
Credit Party under the provisions of this Agreement, any other Loan Document or
otherwise, (ii) any rescission, waiver, amendment or modification of, or any
release from any of the terms or provisions of, this Agreement, any other Loan
Document, or any other agreement, including with respect to any other Credit
Party of the Liabilities under this Agreement, or (iii) the failure to perfect
any security interest in, or the release of, any of the security held by or on
behalf of the Administrative Agent.

                  (b)      The obligations of each Credit Party hereunder shall
not be subject to any reduction, limitation, impairment or termination for any
reason (other than the indefeasible payment in full in cash of the Liabilities),
including any claim of waiver, release, surrender, alteration or compromise of
any of the Liabilities, and shall not be subject to any defense or set-off,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Liabilities or otherwise. Without limiting
the generality of the foregoing, the obligations of each Credit Party hereunder
shall not be discharged or impaired or otherwise affected by the failure of any
Secured Party to assert any claim or demand or to enforce any remedy under this
Agreement, any other Loan Document or any other agreement, by any waiver or
modification of any provision of any thereof, by any default, failure or delay,
willful or otherwise, in the performance of the Liabilities, or by any other act
or omission that may or might in any manner or to any extent vary the risk of
any Credit Party or that would otherwise operate as a discharge of any Credit
Party as a matter of law or equity (other than the indefeasible payment in full
in cash of all the Liabilities).

                  (c)      To the fullest extent permitted by applicable law,
each Credit Party waives any defense based on or arising out of any defense of
any other Credit Party or the unenforceability of the Liabilities or any part
thereof from any cause, or the cessation from any cause of the liability of any
other Credit Party, other than the indefeasible payment in full in cash of all
the Liabilities. The Administrative Agent may, at its election, foreclose on any
security held by it by one or more judicial or nonjudicial sales, accept an
assignment of any such security in lieu of foreclosure, compromise or adjust any
part of the Liabilities, make any other accommodation with any other Credit
Party, or exercise any other right or remedy available to them against any other
Credit Party, without affecting or impairing in any way the liability of any
Credit Party hereunder except to the extent that all the Liabilities have been
indefeasibly paid in full in cash. To the fullest extent permitted by applicable
law, each Credit Party waives any defense arising out of any such election even
though such election operates, pursuant to applicable law, to impair or to
extinguish any right of reimbursement or subrogation or other right or remedy of
such Credit Party against any other Credit Party, as the case may be, or any
security.

                  (d)      Upon payment by any Credit Party of any Liabilities,
all rights of such Credit Party against any other Credit Party arising as a
result thereof by way of right of subrogation, contribution, reimbursement,
indemnity or otherwise shall in all respects be subordinate and junior in right
of payment to the prior indefeasible payment in full in cash of all the
Liabilities. In addition, any indebtedness of any Credit Party now or hereafter
held by any other Credit Party is hereby subordinated in right of payment to the
prior payment in full of the

<PAGE>

Liabilities. No Credit Party will demand, sue for, or otherwise attempt to
collect any such indebtedness. If any amount shall erroneously be paid to any
Credit Party on account of (a) such subrogation, contribution, reimbursement,
indemnity or similar right or (b) any such indebtedness of any Credit Party,
such amount shall be held in trust for the benefit of the Administrative Agent,
the Issuer and the Lenders and shall forthwith be paid to the Administrative
Agent to be credited against the payment of the Liabilities, whether matured or
unmatured, in accordance with the terms of the Loan Documents.

                  20.22    Confidentiality. The Administrative Agent, the Issuer
and the Lenders agree to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to their and their
Affiliates' directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or thereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section, to any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement, (g) with the consent of the Lead Borrower or (h) to the extent such
Information (1) becomes publicly available other than as a result of a breach of
this Section or (2) becomes available to the Administrative Agent, the Issuer or
any Lender on a nonconfidential basis from a source other than the Credit
Parties. For the purposes of this Section, the term "Information" means all
information received from the Credit Parties relating to their businesses, other
than any such information that is available to the Administrative Agent, the
Issuer or any Lender on a nonconfidential basis prior to disclosure by the
Credit Parties. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information. Notwithstanding any other express or
implied agreement, arrangement or understanding to the contrary, each of the
parties hereto hereby agree that, each party hereto (and each of its employees,
representatives or agents) is permitted to disclose to any and all persons,
without limitation, the tax treatment and tax aspects of the Loans and any other
transactions contemplated hereby, and all materials of any kind (including
opinions or other tax analyses) that are provided to the Credit Parties, the
Lenders or the Administrative Agent related to such tax treatment and tax
aspects. To the extent not inconsistent with the immediately preceding sentence,
this authorization does not extend to disclosure of any other information or any
other term or detail not related to the tax treatment or tax aspects of the
Loans or any other transactions contemplated hereby.

                  20.23    Confirmation of Existing Obligations. Each of the
Credit Parties hereby reaffirms and admits the validity and enforceability of
this Agreement, the other Loan Documents and all of its obligations hereunder
and thereunder and agrees and admits that, as of

<PAGE>

the date hereof, it has no defenses to, or offsets or counterclaims against, any
of its obligations to the Secured Parties under the Loan Documents of any kind
whatsoever.

                  20.24    Existing Agreement Superseded. As set forth in
Section 20.14(o), the Original Loan and Security Agreement is superseded by this
Agreement, which has been executed in renewal, amendment, restatement and
modification, but not in novation or extinguishment of, the obligations under
the Original Loan and Security Agreement.

                           [signature pages to follow]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00056-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00056-of-00352.parquet"}]]